Essentia Health is moving forward with plans to raze housing in Duluth’s Central Hillside neighborhood — making way for parking.

Local leaders are voicing concerns about displacing residents in 15 units of housing that's located to the west of the medical district, as Duluth faces an affordable housing shortage. But, Essentia leaders say the ongoing medical district developments — which include infrastructure projects like the parking ramp — will eventually open up more land for development and spur further housing creation. This project is a partnership between Essentia and the city of Duluth, as the city ultimately must approve the reimbursement and will manage the ramp.

The housing that Essentia has agreed to purchase is located along Fourth Avenue East to the west of Essentia's campus, said Mark Hayward, senior vice president of Essentia. The hospital wouldn't confirm the exact location of the apartments, because the agreement to buy the housing isn't yet finalized.

Essentia’s private investment in the ongoing medical district development — totaling $800 million — won’t fund the construction of the parking ramp, Hayward said. The hospital system’s private funding is for a new hospital tower and related infrastructure and financing, Hayward said.

Instead, a law passed during the last legislative session reimburses up to $36.4 million in public funding to the entity that develops a parking ramp on the west side of the district. The ramp could have up to 1,400 new spaces for medical district visitors and the public.

Duluth city councilor Joel Sipress said he’s “very concerned” about losing any number of affordable housing units in the neighborhood, even though the exact number of units hasn’t been determined.

“We have thousands of households in our city where people are struggling to find a decent place to live (and) can afford the rent. We’ve seen steep increases in rents over the last few years. We need to be doing everything (possible) to ensure we do not lose affordable renting units,” he said in an interview.

A recently released housing survey shows the extent of Duluth’s housing crisis. Rent has steadily increased over the last decade, and the waiting list for public housing increased by nearly 500 people last year, according to the Housing Indicator Report. Meaning, over 2,200 people are on a waiting list for affordable housing in the city.

If the Hillside residents are displaced by the proposed parking ramp, Hayward said the hospital would ensure that they found new homes before moving forward with the project. “They wouldn't be taken out of service until all those details were implemented and active for anybody impacted by that," he said.

Sen. Erik Simonson, DFL-Duluth, sponsored the Senate version of the law that funds seven medical district infrastructure projects, one of which is the parking ramp. While he is concerned about the initial impact of possibly displacing residents, he said people should stay focused on the long-term impacts the development will bring because it will open up more land for development.

"It's generally understood that to move development forward you have to create that property space moving forward," he said. “What we end up with at the end of the day is a more cohesive neighborhood."

The development has brought housing to the area already, with a 15-story apartment building proposed for East Superior Street.

However, future housing development in the Central Hillside neighborhood may not be attainable for its residents, as a majority are cost-burdened, said Ryan Glenn, who runs Homeless Person’s Bill of Rights in Duluth. Cost-burdened households are defined as those that pay more than 30% of their income to housing.

“One of the major drawbacks of the area is how cost-burdened it is,” Glenn said. “To put in a new unit could lead to further gentrification and rising rents.

At a Duluth City Council meeting Monday night, several people shared similar concerns about losing affordable housing.

Noah Schuchman, chief administrative officer for the city of Duluth, said in response at the meeting that he doesn’t know specific information about the parking ramp. But, said the city is “committed to preserving affordable housing to the greatest extent possible.”

“We will continue to work with Essentia on that as the project continues and make that specifically clear to them as we move forward,” he said at the meeting.

Joel Kilgour, chair of Duluth’s Affordable Housing Coalition, said he’s concerned about removing housing in a neighborhood where most people make less than $25,000 a year.

“(If) we see prices for rents go up even a little bit, that’s going to price out a lot of the families that are currently living there, and we don’t have a plan for them,” Kilgour said. “That’s going to exacerbate a crisis we’re already facing in Duluth.”

Some of those who are displaced may be able to land new housing, but others may join the lengthy waiting list for public housing and/or subsidized housing, he said.

While the hospital entered into a purchase agreement with the building, it still has to go through the City Council for approval and feedback, Hayward said.

Essentia is planning to bring the development agreement forward at upcoming City Council meetings, with a goal to have it finished by the time its Vision Northland project is complete, Hayward said. Essentia also plans to continue working with local organizations as they are developing the area.

“I'm sure we'll do our best as a community to come together and figure out some housing options for them,” Glenn said. “(But), really, any loss of housing in this community is devastating.”