The St. Paul City Council recently asked the Metropolitan Council for a $1.25 million grant to help fund a new 226-unit, six-story apartment complex on vacant land at Lexington Parkway and University Avenue.

Some neighborhood advocates — seeing the project as a step toward gentrification — are livid.

A 36-page concept design unveiled by Minneapolis-based Alatus envisions efficiency units priced at roughly $1,000 a month. One-bedrooms would lease for $1,400. Two-bedrooms would be $2,050. Four-bedrooms would start at $850 — per bed.

“This project triples the market rent for the area, thereby ensuring increased displacement of the present community adjacent to this luxury apartment complex,” said Frogtown Neighborhood Association co-directors Caty Royce and Tia Williams, as well as board chair Tong Thao, in a Nov. 11 letter to the city council. “This application is by no means ready for submission. Please retract it.”

The $57 million project — to be privately funded other than the potential Met Council money — would include a dozen units that qualify as “affordable” relative to median rents across the metro.

Chris Osmundson, director of development for Alatus, said the company is restricted from making more affordable housing units available because the city program that offers tax credit for low-income housing to renting developments is not available. Applications for 2020 closed in July.

“If the resources were there to put more affordable housing units in, we would do it,” Osmundson said. “It is just not feasible without public assistance.”

Brandon Long, executive director for Union Park District Council, said the high costs at the proposed apartment complex would make it difficult for families to live there, adding that the $850 per bed monthly rent is “out of control.”

MET COUNCIL GRANT

The city council included a request for a Met Council “Livable Communities/Transit-Oriented Development” grant for the proposed 411-417 Lexington Parkway North structure on the Aug. 7 city council agenda.

These grants are intended to promote higher density development and a higher concentration of amenities near transit stations.

The reason for the grant application? Several parts of the project, including available entrepreneurial space in the building, some affordable housing units and a need for improvement to the street’s storm water system, Osmundson said.

The $1.25 million grant application for the development was listed in a part of the public city council meeting called “consent agenda,” where a series of non-controversial items often are approved.

A spokeswoman for St. Paul Planning and Economic Development said Friday that the city has since asked the Met Council to hold off on the application.

Royce, Williams and Tong Thao said the project, which has drawn opposition from neighborhood leaders, should have generated more discussion at the council level. They said it was pushed through without enough public notice.

While developers met with district councils and community members to gather feedback on the project, some district council members argue the feedback was not incorporated into the work.

Alatus founder Bob Lux was an original partner in Dominium, a national developer that has been praised and criticized for constructing attractive affordable housing at price points out of reach for the very poor and targeted to childless, young, white professionals.

The Alatus project would include 22,000 square feet of commercial space for a new grocery store and sit on two acres of land at the edge of mixed-income neighborhoods represented by three district councils — the Frogtown Neighborhood Association, the Hamline-Midway Coalition and the Summit-University Planning Council. All expressed varying levels of concern about the lack of affordability.

Royce said that building luxury apartments adjacent to an already economically vulnerable community will result in greater displacement. The effects the development could have on the housing market is one of her biggest concerns.

The Nov. 11 letter was enough to bend the ear of at least one city council official.

City Council Member Dai Thao, who represents Frogtown, Summit-University and Union Park, said he wants to see more housing in the area targeted to families earning no more than 30 percent of area median income, or $30,000 for a family of four.

He contacted the property owner, the Amherst H. Wilder Foundation, in June to express his reservations.

“I’ve met and shared with (Planning and Economic Development) staff to hold off on the Met Council application until we get further commitments from the developer for more affordable housing units at 30 percent AMI,” said Thao, in an email to a reporter on Wednesday. “I anticipate seeing a proposal early next week.”

DEVELOPMENT WITHOUT DISPLACEMENT?

The kerfuffle underscores growing tensions among advocates for the poor and working class over how to encourage new housing construction without raising average rents so much they force out the locals.

Osmundson said that while the value of the apartments may be higher than the market rate in several adjacent neighborhoods, there is not evidence that the development will result in displacement.

An old axiom has it that an easy way to reduce product prices is to increase supply — in other words, cities could stabilize rents by allowing denser new housing.

But new construction tends to be the priciest housing stock around, and rather than satisfying the needs of the locals, luxury units can draw wealthier tenants from outside the immediate market.

While Osmundson acknowledged that the development’s market rates are high for some near-neighborhoods like Frogtown, the rates more closely resemble market rates in neighborhoods to the west of the development, including Union Park.

According to Osmundson, there is a general belief that spaces like this near light rail stops should have lots of people living there because public transportation is convenient and accessible.

The Nov. 11 letter signers — Royce, Williams and Tong Thao — noted that some city planning staff are working with the National Anti-Displacement Network on how to avoid negative outcomes as development picks up in poor areas across the city. Both Minneapolis and St. Paul joined the network in 2018.

The Wilder Foundation has owned the two acres of vacant land between University Avenue and Interstate 94 since 2008, and potential projects there have evolved with time as different development partners have stepped forward.