Cities struggle with unfinished housing developments

An increase in the amount of unfinished housing developments left over from the recession is leaving some cities to wonder when their vacant neighborhoods will be finished.

Drive out from downtown Minneapolis or St. Paul more than a half hour, and you'll soon stumble upon housing developments full of lone houses surrounded by empty lots. The relics of the foreclosure crisis were started during the housing boom, but as the market slowed in the recession many developers went bust.

Kevin Jaunich and his wife live in one of those incomplete developments. When he and his wife bought their home in the Wright County city of Delano, they were looking for more space for their growing family. They just weren't expecting so much space.

"There are 11 homes in the neighborhood even though there is supposed to be 77," Jaunich said.

The unfinished Fox Meadow development of large two-story homes on a suburban cul-de-sac was started about five years ago by bankrupt auto mogul Denny Hecker. All of the empty lots are now owned by a bank.

So, instead of looking out his front door at an identical house, Jaunich enjoys a more country atmosphere. Birds of prey circle overhead as tall stalks of yellow corn sway in the distance.

"Behind the empty lots we still have a view of the farmland across the road there, beautiful trees, rolling hills and very peaceful," he said.

Fox Meadow is one of several planned communities in Delano started by local or national developers that have stalled over the last few years as the economy took a nosedive.

"Fox Meadow is by far our biggest example of the greatest percentage of unoccupied lots to occupied lots," said Delano City Administrator Phil Kern.

He said he's thankful that the developers completed the infrastructure on Fox Meadow before the housing market crashed but the vacancies are still costly for the city.

"Obviously, vacant lots don't pay the same property taxes that developed lots do with houses on them," he said. "We have to plow streets and maintain roadways out there with one or two houses on a street and so that is unfortunate for the city."

Kern said it adds some cost to the city without having a revenue stream to support it. He said the city hopes that it is just a short-term problem and that it could have been a lot worse.

Some cities have gotten stuck with streets that lead nowhere until new developers are found. Kern is hoping Delano's ready infrastructure will help attract new builders to finish the vacant projects, but he also knows that could take years.

Brad Fisher, President of the Minneapolis Area Association of Realtors, said Fox Meadow is typical of the rapid exurban growth spurred by the housing boom. New construction, he said, now virtually rings the metro starting at a distance of about 30 miles and spreading out from the Twin Cities.

"If you just kind of go out about this distance and travel around the metro area you will see a lot of the cities that had their expansion and they had grown, anticipating that continued growth and that continued momentum," Fisher said.

Fisher said when that growth stopped, the cities faced the same thing Delano is faced with at Fox Meadow.

Fisher said the cities were trying to capitalize on a seemingly limitless demand for housing during the boom -- a demand that has now almost disappeared.

The League of Minnesota Cities found that about 32 percent of Minnesota's 854 cities saw their homestead market value decline in 2009, and while the league found the slowdown was more pronounced in the state's larger cities; it's been especially difficult for small cities.

Barbara Thwing-Swanson is city administrator in Montrose, about an hour west of Minneapolis with a population of about 2,500. Thwing-Swanson was hoping the housing growth that began over the last decade would continue, because attracting residents is key to growing the local economy.

"When you live in a small town you want your own grocer and you want your own drugstore, pharmacy, doctor's office, etc.," Thwing-Swanson said. "All of those businesses are counting how many people are in the town and so for us that's our goal."

Thwing-Swanson said that goal is to get enough rooftops to get some decent commercial services going so residents don't have to drive 10 miles or 15 miles to get those services.

It could be a while before Montrose attracts those rooftops. Thwing-Swanson is hoping the housing market picks up soon so the city's few hundred vacant lots start selling again.

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