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$35.4M Housing Incentive Fund already depleted

BISMARCK — More than $35 million approved by state lawmakers last spring to spur construction of affordable housing for essential workers and low-income residents has already been committed, leaving no available funding until 2015 and demonstrating the pent-up demand for affordable housing across North Dakota, a state official said Thursday.

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The demand is coming not only from western counties dealing with an influx of oil workers and related population growth but also from eastern counties, said Jolene Kline, acting executive director of the North Dakota Housing Finance Agency, which administers the Housing Incentive Fund.

“This program is vitally important,” Kline told the Legislature’s interim Government Finance Committee. “It’s creating units, but there’s not enough funding here to create enough units.”

The Legislature established the Housing Incentive Fund in 2011. It provides up to $3 million or 30 percent of the cost of new apartment and rental units to reduce developers’ debt so they can set cheaper rental rates. Individuals and businesses who support the projects receive a dollar-for-dollar state income tax credit for contributing to the fund.

Lawmakers reauthorized the incentive fund last spring, approving $20 million in tax credits and an extra $15.4 million from the state’s general fund, for a total of $35.4 million.

The first round of funding, which ended June 28, had developers banging down the door for a slice of the pie. The Housing Finance Agency received 26 applications requesting a total of $36.3 million — nearly $1 million more than the total funds available for the 2013-15 biennium.

The second round, which ended Sept. 30, drew 23 applications for a total of $31.3 million.

During the two rounds, the agency awarded a total of $36.9 million to support more than $152.8 million in housing construction projects in 19 cities: Arnegard, Beach, Bismarck, Burlington, Crosby, Devils Lake, Dickinson, Dunn Center, Fargo, Grafton, Hettinger, Jamestown, Lignite, Mandan, Minot, New Rockford, Turtle Lake, Watford City and Williston. The committed funds included $1.5 million that had been awarded to a project in Mandan in 2011-13 but was turned back.

Because of the overwhelming demand, Kline said the agency had to reject $14.1 million in funding requests that could have created an additional 463 new units. Projects that weren’t funded likely won’t be built or, if they are built, will be market-rate units, she said.

The funding of projects in some eastern cities drew a critical eye from the committee’s chairman, Rep. Jeff Delzer, R-Underwood, who said his understanding was that the incentive fund was meant mostly for oilfield cities that were far behind in meeting housing needs.

Kline said 90 percent of the $15 million awarded from the fund in its first two years went to cities in western North Dakota, supporting 23 projects that created 607 new housing units in 13 communities.

However, “Because we have a statewide housing crisis right now, that’s moving further and further east all the time,” she said.

The affordable housing crunch may not be as significant in eastern cities such as Fargo and Grand Forks as in other parts of the state, but they are experiencing housing shortages, primarily among senior citizens but also among some oil workers choosing to live in the east and commute, Kline said.

“All of those projects that we have funded are in communities that have overflow,” she said.

A 74-unit, $10 million apartment built by the Williston State College Foundation with $1 million from the incentive fund was full as soon as it opened in August, with a tenant list that includes employees of several state agencies, college faculty and staff and nurses from a local nursing home that invested in the project, foundation executive director Terry Olson said.

The $1 million from the fund has allowed the foundation to set rental rates about $700 to $1,000 below the current market rate in Williston, and there’s already talk of pursuing a second project on campus “because we have a waiting list of 27 different people for our apartment right now,” Olson said.

“The program is outstanding,” he said.

So far, the Housing Incentive Fund has collected $10.8 million in contributions toward the available $20 million in tax credits, leaving about $9.2 million to raise before Dec. 31, 2014, a goal that Kline said could be met by the end of the year.

Mike Nowatzki

Mike Nowatzki reports for Forum News Service. He can be reached at (701) 255-5607.