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Historic Buildings Finding New Life As Housing Sites

StarTribune

January 17, 1993

By Dick Youngblood

Gary Stenson and his partners are wheeling and dealing all over my old North Dakota stomping grounds, not to mention neighboring South Dakota and Minnesota, with occasional forays into Wisconsin, Kansas and Nebraska.

In their wake, they’re leaving a trail of affordable housing that’s almost as sorely needed in the small towns of America as it is in the big cities.

Even more intriguing, much of that housing is being provided in historic buildings that Stenson and his associates, Larry Olson and LaVerne Hanson Jr., have meticulously and lovingly restored.

There’s the 70-year-old Ryan Hotel in Grand Forks, N.D., which I remember as a flourishing center of downtown activity back in my days as a cub reporter on that corner of the northern glacier. Alas the Ryan did not age any better than I have and wound up being closed in the 1970s. Now, however it’s a substantially rehabbed site for 40 apartments for senior citizens.

Then there’s a 121-year-old jewel called the Union School in Black River Fails, Wis. which has been transformed into 21 apartments for the elderly.

And the 80-year-old Great Northern Hotel in downtown Devils Lake N.D., built during the railroading heyday to accommodate arrivals at the depot across the street. Stenson, a Devils Lake native saved the building from the demolition crews and transformed it into 38 senior citizen apartments.

Indeed, in smaller cities from Arkansas City, Kan., to Little Falls, Minn., the partners have been rescuing aging hotels, schools, hospitals and commercial buildings and turning them into low-cost housing worth upwards of $40 million.

Stenson, Olson and Hanson are principals in MetroPlains Development Inc., a St. Paul-based property developer and manager that is earning a tidy return by exploiting the federal housing-subsidy programs that survived the Reagan-Bush effort to rip gaping holes in the social safety net.

Stenson, 48, started the company in 1978 and is its president. Olson, 41, is a seasoned corporate financial executive who merged his housing-development business with MetroPlains in 1987. Hanson, 40, an architect who has designed virtually all of the company’s projects, became a partner in 1989.

Residents of their projects pay about 30 percent of their incomes for rents, with most paying between $300 and $400 a month.

The company, which does about $4 million worth of development a year, acts as general partner for the limited partners who invest in MetroPlains projects. It collects about $1 million a year in rents and management fees and controls 1,000 units of housing, two-thirds of them in buildings included on the National Register of Historic Places. The company also manages another 1,000 rental units for other owners.

Stenson, a lawyer who has been converted to more productive exertions, started the business almost by accident 14 years ago. That’s when he learned that folks in his hometown were talking about tearing down the defunct Great Northern Hotel and turning the site into a parking lot.

Stenson knew precisely where to look for the resources to rescue the hotel. After all, he’d spent three years in the early 1970s as a legislative aide to Sen. Walter Mondale, specializing in government-assisted housing and community development.

The upshot: He secured a low-interest loan through the Farmers Home Administration (FmHA), obtained so-called Section 8 rent subsidies from the Department of Housing and Urban Development (HUD1 and restored the building to all its high-ceilinged, wood-columned majesty.

It was the first of what was to become a series of projects that have saved a half-dozen of the city s most venerable hunks of real estate. These, coupled with projects involving non-historic buildings, have added more than 250 units of rental housing in Devils Lake, which has a population of about 7,800.

It is a significant boon for the city said Devils Lake Mayor Fred Bott: With more and more people leaving farms and smaller towns for regional trade centers like his, "there’s a real shortage of rental housing in general, and affordable housing in particular."

That’s a problem across rural America, according to a study published in 1989 by HUD and the Bureau of the Census. The mid-1980s survey turned up some troubling statistics:

22 percent, or more than 400,000, of the 1.8 million poor homeowners in non-metro areas paid at least 70 percent of their incomes for housing, and another 13 percent, or 250,000, paid at least 50 percent.

In fact, while the government defines "affordable housing" as costing less than 30 percent of a person’s income, the study found that 65 percent, or 1.2 million, of the poor homeowners in rural America paid more than that for housing.

Nearly one-third, or 445,000, of the 1.4 million poor renters in non-metro areas paid at least 70 percent of their incomes for housing, while another 19 percent, or 265,000, paid at least half of their Incomes. Overall, a stunning 79 percent, or 1.1 million, of poor non-metro renters paid more than an "affordable" 30 percent of their incomes for housing.

Despite the obvious need, HUD’s Section 8 rent-subsidy program perished in the early days of Reaganomics. But Stenson was undeterred.

He found a different source of federal funds: a mortgage and rent subsidy program that FmHA funds to promote affordable housing in communities with fewer than 20,000 people. He also began tapping the generous tax credits available through the National Park Service for substantial rehabilitation of historic buildings.

It has not been easy, however. For one thing, individual state FmHA directors virtually have total control over disbursement of the subsidies, and many of them prefer to see their support go to new construction rather than restorations, Stenson said. Iowa, for example, has resisted MetroPlains proposals for years, and so did Minnesota until recently.

Now, however, the company has received approval for historic tax credits and a low-interest FmHA mortgage to transform the century-old Buckman Hotel in Little Falls Into a 27-unit nursing facility, with construction to start in April.

"It would be a lot easier to go along with some of those state FmHA directors and build new housing," Olson said.

"Rehabbing a historic building is a lot more complicated, because you have to deal with so many agencies - FmHA, historical societies, the Park Service, state housing finance agencies.

"But if you’re willing to invest the time and effort, it’s a whole lot more rewarding, both personally and financially."

Reprinted with permission from the Star-Tribune, Minneapolis - St. Paul, Minnesota.

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