Owatonna Comprehensive Housing Study

Transcription

Housing Market Analysis and Demand Estimates for Owatonna, Minnesota Prepared for: Owatonna Housing and Redevelopment Authority Owatonna, Minnesota May 2013 1221 Nicollet Mall
Suite 218
Minneapolis, MN 55403
612.338.0012
June 11, 2013 Mr. Troy Klecker Community Development Director Owatonna Housing and Redevelopment Authority City of Owatonna 540 West Hills Circle Owatonna, MN 55060 Dear Mr. Klecker: Attached is the Housing Market Analysis and Demand Estimates for Owatonna, Minnesota conducted by Maxfield Research Inc. The study projects housing demand through 2020, and gives recommendations on the amount and type of housing that could be built in Owatonna to satisfy demand over the next five years. Detailed information regarding recommended housing concepts can be found in the Housing Recommendations section at the end of the report. We have enjoyed performing this study for you and are available should you have any ques‐
tions or need additional information. Sincerely, MAXFIELD RESEARCH INC. Matt Mullins Brian Smith Vice President Research Analyst Attachment TABLE OF CONTENTS KEY FINDINGS ............................................................................................................... Introduction .................................................................................................................... Key Findings..................................................................................................................... DEMOGRAPHIC ANALYSIS ............................................................................................. Introduction .................................................................................................................... Primary Market Area Definition ...................................................................................... Population Household Growth Trends and Projections ................................................. Population Age Distribution Trends ................................................................................ Household Income .......................................................................................................... Tenure by Income ........................................................................................................... Tenure by Age of Householder ....................................................................................... Household Type .............................................................................................................. Employment Growth Trends ........................................................................................... Major Employer Interviews ............................................................................................. HOUSING CHARACTERISTICS ......................................................................................... Introduction .................................................................................................................... Age of Housing Stock....................................................................................................... Housing Stock by Structure Type .................................................................................... Condition of Housing Stock ............................................................................................. Housing Stock by Structure Type .................................................................................... Residential Construction Trends in Steele County .......................................................... FOR‐SALE MARKET ANALYSIS ....................................................................................... Introduction .................................................................................................................... Home Sales ...................................................................................................................... Current Supply of Homes on the Market ........................................................................ Actively Marketing and Pending For‐Sale Housing Developments ................................ Mobile Homes ................................................................................................................. For‐Sale Interviews Summary ......................................................................................... RENTAL MARKET ANALYSIS .......................................................................................... Introduction .................................................................................................................... General Occupancy Rental Properties ............................................................................ Housing Choice Voucher Program .................................................................................. Pending Rental Developments in the PMA ..................................................................... Rental Market Interview Summary ................................................................................. Page 1 1 1 4 4 4
4 7 8 12 14 16 19 22 24 24 24 26 27 25 28 31 31 31 33 36 42 44 46 46 46 60 62 62 TABLE OF CONTENTS (continued) SENIOR HOUSING ANALYSIS ......................................................................................... Senior Housing Defined ................................................................................................... Senior Housing in the Primary Market Area ................................................................... Pending Senior Housing Developments .......................................................................... HOUSING DEMAND ANALYSIS ...................................................................................... Introduction .................................................................................................................... Demographic Profile and Housing Demand .................................................................... Estimated Demand For‐Sale Housing.............................................................................. Estimated Demand for General Occupancy Rental Housing .......................................... Estimated Demand for Independent Adult/Few Services Senior Housing .................... Estimated Demand for Affordable Independent Senior Housing ................................... Estimated Demand for Subsidized Senior Housing ......................................................... Estimated Demand for Congregate Senior Housing ....................................................... Demand Estimate for Assisted Living Housing ................................................................ Estimated Demand for Memory Care Housing ............................................................... CONCLUSIONS AND RECOMMENDATIONS.................................................................... Introduction/Overall Housing Recommendations .......................................................... For‐Sale Housing ............................................................................................................. General Occupancy Rental Housing ................................................................................ Senior Housing ................................................................................................................ Challenges and Opportunities ......................................................................................... Page 64 64 65 74 76 76 76 79 81 83 85 86 88 89 92 95 95 98 98 100 102 LIST OF TABLES Table Number and Title Page 1. Population and Household Growth Trends and Projections, Primary Market Area, 1990 to 2020 .................................................................................................................... 5 2. Households by Size, Primary Market Area, 2010 ............................................................ 6 3. Population Age Distribution, Primary Market Area, 1990 to 2020 ................................. 7 4. Household Income by Age of Householder, PMA, 2013 ................................................. 10 5. Household Income by Age of Householder, PMA, 2020 ................................................. 11 6. Tenure by Household Income, PMA, 2011 ...................................................................... 13 7. Tenure by Age, PMA, 2000 and 2010 .............................................................................. 15 8. Household Type Trends, PMA, 1990 to 2010 .................................................................. 18 9. Resident Employment, Steele County, 2000 to 2013 ...................................................... 20 10. Covered Employment by Industry, PMA, 2000, 2008. 2013 ........................................... 21 11. Major Employers, City of Owatonna and Surrounding Areas, May 2013 ....................... 23 12. Age of Housing Stock, Steele County, 2011 ..................................................................... 25 13. Housing Stock by Units in Structure, Steele County, 2011 .............................................. 27 28 14. Condition of Single‐Family and Townhomes, City of Owatonna, 2013 ........................... 15. Residential Construction, Owatonna & Remainder of Steele County, 2000 to 2012 ..... 30 16. Home Resale Trends, Primary Market Area, 2000 to 2013 ............................................. 32 17. Traditional and Bank Owned Home Sales, Primary Market Area, 2000 and 2005 to 2013 33 18. Single‐Family Homes Currently Listed For‐Sale, Primary Market Area, May 2013 ......... 34 19. Bedrooms and Listing Price of Single‐Family Homes, Primary Market Area, May 2013 . 35 20. Active Single‐Family Subdivisions, PMA, May 2013 ........................................................ 39 21. Active Townhome and Patio Home Subdivisions, PMA, May 2013 ................................ 41 22. Mobile Home Parks, Primary Market Area, May 2013 .................................................... 43 23. Market Rate General Occupancy Rental Housing, City of Owatonna, May 2013 ........... 48 24. Affordable General Occupancy Rental Housing, Owatonna and the Remainder of PMA, May 2013 ......................................................................................................................... 54 25. Subsidized General Occupancy Rental Housing, Owatonna and the Remainder of PMA, May 2013 ......................................................................................................................... 58 26. Market Rate Senior Housing, Owatonna and the Remainder of PMA, May 2013 .......... 67 27. Subsidized Senior Housing, Owatonna and the Remainder of PMA, May 2013 ............. 71 28. For‐Sale Housing Demand, Owatonna Market Area, 2013 to 2020 ................................ 78 80 29. Rental Housing Demand, Owatonna Market Area, 2013 to 2020 ................................... 30. Market Rate Adult/Few Services Housing Demand, Owatonna Market Area, 2013 & 2020 84 31. Affordable Independent Senior Housing Demand, Owatonna Market Area, 2013 & 2020 86 32. Subsidized Independent Senior Housing Demand, Owatonna Market Area, 2013 & 2020 87 33. Market Rate Congregate Housing Demand, Owatonna Market Area, 2013 & 2020 ...... 89 34. Market Rate Assisted Living Demand, PMA, 2013 & 2020 .............................................. 91 35. Memory Care Demand, Owatonna Market Area, 2013 & 2020 ...................................... 93 36. Summary of Housing Demand, City of Owatonna, May 2013 ......................................... 95 37. Recommended Housing Development, Owatonna, 2013 to 2020 .................................. 97 KEY FINDINGS Introduction Maxfield Research Inc. was engaged by the Owatonna Housing and Redevelopment Authority to provide an assessment of housing needs for the City of Owatonna, Minnesota. This study is an update of the previous housing needs assessment for HRA completed in 2010. Detailed calculations of housing demand from 2013 to 2020 can be found in the Conclusions and Recommendations section of the report. Recommendations on the amount and types of housing that should be developed to accommodate the housing needs over the remainder of the decade is presented as well. The following are key highlights from the housing needs assessment. Key Findings 1. Steele County has experienced moderate population and household growth over the past couple decades. The population grew 9.6% between 1990 and 2000 and 8.6% between 2000 and 2010. Due to the great recession and lack of household growth over the past five years, growth is projected to decline significantly through 2020 with population and house‐
hold growth of 3.9% and 5.3%, respectively. Owatonna accounts for about 70% of the County’s population base. 2. Between 2000 and 2010, baby boomers age 45‐64 accounted for the majority (77%) of the County’s population growth. This decade the most rapid growth will be in the 55‐64 (18%) and 65‐74 (57%) as the baby boomers continue to age. 3. Overall, there is demand for about 600 new housing units in Owatonna between 2013 and 2020. Out of that demand, 50/50 will be for renter and owner‐occupied housing. The City of Owatonna will capture roughly 75% of these households. 4. Total projected demand by housing type from through 2020 is below:  Owner‐occupied o Single‐family = 206 lots o Townhomes/Twinhomes = 36 lots  General occupancy rental o Market rate = 95 units o Affordable = 32 units = 24 units o Subsidized  Senior housing o Subsidized = 35 units o Adult/few services = 75 units  Ownership = 34 units  Rental = 35 units MAXFIELD RESEARCH INC. 1
KEY FINDINGS o Congregate o Assisted living o Memory care = = = 40 units 0 units 0 units 5. The current supply of available lots for single‐family homes is sufficient to support devel‐
opment for the foreseeable future. As the lots are currently planned, they will likely meet or exceed the need for all types of housing (i.e. entry‐level, move‐up, and executive). 6. The current supply of available lots for townhomes/twinhomes will satisfy all need through 2020. Among the demand for multifamily owner‐occupied units, we find that about half could be age‐restricted housing in either a townhome or cooperative development, alt‐
hough none is currently planned as such. 7. The overall vacancy rate for market rate general occupancy rental housing is 5.5%. Only three properties have been added since 2000, but the overall vacancy rate between them is 2.3% versus 6.7% in older buildings, with some having much higher rates. Therefore, we believe that there is strong demand for a new general occupancy rental development with 55 to 60 units and 30 to 35 units of rental townhomes. 8. Affordable general occupancy rental properties are performing very well, with three of the four Owatonna properties being fully occupied with waiting lists. We recommend adding another similar rental property with up to 35 units as the economy improves. 9. Many of the older market rate rental units that would become available as a result of the development of a new market rate building would be affordable to some low‐ and moder‐
ate‐income households. However, current older rental properties with affordable rents have higher vacancy rates. This could be due to the condition of these properties and the desire of renters wanting newer amenities and better living conditions that may not be pro‐
vided at these buildings. 10. There is demand for 184 units of independent senior housing through 2020. A rental development could accommodate up to 41 units while along with an additional 34 coopera‐
tive units which we recommend be included as an expansion of an existing facility as a new stand‐alone facility may have trouble competing in the market. Another 34 units should be in a subsidized rental property, as demand for subsidized senior units is very high. There are no affordable senior rental developments in Owatonna ad thus, 35 units could be de‐
veloped. The final 40‐ units should be in a congregate building. Existing adult and congre‐
gate buildings are performing well. 11. The existing supply of assisted living and memory care units in Owatonna plus is currently meeting the need for market rate assisted living and memory care units in Owatonna over the decade. Existing facilities are performing well, but would begin to experience higher vacancies if additional units come on‐line. MAXFIELD RESEARCH INC. 2
KEY FINDINGS 12. Assisted living and memory care facilities that can accept Elderly Waivers have no vacancies, and are thus very successful. Facilities that do not accept Elderly Waivers have high vacancy rates, indicating that the demand for assisted living and memory care is high, but that most of the excess demand in the Owatonna area cannot afford private pay rates at these facili‐
ties. MAXFIELD RESEARCH INC. 3
DEMOGRAPHIC ANALYSIS Introduction This section of the report examines factors related to the current and future demand for both owner‐ and renter‐occupied housing in Owatonna, Minnesota. It includes an analysis of popu‐
lation and household growth trends and projections, population age trends and projections, household income data, and household tenure. A review of these characteristics provides insight into the demand for various types of housing in the City. Primary Market Area Definition To compare, we are utilizing the same draw area from the previously completed housing study we provided in 2010. This draw area determines current and future housing demand in Owatonna. The Primary Market Area (PMA) is comprised of the City of Owatonna and the remainder of Steele County, which lies in South‐Central Minnesota. Rice County borders the PMA to the north, Dodge County borders to the east, Waseca County borders to West, and Freeborn County borders to the south. Population and Household Growth Trends and Projections Table 1 presents population and household growth trends for the PMA from 1990 to 2020. The data from 1990, 2000, and 2010 is from the U.S. Census, while the projections 2020 are based on data from the Minnesota Demographic Center. Maxfield Research Inc. has adjusted projec‐
tions based on local building trends. Table 2 presents data about household size in 2010. Key findings of Tables 1 and 2 are:  The PMA contained 36,576 people and 14,330 households in 2010. Owatonna, with a population of 25,599 people and 10,068 households accounted for roughly 70% of the County’s population and household base in 2010.  Steele County has experienced steady growth over the past two decades. Between 2000 and 2010, the total population grew by about 8.6%. A decline in real estate development after the great recession through the first few years of the current decade results in a pro‐
jected growth of 3.9% over the next decade, significantly lower than the two previous dec‐
ades.  Due to the strong real estate market over the first half of the decade, growth remained steady in the PMA during the 2000s specifically within the cities. Between 2000 and 2010, Owatonna’s population grew by 14%, Blooming Prairie by 3%, Ellendale grew by 17% and Medford grew by 26%. The remainder of the County continued to lose population, reflect‐
ing the common trend of rural population loss. All areas except Blooming Prairie will expe‐
rience growth, albeit at a significantly lesser rate between 2010 and 2020. MAXFIELD RESEARCH INC. 4
DEMOGRAPHIC ANALYSIS TABLE 1
POPULATION AND HOUSEHOLD GROWTH TRENDS AND PROJECTIONS PRIMARY MARKET AREA
1990 to 2020
‐‐ U.S. Census ‐‐ 1990
2000
Projections
2010
2020
‐‐‐‐ Change ‐‐‐‐ 2000 to 2010
2010 to 2020
No.
Pct.
No.
Pct.
Population
Owatonna
19,386
22,434
25,599
27,134
3,165
14.1
1,535
6.0
Blooming Prairie
Ellendale
Medford
Remainder of County
2,043
549
733
8,018
1,933
590
984
7,739
1,996
691
1,239
7,051
1,988
758
1,405
6,724
63
101
255
‐688
3.3
17.1
25.9
‐8.9
‐8
67
166
‐327
‐0.4
9.8
13.4
‐4.6
Steele County Total
30,729
33,680
36,576
38,010
2,896
8.6
1,434
3.9
Owatonna
7,382
8,704
10,068
10,731
1,364
15.7
663
6.6
Blooming Prairie
Ellendale
Medford
Remainder of County
745
235
276
2,704
748
252
377
2,765
802
296
450
2,714
823
326
507
2,703
54
44
73
‐51
7.2
17.5
19.4
‐1.8
21
30
57
‐11
2.6
10.3
12.6
‐0.4
11,342
12,846
14,330
15,090
1,484
11.6
760
5.3
Households
Steele County
Sources: U.S. Census; Minnesota Demographic Center; Maxfield Researc
MAXFIELD RESEARCH INC.
5
DEMOGRAPHIC ANALYSIS 



In all areas for all presented decades, the household growth rate exceeds the population growth rate. The average household size in Steele County declined from 2.71 people per household in 1990 to 2.55 in 2010 to a projected 2.52 in 2020. Smaller families as well as the aging of the area population, which results in increasing numbers of empty‐nester households and seniors living alone, cause this trend. An aging population largely explains how rural parts of Steele County lost 688 people between 2000 and 2010 (‐9%) and only lost 51 households (‐2%). Smaller household sizes could be off‐set to some degree should the area continue to attract new and recent immigrants, which typically have a larger number of people in the house‐
hold. Two‐person households are the most common in Owatonna, the remainder of Steele County, and Steele County as a whole. They comprise 35% of Owatonna’s households, 39% of the remainder of the County’s, and 36% of the County’s as a whole. The trend towards decreasing household size will correlate with continued growth of two‐person households. One‐person households form 29% of Owatonna’s households but only 22% of those in the remainder of the county. Owatonna attracts to a greater extent young, single households seeking rental units and seniors living alone that require service‐intensive housing. TABLE 2
HOUSEHOLDS BY SIZE
PRIMARY MARKET AREA
2010
Household Size
1‐person
2‐person
3‐person
4‐person
5‐person
6‐person
7‐or‐more‐persons
Total
Owatonna
2,807
3,495
1,413
1,332
679
195
147
10,068
27.9%
34.7%
14.0%
13.2%
6.7%
1.9%
1.5%
Sources: U.S. Cenus; Maxfield Research Inc.
MAXFIELD RESEARCH INC. Remainder
of County
940
1,670
614
603
298
95
42
4,262
22.1%
39.2%
14.4%
14.1%
7.0%
2.2%
1.0%
Steele
County
3,747
5,165
2,027
1,935
977
290
189
14,330
26.1%
36.0%
14.1%
13.5%
6.8%
2.0%
1.3%
6
DEMOGRAPHIC ANALYSIS Population Age Distribution Trends Table 3 shows the age distribution of the PMA population in 1990 and 2000, as well as projec‐
tions for 2010 and 2020. The 1990, 2000, and 2010 distributions are from the U.S. Census. Maxfield Research Inc. adjusted the 2020 projections from data obtained from ESRI Inc. and the Minnesota Demographic Center. TABLE 3
POPULATION AGE DISTRIBUTION
PRIMARY MARKET AREA
1990 to 2020
Owatonna
17 & under
18‐24
25‐34
35‐44
45‐54
55‐64
65‐74
75+
Total
1990
No.
5,346
1,917
3,331
2,838
1,790
1,514
1,342
1,308
Number of Persons
2000
2010
No.
No.
6,302
6,890
1,875
1,889
3,058
3,365
3,637
3,368
2,912
3,661
1,754
2,882
1,417
1,663
1,479
1,881
2020
No.
7,090
1,886
3,310
3,620
3,446
3,500
2,694
2,144
‐‐‐‐ Change ‐‐‐‐ 2000 ‐ 2010
2010 ‐ 2020
No.
Pct.
No.
Pct.
588
9.3
200
2.9
14
0.7
‐3
‐0.2
307
10.0
‐55
‐1.6
‐269
‐7.4
252
7.5
749
25.7
‐215
‐5.9
1,128
64.3
618
21.5
246
17.4
1,031
62.0
402
27.2
263
14.0
19,386
0.76
No.
3,446
795
1,671
1,615
1,177
995
937
707
22,434
0.77
No.
3,102
873
1,255
1,825
1,555
1,044
765
827
25,599
0.80
No.
2,760
707
1,141
1,391
1,788
1,464
926
800
27,134
3,165
14.1
1,535
6.0
No.
2,369
522
827
1,304
1,327
1,610
1,370
990
No.
‐342
‐166
‐114
‐434
233
420
161
‐27
Pct.
‐11.0
‐19.0
‐9.1
‐23.8
15.0
40.2
21.0
‐3.3
No.
‐391
‐185
‐315
‐87
‐461
146
444
190
Pct.
‐14.2
‐26.2
‐27.6
‐6.3
‐25.8
9.9
48.0
23.7
11,343
0.89
No.
8,792
2,712
5,002
4,453
2,967
2,509
2,279
2,015
11,246
0.80
No.
9,404
2,748
4,313
5,462
4,467
2,798
2,182
2,306
10,977
0.81
No.
9,650
2,596
4,506
4,759
5,449
4,346
2,589
2,681
10,875
‐269
‐2.4
‐102
‐0.9
No.
9,459
2,408
4,137
4,924
4,773
5,110
4,065
3,133
No.
246
‐152
193
‐703
982
1,548
407
375
Pct.
2.6
‐5.5
4.5
‐12.9
22.0
55.3
18.7
16.3
No.
‐191
‐188
‐369
165
‐676
764
1,476
452
Pct.
‐2.0
‐7.2
‐8.2
3.5
‐12.4
17.6
57.0
16.9
30,729
33,680
36,576
38,010
2,896
8.6
0.80
0.78
0.80
0.83
Sources: U.S. Census Bureau; Minnesota Demographic Center; Maxfield Research Inc.
1,434
3.9
Remainder of County
17 & under
18‐24
25‐34
35‐44
45‐54
55‐64
65‐74
75+
Total
Steele County
17 & under
18‐24
25‐34
35‐44
45‐54
55‐64
65‐74
75+
Total
MAXFIELD RESEARCH INC. 7
DEMOGRAPHIC ANALYSIS The following are key trends in Steele County’s age distribution:  Growth in baby boomers, age 45 to 64, propelled the majority (59%) of Owatonna’s growth between 2000 and 2010. Decline in the baby bust generation (‐7%), age 35 to 44, is a result of baby boomers aging out of this age group and being replaced by fewer young people. Owatonna also attracted families with children, which accounts for the 9% growth in the 17 & under age cohort. The less than 1% growth in the 18 to 24 age cohort and the 10% growth in the 25 to 34 age cohort is a result of rapid growth in the 17 & under and 18 to 24 groups in the previous decade.  Patterns in the remainder of the County show heavy declines in the number of families with children. The 35 to 44 age cohort decreased by 24% between 2000 and 2010 for the rea‐
sons mentioned above, which caused an 11% decline in the 17 & under age cohort. The largest growth occurred among the 55 to 64 population due to aging of baby boomers.  Growth between 2010 and 2020 will continue to shift to older populations in both Owaton‐
na and the remainder of the County. Most age cohorts in Owatonna will grow except the 18 to 34 (‐1%) and the 45 to 54 (‐6%) cohorts. The loss of the 45 to 54 population is a result of the very slight growth in the previous decade of the 35 to 44 cohort not keeping up with the aging of baby boomers. The most rapid growth will be in the 55 to 64 (21.5%) and 65 to 74 (62%) age groups due to the aging of baby boomers. In the remainder of the County, the most severe loss will occur in the 45 to 54 age cohort due to the loss in the 35 to 44 cohort in the previous decade. Also, all age cohorts 34 and younger will experience population loss. Household Income Tables 4 and 5 show the estimated distribution of household incomes in Steele County for 2013 and 2020. The data was estimated by ESRI and adjusted by Maxfield Research Inc. based on household growth projections by the Minnesota State Demographic Center. The data helps in ascertaining the demand for different housing products based on the size of the market at specific cost levels. The Department of Housing and Urban Development defines affordable housing costs for families as 30% of a household’s adjusted gross income. Maxfield Research Inc. uses a figure of 25% to 30% for younger households and 40% or more for seniors, since seniors generally have lower living expenses and can often sell their homes and use the proceeds toward rent pay‐
ments. A generally accepted standard for affordable owner‐occupied housing is that a typical house‐
hold can afford to pay 2.5 to 3.0 times their annual income on a single‐family home, down from 3.0 to 3.5 or even higher a few years ago when high‐risk loans were easily available. Thus, a MAXFIELD RESEARCH INC. 8
DEMOGRAPHIC ANALYSIS $50,000 income would translate to an affordable single‐family home of $125,000 to $150,000. The higher end of this range assumes that the person has adequate funds for down payment and closing costs, but does not have savings or equity in an existing home which would allow them to purchase a higher priced home. The following are key points from Tables 4 and 5:  The median household income in Owatonna in 2013 was estimated to be $52,427. The median household income is estimated to be slightly lower in the remainder of the County – at $53,797. Typically, cities such as Owatonna have a lower median income than surrounding rural areas because they tend to have a greater number of lower‐income households living in subsidized rental or lower‐priced housing than the surrounding rural area.  Overall, incomes are expected to increase by about 9% between 2013 and 2020, or slightly less than 2.5% annually, in Owatonna and the remainder of the County. This will result in the median income in Owatonna increasing to $58,848 and the median income in the remainder of the county increasing to $59,906 by 2020. However, income in Owatonna may likely have trouble keeping up with inflation. Between 2000 and 2012, annual inflation ranged from ‐0.4% to 3.8%, and was over 2% in every year except 2002, 2009, and 2010. Non‐Senior Households  In 2013, 8% of the non‐senior households in Owatonna had incomes under $15,000 (471 households). All of these households would be eligible for subsidized rental housing. An‐
other 7% of Owatonna’s non‐senior households had incomes between $15,000 and $25,000 (417 households). Many of these households would qualify for subsidized housing, but many could also afford “affordable” or older market‐rate rentals. If housing costs absorb 30% of income, households with incomes of $15,000 to $25,000 could afford to pay $375 to $625 per month.  Median incomes for households in Owatonna peaked at $67,885 for the 45 to 54 age group in 2013. These households could afford to purchase a home valued from $169,700 to $203,655 (2.5 to 3.0 times income). However, the majority of households (81.6%) in this age group are homeowners, so would have equity from an existing home that they could allocate toward the purchase of a higher priced home. By 2018, the median income for the 45 to 54 age group is projected to increase to $72,610, a 7% increase.  The median resale price of homes in Owatonna was $129,900 in March 2013 (see Table 16). The income required to afford a home at this price would be about $37,100 to $43,300 based on the standard of 3.0 to 3.5 times the median income (and assuming these households do not have a high level of debt). In 2013, 67% (6,799 households) of Owatonna’s non‐senior households had incomes greater than $37,100. MAXFIELD RESEARCH INC. 9
HOUSEHOLD INCOME BY AGE OF HOUSEHOLDER
PRIMARY MARKET AREA
(Number of Households)
2013
Age of Householder
Owatonna
Less than $15,000
$15,000 to $24,999
$25,000 to $34,999
$35,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 to $150,000
$150,000+
Total
Median Income
Remainder of Steele County
Less than $15,000
$15,000 to $24,999
$25,000 to $34,999
$35,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 to $150,000
$150,000+
Total
Median Income
Steele County
Less than $15,000
$15,000 to $24,999
$25,000 to $34,999
$35,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 to $150,000
$150,000+
Total
Median Income
Total
15‐24
25‐34
35‐44
45‐54
55‐64
65 ‐74
75+
1,074
970
1,095
1,728
2,292
1,465
1,192
364
10,180
158
13
56
84
80
36
4
0
431
100
133
163
337
506
247
170
14
1,669
113
134
169
250
434
332
299
86
1,817
101
139
175
246
512
449
351
81
2,053
149
134
145
312
410
256
254
136
1,793
137
81
206
220
261
90
72
42
1,109
317
338
182
280
90
55
41
5
1,308
$52,427
$33,000
$55,050
$63,986
$67,885
$59,660
$43,917
$24,985
453
322
456
758
1,103
619
414
187
4,312
26
0
5
15
26
12
2
1
87
34
32
45
119
177
83
56
4
549
46
24
69
117
214
129
94
51
743
55
41
72
109
276
211
130
47
940
62
61
65
153
229
125
102
68
865
94
36
93
142
137
47
24
13
585
137
129
108
101
45
12
6
4
543
$53,787
$47,500
$56,320
$63,547
$67,554
$60,054
$42,448
$25,459
1,527
1,292
1,551
2,486
3,395
2,084
1,605
551
14,492
184
13
61
99
106
48
6
1
517
134
164
208
456
683
329
226
18
2,218
159
157
238
367
648
461
393
137
2,560
156
179
247
355
787
660
481
128
2,994
210
194
209
465
639
381
356
203
2,658
230
117
299
362
398
137
96
55
1,694
454
467
291
382
135
67
47
9
1,851
$52,869
$35,199
$55,379
$63,841
$67,769
$59,802
$43,339
$25,154
Sources: ESRI; Maxfield Research Inc.
HOUSEHOLD INCOME BY AGE OF HOUSEHOLDER
PRIMARY MARKET AREA
(Number of Households)
2020
Age of Householder
Total
15‐24
25‐34
35‐44
45‐54
55‐64
65 ‐74
75+
1,080
820
938
1,540
2,790
1,798
1,341
424
10,731
142
12
52
70
91
40
4
0
410
95
107
133
291
615
304
193
16
1,755
100
86
123
203
504
395
328
101
1,840
85
97
118
188
553
496
356
84
1,977
144
100
122
274
516
333
301
161
1,950
166
87
212
229
383
145
103
57
1,382
349
332
178
285
128
85
56
5
1,417
$58,848
$35,000
$60,223
$70,257
$72,610
$66,265
$49,758
$26,577
Less than $15,000
417
$15,000 to $24,999
248
$25,000 to $34,999
363
$35,000 to $49,999
635
$50,000 to $74,999
1,304
$75,000 to $99,999
728
$100,000 to $150,000
443
$150,000+
221
Total
4,359
17
‐0
4
12
28
13
2
1
76
30
23
33
91
207
96
60
7
548
37
10
41
90
237
150
98
59
722
38
25
46
77
279
217
125
48
854
52
37
48
123
276
158
118
78
890
99
33
89
140
206
77
35
22
703
143
119
102
101
70
18
6
6
566
$59,906
$54,674
$61,594
$69,248
$71,633
$66,731
$48,850
$27,007
1,498
1,068
1,300
2,175
4,093
2,526
1,785
645
15,090
159
11
56
82
119
53
6
1
486
125
130
166
382
822
401
253
23
2,302
137
96
163
293
742
545
426
160
2,563
123
122
164
265
831
713
481
131
2,831
196
137
169
397
792
491
419
239
2,840
265
120
302
370
589
222
137
80
2,084
492
451
280
386
198
102
62
11
1,983
$59,185
$38,133
$60,568
$69,934
$72,283
$66,428
$49,413
$26,734
Owatonna
Less than $15,000
$15,000 to $24,999
$25,000 to $34,999
$35,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 to $150,000
$150,000+
Total
Median Income
Median Income
Steele County
Less than $15,000
$15,000 to $24,999
$25,000 to $34,999
$35,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 to $150,000
$150,000+
Total
Median Income
Sources: ESRI; Maxfield Research Inc.
Senior Households  Incomes drop significantly as households age. The median income in Owatonna for house‐
holds age 65 to 74 is 26% less than that of the 55 to 64 age cohort. The median drops an additional 43% for the 75+ age cohort. In Owatonna, 12% of households ages 65 to 74 had incomes below $15,000, compared to 24% of households age 75 and over. Many of these low‐income older senior households rely solely on Social Security benefits. Typically, MAXFIELD RESEARCH INC. 11


younger seniors have higher incomes because they are still able to work or are married couples with two pensions or higher Social Security benefits. Generally, senior households with incomes greater than $25,000 can afford market‐rate senior housing. Based on a 40% allocation of income for housing, this translates to monthly rents of at least $833. There are 1,540 senior households in Owatonna (64% of senior households) had incomes above $25,000 in 2013, as did 732 senior households in the re‐
mainder of the County (65% of senior households). Seniors who are able and willing to pay 80% or more of their income on assisted living housing would need an annual income of $33,000 to afford monthly rents of $2,200, which is about the beginning monthly rent for assisted living in Owatonna. In Owatonna, there were an estimated 506 older senior (ages 75 and over) households with incomes greater than $33,000 in 2013 (39%). Seniors age 75 and over are the primary market for assisted living housing. It is important to note that seniors are often able and willing to allocate a larger share of their income on rental housing that meets their needs since they no longer have to save for retirement, their children’s education or major purchases (home, car, etc.). This is particu‐
larly true in “senior” rental projects where support services and personal care assistance are available. In fact, research has shown that, in assisted living projects, up to 50% of residents not only allocated all of their income but spent‐down assets in order to afford monthly housing and service costs. Tenure by Income Table 6 shows the number of owner and renter households in the PMA by income cohort in 2011 based on the American Community Survey five‐year estimate. The data is useful because it shows the housing options and preferences for households based on affordability. Key points from the table are:  As income increases, so does the rate of homeownership. In the PMA, 90% of households earning $50,000 or more own their homes, and every income cohort has higher homeown‐
ership rates than the next lowest. Homeownership rates for the lowest income households in Owatonna are much lower than in the remainder of the County – 32% versus 76.5% for households earning less than $15,000 per year – because of lower housing costs in rural ar‐
eas and a concentration of low‐cost rental properties in Owatonna. In both areas, low‐
income homeowners tend to be seniors that have paid off their mortgages. MAXFIELD RESEARCH INC. 12
TENURE BY HOUSEHOLD INCOME
PRIMARY MARKET AREA
2011 ACS (5‐Year Estimate)
Owatonna
Own
No.
Less than $15,000
$15,000 to $24,999
$25,000 to $34,999
$35,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 to $150,000
$150,000+
Total
356
552
523
1,025
1,718
1,274
1,320
537
7,305
Median Income
$68,001
Pct.
31.6
56.6
52.7
74.1
77.9
93.1
97.9
98.2
73.4
Rent
No.
Pct.
771
424
470
358
488
94
29
10
2,644
$27,514
63.0
48.0
38.0
26.0
11.2
5.3
5.2
3.5
26.6
Rem. of County
Own
Rent
No.
Pct.
No.
Pct.
274
235
380
417
873
794
503
187
3,663
76.5
73.4
87.0
84.4
89.9
96.0
99.2
98.9
89.3
$68,854
Source: US Census Bureau ‐ American Community Survey (5‐Year Estimate); Maxfield Research Inc.
84
85
57
77
98
33
4
2
440
23.5
26.6
13.0
15.6
10.1
4.0
0.8
1.1
10.7
$44,791
Steele County
Own
No.
630
787
903
1,442
2,591
2,068
1,823
724
10,968
$67,294
Pct.
42.4
60.7
63.1
76.8
81.6
94.2
98.2
98.4
78.1
Rent
No.
Pct.
855
509
527
435
586
127
33
12
3,084
56.5
40.5
33.4
21.0
10.5
4.1
3.6
3.1
21.9
$35,000
13

Typically, renter households with incomes of $25,000 or less qualify for government subsi‐
dized housing. In 2011, there were an estimated 1,364 such households in Steele County, or about 44% of the total renter households. However, waitlists are often long for subsi‐
dized housing, forcing low‐income households into market rate units. If such households allocated 30% of their monthly incomes to housing, they could afford a unit that cost no more than $625 per month. Almost all market rate efficiency and one‐bedroom apartments in Owatonna have monthly rents below $625, but only a limited number of two‐bedroom and no three‐bedroom apartments have rents below $625 per month, meaning low‐income families with children would require subsidized rental housing if their housing was to be af‐
fordable. Renter households with incomes of between $25,000 and $40,000 are usually the market for “affordable” rental projects with a shallow subsidy (housing with income restrictions and rents slightly below market rents, such as those financed through Minnesota Housing Fi‐
nance Agency’s Section 42/Low‐Income Housing Tax Credit program). These households can typically afford housing costs of between $625 and $1,000 per month. As of 2011, there were an estimated 817 households in Steele County with incomes between $25,000 and $40,000. Units with shallow subsidies are also scarce, but market rate housing in Owatonna is relatively affordable to such households. Rent for two‐ and three‐bedroom units exceeds $1,000 per month at only one market rate development in the city and at no others exceeds $676 for a two‐bedroom unit and $775 for a three‐bedroom unit. Tenure by Age of Householder Table 7 shows the number of owner and renter households in the PMA by age group in 2000 and 2010. This data shows the propensity of households to own or rent their housing based on their age. Key points derived from the table are:  In 2010, 78% of households in Steele County owned their homes compared to 80% in 2000. In Owatonna in 2010, 74% of households owned their home in 2010 versus 87% in the re‐
mainder of the County. The rural parts of the County have higher homeownership rates be‐
cause the low densities allowed in those areas cannot support multi‐family rental housing.  The highest homeownership rates occur in households ages 45 to 74, and decline as house‐
holds age over 75+. In 2010, 86% of households in Steel County age 55 to 64 owned their homes. The figure increases slightly to 87% for households age 65 to 74, then drops signifi‐
cantly to 73% for households age 75+, though the rate is still relatively high. Many senior households choose to sell their homes and move to rental housing because of the lower maintenance responsibilities or because they require service‐intensive housing such as as‐
sisted living or skilled nursing. MAXFIELD RESEARCH INC.
14
TENURE BY AGE
PRIMARY MARKET AREA
2000 AND 2010
Age 15 ‐ 24
Own Rent
Owatonna
Pct. Own
Rem. of County
Pct. Own
Steele County
Pct. Own
Owatonna
Pct. Own
Rem. of County
Pct. Own
Steele County
Pct. Own
Age 25 ‐ 34
Own Rent
Age 35 ‐ 44
Own Rent
Age 45 ‐ 54
Own Rent
143
350
29.0%
1,021
559
64.6%
1,657
395
80.8%
2000
1,435
257
84.8%
876
127
87.3%
766
116
86.8%
747
255
74.6%
6,645 2,059
76.3%
85
64
57.0%
475
115
80.5%
850
120
87.6%
776
63
92.5%
550
31
94.7%
429
93.7%
29
486
69
87.6%
3,651
491
88.1%
228
414
35.5%
1,496
674
68.9%
2,507
515
83.0%
2,211
320
87.4%
1,426
158
90.0%
1,195
145
89.2%
1,233
324
79.2%
10,296 2,550
80.1%
139
301
31.6%
1,029
622
62.3%
1,408
474
74.8%
2010
1,717
386
81.6%
1,404
294
82.7%
857
163
84.0%
869
405
68.2%
7,423 2,645
73.7%
40
52
43.5%
407
109
78.9%
622
112
84.7%
874
95
90.2%
782
57
93.2%
524
92.3%
44
463
81
85.1%
3,712
550
87.1%
179
353
33.6%
1,436
731
66.3%
2,030
586
77.6%
2,591
481
84.3%
2,186
351
86.2%
1,381
207
87.0%
1,332
486
73.3%
11,135 3,195
77.7%
Sources: U.S. Census, Maxfield Research Inc.
Age 55 ‐ 64
Own Rent
Age 65 ‐ 74
Own Rent
Age 75+
Own Rent
Total
Own Rent
15


The lowest homeownership rates occur in households age 15 to 24. In 2010, 34% of such households in Steele County owned their home. However, only 32% of such households in Owatonna versus 43.5% of such households in the remainder of the County owned their homes. Households in the rural part of the County tend to be at the older end of the cohort and thus more likely to own their home than households in Owatonna. Although the propensity for households ages 15 to 24 to rent their housing is higher, the 25 to 34 age group had, by far, the largest number of renters (731), accounting for slightly less than one‐quarter of all renters. Their needs will therefore be a significant driving force for rental housing development in the next decade. Both Owatonna and the remainder of Steele County experienced slight declines in their overall homeownership rates between 2000 and 2010. All age cohorts in both the Owaton‐
na and the Remainder of the County declined slightly in homeownership rates except for the 15 to 24 age group in Owatonna which increased about 2%. The addition of several sen‐
ior rental developments and the overall aging of older adults resulted in the drop in the PMA. In the remainder of the County, a greater loss in overall owner households compared to renter households has caused a decrease in homeownership percentages. A lack of sen‐
ior rental units in the remainder of the County precluded such a drop in rural areas. Seniors in those areas desiring rental housing would have either moved to Owatonna or left Steele County. Homeownership rates in middle age cohorts were relatively stable in Owatonna and the remainder of the County declining just slightly. Household Type Table 8 shows a breakdown of the type of households in the PMA in 1990, 2000, and 2010. This data is useful in assessing housing demand since the household composition often dictates the type of housing needed and preferred. Key points from the table are:  During the 1990s, married couples without children surpassed married couples with chil‐
dren in the PMA and have continued to grow through the last decade while married couples with children are declining. This is due to couples waiting longer to have children and the baby boomers aging into empty nester years.  Between 2000 and 2010, rapid development of single family homes did not correlate in the growth in of married couples with children. This group actually decreased their portion of households 5.0 percentage points to 23% while married couples without children increased 1.2 percentage points to 33%. Married couples with children also experienced the only de‐
cline in absolute growth between 2000 and 2010, declining 298 households throughout the PMA. MAXFIELD RESEARCH INC. 16
In 2010, married households without children constituted a significantly larger portion of the population in the PMA outside of Owatonna than in Owatonna – 39% versus 30%. As of 2010 the population age 45 and older, which is less likely to have children living at home, was 39% of the population in Owatonna but 45% in the remainder of the County. However, Owatonna has been bridging the gap with significant increases in these categories over the past two decades.  Other family households, which are typically single parents with children, continued to increase between 2000 and 2010. Owatonna added 393 (38%) and the remainder of the County gained 65 (16%). These households are most likely to need affordable rental or ownership housing.  Between 2000 and 2010, roommate households increased slightly in both Owatonna and the remainder of the County for an overall increase in the PMA of 97 households (16%). 
Persons living alone continued to gain as a portion of households, increasing by 593 house‐
holds between 2000 to 2010 to constitute 26% of all households. This reflects the increased number of persons choosing to remain single and also an increase in the number of seniors. As the frailty level of these seniors increases, they will be moving out of their homes creat‐
ing pressure on senior housing alternatives. MAXFIELD RESEARCH INC. 17
HOUSEHOLD TYPE TRENDS
PRIMARY MARKET AREA
1990 to 2010
Non‐Family Households
Family Households
Total Households
1990
2000
2010
Number of Households
Owatonna
Rem.of County
Steele County
Married
With Children
1990
2000
2010
Married
w/o Children
1990
2000
2010
1990
Other
Family
2000
2010
Persons
Living Alone
1990
2000
2010
Other
(Roommates)
1990 2000 2010
7,382
3,960
11,342
8,704
4,142
12,846
10,068
4,262
14,330
2,324
1,412
3,736
2,354
1,232
3,586
2,288
1,000
3,288
2,177
1,439
3,616
2,564
1,490
4,054
3,035
1,653
4,688
678
298
976
1,021
416
1,437
1,414
481
1,895
1,922
698
2,620
2,317
837
3,154
2,807
940
3,747
281
113
394
448
167
615
524
188
712
Owatonna
Rem.of County
Steele County
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
31.5
35.7
32.9
27.0
29.7
27.9
22.7
23.5
22.9
29.5
36.3
31.9
29.5
36.0
31.6
30.1
38.8
32.7
9.2
7.5
8.6
11.7
10.0
11.2
14.0
11.3
13.2
26.0
17.6
23.1
26.6
20.2
24.6
27.9
22.1
26.1
3.8
2.9
3.5
5.1
4.0
4.8
5.2
4.4
5.0
Minnesota
100.0
100.0
100.0
30.1
24.7
24.4
29.8
29.4
28.8
9.6
10.8
11.1
26.4
29.3
31.6
4.1
5.8
4.1
Percent of Total
Sources: U.S. Census Bureau; Maxfield Research Inc.
DEMOGRAPHIC ANALYSIS Employment Growth Trends Since employment growth generally fuels household growth, employment trends are a reliable indicator of housing demand. Typically, households prefer to live near work for convenience. However, housing is often less expensive in smaller towns, making longer commutes attractive for households concerned about housing affordability. Recent employment growth trends for Steele County are shown in Tables 9 and 10. Table 9 presents resident employment data for Steele County from 2000 through 1st Quarter 2013. Resident employment data is calculated as an annual average and reveals the work force and number of employed persons living in the County. It is important to note that not all of these individuals necessarily work in the County. Table 10 presents covered employment in Steele County from 2000 through 1st Quarter 2013. Covered employment data is calculated as an annual average and reveals the number of jobs in the County, which are covered by unemploy‐
ment insurance. Most farm jobs, self‐employed persons, and some other types of jobs are not covered by unemployment insurance and are not included in the table. The data in both tables is from the Minnesota Department of Employment and Economic Development. The following are key trends from the employment data: Labor Force/Resident Employment  With the exception of a few ups and downs at the beginning of the decade, employment had increased every year between 2000 and 2008 until a decline in 2009 (loss of roughly 750 employed persons). Employment has continued to increase from 2009 to 2012 for a total increase of 6.8% over the period.  The total labor force has also grown throughout the period (10% from 2000 to 2012), with a dip from 2001 to 2003. Such a trend is typical in periods of increased unemployment be‐
cause some people who have lost jobs choose to stop seeking employment, at which point they are no longer considered part of the labor force.  The unemployment rate in Steel County closely tracked that of Minnesota as a whole throughout the period. Through 2012, it never deviated more than 0.7 percentage points from the State’s rate, and was within 0.1 points in eight of the 13 years. From 2000 through 2012, the County’s and the State’s unemployment rates have been below the United States’ rate as a whole (except in 2007).  Unemployment in the County began to rise sharply after 2008. From 2008 to 2009, it increased by 3.7 percentage points, however it then decreased again by 1.0 percentage points going the following year (2010) and has continued to decline through 2012. The 1st quarter unemployment rate in 2013 was 5.9%. The largest sector in Steele County’s econ‐
omy is manufacturing, which has experienced a larger decline than many other industries in the present recession. MAXFIELD RESEARCH INC. 19
RESIDENT EMPLOYMENT
STEELE COUNTY
2000 to 2013*
Year
Labor Force
Employment
Unemployment
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013*
19,478
19,802
19,675
19,543
19,650
19,668
20,050
20,427
20,832
20,838
21,294
21,378
21,381
21,140
18,918
19,034
18,785
18,581
18,751
18,836
19,241
19,536
19,781
19,027
19,659
20,011
20,201
19,888
560
768
890
962
899
832
809
891
1,051
1,811
1,635
1,367
1,180
1,252
Number
Percent
1,903
9.8
1,283
6.8
Change 2000‐2012
620
110.7%
Unemployment Rate
County
MN
U.S.
2.9%
3.9%
4.5%
4.9%
4.6%
4.2%
4.0%
4.4%
5.0%
8.7%
7.7%
6.4%
5.5%
5.9%
3.1%
3.8%
4.5%
4.9%
4.6%
4.2%
4.1%
4.7%
5.4%
8.0%
7.4%
6.5%
5.6%
6.1%
4.0%
4.7%
5.8%
6.0%
5.5%
5.1%
4.6%
4.6%
5.8%
9.3%
9.6%
8.9%
8.1%
5.7%
‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ * Average through 1st Quarter 2013 only.
Sources: MN Department of Employment and Economic Development; Maxfield Research Inc.
Covered Employment by Industry 

The Manufacturing sector accounted for the largest portion (26%) of the jobs in Steele County as of 3rd Quarter in 2012. Its loss of 1,827 jobs since 2000 almost completely offset gains in other industries. Losses in Construction (‐282 jobs) and Information (‐108 jobs), ful‐
ly offset gains, leading to a net loss 503 (‐2.5%) jobs between 2000 and 3rd Quarter 2012. Because Steele County’s population grew between 2000 and 2010, comparing total jobs in each of those years does not fully capture the effects of the recession. From 2008 to 3rd Quarter 2012, Steele County lost 1,906 jobs. Manufacturing accounted for 52% (‐997) of these lost jobs. Manufacturing, however, has been losing jobs for several years, so this fig‐
ure is only about half of the jobs it lost between 2000 and 2012. Reduced revenues led to a loss of 161 government jobs (‐8.1%). Losses in Construction were modest because con‐
struction had nearly come to a halt by late 2008. The only industries to gain employment were Professional and Business Services (1,377 jobs) which has been experiencing a boom in growth from 2000 adding 2,300 (241%) along with Education & Health Services (267 jobs) and Natural Resources and Mining (76 jobs) although their gains were very modest. MAXFIELD RESEARCH INC. 20
DEMOGRAPHIC ANALYSIS
TABLE 10
COVERED EMPLOYMENT BY INDUSTRY
PRIMARY MARKET AREA
2000 & 2008 Annual Average and 3rd Quarter 2013
No.
2000
Avg. Wage
No.
2008
Avg. Wage
3rd Quarter 2012
No.
Avg. Wage
Chg. 2000‐2012
No.
Pct.
Chg. 2008‐2012
No.
Pct.
Goods Producing Industries
7,809
$34,750
6,797
$47,227
5,806
$46,013
‐2,003
‐25.6%
‐991
Manufacturing
Natural Resources & Mining
Construction
6,887
137
785
$34,530
$27,520
$37,939
6,057
166
575
$47,759
$31,092
$46,194
5,060
242
503
$47,129
$28,045
$43,333
‐1,827
105
‐282
‐26.5%
76.6%
‐35.9%
‐997
76
‐72
‐17.1%
/
‐19.7%
31.4%
‐14.3%
Service Providing Industries
10,319
$23,348
12,442
$32,565
13,583
$31,931
3,264
31.6%
1,141
8.4%
Trade, Transportation & Utilities*
Retail Trade
Information
Financial Activities
Professional & Business Services
Education & Health Services
Leisure and Hospitality
Other Services
996
2,781
238
1,961
956
1,500
1,418
469
$32,987
$16,115
$32,164
$38,350
$19,374
$26,887
$8,988
$18,767
1,212
3,151
149
2,124
1,879
1,976
1,506
466
$41,793
$21,491
$48,759
$68,985
$16,566
$38,437
$10,926
$23,944
1,111
3,030
130
2,016
3,256
2,243
1,427
457
$45,072
$25,688
$37,232
$65,624
$17,767
$40,005
$11,648
$23,781
115
249
‐108
55
2,300
743
9
‐12
11.5%
9.0%
‐45.4%
2.8%
240.6%
49.5%
0.6%
‐2.6%
‐101
‐121
‐19
‐108
1,377
267
‐79
‐9
‐9.1%
‐4.0%
‐14.6%
‐5.4%
42.3%
11.9%
‐5.5%
‐2.0%
Government
1,851
$31,011
2,143
$36,867
1,982
$42,731
131
7.1%
‐161
‐8.1%
Total
19,980
‐503
‐2.5%
‐1,906
‐9.8%
$28,513
21,383
$37,655
19,477
$37,362
* Excludes retail trade and includes wholesale trade
Sources: Minnesota Department of Employment and Economic Development; Maxfield Research Inc.
21
Wages dropped slightly for most industries between 2008 and 3rd Quarter 2012, and job losses were concentrated in the highest paying industries, such as Manufacturing, Trade/Transportation/Utilities, and Government. The losses have significantly depressed demand for new and higher‐value housing. Major Employer Interviews Maxfield Research Inc. interviewed representatives of large employers in Owatonna in May 2013. The interviews covered topics such as recent trends in job growth, projected job growth, job types, and average hourly wages or annual salaries. Representatives were also asked about housing needs of their employees. Interviews with the area’s largest employers not only provide data regarding commercial job growth, but also reveal employer attitudes and percep‐
tions regarding housing demand in any given area. Table 11 on the following page shows the top 24 employers located in the PMA. All except one are located in Owatonna. The following are key points from the interviews with major employers:  Since the 2010 study, according to the data provided, eight of the top 25 employers experi‐
enced further declines including Federated Insurance, Viracon, and the Owatonna Hospital which are three of the top five employers. Only four companies experienced growth with Truth Hardware and Cybex Corp. among the top employers.  Most employers continue to state that housing is not a typical concern for the employees that they hire. Most manufacturing and retail employees are from the Owatonna area and do not need to find housing. In cases where new employees do not live in Steele County, they typically commute from cities just outside Steele County such as Rochester, Austin, and Waseca, and do not choose to relocate to Owatonna.  The largest employer in Owatonna is now Federated Insurance Company, which employs about 1,375 people which is a decline from 1,500 in 2010. Its employment numbers had remained stable through the recession. It remains the only company interviewed whose new employees regularly had to relocate to Owatonna. Most relocating employees are ex‐
ecutives from other areas of Minnesota and the United States, and many seek new, large homes with many amenities. New employees have not had difficulty finding such homes in Owatonna.  Viracon is the second largest employer, with currently just over 1,100 employees. Viracon has lost almost half of its workforce since its peak in 2008 (1,900 employees). As estimated in past interviews the company shed roughly an additional 100 employees since the past 2010 study, primarily through attrition. The company still has no plans to return to its peak workforce, both because it does not project demand to increase sufficiently and its produc‐
tivity per employee has increased through the recession. MAXFIELD RESEARCH INC.
22
The majority of employers interviewed stated that they expect stable employment figures with potentially some slight growth over the next few years. All dependent on the econo‐
my. Most employers will not be hiring back to the peak years before 2010 due to demand and keeping overall costs down. Some employers are hiring on a contract or temporary ba‐
sis for some positions that in the past were full time. TABLE 11
MAJOR EMPLOYERS
CITY OF OWATONNA AND SURROUNDING AREAS
May 2013
Employer
Products/Services
Federated Insurance Co
Viracon/Curvlite Inc
Truth Hardware
Owatonna Public School District 761
Owatonna Hospital and Clinic
Bosch Automotive Service Solutions
Wenger Corp
Jostens
Steele County
Cybex Corp
Cabela's
Hy‐Vee Food Store
Cash Wise Foods
Wal‐Mart
Koda Living Community
McQuay International
Pearson NCS
Caterpillar
Lakeside Foods, Inc.
Lowe's
Gopher Sport
Bushel Boy Farms
Target
Holiday Inn & Suites
Insurance Carriers
Glass & Glass Product Manufacturing
Metalworking Machinery Manufacturing
Elementary & Secondary Schools
General Medical & Surgical Hospitals, Physicians
Wholesalers
Other Miscellaneous Manufacturing
Printing & Related Support Activities
Executive, Legislative, & Other Gen. Govt. Support
Other Miscellaneous Manufacturing
Sporting Goods, Hobby, & Musical Instrument Stores
Grocery Stores
Grocery Stores
Department Stores
Skilled Nursing Facility
Vent., Heating, Air‐Cond. & Comm. Refrig. Equip. Mfg.
Printing & Related Support Activities
Wholesalers
Fruit & Vegetable Preserving & Spec. Food Mfg.
Department Stores
Department Stores
Fruit & Vegetable Preserving & Spec. Food Mfg.
Department Stores
Hotels (exc. Casino Hotels) & Motels
Total
* Employment figures are estimated.
Sources: MN Department of Employment and Economic Development; Maxfield Research Inc.
Employee Count*
1,375
1,105
735
688
573
540
450
416
325
295
219
207
200
190
180
175
160
133
130
100
90
80
75
67
8,508
23
HOUSING CHARACTERISTICS Introduction The variety and condition of the housing stock in a community provides the basis for an attrac‐
tive living environment. Housing is the primary building block of neighborhoods, supporting goods and services. We examined the housing market in Owatonna and the remainder of Steele County by: 1) reviewing data on the age of the existing housing in Steele County from the 2011 American Community Survey (5‐Year from the US Census); 2) examining the housing stock by structure type; 3) examining recent residential building trends since 2000; and 4) examining the condition of single‐family, duplex, and triplex homes in Owatonna. Age of Housing Stock Table 12 on the following page shows the age of the PMA’s occupied housing stock based on the American Community Survey for 2011. The table includes the number of housing units built in both Owatonna and the remainder of the County over the previous six decades as well as the number of units built prior to 1940. The table further breaks down the data by number of owner‐occupied and renter‐occupied units. The following are key points from Table 12:  In 2011, the largest share of the PMA’s housing stock was built before 1940 (21% of the total), followed by the 1970s (16% of the total), and the 1990’s (14% of the total). With an estimated 1,768 housing units being added after 2000 (an actual 2,184 units as shown Table 15), the 2000’s are the decade with the fourth most building activity.  The significant proportion of homes in the PMA built prior to 1940 indicates that there is likely a substantial need for rehabilitation and/or replacement. This is particularly true in the largely rural remainder of the County where 33% of the housing units were built prior to 1940, versus 19% of the housing units in Owatonna.  Overall, the number of housing units over 60 years old was roughly equal in Owatonna (1,589) and the remainder of the County (1,348). In contrast, the number of housing units built between 1990 and 2000 in Owatonna (1,389) was roughly 3.5 times greater than in the remainder of the County (379).  Nearly one‐third of the rented units in the PMA in 2011 (601) were built prior to 1940. Many of these units are likely to be older single‐family homes and farmsteads that are rent‐
ed.  Thirty‐two percent of all units rented in 2011 were built during the 1970s and 80s. The significant number of rental units built in PMA during this period was due, in part, to the development of federally subsidized rental projects during the decade.
24
HOUSING CHARACTERISTICS TABLE 12
AGE OF HOUSING STOCK
STEELE COUNTY
2011 (ACS 5‐Year Survey)
Year Structure Built
Total
Units
Owatonna
Owner‐Occupied
Renter‐Occupied
Subtotal
<1940
No.
Pct.
1940s
No.
Pct.
1950s
No.
Pct.
1960s
No.
Pct.
1970s
No.
Pct.
1980s
No.
Pct.
1990s
No.
Pct.
2000 and After
No.
Pct.
7,305
2,645
8,517
1,111
478
1,589
15.2
18.1
18.7
200
85
285
2.7
3.2
3.3
1,211
309
1,520
16.6
11.7
17.8
834
179
1,013
11.4
6.8
11.9
1,084
473
1,557
14.8
17.9
18.3
776
388
1,164
10.6
14.7
13.7
1,160
273
1,433
15.9
10.3
16.8
929
460
1,389
12.7
17.4
16.3
Owner‐Occupied
3,663
Renter‐Occupied
440
Subtotal
4,103
1,225
123
1,348
33.4
28.0
32.9
160
46
206
4.4
10.5
5.0
370
56
426
10.1
12.7
10.4
269
27
296
7.3
6.1
7.2
578
80
658
15.8
18.2
16.0
265
32
297
7.2
7.3
7.2
433
60
493
11.8
13.6
12.0
363
16
379
9.9
3.6
9.2
Steele County Total
Owner‐Occupied
10,968
Renter‐Occupied
3,085
Total
14,053
2,336
601
2,937
21.3
19.5
20.9
360
131
491
3.3
4.2
3.5
1,581
365
1,946
14.4
11.8
13.8
1,103
206
1,309
10.1
6.7
9.3
1,662
553
2,215
15.2
17.9
15.8
1,041
420
1,461
9.5
13.6
10.4
1,593
333
1,926
14.5
10.8
13.7
1,292
476
1,768
11.8
15.4
12.6
Sources: Bureau of the Census (American Community Survey 5‐Year Survey); Maxfield Research Inc.
HOUSING CHARACTERISTICS Housing Stock By Structure Type Table 13 shows the housing stock in Owatonna and in Steele County by type of structure and tenure as of 2011 American Community Survey. This indicates the types of housing structures occupied or vacant and whether they are owned or rented. The following are key points from the table:  The dominant housing type is a single family attached/detached home with this type representing 95% of all owner‐occupied housing and 80% of all occupied units in 2011. Sin‐
gle‐family homes accounted for 76% of all occupied housing units in Owatonna versus 91% in the remainder of Steele County. Since 2000, 64% of Owatonna’s new housing units and 80% of the remainder of the County’s units have been single‐family (see Table 15).  Attached housing in structures of two to four units accounted for another 667 units or 5% of all occupied housing units in Steele County. The number of single attached/detached structures that were owned outnumbered those rented 12‐to‐1. Conversely, the number of units rented in structures of two to four units outnumbered those owned units by about 6‐
to‐1. Rental units dominated in structures with two or more units.  In 2011, there were 476 occupied mobile home units in Steele County, comprising 3% of the County’s occupied housing units. The vast majority (93%) of the County’s occupied mobile homes are owner‐occupied. Nearly half (48%) of the County’s occupied mobile homes are located outside of Owatonna compared to 29% of the total number of occupied housing units. MAXFIELD RESEARCH INC. 26
HOUSING CHARACTERISTICS TABLE 13
HOUSING STOCK BY UNITS IN STRUCTURE
STEELE COUNTY 2011 ACS (5‐Year)
Owatonna
No
Pct.
Rem. of County
No
Pct.
Steele County
No
Pct.
Owner occupied:
7,305
1, attached/detached 6,946
2 to 4 units
85
5 to 19 units
20
20 to 49 units
18
50 + units
0
Mobile home
236
100.0
95.1
1.2
0.3
0.2
0.0
3.2
3,663
3,443
14
0
0
0
206
100.0
94.0
0.4
0.0
0.0
0.0
5.6
10,968
10,389
99
20
18
0
442
100.0
94.7
0.9
0.2
0.2
0.0
4.0
Renter occupied:
2,645
1, attached/detached
611
2 to 4 units
545
5 to 19 units
564
20 to 49 units
738
50 + units
177
Mobile home
10
100.0
23.1
20.6
21.3
27.9
6.7
0.4
440
294
33
69
20
0
24
100.0
66.8
7.5
15.7
4.5
0.0
5.5
3,085
905
578
633
758
177
34
100.0
29.3
18.7
20.5
24.6
5.7
1.1
Total occupied:
9,950
1, attached/detached 7,557
2 to 4 units
630
5 to 19 units
584
20 to 49 units
756
50 + units
177
Mobile home
246
100.0
75.9
6.3
5.9
7.6
1.8
2.5
4,103
3,737
47
69
20
0
230
100.0
91.1
1.1
1.7
0.5
0.0
5.6
14,053
11,294
677
653
776
177
476
100.0
80.4
4.8
4.6
5.5
1.3
3.4
Sources: US Census Bureau, Maxfield Research Inc.
Condition of Housing Stock Data provided by the Steele County Assessor’s Office gives an indication of the condition of homes in Owatonna. The Assessor assigns one of seven ratings ranging from Excellent to Poor to each single‐family home, duplex, and triplex. These ratings have been consolidated from the 15 ratings in the previous study. Table 14 shows the number of homes by rating and the percent of the total homes assigned to each rating. The following are key points from Table 14:  About 11% of homes are rated Very Good or Excellent. The majority of homes or about 78 of homes are rated Above Normal or Normal. There are 11% of homes rated Below Normal or worse.  Based on a windshield survey of homes in Owatonna, the overall housing stock remains in good condition. However, comparing a sample of homes from the windshield survey to the MAXFIELD RESEARCH INC. 27
HOUSING CHARACTERISTICS Assessor’s record indicates that many homes rated Normal are adequately maintained and visually may need some minor maintenance such as new shingles, windows, siding, or paint. Just over 50% are rated in Normal condition and 89% are rated at Normal or higher. Home rated Below Normal or lower (roughly 11% of all homes) are not adequately maintained and are in need of major repairs or improvements. 
The most prevalent exterior maintenance problems remain roofs in poor condition and siding in need of new paint or replacement. It was common to see roofs that may not have been replaced in over 20 years, if ever. TABLE 14
CONDITION OF SINGLE‐FAMILY AND TOWNHOMES
CITY OF OWATONNA
2013
Condition*
Excellent
Very Good Above Normal
Normal
Below Normal
Poor
Very Poor
Number
10
897
2,203
4,092
682
163
31
Percent
0.12%
11.10%
27.27%
50.66%
8.44%
2.02%
0.38%
Med. Yr. Built
1928
1979
1964
1991
1915
1915
1900
Med. Sq. Ft.
1,614
1,196
1,223
1,355
1,344
1,399
1,369
Med. Value
$140,150
$144,500
$119,600
$146,400
$90,900
$76,800
$63,200
Med. Val./Sq. Ft**
$114.99
$122.82
$98.00
$108.18
$65.93
$57.92
$45.67
* Condition rating is determined by the Steele County Assessors' Office
** Median Value/Sq. Ft. does not equal median sq. ft. divided by median value because it is calculated from raw data on each record.
Sources: Steele County Assessor's Office, Maxfield Research Inc.

The strongest determinant of a home’s condition is its age, with newer homes being in better condition. Homes in Normal condition are largely new construction concentrated in the northern and eastern edges of Owatonna. Homes rated Below Normal or lower are scattered throughout older areas of Owatonna. Residential Construction Trends in Steele County We obtained data from the Owatonna Building and Inspection Office, Steele County Planning Office, as well as from individual cities in the County on the number of building permits issued for new housing units in the PMA. This data is presented in Table 15, which displays the total number of building permits issued in Owatonna, as well as the remainder of the County for single‐family homes, townhomes/twinhomes, and multifamily units each year since 2000. The following are key points about housing units added since 2000:  The City of Owatonna added 1,799 total housing units between 2000 and 2012, 64% of which were single‐family homes. The remainder of Steele County added 375 housing units, MAXFIELD RESEARCH INC. 28
HOUSING CHARACTERISTICS 80% of which were single‐family homes. A higher proportion of the remainder of the Coun‐
ty’s new housing units was single‐family due to the more rural nature of the area. 


The largest percent increase in single‐family unit permits in Owatonna (39%) occurred between 2001 and 2002 as the economy recovered from a short recession and began to ex‐
perience booming growth. Total single‐family permits peaked in 2003 at 161. Except for a slight increase between 2005 and 2006, single‐family permits declined every year between 2003 and 2009. The decline accelerated as the recession began, with permits dropping 42% between 2006 and 2007, 54% between 2007 and 2008, and 59% between 2008 and 2009. Townhomes/twinhomes have experienced a similar decline in permit activity in Owatonna. After peaking at 28 permits in 2006, permits declined 46% between 2006 and 2007, and then 87% between 2007 and 2008. Total permits issued increased by 3 to a total of 5 be‐
tween 2008 and 2009, but activity is still down 85% from the decade’s peak. Since 2007, townhome development has remained in the low single digits through 2012. Senior housing comprised the majority of multi‐family housing construction during the last decade. Whispering Oaks in Ellendale, opened in 2006, makes up 21 of the 33 multi‐family units added in the remainder of the County. Of the 454 multi‐family units added in Owatonna, 285 (72%) were in senior housing developments. Since 2006, all of the multi‐
HOUSING CHARACTERISTICS family units added in Owatonna have been in four senior developments. Senior housing has performed well in a poor real estate market because the population of the PMA is aging and need rather than overall economic conditions tends to drive demand for senior housing. TABLE 15
RESIDENTIAL CONSTRUCTION
OWATONNA & THE REMAINDER OF STEELE COUNTY
2000 to 2012
Owatonna
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Total
Change
2000 to 2006
2007 to 2012
2000‐2012
Single‐
Family Homes
Townhomes/ Twinhomes
Multi‐
Family Homes
Total
Housing
Units
135
116
161
171
161
123
129
75
34
14
14
13
12
1,158
12
20
26
22
22
25
28
15
2
5
4
1
5
187
52
68
18
0
92
0
138
3
26
0
0
34
23
454
199
204
205
193
275
148
295
93
62
19
18
48
40
1,799
996
86.0%
162
14.0%
155
82.9%
32
17.1%
368
81.1%
86
18.9%
1,519
84.4%
280
15.6%
Single‐
Family Homes
300
Multi‐
Townhomes/ Family Twinhomes
Homes
36
39
Sources: City of Owatonna; Steele County Planning Department;
various city clerks; Maxfield Research Inc.

Total Housing Units
375
Since the report conducted in 2010, the majority of multifamily units added have been in two developments. Traditions Senior Living has added 20 additional memory care units and Eden Valley Place constructed 34 two‐ and three‐bedroom rental townhome units in six buildings. Eden Valley is also currently building two more six‐unit buildings which are dis‐
cussed in more detail in the rental housing section. MAXFIELD RESEARCH INC. 30
FOR‐SALE MARKET ANALYSIS Introduction Maxfield Research Inc. analyzed the for‐sale housing market by collecting data on: 1) single‐
family home sales in the City of Owatonna and the remainder of Steele County; 2) the residen‐
tial lot supply in the Owatonna area; 3) pending for‐sale developments in the Owatonna area; and 4) interviewing local real estate professionals, civic leaders and other community members directly involved in the local housing market to solicit their impressions of existing market conditions and trends. Home Resales Table 16 displays data on home sales in the City of Owatonna and the remainder of Steele County for the years 2000 through March 2013. Table 17 shows the number of traditional sales relative to bank‐owned sales in 2000 and between 2004 and March 2013. The Steele County Assessor’s Office provided the data. The table shows the annual number of sales, average sales price, median sales price, and percentage increase in average sales price. The following are key points from the table:  The housing market was at its peak in Owatonna between 2005 and 2007. The number of homes sold declined from its high in 2005 of 556 to 391 by 2007, but prices continued to rise, reaching the highest average sales price of $174,240 in 2007. The average sales price in 2007 was 53% higher than in 2000, consistent with the real estate boom that was occur‐
ring nationwide.  The remainder of Steele County experienced a similar real estate boom, with average sales prices increasing 55% between 2000 and the peak in 2006. Sales volume peaked in 2004 at 143 homes.  Sales for both Owatonna and the remainder of Steele County continued their sharp decline through 2011 with 166 and 50 home resales respectively. The lowest number of sales for both during the period.  Owatonna accounted for 79% of all home sales in Steele County between 2000 and 2012. In 2012, 76% of sales were in Owatonna.  With the housing market declining between 2007 and 2011, the average sales price in Owatonna decreased 12% and the median sales price decreased 10%, much lower than in large metropolitan areas (experiencing declines of over 30%). Although Owatonna experi‐
enced rapid growth, the values of its homes did not increase at the same rate as those in larger metropolitan areas. However, the total number of sales dropped about 50% in Owatonna from 2007 to 2011. MAXFIELD RESEARCH INC. 31
FOR‐SALE MARKET ANALYSIS TABLE 16
HOME RESALE TRENDS*
PRIMARY MARKET AREA
2000 to 2013^
Owatonna
Steele County Total
Year
No.
Sold**
Avg. Sales
Price
Avg. %
Change
Median
Price
No.
Sold**
Avg. Sales
Price
Avg. %
Change
Median
Price
No.
Sold**
Avg. Sales
Price
Avg. %
Change
Median
Price
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013^
382
465
432
546
549
556
391
335
222
219
186
166
219
39
$113,639
$122,635
$135,516
$153,467
$156,958
$169,942
$169,750
$174,240
$168,100
$158,820
$146,460
$153,868
$164,632
$144,587
‐
7.9%
10.5%
13.2%
2.3%
8.3%
‐0.1%
2.6%
‐3.5%
‐5.5%
‐7.8%
5.1%
7.0%
‐12.2%
$108,200
$116,000
$126,000
$143,250
$147,000
$155,000
$160,000
$155,000
$153,750
$147,500
$137,866
$139,825
$150,000
$130,500
109
118
108
136
143
131
103
73
65
62
54
50
69
6
$98,099
$114,126
$113,961
$131,629
$140,015
$136,454
$152,520
$146,200
$145,270
$141,520
$138,457
$133,236
$157,074
$92,218
‐
16.3%
‐0.1%
15.5%
6.4%
‐2.5%
11.8%
‐4.1%
‐0.6%
‐2.6%
‐2.2%
‐3.8%
17.9%
‐41.3%
$89,500
$99,800
$109,600
$122,850
$129,900
$119,900
$142,800
$127,500
$141,000
$125,250
$126,950
$116,850
$145,000
$97,250
491
583
540
682
692
687
494
408
287
281
240
216
288
45
$110,189
$120,913
$131,205
$149,112
$153,457
$163,556
$166,158
$169,223
$162,929
$155,003
$144,659
$149,092
$162,821
$137,604
‐
9.7%
8.5%
13.6%
2.9%
6.6%
1.6%
1.8%
‐3.7%
‐4.9%
‐6.7%
3.1%
9.2%
‐15.5%
$104,049
$112,721
$122,720
$139,182
$143,466
$148,307
$156,414
$150,080
$150,862
$142,591
$135,410
$134,507
$148,802
$126,067
00 ‐ '12 Change
45%
39%
60%
62%
48%
43%
00 ‐ '06 Change
49%
48%
55%
60%
51%
50%
06 ‐ '09 Change
‐6%
‐8%
‐7%
‐12%
‐7%
‐9%
09 ‐ '12 Change
4%
2%
11%
16%
5%
4%
^ Sales in 2013 are through March.
* Does not include bank‐owned sales (e.g., foreclosures, short sales, liquidation, deed in‐lieu of foreclosure)
** Includes single‐family homes and duplex and triplex units.
Sources: Steele County Assessor, Maxfield Research Inc.
FOR‐SALE MARKET ANALYSIS TABLE 17
TRADITIONAL AND BANK‐OWNED HOME SALES
PRIMARY MARKET AREA
2000 and 2005 to 2013*
‐‐‐‐ Steele County ‐‐‐‐ Bank
Percent
Owned
Total
Bank Owned
Sales^
Sales
Sales
Year
Traditional
Sales
2000
491
13
504
2.6%
2005
2006
2007
2008
2009
2010
2011
2012
2013*
687
494
408
287
281
240
216
288
45
29
30
45
87
111
147
157
151
19
716
524
453
374
392
387
373
439
64
4.1%
5.7%
9.9%
23.3%
28.3%
38.0%
42.1%
34.4%
29.7%
* Sales in 2013 are through March
^ Bank owned sales include foreclosures, short sales, liquidations, and deeds in‐lieu of foreclosure.
Sources: Steele County Assessor's Office, Maxfield Research Inc.


Sales of bank owned properties has put downward pressure on prices of non‐bank owned properties and has made it more difficult to sell traditional properties. There were only 13 bank owned sales in 2000, but 151 in 2012 as a result of high numbers of foreclosures. Ac‐
cording to realtors, most foreclosures now are a result of unemployment, not sub‐prime loans. Therefore, foreclosures and bank owned sales are expected to continue until unem‐
ployment decreases. Home resale data for the county from 2012 through March 2013 was reviewed from the County Assessor data (502 total sales were reported in Owatonna). The data revealed that the average resale price of single‐family homes was $159,413 for traditional sales and $96,152 for bank‐owned sales and foreclosures (a difference of 65%). The bank‐
owned/foreclosure sales tended to be smaller, older homes in comparison to traditional sales. Current Supply of Homes on the Market Table 18 shows the number of homes currently listed for sale in Owatonna and the remainder of Steele County (including the Cities of Blooming Prairie, Ellendale, and Medford), distributed into six price ranges. The Southeast Minnesota Association of Realtors MLS provided the data. MAXFIELD RESEARCH INC. 33
FOR‐SALE MARKET ANALYSIS Table 19 shows the listing prices by number of bedrooms. Key findings from our assessment of the actively listed homes in the PMA are:  A total of 258 homes were listed with the Regional Multiple Listing Service in Steele County in May 2013. In Owatonna there were 200 and in the remainder of the County there were 58. The median listing price for the PMA was $139,450 and the average price was $157,227 due to a large number of homes priced over $200,000.  Listing prices suggest the potential stabilization in the Owatonna housing market. The median listing price in Owatonna of $144,900 is about 3% lower than the median sale price of $150,000 in 2012. 
Real estate values in Owatonna have appeared to have stabilized. Currently, 56% of homes are listed under $150,000. The minimum income needed for a household that spent 3.0 times its annual income on housing to afford a home listed for $150,000 is $50,000. About 53% of all household in Steele County earn above $50,000, so the majority of households could afford a typical home for sale in Steele County. TABLE 18
SINGLE‐FAMILY HOMES CURRENTLY LISTED FOR‐SALE
PRIMARY MARKET AREA
May 2013
Owatonna
Total PMA
Remainder of PMA*
Price Range
No.
Pct.
<$100,000
$100,000 to $124,999
$125,000 to $149,999
$150,000 to $174,999
$175,000 to $199,999
$200,000 and Over
45
35
29
14
26
51
200
22.5%
17.5%
14.5%
7.0%
13.0%
25.5%
100%
Min. $21,850
Max. $799,000
Med. $144,900
Avg. $164,455
Price Range
No.
Pct.
<$100,000
$100,000 to $124,999
$125,000 to $149,999
$150,000 to $174,999
$175,000 to $199,999
$200,000 and Over
26
6
3
4
11
8
58
44.8%
10.3%
5.2%
6.9%
19.0%
13.8%
100%
Min. $12,500
Max. $358,500
Med. $102,750
Avg. $132,205
Price Range
No.
Pct.
<$100,000
$100,000 to $124,999
$125,000 to $149,999
$150,000 to $174,999
$175,000 to $199,999
$200,000 and Over
71
41
32
18
37
59
258
27.5%
15.9%
12.4%
7.0%
14.3%
22.9%
100%
Min. $12,500
Max. $799,000
Med. $139,450
Avg. $157,227
* Includes the Cities of Blooming Prairie, Ellendale, and Medford
Sources: Southeast Minnesota Association of Realtors MLS, Maxfield Research Inc.


Three‐bedroom homes, which could serve the needs of many family households, are even more affordable. About 44% of homes for sale in Steele County in May 2013 had three‐
bedrooms. With a median list price of $125,875, a household would need an income of $41,950 to afford a typical three‐bedroom home if it spent 3.0 times its annual income. About 61% of all Steele County households have an income of at least $41,950. About a quarter of homes for sale in both Owatonna and the remainder of Steele County are listed for $200,000 or over. These homes are likely to have four or more bedrooms and MAXFIELD RESEARCH INC. 34
FOR‐SALE MARKET ANALYSIS 
would require an annual income at least $66,700 to afford a $200,000 home. About 37% of households have incomes of at least $66,700. Because many homes in the $200,000 and over category are listed for far more than $200,000, these homes would be unaffordable to most households in PMA. The median sale price is generally a more accurate indicator of housing values in a commu‐
nity than the average sale price. Average sale prices can be easily skewed by a few very high‐priced or low‐priced home sales in any given year, whereas the median sale price bet‐
ter represents the pricing of a majority of homes in a given market. TABLE 19
BEDROOMS AND LISTING PRICE OF SINGLE‐FAMILY HOMES
PRIMARY MARKET AREA
May 2013
Bedrooms
1
2
3
4
5
6
Total
No.
3
38
85
55
17
2
200
Pct.
1.5%
19.0%
42.5%
27.5%
8.5%
1.0%
Owatonna
Med. Price
Avg. Price
$84,000
$64,500
$113,900
$122,332
$127,000
$137,055
$189,900
$197,433
$262,494
$248,500
$539,000
$539,000
Min. Price
$24,000
$22,900
$21,850
$42,000
$124,900
$279,000
Max. Price
$85,500
$224,900
$324,900
$459,900
$499,000
$799,000
Bedrooms
1
2
3
4
5
6
Total
No.
1
9
27
14
6
0
57
Pct.
1.8%
15.8%
47.4%
24.6%
10.5%
0.0%
Remainder of PMA
Med. Price
Avg. Price
$49,900
$49,900
$65,000
$75,522
$90,000
$108,096
$196,564
$194,450
$192,900
$187,267
‐‐
‐‐
Min. Price
$49,900
$41,900
$12,500
$75,000
$19,900
‐‐
Max. Price
$49,900
$139,000
$239,900
$299,900
$358,500
‐‐
Pct.
1.6%
18.3%
43.6%
26.8%
8.9%
0.8%
Total PMA
Med. Price
Avg. Price
$66,950
$60,850
$104,900
$113,368
$125,875
$130,074
$189,900
$197,257
$214,900
$242,870
$539,000
$539,000
Min. Price
$24,000
$22,900
$12,500
$46,900
$19,900
$279,000
Max. Price
$85,500
$224,900
$324,900
$459,900
$499,000
$799,000
Bedrooms
1
2
3
4
5
6
Total
No.
4
47
112
69
23
2
257
Sources: Southeast MN MLS; Maxfield Research Inc.
FOR‐SALE MARKET ANALYSIS Actively Marketing and Pending For‐Sale Housing Developments Maxfield Research Inc. interviewed City officials and developers/builders of single‐family subdivisions and for‐sale multi‐family developments that are currently being marketed or are pending in the PMA. We are reviewing the previously identified subdivisions from the 2010 study. As of May 2013 we identified 22 subdivisions in four communities (Owatonna, Blooming Prairie, Medford, and Ellendale). It is important to note that there are a few subdivisions that may no longer actively market but due to lack of contact information we cannot be certain. Thus we have retained them in the report for comparison purposes from the previous study. In addition, some subdivisions have been purchased by other developers and have change lots from townhome to single‐family lots and vice versa. As of January 1st, 2013, according to the Housing and Redevelopment Agency, there were a total of 690 vacant single‐family lots (949 in March 2010) and132 townhome lots (238 in March 2010) platted, some with sewer and some without. Many of these are in older neighborhoods, are individual lots, or are in areas without plans sufficiently advanced to consider pending subdivisions. This study focuses only on lots in subdivisions currently being marketed or that are pending. Table 20 shows information regarding single‐family subdivisions and Table 21 shows infor‐
mation regarding townhome and patio home subdivisions. A map showing the locations of the subdivisions follows the tables. The following are key points about these subdivisions:  Twelve of the 22 actively marketing subdivisions are in Owatonna. Four are in Blooming Prairie, three are Ellendale, and two are in Medford. Among the subdivisions there are 507 MAXFIELD RESEARCH INC. 36
FOR‐SALE MARKET ANALYSIS single‐family lots available, 80% of which are in Owatonna. Available multi‐family lots will hold 154 units, 70% of which are in Owatonna, if developed as planned. 

There has been minimal building occurring in any of the actively marketing subdivisions. Before the recession developers were adding about 130 single‐family units per year in Owatonna. The current supply of 404 lots would have lasted about two and a half years at that pace, but at the current rate of building (about 15 per year) it would last over 20 years. There were two pending developments back in 2010, the Highlands by Welker Custom Homes Inc. adjacent to Maple Creek Highlands to the West featuring 16 single‐family homes and 10 townhome units in five structures. This subdivision has been put on hold until other Welker Custom Homes lots are absorbed in other developments. The second, Riverwood Parks, adjacent to Morehouse Place and also being developed by that owner, is platted for six quad‐homes and two condominium buildings with an undetermined number of units. The project is currently been scaled back just to three quad‐homes of which one building has been constructed with two finished units. 



Two existing subdivisions also have pending phases. Majestic Oaks had an additional 102 single‐family homes planned whose lots have not yet received infrastructure and the entire development has been scaled back to 68 lots in 2 phases. Maple Creek Estates has an addi‐
tional 15 lots. Developers are not actively marketing these additional lots. Actively marketing subdivisions predominantly target households seeking move‐up housing. Of all the available single‐family lots in Owatonna, 267, or 66%, are in subdivisions with sin‐
gle‐family homes with stating prices over $200,000. There are six subdivision (139 lots, or 34%) with homes starting around $175,000 with the majority over $200,000. Lot prices at some of the subdivisions have been decreased by roughly $10,000 per lot. Emerald Acres, Linnhaven, Sherwood Heights and Skyview Estates are market rate devel‐
opments targeted to entry‐level buyers. Base home prices are under $200,000 for most homes in these subdivisions. Autumn Hills is a project by the Owatonna HRA, Greater Min‐
nesota Housing Fund, and Southwest Minnesota Housing Partnership to develop owner‐
occupied homes affordable to households earning 80% or less of the area median income. Four units are market rate and the others are subsidized. Only three affordable units and one market rate unit have been built so far, though Habitat for Humanity built the market rate unit, so the household that lives in it ultimately purchased it for a lower‐than‐market‐
rate price. The HRA has indicated that housing construction costs being high have ultimate‐
ly stalled this development. In Owatonna, towhomes in Eden Valley 2nd Addition, Emerald Acres, and Maple Creek Highlands, would attract entry‐level buyers. Most are priced below $200,000. Riverwood Parks, Majestic Oaks, Skyview Estates, and Country Creek 6th Addition are targeted at high‐
er‐income households, with prices going as high as $329,000. MAXFIELD RESEARCH INC. 37

Before the recession an average of 18 townhomes for a total of 36 units were developed each year in Owatonna. The current supply of 108 units would have lasted roughly three years at that pace. With townhome construction almost completely halted (averaging near‐
ly 4 per year since 2009), these units will last over 20 years. Sixty‐eight percent of available single‐family lots outside of Owatonna remain vacant. Only five homes have been developed in Blooming Prairie’s new subdivisions (one is currently under construction). No development has occurred in the Bray Addition or the Peterson 2nd Addition. Single‐family homes in these subdivisions are planned with prices over $200,000. In Ellendale, only six out of 24 units are built in Countryview Estates and 27 lots are still available at crown Ridge (53 total lots). Edgewood Heights has built three homes since 2010 and only has four of eight lots remaining. Scenic Heights in Medford has six out of 12 single‐family lots remaining vacant with no new development from 2010. 

Almost no multi‐family development has occurred recently outside of Owatonna. All of the lots remain available at Prairie 3rd Addition in Blooming Prairie and Riverview Addition in Medford. Scenic Heights in Medford still has seven townhome lots and eight patio home lots available, which will support 22 additional units. All of the single‐family and multi‐family subdivisions in the remainder of Steele County entered the market in 2004 or later. The housing market in the remainder of the County began to soften between 2006 and 2007, and as a result all of the subdivisions have strug‐
gled to attract residents. MAXFIELD RESEARCH INC. 38
FOR-SALE MARKET ANALYSIS
TABLE 20
ACTIVE SINGLE‐FAMILY SUBDIVISIONS
PRIMARY MARKET AREA
May 2013
Subdivision Name
Lot/Unit Inventory
Approved
Available
Owatonna
Country Creek 3rd, 4th, 5th, & 6th
157
93
Eden Valley 2nd Add.
35
33
Emerald Acres # 3 50
26
Linnhaven 2nd & 3rd Add.
32
4
Majestic Oaks
68
58
North Bluff Estates
135
62
North Country #3
65
26
Sherwood Heights #5
33
13
Maple Creek Highlands 52
45
Skyview Estates
37
24
Autumn Hills
15
11
Maple Creek Estates (Phase II)
12
9
Total ‐ Owatonna
691
404
MAXFIELD RESEARCH INC. Base Lot Price /
Average Price
Base Home Price
(incl. lot price)
$29,900 ‐ $36,900
$36,350
N/A
$200,000 ‐ $500,000
$26,900 ‐ $31,900
$28,700
$26,000 ‐ $34,000
$30,000
$31,200 ‐ $55,000
$49,500
$19,900 ‐ $72,900
$45,700
$24,000 ‐ $78,000
$36,700
$25,950 ‐ $55,950
$34,950
$22,000 ‐ $66,000
$44,250
$31,900 ‐ $36,900
$35,600
$25,000 ‐ $40,000
$140,000 ‐ $300,000
$26,900 ‐ $33,500
$32,500
N/A
$150,000 ‐ $200,000
$300,000+
$200,000 ‐ $700,000
$190,000 ‐ $600,000
$184,000 ‐ $300,000
$250,000 ‐ $350,000
$170,000 ‐ $350,000
$119,000 ‐ $132,000
($136,000 ‐ $154,000)
$300,000 ‐ $600,000
Buyer Profile/Comments
Move‐up homes for upper income, professionals, families. Seven homes built since Former lots platted for 4‐plex townhomes bought by Drummer Development and Entry‐level buyers for low‐end, move‐ups for $240,000+. One building currently Starter homes, younger families.
Last two homes built in 2010.
Down from 4‐phases to 2‐phases. Scaled back from 150 lots. Two homes built in 2011.
Range from move‐up to executive housing. Three homes built in 2011. Two homes built in Move‐up and upper‐end homes with families and some empty nesters. One home built in Entry‐level and move‐up homes.
Half of the development does not have infrastructure in place. Most recent home Streets remain unpaved. Three built in 2012.
City‐owned lots. 4 for market rate, 11 for affordable at 80% AMI. Last home built 2009.
Upper‐income buyers. Last home built 2008. 59 total lots in total PUD.
39
TABLE 20 (Continued)
ACTIVE SINGLE‐FAMILY SUBDIVISIONS
PRIMARY MARKET AREA
May 2013
Subdivision Name
Lot/Unit Inventory
Approved
Available
Base Lot Price /
Average Price
Base Home Price
(incl. lot price)
Blooming Prairie
Peterson 2nd Addition
11
11
$30,000 ‐ $40,000
$200,000+
Stalled indefinitely due to the recession.
Bray Addition
18
18
N/A
N/A
Stalled indefinitely due to the recession.
Haberman Addition
7
5
N/A
$250,000 ‐ $450,000
Prairie 3rd Addition
12
9
$45,000
$300,000
High‐end single‐family homes.
No new homes built since 2010 study.
High‐end single‐family homes.
One home currently underconstruction.
Ellendale
Countryview Estates
30
24
$150,000+
Crown Ridge
53
26
$22,000 ‐ $27,000
$25,300
$21,000
Edgewood Heights
8
4
$24,000 ‐ $26,000
$25,600
$150,000+
Medford
Scenic Heights 12
6
$29,700 ‐ $42,900
$300,000‐$400,000
Total ‐ Rem. of PMA
Total ‐ PMA
151
842
103
507
Source: Maxfield Research Inc.
MAXFIELD RESEARCH INC. Move‐up single‐family homes. No construction since 2006.
$150,000+
Move‐up single‐family homes. Three homes have been built since last study in 2010.
Single‐family, twinhomes, & patio homes.
40
TABLE 21
ACTIVE TOWNHOME AND PATIO HOME SUBDIVISIONS
PRIMARY MARKET AREA
May 2013
Subdivision Name
Active Subdivisions
Owatonna
Riverwood Parks
‐‐ Lot/Unit Inventory ‐‐ Approved
Available
Base Lot
Price
Base Home Price
(incl. lot price)
$289,900 ‐ $329,000
$309,000
$175,000 ‐ $185,000
$175,000
$165,000 ‐ $195,000
12
11
N/A
Eden Valley 2nd Addition 34
18
Emerald Acres No. 3 17
0
$32,000 ‐ $34,000
$28,000
$26,900
Majestic Oaks
22
22
North Bluff Estates
36
Country Creek 6th Addition
24
$22,000
$22,000
$16,900 ‐ $23,900
$200,000 ‐ $250,000
12
8
N/A
N/A
Maple Creek Highlands 12
10
$20,000‐$25,000
$175,000‐$200,000
Skyview Estates
17
15
$28,900 ‐$30,900
$29,900
$220,000 ‐ $240,000
Medford
Scenic Heights 24
22
$29,700‐$42,900
$200,000
Riverview Addition 24
24
N/A
N/A
Total ‐ Owatonna
Total ‐ Rem. of PMA
Total ‐ Owatonna
162
48
210
108
46
154
MAXFIELD RESEARCH INC. $250,000
Three quad‐home buildings with upper‐end units
Middle income twinhomes. One four‐plex and 16 twinhome lots. Taken over by Schrom 8 units developed since 2011. Singles, working professionals and seniors.
Development includes upper‐end SF lots and has been scaled back to 2‐phases.
Upper‐end townhomes.
Last townhome built in 2006.
Higher‐end move‐up townhomes..
Last townhome developed 2007.
Unpaved streets. 19 Twinhome lots now 17 detached townhome lots. Two built in 2008.
16 twinhome units on 8 lots and 8 patio home units on 8 lots. One twinhome (2 units) Platted for 12 lots with 24 townhomes. Stalled indefinitely due to recession
41
FOR‐SALE MARKET ANALYSIS Active Housing Subdivisions in Owatonna Mobile Homes Maxfield Research Inc. investigated the availability of mobile homes in mobile home parks in Steele County. Traditionally, research shows that mobile homes usually serve as an alternative to permanent housing, and during times of housing scarcity, the number of homes usually rises. Table 22 displays information pertaining to the identified traditional mobile home parks in the County. Our research revealed that two traditional mobile home parks exist in the City of Owatonna and one exists in the City of Medford. Currently, Colonial Manor houses 216 mobile homes, Skyline Gardens contains 97 homes, and Lazy U Mobile Park has 165 homes, for a total MAXFIELD RESEARCH INC. 42
FOR‐SALE MARKET ANALYSIS of 478 pads. As of May 2010, we identified a total of 22 vacant pads at all of the properties, for a vacancy rate of 4.6%. However, 18 of the 22 vacant pads were at Colonial Manor. The following paragraphs summarize the mobile home parks in the County. Colonial Manor is located at 24th Avenue Northwest in Owatonna and contains a total of 216 pads. All of the pads are rented for $260 per month to residents with owned homes (Colonial Manor does not rent any homes). Tenants pay all utilities (water/sewer, garbage, electric). As of May 2013, 18 pads were vacant. The primary reason is not lack of demand, but that poten‐
tial residents have a very difficult time obtaining financing for a new mobile home. Most of the homes are occupied by working families and seniors. The majority of the tenants work in Owatonna. TABLE 22
MOBILE HOME PARKS
PRIMARY MARKET AREA
May 2013
Project Name/
Address
Total
Pads Vacant
Rent Range
Comments
Owatonna
Colonial Manor
24th Avenue NW
216
18
$260
(pad only)
Skyline Gardens
2126 3rd Ave. NW
97
3
$260 ‐ $270
(pad only)
All resident owned, no rentals. Garbage pick‐up included in rent. Management requires upkeep of units. Wide range of residents. Difficulty getting lending to purchase mobile homes has caused recent vacancies.
All owned by residents. Garbage pick‐up included in rent. Profile: mostly families, not many seniors, most work in Owatonna. Skyline Gardens provides financing to owners to purchase homes.
Medford
Lazy U Mobile Park
4100 66th St. NW
165
1
$300
(pad only)
Only owner‐occupied homes, no renters allowed in the park; water/sewer/garbage are included in rent. Profile: wide range of people, mostly families and a few snow birds.
Skyline Gardens is located at 2126 3rd Avenue Northwest in Owatonna and has a total of 97 pads. As of May 2013, only three pads were vacant. Skyline Gardens offers financing to people purchasing mobile homes in their park. This has enabled Skyline Gardens to remain almost full despite the inability of potential residents to obtain financing elsewhere. Pads are rented to residents with owned homes ranging from $260 to $270 per month. Tenant pays all utilities (garbage pick‐up included). The majority of the residents are working families with very only a few seniors. Lazy U Mobile Park is located at 4100 66th Street Northwest in Medford and has a total of 165 pads. As of May 2013 there were only three vacant pads. All of the pads are rented for $300 per month to residents with owned homes. The rent includes water, sewer, and garbage, while the tenants pay the electricity. Most of the units are three‐bedrooms, with a few one‐ and two‐
FOR‐SALE MARKET ANALYSIS bedrooms. There is a wide mix of tenants, including families and a few snowbirds. Most of the tenants work in Medford or Owatonna. For‐Sale Interviews Summary Maxfield Research Inc. interviewed area real estate agents, local developers, builders, and other persons familiar with Owatonna’s owner‐occupied market to solicit their impressions of the current for‐sale housing market in the community. The following are key points from those interviews.  Realtor interviews indicate that the housing market in Owatonna and Steele County is slowly improving. The average length of time to sell a home has decreased over the first four months of 2013 to about 104 days compared to the average 140 to 150 days since 2010. Average resale price for homes has stabilized and increased slightly each year since 2010.  Although unemployment rates have been slowly declining, newer jobs becoming available have been mostly temporary positions or lower paying jobs than those that were occupied prior to the layoffs. The temporary positions, specifically in the manufacturing sector which experience the largest declines in employment are preventing these households from mak‐
ing the next step in the for‐sale housing market (i.e. purchasing first‐time, move‐up housing, etc.).  According to Realtors, the current inventory is low in Owatonna. The lower inventory in addition to low interest rates has been a catalyst in helping stabilize the market and increas‐
ing resale values.  Foreclosures have remained high since 2010 and have been a negative factor on the hous‐
ing market keeping values down. Although numbers remain high, Realtors state that the impact has diminished of late as these foreclosures are being staggered over the year less‐
ening the impact on the market. Foreclosed homes are quickly purchased when put on the market and thus the supply of foreclosed home on the market has been diminishing.  It is estimated that homeowners in the Owatonna market have experienced an average of a 30% loss in equity in their home values depending on when they purchased their home. If homes were purchased during the peak years before the recession, the loss could be signifi‐
cantly greater. This loss in equity may play factor when considering move‐up housing or new construction.  Construction of new homes is continuing to be very low averaging roughly 15 new single‐
family homes and a handful of twinhome/townhomes per year. At the current pace of con‐
struction, the existing lot supply in Owatonna will last through the decade. MAXFIELD RESEARCH INC. 44
The recession and the following increasing unemployment rate thereafter due to the massive layoffs were the initial cause of the falloff of new housing construction. During the downturn construction costs have steadily increased and this high cost of building is been a major factor in maintaining the few new homes being built each year. Developers and builders are reluctant to build spec homes because they typical end up selling that home for less than it cost to build. MAXFIELD RESEARCH INC. 45
RENTAL MARKET ANALYSIS
Introduction Maxfield Research Inc. identified and surveyed rental properties of twelve or more units in Owatonna. In addition, interviews were conducted with real estate agents, rental housing management firms, private owner landlords, and others in the community familiar with Owatonna’s rental housing stock. For purposes of analysis, we have classified rental properties into two groups: general occu‐
pancy and senior (age restricted). All senior properties are included in the Senior Rental Analy‐
sis. The general occupancy rental properties are divided into three groups: market rate (those without income restrictions), affordable, (those receiving tax credits in order to keep rents affordable), and subsidized (those with income restrictions). Although it was beyond the scope of the study to inventory and aggregate the number of scattered single‐family homes that are rented in the PMA, Maxfield Research Inc. did interview some private homeowners on the properties that they manage to get a rough gauge of the single‐family home, duplex, and triplex rental market. We are well aware of the role these homes play in the general occupancy rental housing market. Rented single‐family homes, duplexes, triplexes, and general occupancy market rate apartments compete for some of the same target markets. Results of the survey can be found in the Rental Market Interview Sum‐
mary. General‐Occupancy Rental Properties Our research of the PMA’s general occupancy rental market included a survey of 33 larger apartment properties in May 2013. These properties represent a combined total of 913 units, including 492 market rate units, 163 affordable units, and 258 subsidized units. At the time of our survey, 23 market rate units, three affordable units, and nine subsidized units were vacant, resulting in an overall vacancy rate of 3.9%. Our previous study, completed in March 2010, found 25 vacancies among market rate units, five in affordable units, and ten in subsidized properties, for an overall vacancy rate of 4.6%. The overall vacancy rate of 3.9% is lower than the industry standard of 5% vacancy for a stabi‐
lized rental market, which promotes competitive rates, ensures adequate choice, and allows for unit turnover. The market indicates a stable supply of rental housing in the community. Tables 23, 24, and 25 summarize information on general occupancy properties surveyed. Table 23 shows information on market rate properties, Table 24 shows information on affordable properties, and Table 25 shows information on subsidized properties. Photographs accompany each section of text and a map follows the property photographs. The following are key points from our survey of these developments. MAXFIELD RESEARCH INC. 46
RENTAL MARKET ANALYSIS
Market Rate Properties 





There are 490 units in the 19 rate developments surveyed. A total of 27 vacant units were identified, for a vacancy rate of 5.5%. Vacancies were scattered among many buildings in Owatonna, but buildings with vacancy rates over 5% tended to be older. This vacancy rate is the same as when surveyed in March 2010 study, reflecting a stable rental housing market in Owatonna over the years. Many households may still be nervous about purchasing a home or may also have problems qualifying to purchase a home. The uncertain job market may also be causing renters to remain in their current unit or buyer apathy. Of all the buildings, 42% had vacancy rates over 5% and all except one were more than 30 years old. The three newest properties developed after 2000 have performed well and have maintained nearly 100% occupancies. Eden Valley Place (2012) is the only new market rate rental building that has been added to the city since the previous survey. Eden Valley Place is a rental townhome development with five‐unit and six‐unit, one‐ and two‐story attached townhomes. It has the second highest rents in Owatonna next to the Gateway Apartments (opened in 2004), at $995 per month for two‐bedroom units and three‐bedroom units. There is also a two‐unit, two‐
bedroom twinhome that rents for $1,095 per month. Eden Valley Place is currently fully occupied and management states they leased up quickly and have maintained nearly 100% occupancy. Although monthly rents at Gateway are about 50% higher than the average in Owatonna, the added features and amenities, such as attached garage parking, dishwasher, in‐unit washer and dryers, and patio warrant these higher rents. There have been only four market rate general occupancy developments built since 1980; and only three built since 2000. Many of the older units, which are concentrated along 21st and 22nd Street NW and on or near State Avenue appear to remain in need of renovations and updates, and it is likely that even well‐maintained older units have outdated interiors. The majority of market rate units are two‐bedroom (270 units, or about 56%), followed by one‐bedroom (164 units, or 33%), three‐bedroom units (38 units, or 8%), and then studios (20 units, or 4%). There were only four properties that offered studio units and five proper‐
ties that offered three‐bedroom units. The monthly rents for studios ranged from $250 to $475, and averaged $380. One‐
bedroom monthly rents ranged from $400 to $865, and averaged $550. Two‐bedroom monthly rents ranged from $495 to $1,095 and averaged about $705. Three‐bedroom monthly rents ranged from $620 to $1,275, and averaged about $1,040. MAXFIELD RESEARCH INC. 47
RENTAL MARKET ANALYSIS TABLE 23
MARKET RATE GENERAL OCCUPANCY RENTAL HOUSING
CITY OF OWATONNA
May 2013
Project Name/ Address
Year
Built
Total
Units
Vacant Unit Mix
Rent Range
Unit Size
Comments
Eden Valley Place
665/670 Colorado Lane
735/737 El Dorado Street
Owatonna
2012
36
0
12 ‐ 2BR
22 ‐ 3BR
2 ‐ 2BR
Gateway Apartments
325 Hoffman Drive
Owatonna
2004
60
3
5.0%
23 ‐ 1BR
28 ‐ 2BR
9 ‐ 3BR
$865
$1,025 ‐ $1,040
$1,225 ‐ $1,275
Park Village Apts I & II
114 22nd Street NW/
2250 N. Cedar Ave.
Owatonna
2001/
2002
36
0
4 ‐ 1BR
32 ‐ 2BR
$555
$655 ‐ $805
Subland Apartments
140 West Pearl
Owatonna
1999
15
0
14 - 1BR
1 - 2BR
$440 - $495
$615
N/A
3‐story building. Features: off‐street parking, coin laundry, some balconies. Tenant pays heat and electric.
1979
11
0
1978
18
1
5.56%
2
7
2
1
17
$575 ‐ $595
$690 ‐ $725
$850
$500
$600
740
836
932
650
828
One 2 1/2‐story building. Features: off‐street parking, coin‐op laundry. Rent includes all utilities. Profile: Mostly married w/children, 2 singles, 1 couple, rest single‐parents.
Features: detached garage, wall‐unit A/C, coin‐op laundry, dishwasher, balcony/patio. Tenant pays all utilities. Profile: Half 50 and over, 2 couples with children.
1978
12
0
700
1,000
3‐story building, balcony. Features: detached garage for $47/mo., coin‐laundry, off‐street parking. Tenant pays electric. Profile: about half couples, half singles.
Crestwood Apartments
216 12th St. NE
Owatonna
Summit Manor
166 22nd Street NW
Owatonna
Hilltop Manor
1208 NE 3rd Avenue
Owatonna
‐ 1BR
‐ 2BR
‐ 3BR
‐ 1BR
‐ 2BR
1 ‐ 1BR
11 ‐ 2BR
$995
$995
$1,095
$500
$675
950 ‐ 1,250
1,250
1,050
One‐ and two‐story attached townhomes (5/6‐unit buildings). One 2‐
unit twinhome on site as well. Features: Attatched garage, full‐sized washer & dryer, dishwasher, microwave, and patio. Tenant pays gas & electric. Profile: wide range, including some seniors.
721 ‐ 768
884 ‐ 1,098
1,105 ‐ 1,325
3‐story building. Features: UG parking (included), community room, exercise room, game room, in‐unit W/D, storage, walk‐in closets, patio/balcony, bay windows, cable included. Tenant pays gas/electric. Profile: mix of singles, couples, and families.
700
928 ‐ 1,028
Features: detached garage, automatic garage door opener, dishwasher, balcony (2nd & 3rd floor only), storage in unit, coin‐op laundry in building, laundry hookups in units (new building only), garbage disposal. Tenant pays electric. Profile: wide range, including some seniors.
48
RENTAL MARKET ANALYSIS TABLE 23 (Continued)
CITY OF OWATONNA
May 2013
Apache Apartments
236 12th St. NE
Owatonna
Year
Built
Total
Units
1976
11
0
1975
24
1974
Rent Range
Unit Size
2 ‐ 1BR
7 ‐ 2BR
2 ‐ 3BR
$575
$675
$775
740
836
932
2
8.3%
9 ‐ 1BR
15 ‐ 2BR
$500
$600
650
750 ‐ 800
48
3
6.3%
12 ‐ 1BR
36 ‐ 2BR
$575
$675
700
1,000
Vacant Unit Mix
Comments
One 2‐story building. Features: off‐street parking, coin‐op laundry, some walk‐in showers. Rent includes all utilities. Profile: mix of singles and couples, some kids and seniors.
Northwest Manor
218 21st Street NW
Owatonna
Clifton Apartments
1927‐2019 Hartle Ave
Owatonna
Cedar Hills
215 22nd Street NW
Owatonna
1970s
42
3
7.1%
6 ‐ EFF
12 ‐ 1BR
24 ‐ 2BR
$250 ‐ $350
$400 ‐ $450
$500 ‐ $550
N/A
N/A
N/A
3‐story building. Features: laundry on each floor, storage rooms, off‐
street parking, some balconies. Tenant pays electricity. Profile: primarily younger singles. Half month free rent on six month lease.
Academy Apartments
706/714 Academy St.
Owatonna
1968
22
0
12 ‐ 1BR
10 ‐ 2BR
$585 ‐ $655
$635 ‐ $740
600
750
Two 11‐unit buildings. Features: detached garages‐$40/mo., coin‐op laundry, cats allowed w/deposit, picnic area, storage lockers. Renter pays gas and electric. Profile: wide range of residents, few seniors. Waitlist of 9 households.
1965
14
0
2 ‐ EFF
4 ‐ 1BR
8 ‐ 2BR
$475
$525 ‐ $600
$700 ‐ $800
600 ‐ 700
700 ‐ 800
1,000
2‐story building. Features: off‐street parking (23 spots), coin‐laundry, a/c unit (charges extra). All utilities included. Profile: mixture of residents but primarily singles.
1950s
21
0
21 ‐ 1BR
400
Three seven‐unit bldgs. Features: no garages, wall‐unit A/C, coin‐op laundry, outdoor patio. Electric not included in rent. Profile: Avg. age 55 years, mostly singles, from young adults to seniors, no children.
Schuh Apartments
445 State Avenue
Owatonna
MontClair Apartments
205‐213 13th St. SW
Owatonna
$485
Features: four 2BR units have balconies, 16 detached garages at $45/mo. Gas and heat included in rent. Profile: wide range, mostly single, 4 seniors.
Two 3‐story 18‐unit and one 12‐unit building. Features: coin‐op laundry, some balconies, off‐street parking, 38 detached garages at $40/mo. Tenant pays electric. Profile: mostly single workers, families, few seniors.
49
RENTAL MARKET ANALYSIS TABLE 23 (Continued)
CITY OF OWATONNA
May 2012
West Hills Estates
421‐431 State Avenue
Owatonna
Year
Built
Total
Units
1932
22
5
#####
2
8 ‐ EFF
10 ‐ 1BR
4 ‐ 2BR
Vacant Unit Mix
Rent Range
Unit Size
Comments
$400 ‐ $425
$425 ‐ $475
$625 ‐ $650
312 ‐ 319
436 ‐ 637
572 ‐ 671
Two 3‐level buildings (11 units each); Residents pay electric. Features: 3 detached garages for $50/mo. (all occupied); off‐street parking, wall‐
unit A/C; some fireplaces; coin‐op laundry; Profile: Mostly singles, some families. $520
$570 ‐ $585
N/A
N/A
3‐story building. Features: balcony, off‐street parking, coin‐laundry, detached garage for $40/mo. Tenant pays electricity.
N/A
2‐story building, balcony
N/A
N/A
N/A
3‐story building. Features: detached garages for $40/mo., off‐street parking, wall A/C, coin laundry. Tenant pays all utilities except water & cable. Profile: single‐parents, families, couples. Has had chronic problems with vacanies; full now b/c offered one mo. free rent with one yr. lease.
N/A
2‐story building. Features: balcony, detached garage (included), laundry. Utilities vary by resident. Profile: mostly middle‐aged singles.
Cedar Ridge
107 NW 22nd Street
Owatonna
N/A
18
0
3 ‐ 1BR
15 ‐ 2BR
Topaz Holdings*
112 NW 21st Street
Owatonna
N/A
18
2
0.111
3 ‐ 1BR
15 ‐ 2BR
Westgate Apartments
585 Adams Avenue
Owatonna
N/A
23
1
0.043
11 ‐ 1BR
9 ‐ 2BR
3 ‐ 3BR
North View Estates
250 21st Street NW
Owatonna
N/A
18
7
0.389
3 ‐ 1BR
15 ‐ 2BR
Modern Air Apartments
811 E. School Street
Owatonna
1950
23
0
4 ‐ EFF
16 ‐ 1BR
3 ‐ 2BR
492
27
5.5%
Totals
N/A
$475 ‐ $500
$495 ‐ $595
$620
$500
$600
$335 ‐ $425
$400 ‐ $440
$650 ‐ $750
192 ‐ 320
640
750 ‐ 900
Unit Mix =
20
163
270
38
‐
‐
‐
‐
Two 1‐story buildings. Features: off‐street parking, detached garages included with some units, coin‐op laundry, 1/2 acre lawn. All utilities included. Profile: all single, 2 single women with children, predominantly adults age 40‐50.
EFF
1BR
2BR
3BR
50
RENTAL MARKET ANALYSIS Market Rate General Occupancy Rental Gateway Apartments Subland Apartments Summit Manor Apartments Apache Apartments MAXFIELD RESEARCH INC.
Park Village Apartments Crestwood Apartments Hilltop Manor Northwest Manor 51
RENTAL MARKET ANALYSIS Clifton Apartments Schuh Apartments West Hills Estates Topaz Holdings MAXFIELD RESEARCH INC.
Cedar Hills MontClair Apartments Cedar Ridge Westgate Apartments 52
RENTAL MARKET ANALYSIS Northview Apartments Modern Air Apartments Eden Valley Place Affordable Properties  We identified five affordable properties (including four in Owatonna and one in Blooming Prairie), all of which were financed through the Low Income Housing Tax Credit (LIHTC) pro‐
gram, otherwise known as the Section 42 program. The maximum income limit for residen‐
cy at these properties ranges from 40% to 60% of the area median income. Income limits are shown in Figure 1. FIGURE 1
Income Limits
Steele County
Low Income Housing Tax Credit Program
Family
Size
1 Person
2 People
3 People
4 People
5 People
40% AMI
$20,000
$22,840
$25,680
$28,520
$30,840
60% AMI
$30,000
$34,260
$38,520
$42,780
$46,260
Source: MN Housing Finance Agency

The five affordable apartment properties contain a total of 163 units. The majority of the units are three‐bedroom (104 units) followed by two‐bedroom (56 units). There are only three one‐bedroom units and no studio or efficiency affordable units. The vast majority of tenants are families, including a high percentage of single‐parents. MAXFIELD RESEARCH INC.
53
AFFORDABLE GENERAL OCCUPANCY RENTAL HOUSING
OWATONNA AND THE REMAINDER OF PMA
May 2013
Year
Built
Total
Units
Vacant
Unit Mix
Rent Range
Unit Size
Comments
Willow Run I Townhomes
2630 3rd Avenue NE
Owatonna
1999
24
0
24 ‐ 3BR
$895
1,200
Section 42 tax credit building. Target income: 60% AMI ‐ $36,840 for family of three. Features: attached garage, W/D in unit, dishwasher, pantry, patio, mini‐blinds, storage in‐unit, playground, basketball hoop, gazebo. Tenant pays heat/electric. Profile: mostly young working families with kids. 22 tax credit units. Waiting list of 20 households.
Willow Run II Townhomes
2785 3rd Avenue NE
Owatonna
2004
32
0
32 ‐ 3BR
$820
1,338
2000
12
0
5 ‐ 2BR
1 ‐ 2BR
6 ‐ 3BR
1997
24
0
24 ‐ 3BR
$895
1,200
Section 42 tax credit building. Target income: 60% AMI ‐ $36,840 for family of three. Tenant pays heat/electric; Features: attached garage, W/D in unit, dishwasher, pantry, patio, mini‐blinds, storage in‐unit, playground. Tenant pays heat/electric. Profile: All families. 28 tax credit units. 4 Section 8 units. Waiting list of 30 names at Willow Run II.
Section 42 tax credit building. Target income: 60% AMI ‐ $36,840 for family of three. Features: attached garage with auto opener included, playground in courtyard, central air, washers and dryers in units, walk‐in closets, patio. Resident pays for gas, electric, phone, cable. Profile: mostly middle‐aged, some families, some seniors.
Section 42 tax credit building. Target income: 60% AMI ‐ $36,840 for family of three. Features: attached garage, W/D in‐unit, dishwasher, patio, mini‐blinds, storage in‐unit, playground, basketball hoop, gazebo. Tenant pays heat/electric. Profile: working families with 2‐4 children, some single‐parent families. All tax credit units. Waiting list of 15 1993
72
3
4 ‐ 1BR
50 ‐ 2BR
18 ‐ 3BR
$590
$645 ‐ $695
$840
623
702 ‐ 870
1,175
164
3
Prairie Village Townhomes
320‐342 4th St. SE
Blooming Prairie
Cedar Run Townhomes
2300 Cedar Avenue N
Owatonna
Woodbridge Apartments
614/616/618 Bridge St.
Owatonna
Totals
1.8%
$520
$520 (Handicap)
$634
Unit Mix =
1,070
1,260
1,260
3‐bldg. Sec. 42 (tax credit) project with 60 tax credit units. Target income: 60% AMI ‐ $36,840 for family of three. Features: detached garage is $40/mo., wall‐unit A/C, coin‐op laundry on each floor, dishwasher, balcony/patio, walk‐in closets, $25 storage lockers on each floor, mini‐
blinds, playground/picnic area. Resident pays electric. Profile: mix of 4 ‐ 1BR
56 ‐ 2BR
104 ‐ 3BR
54
RENTAL MARKET ANALYSIS 



Only three vacant units were identified (1.8% vacancy rate) in Steele County as of May 2013. All vacancies were units located at Woodbridge Apartments. Woodbridge is an apartment‐style building, versus townhome units like the other affordable properties. Con‐
tributing to vacancies is the fact that it is a little older, lacks some of the amenities found at the newer properties, and has small two‐bedroom unit sizes. Excluding Woodbridge Apartments, there are no vacant affordable rental units in Owatonna and long waiting lists at each property. Along with income limits for residents, the properties have maximum rents that are based on a percentage of median income – usually 40% to 60% of median income. With these lim‐
its, rents at the affordable properties range from $590 for the one‐bedroom, $520 to $695 for two‐bedroom units, and $611 to $805 for three‐bedroom units. There has been a 7% to 11% increase in affordable rents since the March 2010 study. The affordable rents are simi‐
lar to many of the market rate properties, and there is likely some market overlap. The LIHTC program was established in 1986 – thus all of these buildings were developed since then, with the oldest being Woodbridge (opened in 1993). The remaining properties were all built within the last fifteen years and have many of the more modern amenities that few other rental properties in the County have such as attached garages, automatic garage door openers, washers and dryers in the units, central air, dishwashers, and play‐
grounds. As we understand, Woodbridge Apartments will be losing its Tax‐Credit qualification April of 2014. A three year protection period will then occur in which the Tax‐Credit units will be phased into market rate units. Thus, by 2017 the number of Tax‐Credit affordable rental units will be reduced from 164 to 92 units. Affordable General Occupancy Rental Housing Willow Run I Townhomes MAXFIELD RESEARCH INC.
Willow Run II Townhomes 55
RENTAL MARKET ANALYSIS Cedar Run Townhomes Woodbridge Apartments Subsidized  All of the subsidized properties are HUD Section 8 or Rural Development (formerly FmHA) properties, requiring rent of 30% of a resident’s adjusted gross income (AGI). Five of the properties are subsidized through Rural Development, while four of the properties receive subsidies through HUD Section 8. All properties were built prior to 1990, with Heather Court being the most recently built subsidized property (1989).  The nine properties offer a total of 258 subsidized rental units in the County. There were 14 vacancies reported by building managers, translating to a vacancy rate of 5.4%. Typically, subsidized rental properties should be able to maintain vacancy rates of 3% or less in most housing markets. Nine of the 14 vacancies were found at three facilities. The eight proper‐
ties in Owatonna had a total of nine vacancies out of 242 units, for a vacancy rate of 3.7%, indicating a stable subsidized housing market.  About 44% of the units at the surveyed apartments are two‐bedroom units (113 units), 28% are three‐bedrooms (73 units) and 26% are one‐bedrooms (52 units). There are also six units that have four bedrooms (2%). There were no efficiency or studio units identified in the subsidized properties.  Although exact figures were unavailable, interviews with the property managers indicated that a sizable majority of the residents at properties subsidized through Rural Development are receiving some sort of rental assistance. This enables them to pay 30% of their income for rent, even if 30% of their income is below the basic rent. Without rental assistance, very low income residents would be required to pay the basic, regardless if it was greater than 30% of their income. The fact that most households in Rural Development properties re‐
ceive rental assistance is an indication that most of these households have an annual in‐
come of about $18,000 or less (a household earning $18,000 paying 30% of their income for rent would pay a rent of $450 – about the average basic rent at Rural Development proper‐
ties). MAXFIELD RESEARCH INC.
56
Unit and common area amenities are limited at the subsidized properties. Features and amenities found at most subsidized developments include playground/picnic areas, balco‐
ny/patios, walk‐in showers, and storage space. One property features detached garages renting for $35 per month, with the remaining offering only off‐street parking for their resi‐
dents. Steele County Transitional Housing Program Steele County Transitional Housing is a private interfaith non‐profit organization that serves the homeless population helping them locate affordable housing and providing the first month’s rent and deposit. The transitional housing program additionally supports those families and individuals with rent subsidies based on a sliding scale for up to two years. The program provides rental assistance with the assistance gradually declining over the allotted two year period in which the household must then sustain rent on their own. The transitional housing units are scattered throughout Steele County and are not fixed units. Units can be located at any rental property in the County. To qualify, the household must be homeless and unable to pay the first month’s rent and deposit. The head of household must be employed or find employment within three months. They must retain employment and consistently pay their portion of the monthly rent. While in the program, the household receives additional case management services in the home. After the expiration of the two‐year period, the household can typically afford rents from $750 to $1,000 per month (two‐ and three bedroom units make up the majority of unit types) on their own. The program currently is supporting 25 households in transitional housing. Over the 13 years the program has been operating the average number of households has been 20. The majority of households that the program serves are three‐ to four‐ person single‐parent family house‐
holds (approximately 90%). These households are typically those with chemical dependency, generational poverty, and domestic abuse. They estimate that 80% of the households that are assisted in the program are successfully maintaining their rental payments at the six month follow‐up and the majority is residing at the apartment they started the program in. The program turns over about one household per month. Those households cannot sustain rent are placed on the Section 8 waiting list. With an 80% success rate, only two to three households per year remain eligible for Section 8 or subsidized housing. The majority of households graduating from the program are able to afford rents from $750 to $1,000. In Owatonna, these households can afford rents at nearly all of the market rate properties and would typically qualify for all of the affordable developments as well. The impact of this program on Section 8 and subsidized housing is minimal. Because the subsidized housing market is showing a 5.4% vacancy rate which is above the market equilibrium industry standard of 3%, it may be important to direct those 20% of households to the vacant subsidized units if they are not already living in these facilities. MAXFIELD RESEARCH INC.
57
SUBSIDIZED GENERAL‐OCCUPANCY RENTAL HOUSING
May 2013
Year
Built
Total
Units
Vacant
Rent Range
Unit Size
Comments
Heather Court
635‐639 Hilltop
Owatonna
1989
36
0
24 ‐ 2BR
12 ‐ 3BR
30% of AGI
748
902
2‐story Rural Development project. Features: off‐street parking, coin‐op laundry, basketball court, some walk‐in showers. Tenant pays electricity. Minimum and maximum rents range from $505 to $675 for 2 BRs and $535 to $717 for 3 BRs.
North Court T.H.
1512 St. Paul Road
Owatonna
1989
29
4
2
18
7
2
1BR
2BR
3BR
4BR
30% of AGI
624
864
1,008
1,168
Cedardale North
324 Cedardale Dr.
Owatonna
Cedardale West
325 Cedardale Drive
Owatonna
1988
16
1
10 ‐ 1BR
6 ‐ 2BR
30% of AGI
624
768
1985
16
0
14 ‐ 1BR
2 ‐ 2BR
30% of AGI
624
768
Rural Development tax‐credit project. Features: off‐street parking, some walk‐in showers, balcony/patio, & coin‐op laundry room. Tenant pays heat & electric. Min. and max. rents range from $510 to $703 for 1BR's, $540 to $733 for 2BR's, $565 to $778 for 3BR's, & $590 to $803 for 4BR's. Rural Development building. Min. and max. rents range from $435 to $596 for 1BR's and $470 to $631 for 2BR's. Features: off‐street parking & some walk‐in showers. Tenant pays electric.
Rural Development building. Features: off‐street parking, some walk‐in showers, & coin‐
op laundry. Rent includes all utilities except electricity.Min. and max. rents range from $440 to $600 for 1BR's and $475to $625 for 2BR's. 1980
30
0
20 ‐ 2BR
10 ‐ 3BR
30% of AGI
869
954
1979
48
0
8 ‐ 2BR
36 ‐ 3BR
4 ‐ 4BR
30% of AGI
911
1,035
1,283
2‐story Section 8 project. Features: off‐street parking, some walk‐in showers, balcony/patio, W/D hook‐ups in‐unit. Tenant pays heath and electricity. Max rents are $697/2BR, $788/3BR, $885/4BR. Mostly families with head of household under 50. 1975
55
4
26 ‐ 1BR
25 ‐ 2BR
4 ‐ 3BR
30% of AGI
625
825
1,125
Five 3‐story buildings. Forty‐four units are Section 236, eleven are Section 8. Features: wall‐unit A/C, diswasher, disposal, microwave, mini‐blinds, playground/picnic area w/ BBQ. Profile: wide mix, singles, families, few seniors. Wait list for Section 8 and 236 units. Currently offering 1st mo. rent free w/1‐year lease. Minimum and maximum rents range from $564 to $612 for 1 BRs, $705 to $765 for 2 BRs, and $856 to $929 for 3 BRs.
1973
12
0
8 ‐ 2BR
4 ‐ 3BR
30% of AGI
782
905
Section 8 building. Features: off‐street parking; W/D hook‐ups in unit, & utility room. Rent includes all utilities.
1983
16
5
14 ‐ 1BR
2 ‐ 2BR
30% of AGI
600
700
2‐story Rural Development project. Features: coin‐op laundry on each floor, emergency pull‐cord system, A/C wall sleeve, community room w/kitchen; Profile: mix in ages with some seniors. Converted from senior to General Occupancy in Nov. 2005. Tenant pays electricity. Maximum rents range from $481 for 1BR's and $511 for 2BR's. 258
14
5.4%
Cedardale T.H.
315 22nd Street SE
Owatonna
Park View Heights
429 St. Paul Place
Owatonna
Lincoln Square Apts.
433 16th Street NE
Owatonna
Ivanhoe Town Houses
615/625 Linn Avenue
Owatonna
Ellendale Square
7th St. & 2nd Ave.
Ellendale Totals
Unit Mix
‐
‐
‐
‐
Section 8 and tax credit project. Features: window‐unit A/C must be provided by resident; some 2BR units have patios; W/D hook‐ups in‐unit; storage space available; detached garages $35/mo.; playground/picnic area; beauty shop, no pets allowed. Resident pays heat and electric. Max rents are $661 & $729 for 2BR's & 3BR's, respectively. Waiting list of 17 names for 2BR, 22 names for 3BR.
58
RENTAL MARKET ANALYSIS Subsidized General Occupancy Rental Heather Court Apartments Cedardale North Cedardale Place Townhomes Lincoln Square Apartments MAXFIELD RESEARCH INC.
North Court Townhouses Cedardale West Parkview Heights Ivanhoe Town Houses 59
RENTAL MARKET ANALYSIS Housing Choice Voucher Program In addition to subsidized apartments, Steele County also has a “tenant‐based” subsidy called Housing Choice Vouchers to help lower income households find affordable housing. The tenant‐based subsidy is funded by the Department of Housing and Urban Development’s (HUD), and is managed by the Owatonna Housing and Redevelopment Authority (HRA). Under the Housing Choice Voucher program (formerly Section 8 Certificates and Vouchers), qualified households are issued a voucher that the household can take to an apartment that has rent levels allowable under HUD guidelines. The household then pays 30% of their adjusted gross income for rent and utilities, and the Federal government pays the remainder of the rent to the landlord. Applicants in Steele County may be eligible for the program if their income is below the current limits shown in the figure below, which are set by HUD on an annual basis. FIGURE 2
Income Limits
Steele County
Housing Choice Voucher Program
Family
Size
Very
Low‐Income
1 Person
2 People
3 People
4 People
5 People
6 People
7 People
8 People
$25,000
$28,550
$32,100
$35,650
$38,550
$41,400
$44,250
$47,100
Source: Owatonna HRA
To be eligible for the Housing Voucher program, rental units must have rent levels allowable under HUD guidelines – or below the “Payment Standard,” which is the same as Fair Market Rents in Steele County. In Steele County, the Payment Standard is $571 for one‐bedroom units, $728 for two‐bedroom units, $1,003 for three‐bedroom units, and $1,289 for four‐bedroom units. Currently, there are 100 vouchers issued. Because the majority of these households have very low incomes, very few could afford rental housing in Owatonna without the assistance of the Voucher program. Demand for the program is high, the waiting list is currently closed and has 700 households, including about 267 households who meet preference criteria (e.g., currently are housing cost burdened, victims of domestic violence, and homeless). With current low turnover, it is about a three to five year wait to receive a voucher. MAXFIELD RESEARCH INC.
60
RENTAL MARKET ANALYSIS General Occupancy Rental Properties in Owatonna MAXFIELD RESEARCH INC.
61
RENTAL MARKET ANALYSIS Pending Rental Developments in the PMA We identified two pending rental developments in the City of Owatonna. The Eden Valley Townhome/Twinhome development is currently building two additional six‐
unit townhome buildings to be opened Fall 2013. Eden Valley operates 36 townhome units in six five/six unit buildings along with a two‐unit twinhome. Metroplains is planning to develop a Tax‐Credit rental development in Downtown Owatonna. This project has been delayed due acquisition of the land from the City. Metroplains will likely revisit this project in 2014. Rental Market Interview Summary Interviews with area rental property managers, real estate agents, private owners, and other persons familiar with the rental market in Owatonna were conducted to solicit their impres‐
sions of the rental housing market in the community. The following are some key points from these interviews:  With the exception of the newer properties, property managers feel that the current market rate rental housing market is still soft. The current overall market rate vacancy rate of 5.5%, is slightly above market equilibrium of 5%, but as in 2010 does not indicate a mar‐
ket as poor as described. Of the eight buildings with vacancy rates over 5%, all but one was opened prior to 1980. The only newer building (Gateway Apartments ‐ 2004) had a vacancy at 5.0%. Thus, the older properties may be fueling the worse than justified perception of the market. The chart below shows that smaller, older apartments have vacancy rates above the market equilibrium. Vacancy Rate by Apartment Type
Type
Market Rate - Post 2000
Market Rate - Pre 2000
Affordable
Subsidized

Avg. Yr. Built
2005
1970
1998
1982
Tot. Units
132
360
164
258
Tot. Vac.
3
24
3
14
Vac. Rate
2.3%
6.7%
1.8%
5.4% Since the March 2010 study, rents have increased at only six properties by an average of 5% and a range of 3% to 11%. All of the newer developments increased rents and a few older properties. Overall, the older rental buildings have either maintained rents from the 2010 or have decreased rents. Further indicating that these older buildings are fueling the per‐
ception in the market. MAXFIELD RESEARCH INC.
62


Older rental properties continue to offer limited amenities with no improvements occurring since 2012. These older properties continue to contain the majority of vacancies. There is a lack of larger size apartment such as three‐bedroom units. Eden Valley Place recently added 22 market rate three‐bedroom units to the market since 2010 and is fully occupied. Many of the older apartments offer smaller sized one‐ and two‐bedroom units. Due to the high number of households forced to rent due to a foreclosures along with in‐
creasing immigrant families, three‐bedroom plus units are currently in high demand. Much of Owatonna’s rental housing stock is composed of medium‐size (12 to 18 units) structures targeted at the low‐ to moderate‐income market. Many of these smaller build‐
ings were built prior to 1985, and do not feature a variety of contemporary amenities. Single‐Family Rental Housing In addition to the identified multifamily rental developments listed in Tables 23 to 25. Figure 3 below shows the licensed rental units in Owatonna by building type and was provided by the City of Owatonna Building Department.  Figure 3 shows that there is over 2,000 total rental units licensed in the City of Owatonna. The largest proportion of units (45%) is located within the previously discussed multifamily rental buildings. The remainder of units is scattered throughout the City of Owatonna in single‐family, duplex, triplex, townhomes, etc.  The City of Owatonna has 259 rental units located in single‐family housing. This constitutes almost 13% of all rental housing options. Single‐family rental units rents range from about $1,200 to $1,500 per month. There has been an increase in this type of rental housing in the PMA due to the poor economy and housing market over the past few years. Single‐
family rental typically attracts larger family households that need more bedrooms that are unavailable at most market rate rental developments. FIGURE 3
Licensed Rental Units
Owatonna
Building Type
Multifamily Bldg.
Duplex
Single‐Family
Townhomes
4‐Plex
Apartment ‐ In Business Bldg.
Triplex
Boarding/Rooming House
Condominium
Total
# of Bldgs. # of Units % of Total
66
179
259
16
25
49
30
1
2
627
917
346
259
180
100
97
90
14
33
2,036
Source: City of Owatonna Building Department
45.0%
17.0%
12.7%
8.8%
4.9%
4.8%
4.4%
0.7%
1.6%
63
SENIOR HOUSING ANALYSIS Senior Housing Defined The term “senior housing” refers to any housing development that is restricted to people age 55 or older. Today, senior housing includes an entire spectrum of housing alternatives, which occasionally overlap, thus making the differences somewhat ambiguous. However, the level of support services offered best distinguishes them. Maxfield Research Inc. classifies senior housing properties into four categories based on the level of support services offered: Adult/Few Services; where few, if any, support services are provided and rents tend to be modest as a result; Congregate; optional services where support services such as meals and light housekeeping are available for an additional fee or service‐intensive where support services such as meals and light housekeeping are included in the monthly rents; Assisted Living; where two or three daily meals as well as basic support services such as trans‐
portation, housekeeping and/or linen changes are included in the fees. Personal care services such as assistance with bathing, grooming and dressing is included in the fees or is available either for an additional fee or included in the rents. Memory Care; where more rigorous and service‐intensive personal care is required for people with dementia and Alzheimer’s disease. Typically, support services and meal plans are similar to those found at assisted living facilities, but the heightened levels of personalized care de‐
mand more staffing and higher rental fees. CONTINUUM OF HOUSING AND SERVICES FOR SENIORS
Single-Family
Home
Townhome or
Congregate Apartments w/
Nursing
Assisted Living
Apartment
Optional Services
Facilities
Age-Restricted Independent Apartments,
Congregate Apartments
Memory Care
Townhomes, Condominiums, or
w/ Intensive Services
Units
Cooperatives
Fully Independent
Lifestyle
Fully or Highly
Dependent on Care
Senior Housing Products
These four senior housing products tend to share several characteristics. First, they usually offer individual living apartments with living areas, bathrooms, and kitchens or kitchenettes. Second, they generally have an emergency response system with pull‐cords or pendants to promote security. Third, they often have a community room and other common space to encourage socialization. Finally, they are age‐restricted and offer conveniences desired by MAXFIELD RESEARCH INC.
64
SENIOR HOUSING ANALYSIS seniors, although assisted living developments sometimes serve non‐elderly people with special health considerations. The four senior housing products offered today form a continuum of care from a low level to a fairly intensive one; often the service offerings at one type overlap with those at another. In general, however, adult/few services developments tend to attract younger, more independent seniors, while assisted living and memory care developments tend to attract older, frailer seniors. Senior Housing in the Primary Market Area As of May 2013, Maxfield Research identified 17 senior housing properties in the PMA. These properties contain a total of 795 units. Six of the properties are subsidized, while the remaining 11 are market rate. Of the 11 market rate developments, four offer multiple service levels. Table 26 provides information on market rate properties and Table 27 provides information on subsidized properties. Information in both tables includes year built, number of units, unit mix, number of vacant units, rents, and general comments about each property. Photographs follow each section and a map of the properties follows the final photographs. The following are key points from our survey of the PMA’s senior housing supply. Market Rate Senior Properties Maxfield Research Inc. identified 11 existing market rate, senior properties in Steele County. These properties contain 567 rental units, and represent all four previously defined levels of care on the senior housing continuum displayed in Figure 2. The properties are listed in Table 26 by the type of service they provide. The following are key findings from each level of care: Adult/Few Services  There are three adult/few service facilities with a total of 123 units. Two of the properties, Morehouse Place and Realife Cooperative, are owner‐occupied cooperatives for active older adults. Under the cooperative model, residents buy a share of the corporation that owns the building and then leases their unit from the corporation for a monthly fee. The remain‐
ing property, Southway Manor, is a senior rental property that offers few services. There are currently no vacancies at any of the developments.  Realife Cooperative requires an entrance fee of $21,046 to $25,082 for its one‐bedroom units and $30,522 to $32,120 for the two‐bedroom units. Morehouse Place requires an en‐
trance fee of $25,200 to $25,898 for its one‐bedroom units and $28,136 to $47,425 for its two‐bedroom units. Morehouse Place would not provide current pricing for May 2013. MAXFIELD RESEARCH INC.
65
SENIOR HOUSING ANALYSIS 

Amenities in the market rate units are significantly greater than in their subsidized counter‐
parts. All three developments offer covered parking, patios, and community rooms. More‐
house Place and Realife Cooperative also offer gardening areas, libraries, and other recrea‐
tional spaces. Morehouse Place and Southway Manor have washers and dryers in the units. The average age of residents was similar at each development, with the average age being 78 at Morehouse Place, 75 at Southway Manor, and 80 at Realife Cooperative. Congregate  We identified three properties for a total of 146 units in Owatonna. As May 2013, there were two vacancies for a rate of 1.4%. There were no vacancies at the time of the previous two studies in February 2006 and March 2010. Sixty‐one units were added in 2006 with the opening of Countryside, so the continued low vacancy rates indicate high demand for con‐
gregate housing.  In 2010, Heather Haus converted from a congregate development to an assisted living facility, removing 20 units of the congregate senior housing stock.  Countryside is a catered living facility built in 2006 that can provide assisted living services for additional fees as resident’s age and their needs increase. One meal per day, weekly housekeeping, activities, and transportation are included in the base congregate living fee. Monthly rent for a basic one‐bedroom unit is $1,915, for a one‐bedroom with a den is $2,090, and for a two bedroom ranges from $2,150 to $2,230. There remains about 60% of the residents from the previous 2010 study that receive only a congregate level of care, while the other 40% receive assisted living care.  The Brooks is a 50‐unit congregate facility built in 2000. Monthly rents range from $1,900 to $2,225 for one‐bedroom units and $2,355 for two‐bedroom units. This property is more service‐intensive and includes some personal care assistance, which is reflected in the high‐
er monthly rents. They have seven detached garages available for $50 per month, as well as a beauty/barber shop, exercise room, and community dining room. It is important to note that like Countryside, The Brooks is a congregate/assisted living hybrid. While the base ser‐
vice package would classify the property as a congregate property, residents can also re‐
ceive assisted living care should they require such services. Assisted Living  There are six assisted living facilities in Owatonna, with a total of 186 units. Three of the six facilities, representing 131 units, or 70% of the total, were built after 2006. Because need drives demand for assisted living more than economic trends, development of assisted liv‐
ing has continued despite the recession. MAXFIELD RESEARCH INC.
66
SENIOR HOUSING ANALYSIS TABLE 26
MARKET RATE SENIOR HOUSING
May 2013
Year
Built
Project Name/City
No. of
Units
No.
Vacant
46
0
No.
Type
1998
Southway Manor
2260 Hartle Avenue
Owatonna
1997
45
0
12 ‐ 1BR
33 ‐ 2BR
770 ‐ 850
975 ‐ 1,100
1988
32
4
14 ‐ 1BR
614 ‐ 659
18 ‐ 2BR
817 ‐ 914
32 ‐ 2BR
828 ‐ 856
Subtotal
Comments
Adult/Few‐Services
$706 ‐ $739
Cooperative building. Features: underground parking included in fee, $25,200 ‐ $25,898
some fireplaces, balcony/patio, W/D in‐unit, storage locker in garage, 935 ‐ 1,624
$806 ‐ $1,234
emergency call, craftroom, wood shop, gardening, library, billiard table, $28,136 ‐ $47,425
car wash, exercise room, porch, guest suite, & limited activity program. (Current pricing not provided) Profile: Avg. age 78 years, 11 couples. Waiting list of 8 names.
Morehouse Place
353 Lemond Rd.
Owatonna
Realife Cooperative
235 22nd St. SW
Owatonna
14 ‐ 1BR
Unit Mix/Sizes/Rents
Sizes
Monthly Rent
$750 ‐ $775
$825 ‐ $925
$572
$21,046
$736
$30,522
‐
‐
‐
‐
$614
$23,082
$867
$32,120
Features: tuck‐under garages ‐ $60/mo., detached garages ‐ $50/mo., wall‐unit A/C, dishwasher, disposal, walk‐in closet, balcony/patio, 2/3 of units have W/D, coin‐op laundry also, community room. Profile: Avg. age 75 years.
Cooperative project. Features: 20 detached garages are $25/mo. (full), off‐
street parking, garden plots, community/activity/dining room, reading alcoves w/books, craft/woodworking room, patio, storage bins, gazebo. Profile: Avg. age 80 years, 5 couples. They have a small waiting list. They turnover about 3 units/year.
3.3%
123
4
2006
61
1
30 ‐ 1BR
11 ‐ 1BR/Den
20 ‐ 2BR
505 ‐ 615
605 ‐ 751
716 ‐ 886
Congregate
$1,915
$2,090
$2,150 ‐ $2,230
Park Place
125 Park Street
Owatonna
2001
35
0
27 ‐ 1BR
8 ‐ 2BR
507 ‐ 605
848
$1,391 ‐ $1,656
$1,947
Monthly rent includes noon meal, housekeeping, transportation arrangements. Other meals, laundry service, and home care services are available for extra fee. Avg. age is 87.
The Brooks
2480 St. Paul Road
Owatonna
2000
50
1
40
4
2
4
528
644
825
1,000
$1,900
$1,950
$2,225
$2,355
Base monthly fees include utilities, laundry, housekeeping, one meal (noon), & activities. Building features dining room, beauty shop, fireplace room, exercise room, & 7 detached garages. About 30%‐40% of residents have Elderly Waivers.
146
2
Countryside
650 Elderado
Owatonna
Subtotal
‐ 1BR (A)
‐ 1BR (B)
‐ 1BR (C)
‐ 2BR (D)
1.4%
Rent includes one meal/day, weekly housekeeping, activities program, transportation, social‐wellness programs, & staff supervision. Additional assisted living services available for a fee. $500 for second occupant.
67
SENIOR HOUSING ANALYSIS TABLE 26 (Continued)
May 2013
No. of
Units
No.
Vacant
Valleyview of Owatonna
2008
1212 Frontage Rd
Owatonna
Traditions of Owatonna
2006
24th Place NW
Owatonna
60
10
42
5
Whispering Oaks
903 Calvery Court
Ellendale
Park Place
125 Park Street
Owatonna
2006
29
0
2001
15
0
1996
20
1995
Year
Built
Project Name/City
Alterra Sterling House
334 Cedardale Dr.
Owatonna
Heather Haus
223 4th St. NW
Blooming Prairie
Type
Sizes
Monthly Rent
Assisted Living
$867 Room & Board Fee
$1,600 ‐ $5,600
Personal Care Fee Range
$2,475 ‐ $2,675
$2,965
38
20
2
38
4
‐
‐
‐
‐
‐
Studio
Suite
2BR
1BR
2BR
312
468
624
550 ‐ 625
820
5
14
10
7
8
‐
‐
‐
‐
‐
Studio
1BR
2BR
Studio
1BR
400
805
1,035
452
540
$2,100
$2,365
$2,690
$2,395
$2,485
6
19 ‐ Private
1 ‐ Companion
225
300
$2,250
20
1
16 ‐ 1BR
4 ‐ 2BR
537 ‐ 607
713
$2,650
$2,700
186
22
11.8%
Subtotal
No.
Comments
Remodeled hotel. Monthly fee includes: 3 meals/day, housekeeping, 24hr staff, scheduled transportation, & activities. Building features dining room, chapel, beauty shop, fitness center, indoor pool, malt shop.
Inlcudes memory care in building. Monthly fee includes: 3 meals/day; personal care, medication dispensation, health monitoring, housekeeping, linen, & laundry, emergency call, activity director, 24‐hour staff. Base monthly rent includes 3 meals/day, activities, & housekeeping. Building features beauty shop, fireplace, computer room, fitness room, & game room.
Base fee includes all meals and snacks; additonal fee for Level 2 personal care package. Avg. age is 87.
1‐story building. Features: Community library/activity/dining room, outdor patio, chapel services. Monthly fee includes 3 meals/day, personal care, medication dispensation, health monitoring, housekeeping, & linen/laundry service. Available to private pay residents only. Attached to Prairie Manor Care Center. Building features community & private dining, community lounge w/fireplace, chapel, common laundry, garden plots, and detached garages. Profile: avgerage age = 85 years.
68
SENIOR HOUSING ANALYSIS TABLE 26 (Continued)
May 2013
Project Name/City
Valleyview of Owatonna
1212 Frontage Rd
Owatonna
Traditions of Owatonna
24th Place NW
Owatonna
Traditions of Owatonna II
24th Place NW
Owatonna
Clare Bridge Cottage
364 Cedardale Dr.
Owatonna
Year
Built
No. of
Units
No.
Vacant
2008
30
12
30 ‐ Studio
2006
10
5
10 ‐ Studio
2008
46
5
46 ‐ Studio
450
$2,895
1999
26
(beds)
5
22 ‐ Standard
2 ‐ Dbl Occ.
225
300
$2,860
No.
Type
Monthly Rent
Sizes
Memory Care
312
$867 Room & Board Fee
$1,600 ‐ $5,600
Personal Care Fee Range
400
$2,895
Subtotal
112
27
Secured area in remodeled hotel with assisted living. Monthly fee includes: 3 meals/day, housekeeping, 24hr staff, scheduled transportation, & activities.
In building with assisted living. Monthly fee includes: 3 meals/day; personal care, medication dispensation, health monitoring, housekeeping, linen, & laundry, emergency call, activity director, 24‐hour staff. Monthly fee includes: 3 meals/day; personal care, medication dispensation, health monitoring, housekeeping, linen, & laundry, emergency call, activity director, 24‐hour staff. 1‐story building. Features: Community library/activity/dining room, outdor patio, game room, chapel services. Monthly fee includes 3 meals/day, personal care, medication dispensation, health monitoring, housekeeping, & linen/laundry service. Available to private pay residents 24.1%
Comments
69
SENIOR HOUSING ANALYSIS 


Nearly half of the 22 vacancies in the PMA are in Valleyview of Owatonna, the newest facility opened in 2008. Excluding Valleyview, the vacancy rate for assisted living is 9.5%, which is slightly higher than the market equilibrium of 7%. Valleyview Assisted Living was converted from the former Ramada Inn. The property is located off of Interstate 35 and Highway 14 and includes 90 units ‐ 60 assisted living units and 30 memory‐care units. Previously the property had experienced extremely high vacan‐
cies (as shown in the March 2010 study). According to Valleyview personnel, the high va‐
cancies were a result of Steele County pulling its Elderly Waiver contract from the facility. Valleyview was originally planned to have all of the units designated for Elderly Waivers. A reinstatement of the County contract for Elderly Waivers has resulted is an increased occu‐
pancy rate. The property still however accounts for nearly half of the vacant units in the market. Sterling House and Clare Bridge Cottage also accept only private pay and as a result have 20% and 19% vacancy rates, respectively. Traditions of Owatonna, Heather Haus, Park Place, and Whispering Oaks all accept Elderly Waiver. The Traditions currently has five va‐
cant and Heather Haus has one vacancy while the other properties are full. Therefore, need for assisted living is high in Owatonna, but much of it comes from lower‐income seniors who cannot afford assisted living without assistance. 
Sterling House and Whispering Oaks include only traditional assisted living units. Valleyview of Owatonna and Traditions of Owatonna also include memory care units, and as already mentioned, Park Place also includes congregate units.  All of the developments include in the base fee three meals per day and housekeeping. Each also has a dining room and activities. Valleyview of Owatonna and Whispering Oaks have beauty shops and fitness rooms. Amenities are relatively similar because all of the fa‐
cilities were built since 1996 as the demand for assisted living grew. Memory Care  There are four memory care facilities with 112 beds in Owatonna. Three developments opened in the last seven years and account for 86 beds (Traditions II recently opened 20 additonal MC units in 2010), or 77% of the total beds. As of May 2013, there were 27 va‐
cancies in the PMA. Valleyview accounted for 37% of the vacant units (12 vacant). Exclud‐
ing Valleyview, the vacancy rate was still 18.3%, which is well above the market equilibrium of 7%. Traditions of Owatonna, Traditions II of Owatonna, and Clare Bridge Cottages each had five vacancies.  All of the facilities offer studio/private rooms, but only Clare Bridge Cottages offers shared rooms, of which there are only two. Ninety‐eight percent of all units in Owatonna are in studio/private rooms. MAXFIELD RESEARCH INC.
70
SENIOR HOUSING ANALYSIS Market Rate Senior Housing Morehouse Place (Adult ‐ Few Services) Countryside (Congregate/AL) The Brooks (Congregate/AL) Traditions II (MC) MAXFIELD RESEARCH INC.
Southway Manor (Adult ‐ Few Services) Park Place (Congregate/AL) Traditions I (AL/MC) Alterra Sterling House (AL) 71
SENIOR HOUSING ANALYSIS Clare Bridge Cottage (MC) Valley View (AL/MC) Subsidized Senior Housing Properties  There were a total of 228 units in the County’s five subsidized senior properties. There were six vacant units among these properties as of May 2013, resulting in a vacancy rate of 2.6%. A vacancy rate of 3.0% is considered to be market equilibrium for subsidized housing.  There are four subsidized senior properties located in Owatonna with a combined total of 193 units, or 85% of the County total. The majority of vacancies (4 out of 6) were located at Cedardale South. If we exclude those units, the vacancy rate in the County would be 1.0%, indicating that there is a strong subsidized senior housing market. The County’s other two subsidized properties are located in Medford (20 units) and Blooming Prairie (15 units).  Maple Trails Apartments opened in 2006 and is the only subsidized senior housing built in the last 25 years. Its units are accessible for seniors with disabilities, and it includes a com‐
munity room.  Overall, the unit sizes at the subsidized senior properties are considerably smaller than many of the previously mentioned general‐occupancy rental properties, and smaller than most of the market rate senior rental properties.  A small portion of residents in Cedardale Place are not seniors because the development is open to low‐income individuals with disabilities who are of all ages. As a result, the average age of residents is 73, slightly younger than most senior housing facilities where the average age tends to be in the mid‐80s. Subsidized senior housing offers affordable rents to qualified lower income seniors and handi‐
capped/disabled persons. Typically, rents are tied to residents’ incomes with rents based on 30 percent of adjusted gross income (AGI), or a rent that is below the fair market rent. Two Federal government agencies, the Department of Housing and Urban Development (HUD) and the United States Department of Agriculture’s Rural Development, provide funding for the vast majority of subsidized senior housing properties. In Steele County, the HUD Section 8 program sponsors three of the properties, with the remaining two classified as Rural Development properties. MAXFIELD RESEARCH INC.
72
SENIOR HOUSING ANALYSIS TABLE 27
SUBSIDIZED SENIOR HOUSING
May 2013
Year
Built
Project Name/City
No. of
No.
Units Vacant
No.
Type Sizes Monthly Rent Comments
Maple Trails Apartments
165 24th Place NW
Owatonna
Cedardale South
345 Cedardale Dr.
Owatonna
2006
25
2
25 ‐ 1BR
540
30% of AGI
Section 202 building. Features: Controlled entry, activity room, community room, laundry facilities. Tenants pay heat & electric. Rent will be $462 with a utility allowance of $30.
1984
36
4
35 ‐ 1BR
1 ‐ 2BR
634
832
30% of AGI
Medford Manor
216 SE 1st Street
Medford
Cedardale Place
2211 Hartle Ave.
Owatonna
1982
20
0
20 ‐ 1BR
550
30% of AGI
Rural Development building. 3‐story. Min. rent = $445 for 1BR & $475 for 2BR. Max. rent = $624 for 1BR & $654 for 2BR. Features: off‐street parking, community room, some walk‐in closets & showers, coin‐op laundry room, & emergency call system. Rent includes all utilities except electricity. Section 8 buildings. Features off‐street parking, some walk‐in showers, coin‐
op laundry, & emergency call system. Rent includes all utilities except electricity.
1980
68
0
67 ‐ 1BR
1 ‐ 2BR
449
554
30% of AGI
Section 8 senior/disabled project. Features: detached garages ‐ $35/mo.; wall‐unit A/C must be supplied by resident; walk‐in showers; coin‐op laundry; community room; library; game room; Market rents are $645 & $731 for 1BR's and 2BR's, respectively. Tenants pay electric. Profile: Avg. age 73 years, 2 couples. Waiting list of 14 names.
Prairie Villa 455 2nd Street SE
Blooming Prairie
1980
15
0
15 ‐ 1BR
870
30% of AGI
Rural Development project operating under Section 8. Market rents are $455/mo.; off‐street parking; rent includes all utilities except electricity; community room; some walk‐in showers; coin‐op laundry; emergency call system. Avg. age is 83, no couples. Usually turn about 1 unit/year.
Ivanhoe Apts.
220/230 18th St. SW
Owatonna
1973
64
0
64 ‐ 1BR
416
30% of AGI
Section 8. Two 2‐story buildings. Features off‐street parking, community room, some walk‐in showers, coin‐op laundry, & emergency call system. Rent includes all utilities.
228
6
2.6%
Totals
SENIOR HOUSING ANALYSIS Subsidized Senior Housing Maple Trail Apartments Cedardale Place Apartments Cedardale South Ivanhoe Apartments Pending Senior Housing Developments We identified two speculative senior housing developments in the City of Owatonna. Countryside had purchased land adjacent to its current site for a future expansion. Plans for this expansion have stalled due to demand and the economy. It is unclear if and when this expansion will occur at this time. The Park Place senior housing development has discussed expanding the assisted living portion of the building. This project is very preliminary at this time and there are no further details.
SENIOR HOUSING ANALYSIS Senior Rental Properties in Owatonna MAXFIELD RESEARCH INC. 75
HOUSING DEMAND ANALYSIS Introduction Previous sections of this study analyzed the existing housing supply and the growth and demo‐
graphic characteristics of the population and household base in the City of Owatonna and its PMA (Steele County). This section of the report presents our estimates of housing demand in Owatonna from 2013 to 2020. Demographic Profile and Housing Demand The demographic profile of a community affects housing demand and the types of housing that are needed. The housing life‐cycle stages are: 1. Entry‐level householders  Often prefer to rent basic, inexpensive apartments  Usually singles or couples without children in their early 20's  Will often “double‐up” with roommates in apartment setting 2. First‐time homebuyers and move‐up renters  Often prefer to purchase modestly‐priced single‐family homes or rent more upscale apartments  Usually married or cohabitating couples, in their mid‐20's or 30's, some with children, but most are without children 3. Move‐up homebuyers  Typically prefer to purchase newer, larger, and therefore more ex‐
pensive single‐family homes  Typically families with children where householders are in their late 30's to 40's 4. Empty‐nesters (persons whose children have grown and left home) and nev‐
er‐nesters (persons who never have children)  Prefer owning but will consider renting their housing  Some will move to alternative lower‐maintenance housing products  Generally couples in their 50's or 60's 5. Younger independent seniors  Prefer owning but will consider renting their housing  Will often move (at least part of the year) to retirement havens in the Sunbelt and desire to reduce their responsibilities for upkeep and maintenance  Generally in their late 60's or 70's
HOUSING DEMAND ANALYSIS DEMOGRAPHICS & HOUSING DEMAND
Age Cohort
Student
Housing
18‐24
25‐29
30‐34
35‐39
40‐44
45‐49
50‐54
55‐59
60‐64
65‐69
70‐74
75‐79
80‐84
85+
18 ‐ 24
Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. Rental
Housing
1st‐time
Home Buyer
Move‐up
Home Buyer
2nd
Home Buyer
Empty Nester/
Downsizer
Senior
Housing
18‐34
25‐39
30‐49
40‐64
55‐74
65‐79
55+ & 65+
77
HOUSING DEMAND ANALYSIS 6. Older seniors  May need to move out of their single‐family home due to physical and/or health constraints or a desire to reduce their responsibilities for upkeep and maintenance  Generally single females (widows) in their mid‐70's or older TYPICAL HOUSING TYPE CHARACTERISTICS
Target Market/
Demographic
Unit/Home
Characteristics
Lot Sizes/
Units Per Acre
Entry‐level single‐family
First‐time buyers: Families, couples w/no children, some singles
1,200 to 2,200 sq. ft.
2‐4 BR | 2 BA
80'+ wide lot
2.5‐3.0 DU/Acre
Move‐up single‐family
Step‐up buyers: Families, couples w/no children
2,000 sq. ft.+
3‐4 BR | 2‐3 BA
80'+ wide lot
2.5‐3.0 DU/Acre
Executive single‐family
Step‐up buyers: Families, couples w/no children
2,500 sq. ft.+
3‐4 BR | 2‐3 BA
100'+ wide lot
1.5‐2.0 DU/Acre
Small‐lot single‐family
First‐time & move‐down buyers: Families, couples w/no children, empty nesters, retirees
1,700 to 2,500 sq. ft.
3‐4 BR | 2‐3 BA
40' to 60' wide lot
5.0‐8.0 DU/Acre
Entry‐level townhomes
First‐time buyers: Singles, couples, 1,200 to 1,600 sq. ft.
2‐3 BR | 1.5BA+
6.0‐12.0 DU/Acre
Move‐up townhomes
First‐time & step‐up buyers: Singles, couples, some families, empty‐nesters
1,400 to 2,000 sq. ft.
2‐3 BR | 2BA+
6.0‐8.0. DU/Acre
Executive townhomes/twinhomes
Step‐up buyers: Empty‐nesters, retirees
2,000+ sq. ft.
3 BR+ | 2BA+
4.0‐6.0 DU/Acre
Detached Townhome
Step‐up buyers: Empty‐nesters, retirees, some families 2,000+ sq. ft.
3 BR+ | 2BA+
4.0‐6.0 DU/Acre
Condominums
First‐time & step‐up buyers: Singles, couples, empty‐nesters, retirees
800 to 1,700 sq. ft.
1‐2 BR | 1‐2 BA
Low‐rise: 18.0‐24.0 DU/Acre
Mid‐rise: 25.0+ DU/Acre
Hi‐rise: 75.0+ DU/Acre
Apartment‐style rental housing
Singles, couples, single‐parents, some families, seniors
675 to 1,250 sq. ft.
1‐3 BR | 1‐2 BA
Townhome‐style rental housing
Single‐parents, families w/children, empty nesters
900 to 1,700 sq. ft.
2‐4 BR | 2BA
8.0‐12.0 DU/Acre
Student rental housing
College students, mostly undergraduates
550 to 1,400 sq. ft.
1‐4BR | 1‐2 BA
Senior housing
Retirees, Seniors
550 to 1,500 sq. ft.
Suites ‐ 2BR | 1‐2 BA
Varies considerably based on
senior product type
Both
Rental Housing
For‐Sale Housing
Housing Types
Smaller, outstate communities and rural areas tend to have higher proportions of younger households that own their housing than in the larger growth centers or metropolitan areas. In addition, senior households tend to move to alternative housing at an older age. These condi‐
tions are a result of housing market dynamics, which typically provide more affordable single‐
family housing for young households and a scarcity of senior housing alternatives for older households. Therefore, the age categories for housing life cycles will be somewhat different in Owatonna than in communities located closer to the Twin Cities Metro Area. MAXFIELD RESEARCH INC. 78
HOUSING DEMAND ANALYSIS The baby boom generation will have the biggest effect on the housing market in Owatonna as their life cycle continues. Baby boomers are currently ages 49 to 67, and as they age over this decade, they will increase the population in the age groups 55 to 74. The 55 to 64 and 65 to 74 age groups in Owatonna will see increases of 618 (21.5%) and 1,031 (62%) people, respectively, during this decade. Some of these baby boomers will prefer more expensive single‐family homes, while many others who become empty nesters may prefer to downsize or desire maintenance‐free alternatives. With the baby busters following in the baby boomers’ wake, the age group 45 to 54 will decline, somewhat decreasing the overall demand for move‐up housing. Estimated Demand for For‐Sale Housing Table 28 presents our demand calculations for general occupancy for‐sale housing in Owatonna between 2013 and 2020. Between 2013 and 2020, the Owatonna Market Area is projected to add 598 new households. Based on our analysis of household growth forecast in specific age cohorts, we estimate that 25% of these households will support demand for general occupancy housing products (i.e. vs. senior housing), generating total demand for 150 general occupancy housing units through this decade. Demand for housing is apportioned between ownership and rental housing products. According to historic U.S. Census data, approximately 77% of households under age 65 owned their housing in 2010 in the Owatonna Market Area. Applying this percentage to the total demand for general occupancy units yields demand for 115 for‐sale units between 2013 and 2020. Demand is also forecast to emerge from existing Market Area householders through turnover. An estimated 8,481 owner‐occupied households are located in the Owatonna PMA in 2013. Based on mobility data from the Census Bureau, an estimated 25% of owner households will turnover in a five‐year period, resulting in 2,120 existing households projected to turnover. Finally, we estimate 7.5% of the existing owner households will seek new for‐sale housing, resulting in demand for 159 for‐sale units through 2020. Next, we estimate that 15% of the total demand for new for‐sale units in the Owatonna Market area will come from people currently living outside of the Market Area. A portion of this market will be former residents of the area, such as “snow‐birds” heading south for the winters. Adding demand from outside the Owatonna PMA to the existing demand potential, results in a total estimated demand for 323 for‐sale housing units by 2020. Based on land available, building trends, and demographic shifts (increasing older adult popula‐
tion), we project 85% of the for‐sale owners will prefer traditional single‐family product types MAXFIELD RESEARCH INC. 79
HOUSING DEMAND ANALYSIS while the remaining 15% will prefer a maintenance‐free multi‐family product (i.e. twin homes, townhomes, or condominiums). We then subtract the current identified platted lots that are under construction or approved. After subtracting the current lot supply (a total of 507 single‐family and 154 multifamily lots.) we find no demand through 2020 because of an excess supply of both single‐family and multifamily lots. TABLE 28
FOR‐SALE HOUSING DEMAND
OWATONNA MARKET AREA
2013 to 2020
Demand from Projected Household Growth
Projected household growth in the Owatonna Market Area 2013 to 2020¹
(times) Pct. of HH growth for general occupancy housing2
(equals) Projected demand for general occupancy units
x
=
598
25%
150
(times) Propensity to Own
(equals) Total demand potential for ownership housing (2013 to 2020)
x
=
77%
115
Demand from Existing Owner Households
Number of owner households (age 64 and younger) in PMA, 2013
4
(times) Estimated percent of owner turnover
(equals) Total existing households projected to turnover
x
=
8,481
25%
2,120
3
(times) Estimated percent desiring new housing
(equals) Deamnd from existing households
x
(equals) Total demand from household growth and existing households, 2013 to 2020
=
7.5%
159
274
(times) Demand from outside Owatonna Market Area
(equals) Total demand potential for ownership housing, 2013‐2020
15%
323
(times) Percent desiring for‐sale single‐famiy vs. multifamily5
(equals) Total demand potential for new single‐family & multifamily for‐sale housing
(minus) Units under construction or approved platted lots (undeveloped and developed lots)
(equals) Excess demand for new general occupancy for‐sale housing 6
Single Family
Multi‐
family*
x
=
85%
274
15%
48
‐
=
507
0
154
0
1
Estimated household growth based on data from the Minnesota Demographic Center, ESRI, Steele Cnty. Communities Building Permits, and Maxfield Pct. of household growth age 65 and younger (U.S. Census ‐ 2010, ESRI, Maxfield Research Inc.).
3 Pct. Owner households age 65 and younger in the PMA (2010)
4
Based on on turnover from 2011 American Community Survey for households moving after 2005.
5
Based on preference for housing type and land availability
2
6 Approved platted lot data does not account for the scattered lot supply which includes individual lots and lots in older non‐marketing subdivisions. * Multi‐family demand includes demand for townhomes, twinhomes, and condominium units.
HOUSING DEMAND ANALYSIS Estimated Demand for General‐Occupancy Rental Housing Table 29 presents our calculation of general‐occupancy rental housing demand in the Owaton‐
na PMA. This analysis identifies potential demand for rental housing that is generated from both new households and turnover households. A portion of the demand will be drawn from existing households in Owatonna that want to upgrade their housing situations. First, we calculate potential demand from new household growth by age group based on the propensity of households to rent their housing. For purposes of our analysis, we focus on households between the ages of 18 and 64 that will account for the vast majority of general‐
occupancy rental demand. Based on our analysis of household growth forecast in specific age cohorts, household growth is only projected in the age 25 to 34 age cohort (although there is stagnant growth among the 45 to 64 age cohort). Next, we calculate the percentage of house‐
hold growth that will likely rent their housing. In 2010 the percentage of renters ranged from about 67% among the under 25 age cohort to 15% among the 45 to 64 age cohort. The second part of our analysis calculates demand from existing households, or turnover demand. Younger households tend to be highly mobile, relative to older households. Mobility rates were calculated for the renter population based on Census data and were applied to the existing renter household base. Finally, we estimate the percentage of the existing renter households will seek new rental housing by age cohort resulting in demand for 182 units by 2020. Similarly to for‐sale housing, we estimate that 15% of the total demand for new rental housing units in the Owatonna Market Area will come from people currently living outside of the Market Area. As a result, we find demand for 214 renter households based on household growth and existing households alone between 2013 and 2020. Based on a review of household incomes and sizes and monthly rents at existing projects, we estimate that approximately 20% of the total demand will be for subsidized housing, 30% will be for affordable housing, and 50% will be for market rate housing. Next we subtract housing projects that are under construction or pending at this time, since these projects will satisfy some of the calculated demand for general occupancy rental housing. There is only one general occupancy rental development under construction at this time. Eden Valley Place is adding two six‐unit townhome buildings. Therefore, there is demand in the Owatonna Market Area for 43 subsidized units, 64 affordable units, and 95 market rate units through 2020. Finally, we estimate that a site in Owatonna can capture 75% of the total Market Area de‐
mand, resulting in demand for 32 subsidized units, 48 affordable units, and 71 market rate units in Owatonna. MAXFIELD RESEARCH INC. 81
HOUSING DEMAND ANALYSIS TABLE 29
RENTAL HOUSING DEMAND
2013 to 2020
‐‐‐‐‐‐‐‐ Number of Households ‐‐‐‐‐‐‐‐ Age 25 to 34
Age 35 to 44
Age 45 to 64
Under 25
Age 65 & Over
Demand From Household Growth
Projected Growth in Household Base by 2020
1
(times) Proportion Estimated to Be Renting Their Housing
(equals) Projected Demand for Rental Housing Units
x
=
‐31
66.4%
0
84
33.7%
28
3
22.4%
1
19
14.8%
3
523
20.4%
107
Demand From Existing Households
Number of renter households in 2013
2
(times) Estimated % of renter turnover between 2013 & 2020
(equals) Total Existing Renter Households Projected to Turnover
x
=
347
97.2%
337
743
78.8%
585
599
74.5%
446
849
70.6%
599
1,505
53.8%
810
(times) Estimated % Desiring New Rental Housing
(equals) Demand From Existing Households
x
=
5%
17
10%
59
10%
45
5%
30
5%
40
17
87
45
33
147
Total Demand From Household Growth and Existing Households
Total Demand from Household Growth and Existing Households
(plus) Demand from outside Market Area (15%)
182
32
(equals) Total Demand for Rental Housing in the Owatonna Market Area
214
3
Subsidized
Affordable
Market Rate
(times) Percent of rental demand by product type
(equals) Total demand for new general occupancy rental housing units
x
=
20%
43
30%
64
50%
107
(minus) Units under construction or pending*
(equals) Excess demand for new general occupancy rental housing
‐
=
0
43
0
64
12
95
(times) Percent of Market Area demand capturable by Owatonna
(equals) number of units supportable by the City of Owatonna
x
=
75%
32
75%
48
75%
71
¹ Based on 2010 Census data.
² Based on Turnover from 2011 American Community Survey for households moving after 2005.
3
Based on the combination of current rental product and household incomes of area renters (non‐senior households)
*Pending/proposed competitive units at 95% occupancy.
82
HOUSING DEMAND ANALYSIS There potentially could be higher demand to account for pent‐up housing demand. With pent‐
up demand (a shortage of units), people who would normally form their own rental households instead room with other persons in a housing unit, live with their parents, live in single‐family rentals, or live in housing outside of the area and commute to jobs. A healthy rental market is expected to have a vacancy rate of about 5% to allow for sufficient consumer choice and unit turnover. In Owatonna, we found that the overall vacancy rate was just over 5% among the general‐occupancy rental supply – indicating stabilized occupancy operating at equilibrium. The majority of these vacancies however are occurring in a much older rental supply while newer units are experiencing well below equilibrium vacancy rates. Estimated Demand for Independent Adult/Few Service Senior Housing Table 30 presents our demand calculations for market rate independent senior housing in Owatonna in 2013 and 2020. In order to determine demand for independent senior housing, the potential market is reduced to those households that are both age and income qualified. The age‐qualified market is defined as seniors age 55 and older, although independent living projects will primarily attract seniors age 65 and older. We calculate that the minimum income needed to afford monthly rents is $30,000, since seniors with this income could afford a monthly rent of $1,000 based on spending 40% of their income. In addition, we add households with incomes between $20,000 and $29,999 who would be able to supplement their incomes with the proceeds from a home sale. We estimate the number of age/income‐qualified senior households in the Owatonna Market Area in 2013 to be 4,762 households. Adjusting to include appropriate long‐term capture rates for each age cohort (0.5% of house‐
holds age 55 to 64, about 4.5% of households age 65 to 74, and 10% of households age 75 and over) results in a market rate demand potential for 180 independent senior rental units in 2013. Some additional demand will come from outside the Owatonna Market Area. We estimate that 15% of the long‐term demand for independent senior housing will be generated by seniors currently residing outside the Owatonna Market Area. This demand will consist primarily of parents of adult children living in the Owatonna area, individuals who live just outside of the Owatonna Market Area and have an orientation to the area, as well as former residents who desire to return. Together, the demand from Owatonna Market Area seniors and demand from seniors who would relocate to Owatonna results in a demand for 211 active adult units in 2013. Independent demand in Owatonna is apportioned between ownership and rental housing. Based on the age distribution, homeownership rates and current product available in Owaton‐
na, we project that 55% of Owatonna’s demand will be for adult ownership housing (116 units) and 45% will be for rental housing (95 units). MAXFIELD RESEARCH INC.
83
MARKET RATE ADULT/FEW SERVICES HOUSING DEMAND
2013 & 2020
2013
Age of Householder
55‐64
65‐74
75+
2020
Age of Householder
55‐64
65‐74
75+
2,149
1,198
784
2,337
1,397
760
208
87%
1,379
379
73%
1,061
+
x
=
202
86%
2,322
=
169
86%
2,482
302
87%
1,660
280
73%
964
x
=
0.5%
12
4.5%
62
10.0%
106
x
=
0.5%
12
4.5%
75
10.0%
96
# of Households w/ Incomes of >$30,0001
# of Households w/ Incomes of $20,000 to $29,999
(times ) Homeownership Rate
(equals) Total Potential Market Base
1 (times) Potential Capture Rate (equals) Demand Potential +
x
Potential Demand from Market Area Residents
(plus) Demand from Outside Market Area (15%)
(equals) Total Demand Potential
2
=
180
=
184
+
=
32
211
+
=
32
216
Renter‐
Owner‐
Occupied
(times) % by Product Type
(equals) Demand Potential by Product Type
(minus) Existing and Pending MR Active Adult Units
(equals) Excess Demand for MR Active Adult Units
3
(times) Percent capturable by a Site in Owatonna
(equals) # of units supportable by a Site in Owatonna
Renter‐
Owner‐
Occupied
Occupied
Occupied
x
=
55%
116
x
=
45%
95
x
=
55%
119
x
=
45%
97
‐
=
74
42
‐
=
43
52
‐
=
74
45
‐
=
43
54
x
=
75%
32
x
=
75%
39
x
=
75%
34
x
=
75%
41
1
2020 calculations define income‐qualified households as all households with incomes greater than $35,000 and homeowner households with incomes between $25,000 and $34,999.
2
Based on project manager interviews and historical trends. We estimate that roughly 40% of demand will come from outside the markt area.
3
Existing and pending are deducted at market equilibrium (95% occupancy).
Next, we subtract existing competitive market rate units (minus a vacancy factor of 5% to allow for sufficient consumer choice and turnover) from the owner and rental demand. Subtracting the existing competitive market rate units results in total demand potential for 42 adult owner‐
occupied units and 52 adult rental units in 2013. No one community, including Owatonna, would be able to capture 100% of the demand. Since Owatonna is the primary service center, containing health care and shopping in addition to other services, we believe that it can capture 75% of the demand for ownership projects and rental projects. This results in total demand for 32 adult owner‐occupied units and 39 adult rental units in Owatonna in 2013. Adjusting for inflation, we have estimated that households with incomes of $35,000 or more and homeowners with incomes of $25,000 to $34,999 would income qualify for market rate independent senior housing in 2020. Considering the growth in the older adult base and the income distribution of the older adult population in 2020, the methodology projects that MAXFIELD RESEARCH INC.
84
HOUSING DEMAND ANALYSIS demand will increase slightly to 34 adult owner‐occupied units and to 41 adult rental units in the City of Owatonna by 2020. Estimated Demand for Affordable Independent Senior Housing Table 31 presents our demand calculations for affordable independent senior housing in the Owatonna Market Area in 2013 and 2020. While the methodology used to calculate demand for affordable housing closely mirrors the methodology used to calculate demand for market rate housing, we make several adjustments to more precisely quantify demand among this market segment. The following points summa‐
rize these adjustments:  Income‐Qualifications: In order to arrive at the potential age and income‐qualified base for low‐income and affordable housing, we include all senior households age 55+ that qualify for the income guidelines for two‐person households in 2013 between 30% and 60% of AMI. The income‐restriction for a two‐person household at 30% AMI is $17,130 and the in‐
come‐restriction for a two‐person household at 60% AMI is $34,260. 
Capture Rates: Households in a need‐based situation (either requiring services or financial assistance) more readily move to housing alternatives than those in non‐need based situa‐
tions. Hence, the capture rate among each age group is higher than for market rate hous‐
ing. Capture rates are employed at 1.5% for households age 55 to 64, 7.0% for households age 65 to 74 and 17.0% for households age 75 and older. 
Potential Demand Capture: Seniors in need‐based situations are less selective when securing housing than those in non‐need based situations. We estimate that a high‐quality site would capture a greater proportion of total demand for financially‐assisted housing than for market rate housing; hence, the potential capture rate increases to 65% for af‐
fordable active adult housing. Using the methodology described above results in a demand potential for 38 affordable active adult housing units in 2013. We estimate that seniors currently residing outside the Owatonna Market Area will generate 15% of the demand for affordable active adult housing – increasing demand to 45 affordable units. Demand for outside the Owatonna Market Area includes parents of adult children living in the Owatonna Market Area, individuals who live just outside the Owatonna Market Area and have an orientation to the area and former residents who desire to return upon retirement. Next we subtract existing competitive units. There is currently no affordable independent project in the Owatonna Market Area. Thus, demand is remains at 45 units in 2013. MAXFIELD RESEARCH INC.
85
HOUSING DEMAND ANALYSIS No single site can capture all of the excess demand in Owatonna. We estimate that a site in Owatonna could capture 75% of the Owatonna Market Area demand, resulting in demand for 34 affordable independent senior units in 2013. TABLE 31
AFFORDABLE INDEPENDENT SENIOR HOUSING DEMAND
2013 & 2020
2013
Age of Householder
55‐64
65‐74
75+
# of Households w/ Incomes of $15,000 to $37,170¹
388
394
736
(times ) Percent Renter Households
x
=
14%
54
13%
51
27%
199
(times) Potential Capture Rate (equals) Demand Potential x 1.5%
= 1
7.0%
4
17.0%
34
2020
Age of Householder
55‐64
65‐74
75+
376
487
758
14%
53
13%
63
27%
205
x 1.5%
= 1
7.0%
4
17.0%
35
x
Total Market Rate Demand Potential
=
38
=
40
+
=
7
45
+
=
7
47
(minus) Existing and Pending Affordable Units1
(equals) Total Demand Potential in Market Area
‐
=
0
45
‐
=
0
47
(times) Estimated Percent Capturable by a Site in Owatonna
(equals) Excess Demand Capturable by a Site in Owatonna
x 75%
= 34
x 75%
= 35
¹ 2020 calculations define income‐qualified households as all households with incomes between $16,275 and $37,170
1
Includes existing and pending units at 95% occupancy, or market equilibrium. No additional units are planned through 2017.
Adjusting for inflation, we estimate that households with incomes between $16,275 and $37,170 would qualify for affordable housing in 2020. Although growth in senior households is projected, the age‐income qualified base for affordable housing is shown to decline in Owaton‐
na through 2020. Following the same methodology, we project that excess demand capturable by a site is calculated to increase slightly to 35 affordable independent senior housing units by 2020. Estimated Demand for Subsidized Senior Housing Table 32 presents our demand calculations for subsidized senior housing in Owatonna in 2013 and 2020. The target market for subsidized senior housing is senior households with incomes below 30% AMI. The 2013 income qualification for a two‐person household earning 30% AMI or less in Steele County is $17,130. Two Federal government agencies, HUD and the United State De‐
partment of Agriculture’s Rural Development, provide funding for the vast majority of subsi‐
86
HOUSING DEMAND ANALYSIS dized senior housing developments. The age restrictions are typically age 62+, therefore we only include senior households age 62+ with incomes below 30% AMI. We deduct senior homeowners who earn between $12,500 and $15,000 from the potential market since these seniors will likely have home equity that may cause them to disqualify for subsidized senior housing. In total, we estimate the number of age/income‐qualified older adult and senior households in the Owatonna Market Area in 2013 is 715 households.
A portion of seniors who are age‐ and income‐qualified for subsidized senior housing will choose other housing options (i.e. market rate projects with the financial assistance of family members) or will delay moving to senior housing alternatives until they need greater levels of care. Therefore, only a portion of the age‐ and income‐qualified market will choose to reside at a subsidized senior housing community. We estimate that approximately 30% of the total age/income‐qualified market would both need and desire subsidized senior housing. Applying a 30% capture rate, results in an estimated potential demand for 215 subsidized senior housing units in the Owatonna Market Area in 2013. We anticipate that 15% of the demand for subsidized senior housing in will be generated by seniors currently residing outside the Owatonna Market Area. This additional demand includes seniors residing in just outside the Owatonna Market Area, seniors who have an orientation to the area (i.e. church, doctor, etc.), seniors who previously lived in the area and desire to move back, or seniors who desire to move near their adult children who already live in the area. Including demand from outside of the Owatonna Market Area increases total demand potential to 253 units in 2012. TABLE 32
SUBSIDIZED INDEPENDENT SENIOR HOUSING DEMAND
2013 & 2020
2013
Age of Householder
55‐64
65‐74
75+
210
230
454
Households w/Incomes < $15,000¹
(minus) Households w/Incomes of $12,500 ‐ $15,000
(times) Homeownership Rate
(equals) Disqualfied Homeowner Households
Potential Market by Age
Potential Market Total in the PMA
‐
x
=
53
86%
46
58
87%
50
113
73%
82
164
180
715
372
2020
Age of Householder
55‐64
65‐74
75+
213
245
506
‐
x
=
42
86%
36
49
87%
43
118
73%
86
171
196
755
388
(times) Percent Needing/Desiring Subsidized Senior Housing
(equals) Demand Potenital from Market Area residents
x 30%
= 215
x 30%
= 227
(plus) Demand From Ouside the Market Area (15%)
(equals) Total Demand Potential for Subsidized Senior Housing in Market Area
+
+
(minus) Existing & Pending Subsidized Senior Units in Market Area²
(equals) Total Market Area Subsidized Senior Housing Demand Potential
‐ 221
= 32
‐ 221
= 45
Percent Capturable on a Site in Owatonna
Total number of units supportable on a Site in Owatonna
x 75%
= 24
x 75%
= 34
38
253
40
266
¹ 2020 calculations define income‐qualified households as all households with incomes less than $16,200
² Competitive subsidized units, minus a 3% vacancy rate.
87
HOUSING DEMAND ANALYSIS From this potential demand, we subtract the existing number of competitive housing units in Owatonna. Currently, there are six subsidized senior buildings in the Market Area with a total of 228 units with six vacant units. Subtracting these units, minus a 3% vacancy factor, results in excess demand from local seniors for about 32 units in 2013. No single building or location can capture all of the Owatonna demand. We estimate that a building on a site in Owatonna could capture 75% of the excess demand, or 24 units in 2013. To calculate demand in 2020, we increase the income‐qualifications to account for inflation. Following the same methodology and holding constant the number of competitive units (we did not identify any new product proposed to come online); demand is forecast to increase over the next five years to 34 units in 2020. Estimated Demand for Congregate Senior Housing Table 33 presents our demand calculations for congregate housing in Owatonna in 2013 and 2020. The potential age‐ and income‐qualified base for congregate senior housing includes all senior (65+) households with incomes of $30,000 as well as homeowner households with incomes between $20,000 and $30,000 who would qualify with the proceeds from the sales of their homes. The proportion of eligible homeowners is based on the 2010 Census homeownership rates of the Owatonna Market Area seniors. The number of age, income, and asset‐qualified households in Owatonna is estimated to be 2,440 households in 2013. Demand for congregate housing is need‐drive, which reduces the qualified market to only the portion of seniors who need some assistance. Adjusting to include appropriate capture rates for each age cohort (1.5% of households age 65 to 74 and 11.0% of households age 75 and older) results in a local demand potential for 137 congregate units in 2013. We estimate that seniors currently residing outside of the Owatonna area will generate 15% of the demand for congregate senior housing. Together, the demand from Owatonna Market Area seniors and demand from seniors who are willing to locate to the Owatonna Market Area totals 162 congregate units in 2013. Next we subtract existing competitive units from the overall demand. There are three congre‐
gate senior projects in the Owatonna Market Area that include 146 units. Additionally we account for roughly 10% of the units utilizing Elderly Waiver (The Brooks has roughly 30% to 40% EW) which decreases competitive units to 106. After subtracting existing congregate units, the total demand is reduced to 61 units. No single location can capture all of the demand in a market area. We estimate that 75% of total demand in Owatonna can be captured on a site in Owatonna. Demand is calculated for 46 congregate units in Owatonna in 2013. MAXFIELD RESEARCH INC.
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MARKET RATE CONGREGATE HOUSING DEMAND
2013 & 2020
# of Households w/ Incomes of >$30,000¹
2013
Age of Householder
75+
65‐74
2020
Age of Householder
65‐74
75+
1,197
785
1,397
760
379
73%
277
+
x
=
302
87%
263
280
73%
204
=
x
=
1,660
964
1.5%
11.0%
25 + 106
# of Households w/ Incomes of $20,000 to $29,999¹
(times) Homeownership Rate
(equals) Potential Market
+
x
=
208
87%
181
(times) Potential Capture Rate²
(equals) Demand Potential =
x
=
1,378
1,062
1.5%
11.0%
21 + 117
Potential Demand from Market Area Residents
=
+
=
137
24
162
=
+
=
131
23
154
(minus) Existing and Pending Congregate Units3
(equals) Excess Demand for Congregate Units
‐
=
101
61
‐
=
101
53
75%
46
75%
40
¹ 2017 calculations define income‐qualified households as all households with incomes greater than $35,000 and homeowner households with incomes between $25,000 and $34,999.
²The potential capture rate is derived from data from the Summary Health Statistics for the U.S. Population: National Health Interview Survey, 2007 by the U.S. Department of Health and Human Services. The capture rate used is the percentage of seniors needing assistance with IADLs, but not ADLs (seniors needing assistance with ADLs typcially need assistance with multiple IADLs and are primary candidates for assisted living.).
3
Existing and pending are deducted at market equilibrium (95% occupancy).
Adjusting for inflation, we estimate that households with incomes of $35,000 or more and senior homeowners with incomes between $25,000 and $35,000 would qualify for congregate housing in 2020. Following the same methodology, demand is calculated to decline slightly to 40 units through 2020. Demand Estimate for Assisted Living Housing Table 34 presents our demand calculations for assisted living senior housing in the PMA in 2013 and 2020. This analysis focuses on the potential private pay/market rate demand for assisted living units. MAXFIELD RESEARCH INC.
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HOUSING DEMAND ANALYSIS The availability of more intensive support services such as meals, housekeeping and personal care at assisted living facilities usually attracts older, frailer seniors. According to the 2009 Overview of Assisted Living (which is a collaborative research project by the American Association of Homes and Services for the Aging, the American Seniors Housing Association, National Center for Assisted Living, and National Investment Center for the Seniors Housing and Care Industry), the average age of residents in freestanding assisted living facilities was 87 years in 2008. Hence, the age‐qualified market for assisted living is defined as seniors ages 75 and over, as we estimate that of the half of demand from seniors under age 87, almost all would be from seniors over age 75. In 2013, there were 2,817 seniors age 75 and older in the PMA. Demand for assisted living housing is need‐driven, which reduces the qualified market to only the portion of seniors who need assistance. According to a study completed by the U.S. Census Bureau (2005 panels of the Survey of Income and Program Participation (SIPP) files), 30% of seniors needed assistance with everyday activities (from 25.5% of 75‐to‐79‐year‐olds, to 33.6% of 80‐to‐84‐year‐olds and 51.6% of 85+ year olds). Applying these percentages to the senior population yields a potential assisted living market of 1,043 seniors in the PMA. Due to the supportive nature of assisted living housing, most daily essentials are included in monthly rental fees, which allow seniors to spend a higher proportion of their incomes on housing with basic services. Therefore, the second step in determining the potential demand for assisted living housing in the PMA is to identify the income‐qualified market based on a senior’s ability to pay the monthly rent. We consider seniors in households with incomes of $40,000 or greater to be income‐qualified for assisted living senior housing in the PMA. Households with incomes of $40,000 could afford monthly assisted living fees of $3,000 by allocating 90% of their income toward the fees. According to the 2009 Overview of Assisted Living, the average arrival income of assisted living residents in 2008 was $27,260, while the average annual assisted living fee was $37,281 ($3,107/month). This data highlights that seniors are spending down assets to live in assisted living and avoid institutional care. Thus, in addition to households with incomes of $40,000 or greater, there is a substantial base of senior households with lower incomes who income‐
qualify based on assets – their homes, in particular. Seventy‐three percent of the age 75+ households in the PMA are homeowners, and the year to date median resale price of homes in Owatonna was $148,800. Seniors selling their homes for the median resale price would generate about $139,872 in proceeds after selling costs. With an average monthly fee of $3,000, these proceeds would last nearly four years in an assisted living facility, which is longer than the average length of stay in assisted living (27 months according to the 2009 Overview of Assisted Living). For each age group in Tables 5, we estimate the income‐qualified percentage to be all seniors in households with incomes above $40,000 (who could afford monthly rents of $3,000+ per month) plus 40% of the estimated seniors in homeowner households with incomes below $40,000 (who will spend down assets, including MAXFIELD RESEARCH INC.
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HOUSING DEMAND ANALYSIS home‐equity, in order to live in assisted living housing). This results in a total potential market of 459 units from the PMA in 2013. TABLE 34
MARKET RATE ASSISTED LIVING DEMAND
PRIMARY MARKET AREA
2013 & 2020
2013
Age group
People
75 ‐ 79
80 ‐ 84
85+
Total
1,032
786
999
2,817
Percent Income‐Qualified
2020
Percent
Needing
Assistance¹
Number
Needing
Assistance1
People
25.5%
33.6%
51.6%
263
264
515
1,043
1,100
947
1,086
3,133
2
Percent
Needing
Assistance¹
Number
Needing
Assistance1
25.5%
33.6%
51.6%
281
318
560
1,159
44%
44%
Total potential market
(times) Percent living alone
(equals) Age/income‐qualified singles needing assistance
x
=
459
50%
229
510
50%
255
(plus) Proportion of demand from couples (12%)³
(equals) Total age/income‐qualified market needing assistance
+
=
31
261
35
290
(times) Potential penetration rate
(equals) Potential demand from PMA residents
x
=
40%
104
40%
116
(plus) Proportion from outside the PMA (15%)
(equals) Total potential assisted living demand
+
=
18
123
20
136
‐
130
130
(equals) Total excess market rate assisted living demand
=
0
6
(times) Percent that could be captured on the Site in the PMA
x
80%
80%
(equals) Excess market rate assisted living demand on the Site
=
0
5
4
(minus) Existing market rate assisted living units
5
1
The percentage of seniors needing assistance with ADLs, based on the 2005 panels of the Survey of Income and Program Participation (SIPP) files, conducted by the U.S. Census Bureau.
2
Includes households with incomes of $40,000 or more (who could afford monthly rents of $2,600+ per month) plus 40% of the estimated owner households with incomes below $40,000 (who will spend down assets, including home‐equity, in order to live in assisted living housing).
3
The 2009 Overview of Assisted Living (a collaborative project of AAHSA, ASHA, ALFA, NCAL & NIC) found that 12% of assisted living residents are couples.
4
We estimate that 60% of the qualified market needing assistance with ADLs could either remain in their homes or reside at less advanced senior housing with the assistance of a family member or home health care, or would need greater care provided in a skilled care facility.
5
Existing and pending units have been adjusted based on location in PMA, minus 15% estimated to be occupied by Elderly Waiver (50% at Valleyview of Owatonna) residents at a 95% occupancy rate.
Because the vast majority of assisted living residents are single (88% according to the 2009 Overview of Assisted Living), our demand methodology multiplies the total potential market by the percentage of seniors age 75+ in the PMA living alone. Based on 2010 Census data, 50% of MAXFIELD RESEARCH INC.
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HOUSING DEMAND ANALYSIS age 75+ households in the PMA lived alone. Applying this percentage results in a total base of 229 age/income‐qualified singles. The 2009 Overview of Assisted Living found that 12% of residents in assisted living were couples. There are a total of 261 age/income‐qualified seniors needing assistance in the PMA including both couples and singles. We estimate that roughly 60% of the qualified market needing significant assistance with ADLs would either remain in their homes or less service‐intensive senior housing with the assistance of a family member or home health care, or would need greater care provided in a skilled care facility. The remaining 40% could be served by assisted living housing. Applying this potential market penetration rate of 40% results in demand for 104 assisted living units in 2013. As discussed in the PMA definition section, we estimate that a portion of demand for assisted living units in the PMA (15%) will come from outside the PMA. This secondary demand will include households currently living just outside the PMA, former residents, and parents of adult children that desire supportive housing near their adult children. Applying this figure results in total potential demand for 123 assisted living units in 2013. Next, existing and pending assisted living units are subtracted from overall demand. The PMA has six assisted living properties with a total of 186 units. We conservatively estimate that about 15% of the assisted living units at properties in the PMA are occupied by residents utilizing public subsidy (50% at Valleyview of Owatonna). We exclude these low income units in our calculations for private‐pay assisted living. Including these units at a 5.0% vacancy, we subtract 130 competitive units. Subtracting the remaining competitive units results in an oversupplied assisted living market in 2013. Using the same methodology, we find that the potential demand from PMA residents in 2020 will increase by 116 households. With 15% of demand coming from outside of the PMA, there will be a total demand for 136 assisted living units in the PMA. There are no pending assisted living developments in the PMA and thus, we subtract the existing 130 competitive units from the total demand, resulting in excess demand increasing slightly to only six units in 2020. No single Site can capture all of the potential demand in a PMA. We project that the Site in the PMA can capture 80% of the PMA excess demand for a total of five assisted living units in 2020. Estimated Demand for Memory Care Housing Table 35 presents our demand calculations for market rate memory care senior housing in Owatonna in 2013 and 2020. Demand is calculated by starting with the estimated Owatonna senior (age 65+) population in 2013 and multiplying by the incidence rate of Alzheimer’s/dementia among this population’s age cohorts. According to the Alzheimer’s Association (Alzheimer’s Disease Facts and Figures, MAXFIELD RESEARCH INC.
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HOUSING DEMAND ANALYSIS 2007), 2% of seniors ages 65 to 74, 19% of seniors ages 75 to 84, and 42% of seniors ages 85+ are inflicted with Alzheimer’s Disease. This yields a potential market of 826 seniors in the Owatonna Market Area. TABLE 35
MEMORY CARE DEMAND
2013 & 2020
2020
2013
65 to 74 Population
(times) Dementia Incidence Rate¹
(equals) Estimated Age 65 to 74 Pop. with Dementia
3,032
x 2%
=
61
75 to 84 Population
(equals) Estimated Age 75 to 84 Pop. with Dementia
x
=
1,818
19%
345
x
=
2,047
19%
389
85+ Population
(equals) Estimated Age 85+ Pop. with Dementia
x
=
999
42%
420
x
=
1,086
42%
456
(equals) Total Senior Population with Dementia
=
826
=
926
(times) Percent Income/Asset‐Qualified²
(equals) Total Income‐Qualified Market Base
x
=
25%
206
x
=
25%
232
(times) Percent Needing Specialized Memory Care Assistance
(equals) Total Need for Dementia Care
x
=
25%
52
x
=
25%
58
Total Demand Potential
+
=
9
61
+
10
68
(minus) Existing and Pending Memory Care Units³
(equals) Excess Demand for Memory Care Units
‐
=
85
0
‐
=
85
0
x
85%
x
85%
=
0
=
0
4,065
x 2%
=
81
¹ Alzheimer's Association: Alzheimer's Disease Facts & Figures (2007)
² Income‐qualified households consider 3/4 of those with incomes greater than $60,000 in 2010 plus 15% of homeowners with incomes below this threshold.
³ Existing memory care units less units occupied by public pay residents and a 7% vacancy rate.
Because of the staff‐intensive nature of dementia care, typical monthly fees for this type of housing are at least $4,000 and range upwards of $5,000 when including service packages. Based on our review of senior household incomes in the Owatonna Market Area, homeowner‐
ship rates and home sale data, we estimate that 25% of seniors in the Owatonna Market Area would have incomes and/or assets to sufficiently cover the costs of memory care housing. This MAXFIELD RESEARCH INC.
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HOUSING DEMAND ANALYSIS figure takes into account married couple households where one spouse may have memory care needs and allows for a sufficient income for the other spouse to live independently. Multiply‐
ing the number of seniors with Alzheimer’s/dementia (826 seniors) by the income‐qualified percentage results in a total of 206 age/income‐qualified seniors in the Owatonna Market Area in 2013. According to data from the National Institute of Aging, about 25% of all individuals with memory care impairments comprise the market for memory care housing units. This figure considers that seniors in the early stages of dementia will be able to live independently with the care of a spouse or other family member, while those in the later stages of dementia will require intensive medical care that would only be available in skilled care facilities. Applying this figure to the estimated population with memory impairments yields a potential market of about 52 seniors in the Owatonna Market Area. We estimate that 15% of the overall demand for memory care housing would come from outside of the Owatonna Market Area. Together, demand totals 61 memory care units in 2013. We reduce the demand potential by accounting for the existing memory care product in the Owatonna Market Area. There are four projects with a total of 112 units, however we reduce the competitive units to include only the private pay units (estimated at 85 units @ 93% occu‐
pancy). Subtracting these competitive units indicates that there is an oversupply in 2013. Following the same methodology, demand is calculated to remain the same and continue to be an oversupplied market through 2020.
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CONCLUSIONS AND RECOMMENDATIONS Introduction/Overall Housing Recommendations This section summarizes demand calculated for specific housing products in Owatonna and recommends development concepts to meet the housing needs forecast for the City. All recommendations are based on findings of the Comprehensive Housing Market Analysis. The following table and charts illustrate calculated demand by product type. It is important to recognize that housing demand is highly contingent on projected household growth; household growth could be higher should increased job growth ensue and the overall economy improves. TABLE 36
SUMMARY OF HOUSING DEMAND
CITY OF OWATONNA
May 2013
2013‐2020
Type of Use
General‐Occupancy
Rental Units ‐ Market Rate
Rental Units ‐ Affordable
Rental Units ‐ Subsidized
For‐Sale Units ‐ Single‐family
For‐Sale Units ‐ Multifamily
71
48
32
0
0
Total General Occupancy Supportable
151
2013
2020
Age‐Restricted (Senior)
Market Rate
Adult Few Services (Active Adult)
Ownership
Rental
Congregate
Assisted Living
Memory Care
71
32
39
46
0
0
75
34
41
40
5
0
Total Market Rate Senior Supportable
117
120
Affordable/Subsidized
Active Adult ‐ Subsidized
Active Adult ‐ Affordable
24
34
34
35
Total Affordable Senior Supportable
58
69
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CONCLUSIONS AND RECOMMENDATIONS MAXFIELD RESEARCH INC.
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CONCLUSIONS AND RECOMMENDATIONS Based on the finding of our analysis and demand calculations, Table 37 provides a summary of the recommended development concepts by product type for the City of Owatonna. It is important to note that these proposed concepts are intended to act as a development guide to most effectively meet the housing needs of existing and future households in Owatonna. The recommended development types do not directly coincide with total demand as illustrated in Table 36 due primarily to the recovering housing market and economy. TABLE 37
RECOMMENDED HOUSING DEVELOPMENT
OWATONNA
2013 to 2020
Purchase Price/
Monthly Rent Range¹
No. of Units
Development
Timing
$900/1BR ‐ $1,250/3BR
45 ‐ 50
2014+
$1,000/2BR ‐ $1,250/3BR
15 ‐ 20
2014+
General Occupancy Rental Housing Market Rate Rental Housing 2
Apartment‐style
Townhomes
Total
60 ‐ 70
Affordable Rental Housing
Apartment or Townhomes
Moderate Income3
40 ‐ 50
2014+
Subsidized Rental Housing
Apartment‐style5
30% of Income
25 ‐ 30
2014+
Senior Housing (i.e. Age Restricted)
Active Adult Market Rate Ownership
Active Adult Market Rate Rental4
Active Adult Affordable Rental4
Congregate
Subsidized Senior5
Limited/Full‐Equity Cooperative
$850/1BR ‐ $1,000/2BR
Moderate Income3
$1,950/1BR ‐ $2,300/2BR
30% of Income
Total
28
35
25
35
25
148
‐ 34
‐ 40
‐ 35
‐ 40
‐ 35
‐ 184
2014+
2014+
2014+
2014+
2014+
¹ Pricing in 2013 dollars. Pricing can be adjusted to account for inflation.
2 The development of these products can occur after the vacancy rate is at or below 5%. Additional rental development could occur after new development has been absorbed and phased into the market.
3 Affordablity subject to income guidelines per Minnesota Housing Finance Agency (MHFA). See Figure 1 on Page 55 for Steele County Income limits.
4 Alternative development concept is to combine active adult affordable and market rate active adult into one mixed‐income Subsized buildings will be difficult to develop financially .
5. Note ‐ Recommended development does not coincide with total demand.
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CONCLUSIONS AND RECOMMENDATIONS For‐Sale Housing According to table 20, there are more than 400 developed vacant single‐family lots and nearly 110 twinhome/townhome lots in Owatonna. The lot supply benchmark for growing communi‐
ties is a three‐ to five‐year lot supply. Between 2009 and 2012 only 53 single‐family and 15 twinhome/townhome building permits were issued, averaging 13 single‐family and four twinhome/townhome permits annually. Given the minimal new construction market over the past few years and the high number of existing platted lots in Owatonna, the existing for‐sale market, we do not recommend platting any additional lots though the decade unless significant new housing construction is experienced over the next five years. General Occupancy Rental Housing Our competitive inventory identified that the vacancy rates for all types of general occupancy rental product are at market equilibrium as of May 2013. Due to the age and positioning of most of the existing rental supply, a significant portion of units are priced at or below guidelines for affordable housing, which indirectly satisfies demand from households that income‐qualify for financially assisted housing. However, the growing renter base is seeking newer rental properties with additional and updated amenities that are not offered in older developments. Although ownership housing in Owatonna is very affordable for first‐time home buyers, some are choosing to rent due to fears of past housing market performance. Based on our analysis, Owatonna can accommodate 85 to 95 new market rate rental housing units, up to 32 affordable units, and up to 24 subsidized units through 2020. Although the overall vacancy rate continues to perform at 5% or slightly above, the majority of vacant units are located in much older buildings while newer rental product is performing at 2.0%.  Market Rate Rental – The existing market rate rental supply in Owatonna is older as over 73% of the units are at least 30 years of age or older. We recommend a new middle‐ to upper‐market rental project with roughly 45 to 50 units that will attract a diverse resident profile; including young to mid‐age professionals as well as singles and couples across all ages. To appeal to a wide target market, we suggest a market rate apartment project with a unit mix consisting of one‐bedroom units, one‐bedroom plus den units, two‐bedroom units, and two‐bedroom plus den or three‐bedroom units. Larger three‐bedroom units would be attractive to households with children. Monthly rents (in 2013 dollars) should range from $900 for a one‐bedroom unit to $1,250 for a three‐bedroom unit. Average rents in Owatonna are approximately $0.80 per square foot, however monthly rents should range from about $1.00 to $1.15 per square foot to be financially feasible. Monthly rents can be trended up by 2.0% annually prior to occupancy to account for inflation depending on overall market conditions. Because of construction and development costs, it may be difficult for a market rate apartment to be financially fea‐
98
CONCLUSIONS AND RECOMMENDATIONS sible with rents lower than the suggested per square foot price. Thus, for this type of pro‐
ject to become a reality, there may need to be a public – private partnership to reduce de‐
velopment costs and bring down the rents or the developer will need to provide smaller unit sizes. New market rate rental units should be designed with contemporary amenities that include open floor plans, higher ceilings, in‐unit washer and dryer, full appliance package, central air‐conditioning, and garage parking. 

Market Rate General Occupancy Rental Townhomes– In addition to the recommended apartment project, we find that demand exists for some larger townhome units for families – including those who are new to the community and want to rent until they find a home for purchase. The success of the newly developed Eden Valley Place is a prime example of the needed demand for this type of product. An additional 15 to 20 rental townhome units could be supported in Owatonna over this decade. We recommend a project with rents of approximately $1,000 for two‐bedroom units to $1,250 for three‐bedroom units. Units should feature contemporary amenities (i.e. in‐unit washer/dryer, high ceilings, etc.) and an attached two car garage. Affordable General Occupancy Rental Townhomes– We recommend 45 to 50 units of moderate‐income affordable rental townhome project to meet the affordable demand in Owatonna. Affordable rental townhomes have been found to be popular in Owatonna and both the Willow Run and Cedar Run Townhome projects in Owatonna are fully leased. With the units at Woodbridge being converted to market rate over the next four years, the demand for affordable rental units will grow by 2017. After the period, a total of 72 af‐
fordable units will no longer be serving the market area. We recommend a project with two‐ and three‐bedroom units. Units should feature central air conditioning, full appliance package, in‐unit washer/dryer, an attached one/two car garage. Such development could assist in drawing more families to the community that cannot find affordable housing options through ownership or market rate rental in the sur‐
rounding area. It is important to note that the majority of market rate rental properties in Owatonna will have rents that are considered affordable and would fall below those rents that a new af‐
fordable development would be able to charge. Thus, the majority of market rate rental properties could be considered affordable due to their low rents. We believe the addition of the rental developments suggested above will further provide sufficient housing choices in the City and will continue to serve the needs of households that live and/or currently work in Owatonna. MAXFIELD RESEARCH INC.
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CONCLUSIONS AND RECOMMENDATIONS Senior Housing As illustrated in Table 36, demand exists for adult few service and congregate senior housing product types in the City of Owatonna. Development of additional senior housing is recom‐
mended in order to provide housing opportunity to these aging residents in their stages of later life. The development of additional senior housing serves a two‐fold purpose in meeting the housing needs in Owatonna: older adult and senior residents are able to relocate to new age‐
restricted housing in Owatonna, and existing homes and rental units that were occupied by seniors become available to other new households. Hence, development of additional senior housing does not mean the housing needs of younger households are neglected; it simply means that a greater percentage of housing need is satisfied by housing unit turnover. The types of housing products needed to accommodate the aging population base are discussed individually in the following section. 
Active Adult – Demand was projected for 75 market rate active adult units in Owatonna through 2020. Currently, there are three active adult products in Owatonna; two are coop‐
erative ownership products and the other is market rate rental. It is likely there are seniors who currently reside in general‐occupancy housing that would consider a newer active adult rental product. In addition, there may be seniors who no longer want the burden of the maintenance of homeownership and would like the choice of additional active adult co‐
operatives or rental products. The current developments are all performing well with a to‐
tal vacancy rate at 3%. Ownership With current ownership developments performing well, our calculations find it feasible for additional cooperative units to be absorbed into the Owatonna market. However, we do not feel the Owatonna market can support a third stand‐alone facility. Thus, we would rec‐
ommend any additional cooperative units be part of an expansion of an existing facility. Rental We find there is demand sufficient to support a new development of 35 to 40 active adult units. Development of this product could be in a separate stand‐alone facility or in a mixed‐
income project. A mixed‐income building could include a portion of units that would be af‐
fordable to seniors with incomes established the Minnesota Housing Finance Agency. Across Minnesota and the U.S., many markets have experienced delays in realizing demand for market rate active adult housing. These delays are the result of seniors who choose not to sell their homes or find they are unable to sell their homes along with the fact that active adult rental housing is not need‐based. Because many seniors are wary to sell their home in the current home sale market due to depressed home values, the development of an active adult rental property should be delayed until housing values show stability and potential growth. MAXFIELD RESEARCH INC.
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CONCLUSIONS AND RECOMMENDATIONS Both types of buildings have been successful in Owatonna and our calculations indicate that one building of each type could be supported. However, we recommend that only one of the two buildings come on‐line during a couple year period so that they do not share their initial marketing periods. Otherwise, the absorption of both could be slowed, especially if the resale housing market does not improve much from the current situation. 

Affordable and Subsidized Rental – Currently there are no affordable senior rental develop‐
ments in PMA. Many candidates for affordable senior rental may be residents at older mar‐
ket rate rental properties. These older properties would have similar rents that would be considered affordable for these seniors. The lack of affordable senior housing may be due to the cost and funding associate with this type of development. Therefore any affordable senior housing project could best be incorporated into a mixed‐income building to be feasi‐
ble. We recommend a senior housing development with 25 to 35 units in either a stand along building or incorporated within a mixed‐income development. We recommend 25 to 35 units of senior subsidized housing through 2020. Although the study shows demand for subsidized units in Owatonna and the existing product has a va‐
cancy rate of less than 3%, the development of subsidized senior housing can be challeng‐
ing. Financing subsidized senior housing is difficult as federal funds have been shrinking. Therefore, a new subsidized development would likely rely on a number of funding sources; from low‐income tax credits (LIHTC), tax‐exempt bonds, Section 202 program, USDA 515 program, among others. Congregate – All three congregate facilities in Owatonna are nearly fully occupied and have a history of high occupancy rates. We recommend 35 to 40 congregate units with a mix of one‐bedroom, one‐bedroom plus den, and two‐bedroom units. Base monthly rents should range from $1,950 for one‐bedroom units to $2,300 for two‐bedroom units. The monthly fees should include all utilities (except telephone and basic cable/satellite television) and the following services: 





I’m OK program; Daily noon meal; Regularly scheduled van transportation; Social, health, wellness and educational programs; 24‐hour emergency call system; and Complimentary use of laundry facilities. In addition, meals and other support and personal care services will be available to congre‐
gate residents on a fee‐for‐service basis, such as laundry, housekeeping, etc. When their care needs increase, residents also have the option of receiving assisted living packages in their existing units. MAXFIELD RESEARCH INC.
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CONCLUSIONS AND RECOMMENDATIONS 
Assisted Living and Memory Care The existing supply of assisted living and memory care units is meeting the need for addi‐
tional assisted living or memory care units in Owatonna over the decade. Overall vacancy rates among assisted living and memory care facilities in Owatonna is high and much of the current excess demand keeping the facilities fully occupied is from low income seniors utiliz‐
ing the Elderly Waiver program to pay for their services. Challenges and Opportunities Table 37 identified and recommended housing types that would satisfy the housing needs in Owatonna through 2020. The following were identified as the greatest challenges and oppor‐
tunities for developing the recommended housing types (in no particular order).  Affordability. Based on current home prices, the majority of Owatonna householders could afford to purchase an entry‐level home given today’s pricing (see following page). Likewise, most householders can also afford the average market rate rent of Owatonna rental devel‐
opments. Because of this condition, some householders who would not consider purchas‐
ing may do so earlier since the cost to own an entry‐level home is on‐par with rental hous‐
ing costs. In fact there are cases where owning a home may be more affordable than rent‐
ing given today’s depressed real estate prices. Furthermore, investors may purchase single‐
family homes at reduced prices and convert the properties to single‐family rentals that could compete with traditional apartment units. The chart on the following page compares the costs of homeownership to rentals given today’s housing costs based on a 30% alloca‐
tion of income to housing. We do note, however, that not all householders will have the credit scores and down payment that would qualify them to purchase for‐sale housing.  Shadow Rental Inventory. Shadow rentals are generally considered nontraditional rentals that were previously owner‐occupied single‐family homes, townhomes, or condominiums. The shadow market has been particularly fueled by homeowners who lost their home to foreclosure who opt to not rent in a traditional rental complex. Typically, short sales and foreclosures have resulted in substantial price reductions which have allowed buyers or in‐
vestors to charge rents below market while still maintaining a profit. Although the shadow market rentals tend to be more affordable, renters run the risk of evictions if the owner does not pay the mortgage. The City of Owatonna currently has 259 licensed single‐family rental properties.  Shadow Foreclosure Market. The shadow foreclosure market refers to homes that are either in foreclosure or the owners are behind on their mortgage payments, signaling that additional homes could eventually join the existing supply of lender‐owned properties. Re‐
cently there has been concern that many banks have been delaying foreclosures and hold‐
102
CONCLUSIONS AND RECOMMENDATIONS ing onto a large number of homes after foreclosure and not bringing the homes to the mar‐
ket. OWATONNA HOUSING AFFORDABILITY ‐ BASED ON HOUSEHOLD INCOME
For‐Sale (Assumes 10% down payment and good credit)
Price of House
Pct. Down Payment
Total Down Payment Amt.
Cost of Loan
Interest Rate
Number of Pmts.
Monthly Payment (P & I)
(plus) Prop. Tax
(plus) Homeowner's Ins./Assoc. Fee for TH
(plus) PMI/MIP (less than 20%)
Subtotal monthly costs
Entry‐Level
$150,000
10.0%
$15,000
$135,000
Single‐Family
Move‐Up
$200,000
10.0%
$20,000
$180,000
Executive
$250,000
10.0%
$25,000
$225,000
Entry‐Level
$150,000
10.0%
$15,000
$135,000
Townhome
Move‐Up
$175,000
10.0%
$17,500
$157,500
Exec/Det.
$200,000
10.0%
$20,000
$180,000
4.000%
360
‐$645
‐$225
‐$50
‐$59
‐$978
4.000%
360
‐$859
‐$300
‐$67
‐$78
‐$1,304
4.000%
360
‐$1,074
‐$375
‐$83
‐$98
‐$1,630
4.000%
360
‐$645
‐$225
‐$125
‐$59
‐$1,053
4.000%
360
‐$752
‐$263
‐$125
‐$68
‐$1,208
4.000%
360
‐$859
‐$300
‐$125
‐$78
‐$1,362
Housing Costs as % of Income
Minimum Income Required
Pct. of Owatonna Housholds
30%
30%
30%
30%
30%
30%
$39,120
$52,161
$65,201
$42,120
$48,307
$54,494
64.5%
50.2%
38.5%
61.1%
54.1%
48.1%
Existing Rental 2BR
$550
$705
$6,600
$8,460
3BR
$1,040
$12,480
$900
$10,800
New Rental
2BR
$1,050
$12,600
3BR
$1,250
$15,000
Rental
1BR
Monthly Rent
Annual Rent
Housing Costs as % of Income
Minimum Income Required
Pct. of Owatonna Housholds

1BR
30%
30%
30%
30%
30%
30%
$22,000
$28,200
$41,600
$36,000
$42,000
$50,000
82.8%
76.5%
61.7%
68.0%
61.2%
52.2%
The City of Owatonna’s should consider participating in the “First Look” program which helps community leaders gauge future foreclosures activity. The First Look program will provide the City of Owatonna with up‐to‐date information on properties in the foreclosure process; including key information on the mortgagee, redemption period, etc. The program also allows participating communities the first opportunity to purchase bank‐owned proper‐
ties so homes can be resold, rehabilitation, demolished, or rented. Through this program the City should be able to monitor any future waves of foreclosure activity. Owatonna should consider participating in this program and if necessary, take advantage of purchasing distressed real estate that could be rehabbed and brought to the market to stabilize hous‐
ing values while working with first‐time homebuyer programs. Lender‐mediated Properties. As illustrated in Table 17, lender‐mediated properties have accounted for about 38% of for‐sale resale activity over the past three years. Comparative‐
ly, lender‐mediated properties in the Twin Cities Metro Area comprise 43% of all sales activ‐
ity. Numerous other cities outside the Metro Area but within a one‐hour drive have much higher percentages of lender‐mediated properties; some upwards of 50% to 60% of real es‐
tate transactions. The prolonged market share of lender‐mediated properties will continue to bring down pricing in Owatonna until this supply has been absorbed. As a result, it will MAXFIELD RESEARCH INC.
103



be difficult for new construction to be able to compete with this inventory in the short‐
term. Gas Prices. Historically, economic theory has held that the price of housing declines from the distance from the denser, city center (i.e. Twin Cities). Many people who work in the Metro Area have been attracted to Owatonna for its lower housing costs, excellent schools, and its small town charm with regional amenities. However, many exurban communities that had been attractive to commuters have been hit especially hard by the economic downturn as gas prices have doubled over the past few years. Studies have found that in‐
creases in gas prices have reduced new home construction in locations with longer com‐
mute times. Therefore, Owatonna’s ability to attract new householders with longer com‐
mute times will continue to be challenging given today’s transportation costs. Job Growth/Employment. Historically, low unemployment rates have driven both existing home purchases and new‐home purchases. Although Steele County has historically main‐
tained a lower unemployment that the rest of the U.S. during the Great Recession, the un‐
employment rate of about 5.9% is above equilibrium and similar to the State of Minnesota (6.1%). Today’s unemployment rate has come down considerably from 8.7% in 2009. The high unemployment rate was mostly a result of massive layoffs at Federated Insurance and Viracon, the City’s largest employers along with many other manufacturing companies. Alt‐
hough Owatonna has adding jobs in other sectors, a number of jobs still need to be created to make‐up the losses. Lack of job growth leads to slow or diminishing household growth, which in‐turn relates to reduced housing demand. Further job creation in Owatonna will result in household growth that could exceed projections as outlined in Table 1. Land Supply. Tables 20 and 21 inventoried active subdivisions with available lots. Based on our research there are over 500 vacant lots, not included scattered lots throughout the city. Based on this lot supply and the recent construction activity over the past five years, there is a large excess supply of platted lots in the community. Because of this, it is very unlikely that developers will plat lots in the short‐term, especially given development costs and to‐
day’s price points for lot sales. Housing Programs. The Owatonna Housing and Redevelopment Authority (HRA) offers a number of programs to promote and preserve the existing housing stock in Owatonna. Some of the key programs that are offered include: o First‐time home‐buyer programs; o Creating affordable housing program; o Home improvement programs; and o Rental rehabilitation programs However, there are other programs the HRA could consider to aid and improve the City’s housing stock. The following is a sampling of potential programs that could be explored. MAXFIELD RESEARCH INC.
104

o Remodeling Advisor – Partner with local architects and/or builders to provide ideas and general cost estimates for property owners. o Construction Management Services – Assist homeowners regarding local building codes, reviewing contractor bids, etc. Typically provided as a service by the building depart‐
ment. o Historic Preservation – Encourage residents to preserve historic housing stock in neigh‐
borhoods with homes with character through restoring and preserving architectural and building characteristics. Typically funded with low interest rates on loans for preserva‐
tion construction costs. o Mobile Home Improvements – Offer low or no‐interest loans to mobile home owners for rehabilitation. Establish income‐guidelines based on family size and annual gross in‐
comes. o Townhome/Condo Association Improvements – Offer associations low‐interest loans for common‐area improvements. Unit owners repay the loan through association fees. Many townhome/condo associations have been unable to secure financing due to de‐
pressed real estate pricing; this program assists with improving housing stock with older properties that may have deferred maintenance. o Rent to Own ‐ Income‐eligible families rent for a specified length of time with the end‐
goal of buying a home. The HRA saves a portion of the monthly rent that will be allocat‐
ed for a down payment on a future house. o Rental Collaboration – Host meetings on a regular basis (quarterly, bi‐annually, or annu‐
ally) with rental property owners, property management companies, Realtors, etc. to discuss key issues and topics related to the rental housing industry in Owatonna. o Home Fair – Provide residents with information and resources to promote improve‐
ments to the housing stock. Typically offered on a weekend in early spring where home owners can meet and ask questions to architects, landscapers, building contractors, lenders, building inspectors, etc. Age of Rental Housing Stock. As illustrated in the Rental Market Analysis section of the report, the majority of rental housing units are older. There has been two general‐
occupancy rental projects constructed over the past 10 years and both have performed at nearly full occupancy since opening. The average age of apartment communities is over 30 years old in Owatonna. As a result, most of the rental housing stock lacks the contemporary amenities many of today’s renters seek. Many renters today seek the following unit ameni‐
ties: in‐unit laundry, walk‐in closets, balconies/patios, oversized windows, and individually controlled heating and air‐conditioning. Community Amenities include community rooms with kitchens and big screen TVs, fitness centers, Wi‐Fi, extra storage, and the inclusion of environmentally‐responsible design and features. Most of these features and amenities are not offered in current rental housing products in Owatonna. Lifestyle Renters. The for‐sale market, which today is considered the worst downturn since the Great Depression, has resulted in a fundamental shift in the way American’s view homeownership today. Home buyer psychology is fragile as many former owners lost their homes to foreclosures, lost home equity in the sale of their home, or simply have decided to MAXFIELD RESEARCH INC.
105
temporarily return to the renter pool during the economic recovery. Potential buyers are on the sidelines waiting for clear improvements in the economy before deciding to pur‐
chase a home. Historically, householders rented because they couldn’t afford to buy or didn’t have the credit to qualify for a mortgage. Today that is no longer the case and many householders are renting by choice. Demand is being driving by the Echo Boomers, would‐
be buyers on the side‐line, and empty nesters. As a result, rental housing is the bright spot in today’s real estate environment, across the country and in communities throughout Min‐
nesota. Because of this evolvement, new rental housing with contemporary amenities should be well‐received in Owatonna. Multifamily Development Costs. It may be difficult to construct new multifamily product with amenities today’s renter’s desire given achievable rents and development costs. Maxfield Research tracks development and construction costs for new rental housing across Minnesota. In the Twin Cities core the average costs per unit ranges on average from about $150,000 to $250,000; whereas in out‐state Minnesota, many market rate rental projects average over $110,000 per unit. The average rent per square foot in Owatonna is under $1.00 per square foot, when most out‐state Minnesota projects will need at least $1.05 or more per square foot to be financially feasible. Based on these costs, it may be difficult to develop stand‐alone multifamily housing structures by the private sector based on achieva‐
ble rents. As a result, a private‐public partnership or other financing programs may be re‐
quired to spur development. MAXFIELD RESEARCH INC.
106

Owatonna Comprehensive Housing Study

Transcription

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