Alatus real estate deal plays fast and loose with ‘affordable’ housing
Like a good neighbor, St. Paul’s Wilder Foundation has been there for the St. Paul Frogtown, Midway and Rondo neighborhoods. But a land sale now threatens to ruin its good name and its reputation.
The attempted $57 million acquisition by real estate company Alatus LLC of the land next door to the Wilder offices at 451 Lexington Parkway North and along the Green Line corridor has neighbors and housing justice advocates crying foul. Some have even accused the nonprofit foundation of opening the door to gentrification.
The lot near the White Castle and Super America just south of the corner of Lexington Parkway and University Avenue is known by many for the giant mounds of snow that are on display there during really snowy winters.
In a response to a letter written to Wilder Board Chairperson Julie Brunner by the Frogtown Neighborhood Association in January 2020, she wrote, “Funds from the sale of the property will fuel Wilder’s efforts to help hundreds of people each year provide a stable home for their families.” Brunner acknowledged that the nonprofit has provided housing help to those experiencing emergencies and even homelessness.
Frogtown Neighborhood Association, the Summit-University District Council. Midway RiseUp! and the St. Paul Housing Justice Center have registered complaints about the project, objecting primarily on the basis that it will drive up housing costs, taxes and rents in the area.
“They are disregarding their responsibility and obligation to the community [in order] to make money. They are saying that they need the money in order to provide their programming and funding.
“So they are contributing to the problem so that they can continue addressing the problem,” said Danielle Swift, anti-displacement community organizer for the Frogtown Neighborhood Association. “We gotta help poor people, but we are not going to stop doing what we are doing that contributes to their problems.”
Planning commission said no
The St. Paul Planning Commission in March turned down the Alatus project by a narrow margin. Commissioners who voted it down appeared to be in agreement that the project was not consistent with City’s 2040 comprehensive plan or the Lexington Station area plan, which requires that equity be included in every development. The Commission’s decision ran counter to City planning staff and even the planning commission’s zoning committee, which gave the project the okay to move forward.
Alatus has appealed, and the St. Paul City Council will decide the issue on April 7.
“Anybody who has allowed the word ‘equity’ to come out of their mouths should vote no on this project,” said Caty Royce, executive director of the Frogtown Neighborhood Association.
“It’s obvious that this developer does not have this community in mind,” said Commissioner Adrian Perryman.
“That is not reflective of St. Paul household incomes,” said Commissioner Tram Hoang before the vote against the site plan. She said the City’s comprehensive plan requires housing within St. Paul to provide options for a variety of household incomes.
“When we use the term ‘affordable,’” she said, “we have to be really cautious. Everything is affordable to someone.”
“[The project] does not meet the values that the City has stated very clearly. Yes, we have a housing shortage, but we don’t just have a housing shortage. We have an affordable housing shortage,” said Commissioner Kathy Mouacheupao.
The initial concept plan presented by Alatus called for 288 units, including “micro units” to be priced at $1,000 a month, one-bedroom apartments priced at $1,400, two-bedroom units priced at $2,050, and four-bedrooms starting at $850 per bedroom. These prices would make the project market-rate, which raised eyebrows initially among community groups.
Some suspect that Wilder and Alatus are taking advantage of efforts to rebuild the Midway corridor and the Frogtown area in the wake of the uprising and riots after the murder of George Floyd. Others fear that if the deal goes through it will open the door to gentrification of the Frogtown and Rondo neighborhoods. Business interests have long tried to open up the corridor along the Green Line for more market-rate housing.
According to Jack Cann of the St. Paul Housing Justice Center, this is not the first time Wilder Foundation has made a questionable real estate sale. In 2015 they sold one of their high-rise properties that housed the elderly at a subsidy to Real Estate Equities for $2-2.5 million, which was under market value.
Real Estate Equities sold the property in turn for $10 million years later to Common Bond, making a nearly $8 million profit.
“Unlike the excuse they have given for selling the land to Alatus,” said Cann, “they can’t even use making profit as an excuse, because they sold below market value to Real Estate Equities. It’s a deal in my mind that calls into question their commitment, not to mention their common sense.”
Alatus LLC is a real estate company out of Minneapolis that has been involved in controversy over development plans in Minneapolis. After signing on to purchase the Wilder Foundation land, they applied through the City of St. Paul for a $2 million Met Council Transit Oriented Development grant. The infrastructure grant was designed by the Met Council to encourage high density development.
The City of St. Paul pulled the grant application after getting pushback from community groups. In the application Alatus did not mention that the project would include affordable units but said that housing vouchers would not be accepted.
Alatus eventually amended their original proposal to include 150 units that meet the legal and technical definition of affordable housing. However, these affordable units exceed average rent in the area and are unaffordable to most of those presently living in the neighborhood.
“The average income in the area is $35,000 What Alatus is calling affordable is double the neighborhood median income,” said Royce.The “affordable” apartments are aimed at families earning as much as $62,000, which is 60% of Twin Cities AMI, nearly double what a low-income family of four in St. Paul could reasonably afford.
Cann’s housing justice group wrote to the St. Paul City Council making the case that the Alatus site plan has nothing to do with affordability and reminded the officials that in order to approve a site plan it has to be consistent with the 12 rules of the City’s comprehensive plan. According to Cann, the Alatus project “goes against the grain of that comprehensive plan.”
The Frogtown Neighborhood Association, in a letter to the Wilder Foundation board, wrote, “The proposed development almost guarantees steep and immediate property tax and rent increases to at-risk elders on fixed incomes and very under-resourced households paying an average of 60% of their income in rents… We believe MN Statutes require that all actions of a Not for Profit organization be connected to their mission.”
Frogtown neighbors say that the project is inconsistent with the stated mission of the Wilder Foundation, which is “to promote the social welfare of persons residing or located in the greater Saint Paul metropolitan area by all appropriate means.” One of the ways Wilder has aided the social welfare of the community is by providing affordable housing.
“It’s a second attack on the old Rondo neighborhood,” said former city council member Debbie Montgomery. “They stole our land in 1956. They paid my grandparents $5,000 for a four-bedroom house and three city lots through eminent domain… Then we were redlined so we couldn’t buy a house north of University and south of Marshall and west of Lexington all the way down to the flats in the east.
“They are taking advantage of the riots which burned down a lot near Midway and on University to build market rate housing,” she said. Montgomery added that her neighborhood on the other side of Lexington near the proposed project is at 30% of AMI. She said one of her neighbors told her that her taxes increased by $900 last year.
“When we interact with people in the development world there are no blind laws of business,’ said Father Mark Moriarty of the Church of St. Agnes in St, Paul. “There are always human beings involved. We can’t just blame supply and demand.”