HRA saving the homes we have while building the homes we need.

DULUTH — A roof that leaks or a furnace that quits can put a homeowner's finances under pressure long before a mortgage payment becomes a problem. In a city where much of the housing stock is decades old, the cost of keeping existing homes habitable has become an increasingly important part of Duluth's broader housing discussion.

The Housing and Redevelopment Authority of Duluth is confronting that challenge on two fronts: providing financial assistance to preserve existing homes while developing additional housing to meet demand that continues to exceed available supply. The work ranges from replacing failed heating systems and deteriorating roofs to constructing single-family homes in Morgan Park and pursuing additional apartment developments downtown.

The HRA's rehabilitation department recently received approximately $500,000 from two new funding sources after exhausting its available assistance funds earlier this year, according to Jacob K. Morgan, the authority's Director of Rehabilitation and Real Estate. The additional money will allow the department to resume a more aggressive effort to reach qualifying homeowners, many of whom face repair bills that have increased substantially in recent years.

"We were sort of on pause for most of the summer because we had spent down all the money that we had, but we recently got some new money and so now we're going to do a new marketing push soon to try to drum up a little bit more interest," Morgan said. 

Even without advertising, the department continued receiving 15 to 30 calls monthly from residents requesting applications, he said. When the HRA distributes promotional materials through utility bills, inquiries can increase to 60 or 70 in a month.

Morgan estimates that more than half of Duluth's housing stock is older than 50 years, creating continuing maintenance demands that can be financially overwhelming for households with limited resources. The HRA's rehabilitation programs are designed to address those problems before deteriorating conditions make homes unsafe or force their occupants to relocate.

"We have a number of different loan programs for low to middle income homeowners in Duluth, homeowners and landlords actually, that they can get loans that are 0% interest and deferred for anywhere from 15 to 30 years," Morgan said. "We can't do kitchen remodels or things like that, but new siding, new windows, new roof, new furnace, that kind of thing."

The objective, he said, is to preserve housing that already exists and prevent displacement. "So we're essentially trying to extend the life of people's homes where they're already living so that they're not displaced when they can't afford to fix whatever is wrong."

The HRA administers several rehabilitation programs, including Healthy Homes, single-family and rental rehabilitation assistance, emergency repair loans and funding for specific improvements such as exterior repairs and fuel oil heating conversions. Most programs target health and safety problems, structural deterioration and energy efficiency rather than cosmetic improvements. Some loans have forgivable provisions, while others remain secured against the property until repayment conditions are met.

For qualifying homeowners, the assistance can be substantial. Morgan said the department generally works within a $30,000 project limit, although certain combinations of funding can increase available financing to approximately $40,000. Applicants typically must have household incomes at or below 80% of the area's median income (for a family of four, that is $80,900), with eligibility requiring documentation of earnings and other income sources.

"Our rehab programs are essential for preserving the envelope of the home," said Jill Keppers, Executive Director of HRA of Duluth. "With some of the oldest housing stock in the state, we need to bring resources to Duluth to ensure we keep these homes viable long into the future."

The financial assistance comes with an application process that Morgan acknowledged can be lengthy. After income verification, an HRA rehabilitation adviser inspects the property, identifies qualifying repairs and establishes a scope of work. Federal and state funding requirements may then trigger environmental and historic preservation reviews before contractors can begin.

"We have to do environmental reviews on every property we work on," Morgan said. The review process can take three to six months in some cases, depending on the project and the agencies involved. The overall process commonly takes four to six months and occasionally longer, although the HRA hopes to complete much of the administrative work during winter so construction can begin when weather permits.

The department also operates an emergency repair program that can move considerably faster when a homeowner faces an immediate health or safety threat. Morgan said the HRA can use unrestricted funds to avoid the lengthy environmental review requirements associated with some other financing sources, allowing repairs such as replacing a failed furnace to proceed more quickly.

"If somebody has a red tagged furnace and it's November or almost, they can call us and say, 'I need a furnace now,'" Morgan said. After verifying the problem, the department can arrange for a contractor and potentially complete the work within a week. Emergency assistance remains a loan rather than an outright grant, with zero interest and repayment generally deferred until the property is sold or the 30-year term expires.

Even with additional financing, inflation in construction costs has reduced the amount of work the HRA can accomplish with each loan. Morgan said rehabilitation projects that previously averaged $15,000 to $16,000 are increasingly reaching the department's $30,000 maximum, sometimes because a single major repair consumes much of the available financing.

Five years ago, he said, a homeowner might have received a new roof, windows and furnace for approximately $20,000. Today, a roof replacement alone can cost $15,000 to $20,000, leaving less money available for other necessary improvements.

"Now we're hitting our $30,000 max every time," Morgan said. The combination of aging houses, increasing repair needs and higher construction prices means newly available program funds can be committed quickly.

The HRA's work extends beyond financing repairs for individual property owners. Morgan also handles the acquisition and sale of properties, including a partnership with Community Action Duluth that combines housing rehabilitation with construction workforce training. Under that arrangement, the HRA purchases deteriorated properties, sometimes including condemned houses, and construction trainees rehabilitate the buildings before they are sold to income-qualified buyers.

"The HRA buys old, sometimes condemned, but generally homes that are in really bad shape in need of substantial rehab," Morgan said.

The construction training crew then repairs the properties, providing participants with practical experience in the building trades while returning improved housing to the community. Morgan oversees the real estate transactions associated with those properties.

That effort illustrates how rehabilitation can serve several purposes simultaneously: preserving existing housing, returning neglected properties to productive use and providing construction experience to workers entering the trades. It also connects the HRA's rehabilitation activities with its broader responsibility to expand Duluth's housing opportunities.

On the development side, Caleb Anderson, the HRA's development coordinator, is responsible for assembling new projects, identifying funding sources and guiding developments through planning, financing and construction. The position was brought back as the authority expanded its development activities following projects such as Fairmont Cottages and Skyridge Flats.

"I was hired to conceive new projects, seek funding and put them together," Anderson said.

During his approximately two and a half years with the authority, he has worked on the completion of Skyridge Flats in the Harbor Highlands area and the sixth phase of Harbor Highlands development, along with additional projects now moving through construction or financing.

The need for new housing remains substantial. Duluth's 2025 comprehensive housing study identified demand for 2,094 additional affordable housing units by 2030, underscoring the gap between projected household needs and the city's ability to produce housing within reach of lower-income residents.

"The 2025 housing study had projected such a strong demand over the next five, 10 years that it's kind of like just build, build, build," Anderson said. "I think it would be a Herculean effort to actually fulfill the demand within that effort within that study."

Anderson said one of the study's most striking findings was the demand for rental housing relative to homes for purchase. The shortage is particularly pronounced among households seeking affordable or moderately priced accommodations, while competition for government financing limits how quickly additional developments can proceed.

"I was surprised at how much more demand was identified for rental than for sale housing," Anderson said. Affordable housing financing remains competitive, he added, making it essential for local developers and public agencies to pursue available state and federal resources consistently.

The HRA is also pursuing additional homeownership opportunities. Anderson said the authority recently completed three owner-occupied homes in Duluth's Central Hillside neighborhood and has 12 additional single-family homes under construction in Morgan Park.

The Morgan Park development, called Orchards of Morgan Park, is scheduled to bring 12 new houses to the market in summer 2027. Each is designed as a 1,400-square-foot, single-level residence with three bedrooms, two bathrooms, energy-efficiency features and an individual lot of approximately 0.15 acres.

The HRA anticipates listing the homes for approximately $325,000 each. Initial buyers must meet household income limits of $118,900 for one- or two-person households and $134,500 for larger households. According to the HRA's published plans, the income restrictions will apply to the original purchasers but not subsequent buyers.

While developments such as Morgan Park address demand for owner-occupied housing, Anderson said the authority is exploring other opportunities that could support downtown Duluth's recovery and accommodate additional residents. Its interests include workforce housing, market-rate apartments and potentially additional affordable housing, although the feasibility of specific projects will depend on financing and development conditions.

"We look for opportunities where we can get the most return on our investment for units and time and neighborhood vitality," Anderson said. The HRA is pursuing the possibility of a market-rate development downtown while continuing to seek financing for housing serving lower-income residents throughout the city.

Anderson sees downtown housing as a potential economic development tool as well as a response to the city's residential needs. More people living in the downtown district could support nearby businesses, increase activity beyond traditional working hours and strengthen the market for additional private investment.

"It seems like a win-win for community need and for downtown vitality to concentrate workforce and market rate and potentially some affordable housing downtown," he said.

One of the authority's most substantial downtown initiatives is its partnership with Union Gospel Mission on the proposed Mission Engagement Center and Mission Heights Housing development. Planned for 313 W. Second St., the project would combine a service center for people experiencing homelessness with 40 permanent supportive housing apartments on the building's upper floors.

The proposed engagement center would consolidate services that include meals, hygiene facilities, laundry, medical assistance, social services, counseling and daytime or overnight accommodations. Anderson described the development as a comprehensive approach to assisting people experiencing homelessness while providing a pathway toward more stable housing.

"It has potential to be hugely impactful for downtown Duluth and for hundreds of individuals who need those services," Anderson said.

The project has been divided into financing components because the service center and residential apartments qualify for different funding programs. Anderson said the engagement center portion, projected to cost approximately $10.4 million, has secured its anticipated funding through a combination of sources that includes fundraising by Union Gospel Mission.

The 40-apartment residential component remains dependent on additional financing. Anderson said the housing proposal is under review by Minnesota Housing, with a funding decision anticipated in December. The Duluth City Council has already expressed support for the housing project and conditionally committed $400,000 in future federal housing funds, subject to the required financing and development agreements.

"We're waiting on the second portion, the 40 apartments for the second and third floor, they're under review by Minnesota Housing right now, and we're hopeful that we'll be funded in December to do that," Anderson said.

The city's approved planning documents place the proposed apartments on the second and third floors above the first-floor service center. The funding decision will help determine whether the residential portion can advance toward construction as planned.

For Anderson, the undertaking reflects the complexity of developing affordable housing in a market where land, construction, financing and long-term operating costs must come together before a project can move forward. Larger developments frequently require multiple funding sources, financial consultants, legal assistance and agreements among public agencies, nonprofit organizations and private contractors.

The same difficulties apply to the broader effort to increase Duluth's housing inventory. Even when projects receive community support, development schedules can extend for years while financing applications are prepared, reviewed and approved.

"Our Board of Commissioners is dedicated to addressing the housing needs in our community by using the powers of the HRA to think outside our traditional low-income focus and lean into housing for all income levels," said Keppers. "Spurring development downtown is one way for us to encourage both private development and economic growth in Duluth."

Anderson said the public's frustration with housing costs, limited choices and homelessness is understandable. He also cautioned that even an active development program cannot quickly eliminate problems that have accumulated over many years.

"I would say that the frustration by the public, and in many cases, desperation for housing affordability and choice is real," Anderson said. Duluth has a network of organizations working on the problem, he said, but the scale of the challenge requires sustained investment and cooperation.

"Change isn't quick," Anderson said. "The forces against us are strong, and I think it's something that just isn't going to happen overnight."

That reality connects the HRA's two principal housing efforts. Constructing additional apartments and single-family homes is essential to expanding supply, but preserving existing properties can prevent the loss of housing that Duluth already has. For a homeowner facing a failed furnace or an unaffordable roof replacement, the immediate concern is not the number of new apartments planned across town but whether the house they occupy can remain safe and affordable.

For the HRA, the work continues in both directions. New rehabilitation funding provides another opportunity to help qualifying homeowners, while developments in Morgan Park and downtown represent efforts to add housing to a market where demand continues to outpace supply.

"As I have led the HRA into the housing development space in our community, I have been encouraged by our success with Fairmount Cottages, Skyridge Flats, and Harbor Highlands Phase VI Townhomes," said Keppers. "Now that we have a solid team in place, I hope to continue the momentum with the Union Gospel Mission project that will change the homeless response system in our community as well as future opportunities to assist the city with redeveloping downtown, Lester Park, or wherever we are needed."

Residents interested in rehabilitation assistance can contact the Duluth HRA at 218-529-6300 or visit duluthhousing.com for information about eligibility, available programs and the application process.