Section Table of Contents

Page

Demographic Data Overview

HC-2

Population Estimates and Trends

HC-4

Population Projections

HC-5

Population by Age

HC-6

Population by Age - Comparison with Minnesota

HC-7

Households Estimates and Trends

HC-8

Average Household Size

HC-9

Household Projections

HC-10

Households by Age of Householder

HC-11

Household Characteristics

HC-12

Households by Tenure

HC-13

Income Data

HC-14

Existing Housing Inventory

HC-15

Permanent and Seasonal Housing

HC-16

Census Housing Vacancy

HC-17

Home Values

HC-18

Home Sales

HC-19

Home Sales - Historical Data

HC-20

Land and Infrastructure Availability

HC-21

Rental Housing

HC-22

Findings and Recommendations

HC-27

 

City of Hill City

Demographic Data Overview

Sources of Data:

The following pages contain demographic data obtained from a variety of local, state and national sources. During the course of this Study, Census data was being released from the 2000 Census. Whenever data from the Census was available, it has been used in this Study. However, some characteristics, such as income related information, had not been released when this Study was prepared, so estimates from other sources have been used.

Primary data sources, in addition to the 2000 Census, include prior year estimates from the U.S. Census Bureau, the Minnesota State Demographer’s Office, Claritas, Inc., an Arlington, VA based data reporting service, and Woods & Poole Economics, Inc., a Washington, DC based economic forecasting company.

The data that we have obtained from Claritas, Inc. is for the Hill City Market Area, as defined below. Because of the relatively small size of Hill City, estimates and projections are very difficult to make with a reasonable degree of accuracy. Estimates and projections are more reliable when made for a larger area. For this reason, we have only used the Claritas information for the Market Area and the County. Woods & Poole only issues their estimates and projections at the County-wide level.


Market Area Definition:

We have provided demographic data on population, households, income and other characteristics for the City of Hill City, and for a primary market area that surrounds the City. The primary market area is referred to in the Study as the Hill City Market Area. This market area includes jurisdictions on the northern edge of Aitkin County including the City of Hill City, the Townships of Ball Bluff, Cornish, Hill Lake, Macville and Verdon; and the Unorganized areas of Northeast Aitkin and Northwest Aitkin.

A map showing the Hill City Market Area is provided on the following page. (not included)

Although the geographic boundaries of this Market Area represent the Aitkin County jurisdictions immediately surrounding the City, housing in Hill City has the potential to draw from a larger Market Area. The City is close to the border with Itasca County, and this area represents a market draw area for the City. The inclusion of a Hill City Market Area definition is intended to represent a primary area that is oriented to the City. The inclusion of demographic data for this area allows for some degree of comparison between the City and the surrounding jurisdictions. For most demographic characteristics, we have also included data for Aitkin County as a whole, to again provide a perspective on broader market conditions in the larger region. 

Hill City Market Area

Population Estimates and Trends:

Table 1 Population Trends - 1980-2000

 

1980 Population

1990 Population

% Change 1980-1990

2000 Population

% Change 1990-2000

Hill City

533

469

-12.0%

479

2.1%

Hill City Market Area

1,969

1,623

-17.6%

1,850

14.0%

Aitkin County

13,404

12,425

-7.3%

15,301

23.1%

Source: U.S. Census Bureau

►          After experiencing a population loss of 12% in the 1980s, Hill City had a slight population increase over the last 10 years. According to the Census, Hill City added 10 people, for a population increase of 2.1% between 1990 and 2000. However, adjusting for the large population losses of the 1980s, the City’s population is still 10% lower than it was in 1980.

►          The jurisdictions forming the Hill City Market Area showed similar growth patterns to the City of Hill City. After losing nearly 18% of its population in the 1980s, the Market Area experienced a population increase of 14% from 1990 to 2000. However, the Market Area population level in 2000 is still more than 6% below the population level in 1980.

►          Aitkin County has grown at a faster rate. After a population loss of more than 7% in the 1980s, the County added population at a rate greater than 23% from 1990 to 2000.

►          Although the 2000 Census data released to date does not show the components of population gains and losses, in their 1999 County estimates, the Census Bureau identified the sources of population gains and losses for counties. In Aitkin County, they estimated population decreases for deaths exceeding births, but a significant population gain due to domestic in-migration. While the Hill City Market Area represents only a portion of the entire County, it is probable that the causes of population change are similar to County-wide patterns, with domestic in-migration as the largest component of the small population gain that has occurred since 1990.

►          Although we consider the 2000 Census data to be the most reliable indicator of population levels, we have also obtained current-year population estimates from Claritas, Inc., a private data reporting service. The Claritas estimates for 2001 show an estimated population of 15,518 people in Aitkin County, and 1,859 for the Hill City Market Area. These estimates are relatively consistent with the 2000 Census data.

►          We have also obtained a 2001 population estimate from Woods & Poole Economics, a private economic forecasting service. They estimate the Aitkin County population to be 14,550 people in 2001, well below the 2000 Census figures.

Population Projections:

The following table presents possible population level projections using four different sources. The 10 year growth trend is based on the rate of change between 1990 and 2000, using the 1990 Census and the 2000 Census, and projects this rate of growth forward between 2000 and 2006. The 20 year growth trend uses the same methodology, but calculates an annual growth rate from 1980 to 2000. The third and fourth projections are provided by Claritas, Inc., and Woods & Poole Economics, private companies that provide demographic data. Woods & Poole only issues data and projections at the County level.

Table 2 Population Projections Through 2006

 

2000 Population

Census

2006 Projection from 10 year growth trends

2006 Projection from 20 year growth trends

2006 Claritas Projection

2006 Woods & Poole Projection

 Hill City

479

485

464

N/A

N/A

 Market Area

1,850

2,005

1,816

1,939

N/A

Aitkin County

15,301

17,426

15,951

16,611

15,190

Source: U.S. Census Bureau; Claritas, Inc.; Woods & Poole Economics, Inc.; Community Partners Research, Inc.

►          Population projections calculated from recent trends for the City of Hill City differ depending on the inclusion of 1980s population data, when the City lost approximately 12% of its total population. In the 1990s, population trends reversed, and the City added a small number of people. Projections based on the last 10 years are probably overly optimistic, while those based on 20 year patterns may be too pessimistic. In our opinion, it is reasonable to assume that population growth over the 6 year period between 2000 and 2006 will be within the range between 0 and 6 additional people.

►          Projections for the Hill City Market Area and the County of Aitkin also vary depending on a 10 year versus 20 year calculation method. These methods anticipate that the Market Area will add as many as 155 people from 2000 to 2006. In this same projection period, Aitkin County is expected to add between 651 and 2,125 people.

►          Claritas projects that the Market Area will add 80 people and that the County will add 1,093 people between 2001 and 2006. These projections are well within the ranges provided above.

►          Woods & Poole Economics projects that Aitkin County will add 640 people from 2001 to 2006. Again, they start with a lower base year estimate for 2001. While Woods & Poole’s estimates and projections are too low, they do anticipate continued County-wide growth into the foreseeable future.


Population By Age:

The following table compares the City, Market Area and County populations by age in 1990 and 2000, along with the percentage changes. While this table examines the changes over the last 10 years, the table on the following page compares the City, Market Area and County with the State of Minnesota for the distribution of population by age.

Table 3 Persons by Age - 1990 - 2000


Age

City of Hill City

Market Area

Aitkin County

1990

2000

% Change

1990

2000

% Change

1990

2000

% Change

 0-19

148

130

-12.2%

500

513

2.6%

3,197

3,544

10.9%

20-24

24

29

20.8%

56

68

21.4%

359

486

35.4%

25-44

124

123

-0.8%

441

481

9.1%

2,989

3,302

10.5%

45-64

90

117

30.0%

356

502

41.0%

2,952

4,452

50.8%

65-74

47

45

-4.3%

169

179

5.9%

1,730

1,993

15.2%

75-84

29

29

0%

86

87

1.2%

898

1,130

25.8%

 85+

7

6

-14.3%

15

20

33.3%

300

394

31.3%

Total

469

479

2.1%

1,623

1,850

14.%

12,425

15,301

23.1%

Source: U.S. Census; Community Partners Research, Inc.

►          With a relatively small population, and very little population growth in the last decade, the City has experienced only slight movement in the distribution of population by age. The largest numeric losses are in the age ranges 19 years old and younger, where the number of children declined by more than 12%. The largest numeric gains were among adults in the age ranges between 45 and 64 years old, where the population increased by 30%.

►          In the Hill City Market Area, every age group reported an increase in population between 1990 and 2000. There was a large percentage increase in the population between 45 and 64 years old. Much of the “baby boom generation” was in this age cohort in 2000. People in these age ranges also represented the largest increase for Aitkin County as a whole.

►          Despite the growth of population in the primary child-rearing age groups, the Hill City Market Area’s percentage of children increased only slightly between 1990 and 2000.

►          The older senior population, age 85 and older, increased by more than 33% in the Market Area, but this age cohort is a very small percentage of the total Market Area population.


Population By Age - Comparison to Minnesota:

The following table compares the City, Market Area and County populations by age in 2000 to State-wide age distribution patterns.

Table 4 Persons by Age - 1990 - 2000


Age

Hill City

Market Area

Aitkin County

Minnesota

2000

Percent

2000

Percent

2000

Percent

2000 Percent

 0-19

130

27.1%

513

27.7%

3,544

23.2%

29.1%

20-24

29

6.1%

68

3.7%

486

3.2%

6.6%

25-44

123

25.7%

481

26.0%

3,302

21.6%

30.5%

45-64

117

24.4%

502

27.1%

4,452

29.1%

21.7%

65-74

45

9.4%

179

9.7%

1,993

13.0%

6.0%

75-84

29

6.1%

87

4.7%

1,130

7.4%

4.3%

 85+

6

1.3%

20

1.1%

394

2.6%

1.7%

Total

479

100%

1,850

100%

15,301

100%

100%

Source: U.S. Census; Community Partners Research, Inc.

►          The percentage of children in the City’s population is slightly below the County-wide percentage, and is below the State-wide percentage for children in the population.

►          The City’s percentage of population is lower than the comparable State-wide percentages for all age groups under 45 years old. For the age ranges between 45 years old and 84 years old, the City’s percentages are above the State-wide average.

►          While the City and the Market Area have an above-average population of senior citizens in the age ranges between 65 and 84 years old, there is a below average percentage of senior citizens age 85 and older. This implies that older seniors tend to leave the area as they age, probably looking for additional medical and service options in larger neighboring communities.

►          According to the 2000 Census, the median age in the City of Hill City is 39.8 years old and in the County it is 46.5 years old. For the entire State of Minnesota the median age is 35.4 years old.


Household Estimates and Trends:

Table 5 Household Trends - 1980-2000

 

1980 Households

1990 Households

% Change 1980-1990

2000 Households

% Change 1990-2000

Hill City

209

198

-5.3%

213

7.6%

Hill City Market Area

675

627

-7.1

745

18.8%

Aitkin County

5,005

5,126

2.4%

6,644

29.6%

Source: U.S. Census Bureau; Community Partners Research, Inc.

►          After a decade of household losses in the 1980s, the City of Hill City experienced a household growth rate of nearly 8% from 1990 to 2000. The household level reported in the 2000 Census was 4 households higher than in 1980.

►          Household growth in the Hill City Market Area was very strong over the last decade. >From 1990 to 2000, the Market Area added 118 new households, or a household increase of nearly 19%. This reversed the losses that had occurred in the 1980s. Most of the household growth in the Market Area occurred in the Northwest Aitkin Unorganized Area, Hill Lake Township and Ball Bluff Township, which offer lakeshore and rural residential options.

►          Aitkin County’s household growth approached 30% in the 1990s. While all regions of the County added households, the majority of the household growth occurred in the jurisdictions that form the Aitkin Market Area.

►          Although the 2000 Census data released to date does not show the components of household gains and losses, in their 1999 County estimates, the Census Bureau identified the sources of population gains and losses for counties. In Aitkin County, they estimated population decreases for deaths exceeding births, but a significant population gain due to domestic in-migration. While the Hill City Market Area represents only a portion of the entire County, it is probable that the causes of household change are similar to County-wide patterns, with domestic in-migration as the largest component of growth.

►          Increasingly, seasonal use structures in northern Minnesota are being converted to year-round residences, as people move into the area to retire, or tele-commute to their employment. While a number of new houses may have been built in the Market Area to house new residents, it is also possible that many new households have occupied an existing unit that was previously a seasonal-use structure.

►          Claritas, Inc., estimates that there are 788 households in the Market Area in 2001, reasonably consistent with 2000 Census data.


Average Household Size:

The following table provides U.S. Census Bureau information on average household size. We have also provided projections by Claritas, Inc., which were prepared prior to the release of any 2000 Census data.

Table 6 Average Number of Persons Per Household
1980-2006

 

1980 Census

1990 Census

2000 Census

2006 Projected Claritas

Hill City

2.55

2.37

2.25

N/A

Hill City Market Area

2.92

2.59

2.48

2.46

Aitkin County

2.65

2.39

2.28

2.21

Source: U.S. Census; Claritas, Inc.

►          In most areas in Minnesota and across the nation, average household size has been decreasing in recent decades. This has been due to household composition changes, such as more single parent families, more senior households due to longer life spans, etc. This trend of smaller household sizes has been occurring in Hill City as the average household size has decreased from 2.55 persons per household in 1980 to 2.25 persons in 2000. For the State of Minnesota, the average household size was 2.52 people in 2000.

►          Average household sizes for the Market Area and for the County as a whole have continued to decrease in the 1980s and 1990s. Although the averages are higher than for the City of Hill City, they are still well below the State-wide average.

►          The 2006 projection from Claritas shows that the average household size is expected to decrease over the next five years for the Market Area and the County.

►          Woods & Poole projects that the Aitkin County average household size will decline from 2.35 persons per household in 2001 to 2.31 persons in 2006.


Household Projections:

The following table presents possible household level projections using four different sources. The 10 year growth trend is based on the rate of change between 1990 and 2000, using the 1990 Census and the 2000 Census, and projects this rate of growth forward to 2006. The 20 year growth trend uses the same methodology, but calculates an annual growth rate from 1980 to 2000. The third and fourth projections are provided by Claritas, Inc., and Woods & Poole Economics, private companies that provide demographic data. Woods & Poole only issues data and projections at the County level.

Table 7 Household Projections Through 2006

 

2000 Household Estimate

2006 Projection from 10 year growth trends

2006 Projection from 20 year growth trends

2006 Claritas, Inc. Projection

2006 Woods & Poole Projection

 Hill City

213

223

214

N/A

N/A

Hill City Market Area

745

829

768

788

N/A

Aitkin County

6,644

7,825

7,297

7,422

6,480

Source: Community Partners Research, Inc.; Claritas, Inc.

►          Our projections indicate that the City of Hill City is expected to add between 1 and 10 new households between 2000 and 2006.

►          Projections for the Hill City Market Area and the County of Aitkin vary depending on a 10 year versus 20 year calculation method. These two methods anticipate that the Market Area will add between 23 and 84 households from 2000 to 2006. In this same projection period, Aitkin County is expected to add between 653 and 1,181 households.

►          The Claritas projection for the Hill City Market Area indicates an increase of 47 households between 2001 and 2006, in the middle of the range provided above. Claritas starts with a higher base year (2001) estimate than the 2000 Census. Claritas projects that the County will add 622 households between 2001 and 2006. This projection is near the lower end of the range provided above.

►          Woods & Poole Economics projects that Aitkin County will add 430 households from 2000 to 2006. Woods & Poole’s base year estimate for 2000 is well below the County household count reported by the Census. While their estimates and projections are too low, they do anticipate continued County-wide growth into the foreseeable future.


Households By Age of Householder:

The following table compares Market Area households by age of householder in 1990 and 2000, along with the numeric and percentage changes.

Table 8 Market Area Households by Age - 1990 - 2000

Age of Householder

Hill City Market Area

1990

2000

Numeric Change

Percentage Change

15-24

20

17

-3

-15.0%

25-34

106

88

-18

-17.0%

35-44

118

163

45

38.1%

45-54

103

130

27

26.2%

55-64

88

153

65

73.9%

65-74

112

116

4

3.6%

75-84

68

64

-4

5.9%

 85+

12

14

2

16.7%

Total

627

745

118

18.8%

Source: U.S. Census; Community Partners Research, Inc.

►          Census data show that the Hill City Market Area has added households in most age ranges since 1990. However, three age groups did show a net loss of households, including the 25 to 34 year old range which lost 18 households between 1990 and 2000, the 75 t0 84b year old group, which lost 4 households, and the 15 to 24 year old range, which lost 3 households.

►          The largest numeric gains occurred in the 55 to 64 year old group and the 35 to 44 year old age group.

►          The number of senior citizen households, age 65 and older, had a net gain of only 2 households between 1990 and 2000.


Household Characteristics:

The following table presents data on household characteristics from the 2000 Census. Data has been presented as percentages of the total households to allow for comparative analysis between the City, the Market Areas and State.

Table 9 Households by Type - 2000

 

Married Couple Family

Male Householder

No Wife Present

Female Householder No Husband Present

Non-Family Household

With Related Children

W/O Related Children

With Related Children

W/O Related Children

With Related Children

W/O Related Children

1 Person Household

Non-Family Household

Hill City

16.4%

24.9%

3.8%

0.9%

8.9%

1.9%

36.2%

7.0%

Market Area

20.7%

37.2%

2.7%

1.5%

4.7%

2.6%

26.2%

5.1%

Aitkin Co.

16.9%

40.5%

2.1%

1.3%

3.6%

2.6%

28.7%

4.2%

Minnesota

25.2%

28.5%

2.0%

1.6%

5.9%

3.0%

26.9%

6.9%

Source: 2000 Census; Community Partners Research, Inc.

►          According to the Census, Hill City’s percentage of married couples with children was well below average when compared to the State of Minnesota. The City’s percentage of 1 person households was well above the comparable averages. A large number of 1 person households is common in communities with a large, older senior population.

►          While the Market Area and the County had a below average percentage of married couples with children when compared to the State-wide average, there was an above average percentage of married couples without children. This would be consistent with some of the surrounding township and unorganized area’s popularity as a retirement location.

►          While Hill City did have a below average percentage of married couples with children, the City did have an above average percentage of single parent families with children.


Households by Tenure:

Table 10 Households by Tenure - 2000

 

Occupied Units

Owner-Occupied Units

% Owner Units

Renter-Occupied Units

% Rented Units

Hill City

213

151

70.9%

62

29.1%

Hill City Market Area

745

644

86.4%

101

13.6%

Aitkin County

6,644

5,676

85.4%

968

14.6%

Minnesota

1,895,127

1,412,865

74.6%

482,262

25.4%

Source: U.S. Census

►          In 2000, Hill City’s percentage of owner-occupied housing was below the State-wide average. The City’s above average percentage of rental units is somewhat typical of cities that serve as a rental center for a surrounding area. Hill City is the retail, service and rental housing center for a portion of northern Aitkin County and provides much of the area’s rental housing.

►          Although Hill City has an above average percentage of rental housing units, the surrounding townships have primarily owner-occupied housing. Excluding units in Hill City, the surrounding jurisdictions in the Market Area have a 92% owner-occupancy rate.


Income Data:

Income data from the 2000 Census is not scheduled for release until 2002. Income data has been presented from a 2001 estimate of income calculated by Claritas, Inc., a national data reporting company. Income includes total money received in the stated calendar year by all household members 15 years old and over. Because of the relatively small size of Hill City, which creates difficulties in accurately estimating income levels, data is only provided for the larger Market Area and the County.

The first table provides a median income estimate for all households, while the second table provides a median income estimate for all families that have more than one related individual living in the same household.

Table 11 Estimated Household Income - 1989 to 2001

 

Household Income

1989 Median

2001 Median

% Change

Hill City Market Area

$16,225

$25,026

54.2%

Aitkin County

$17,487

$26,494

51.5%

Source: Claritas, Inc.

Table 12 Estimated Family Income - 1989 to 2001

 

Family Income

1989 Median

2001 Median

% Change

Hill City Market Area

$20,938

$30,515

45.7%

Aitkin County

$21,836

$33,134

51.7%

Source: Claritas, Inc.

►          Using the commonly accepted standard that 30% of gross income can be applied to housing expenses without experiencing a cost burden, a median income household in the Hill City Market Area could afford approximately $626 per month for housing and a median income family could afford $763 per month.

►          Using the mortgage affordability calculator of the National Association of Realtors, a household earning the Hill City Market Area’s median household income of $25,026 can afford to purchase a house at approximately $60,000. This assumes relatively low fixed debt, $3,000 available for a down payment, and a 30 year fixed rate mortgage at 7.25%. A median income family, with identical terms but having higher fixed debt and $5,000 for a down payment can afford a $76,800 house. Closing costs have not been included in either calculation.

►          Household income estimates for 2001 indicate that approximately 21.5% of Hill City Market Area households have incomes above $50,000. Households in this income range will generally have incomes sufficient for the costs associated with new home construction, or houses above $125,000.


Existing Housing Inventory:

Table 13 Occupied Housing Units by Year Built

 

1939 and Earlier

1940-1959

1960-1979

1980-1989

1990-2000*

Owned

Rented

Owned

Rented

Owned

Rented

Owned

Rented

Owned

Rented

Hill City

56

8

14

0

42

56

14

2

2

0

Source: 1990 Census; Building Permits

* The tenure and occupancy status for units constructed since 1990 is not exactly known. This table assumes tenure based on the best available information on structure type, and from the City’s building permit records.

►          The owner-occupied housing stock in Hill City is very old. The 1990 Census identified over 44% of the owner-occupied housing units at that time as pre-1940 construction. This was nearly two times greater than the State-wide average for pre-1940 housing of approximately 25%.

►          Most of the City’s rental housing was built after 1960. The Census identified approximately 12% of the occupied rental units as pre-1940 built housing.

Table 14 Hill City Housing Units By Number of Units and Tenure

 

Total Units - 1990

Owner Occupied 1990

Renter Occupied 1990

Unit changes 1990-2000

Total

Census+new units

1 Unit Detached

162

101

28

-2

160

1 Unit Attached

0

0

0

0

0

2 Units

10

1

7

0

10

3-4 Units

12

0

0

0

12

5+ Units

177

0

37

0

177

Mobile Home

34

22

0

2

36

Total

395

124

72

0

395

Source: 1990 Census; Building Permits

►          Hill City has had no new housing in the last decade. According to City records, 2 mobile homes were added to the community.

►          Only limited information is available on demolished units, but it appears that 2 houses were removed in the 1990s.

►          The unit counts reported in the 1990 Census for single family, duplex and mobile home units are higher than those obtained from a visual unit inventory completed in 2001. It is possible that additional units have been lost since 1990. It is also possible that some units at the edges of the City limits were not included in the visual inventory completed for this Study.


Permanent and Seasonal Housing:

Like many areas in northern Minnesota, the area surrounding Hill City has a large number of seasonal use housing units. Increasingly, these seasonal use units are being converted to year-round housing units, to accommodate both retirees who are moving into the area, and also working age households who are looking to take advantage of the lakes, trees and other amenities of a wilderness housing location. The following table provides information on seasonal use housing units.

Table 15 Seasonal Use and Year-Round Occupied Housing Units - 2000

 


Total Units

Year-Round Occupancy Units

Seasonal Use Units

Units

Percent

Units

Percent

Hill City

391

282

72.1%

109

27.9%

Hill City Market Area

1,411

939

66.5%

472

33.5%

Aitkin County

14,168

7,499

52.9%

6,669

47.1%

Source: 2000 Census

►          The 2000 Census identified 109 seasonal use housing units within the City of Hill City, probably reflecting housing that is Part of Quadna Resort, but within the City limits. Seasonal use units make up more than 33% of the stock in the Market Area, representing 472 housing units. The largest number of seasonal use units were in Hill City, Hill Lake Township and Northwest Aitkin Unorganized area. These three jurisdictions, along with Ball Bluff Township, accounted for most of the household growth that has occurred in the Hill City Market Area.

►          Information from utility providers in northern Minnesota indicates that in some areas, as many as 5% of the seasonal use units are converted to year-round use on an annual basis. This conversion to year-round use allows for significant, permanent household growth in the area without a commensurate level of new housing construction activity. The availability of these seasonal use units in the surrounding rural areas also helps to explain the significantly higher household growth rates that the Market Areas are experiencing when compared to the Cities in the area.


Census Housing Vacancy:

The 2000 Census provided information on the occupancy/vacancy status at the time the Census was taken.

Table 16 Seasonal Use and Vacant Housing Units - 2000

 

Total Units

Total Vacant Units

Seasonal Use Vacant

Vacant For Rent

Vacant For Sale

Other Vacant

Hill City

391

178

109

48

4

17

Market Area

1,411

666

472

48

11

135

Aitkin County

14,168

7,524

6,669

97

68

690

Source: 2000 Census

►          The Census reported that there were 48 vacant rental units and 4 vacant owner-occupied units in Hill at the time of the Census. This equates to a vacancy rate of 43.6% for rental housing and 2.6% for owner-occupied housing. State-wide, the 2000 vacancy rate was 4.1% for rental housing and 0.9% for owned housing according to the Census.

►          The Census lists a large number of “other vacant” units. The status of these units is not always defined. In some cases, these are units that are vacant temporarily due to turn-over, such as units that have been recently sold but the new owner has not yet moved in. It is possible that some of these units may also represent resort-type housing units. The largest number of “other vacant” units in Aitkin County are in Shamrock Township, with 207 such units. Shamrock Township includes much of the development on Big Sandy Lake.


Home Values:

Table 17 Estimated Owner Occupied House Value - 2001

 

2001 Median Home Value Estimate

Hill City

$25,515

Source: Community Partners Research, Inc.; Aitkin County Assessor

►          Data on median owner-occupied home values is from the Aitkin County Assessor’s Office. Data was reviewed on 189 homesteaded houses. This data may include two and three-unit structures where the owner occupies one of the units in the building. This data also appears to include owner-occupied mobile homes.

►          The median value in the Assessor’s data is $24,300, which represents the estimated market value in January 2001. Estimated market values are supposed to be within 95% of actual market value, and generally lag slightly behind true sales values. To adjust this value, we have increased the median value by 5%, bringing the current estimated median home value to $25,515.

County estimated market value data has also been used to analyze the number of homesteaded houses in the City that fall into defined value ranges. The value range identifies the number and percentage of houses compared to $77,540, based on the purchase price limit for first-time home buyer programs available through the Minnesota Housing Finance Agency (MHFA). This value range also represents the approximate purchase amount that is considered affordable at the Hill City Market Area median family income level of $30,515, with a 5% down payment.

Table 18 Owner-Occupied Houses By Specified Value Range - 2001

Value Range

Number of Homesteaded Houses

Percent of Homesteaded Houses

$0 - $77,540

Eligible for first-time buyer

Affordable at median family income


181


95.8%

$77,540+

Above limits for first-time buyer

Above affordable level at median income


8


4.2%

Source: Aitkin County Assessor; Community Partners Research, Inc.

►          Based on home value estimates generated from County estimated market values, nearly 96% of the City’s existing single family housing stock is in a price range that is eligible for first-time home buyer mortgage programs. The same percentage of houses is considered to be affordable to households at the Hill City median family income level of $30,515.


Home Sales:

The previous page examined all owner-occupied houses in the City as an indicator of ownership affordability. This section examines those houses that have been sold within a recent 12 month time period. It is important to note that the number of houses that have sold is relatively small, and may not be an accurate indicator of overall home values. However, this sample does provide some insight into those units that are turning-over in the City.

Table 19 Median Value of Recent Residential Sales -
July 2000 - June 2001

 

Number of Good Sales

Median Sale Price

Hill City

16

$43,500

Source: Community Partners Research, Inc.; Aitkin County Assessor

►          In the 12 month period ending June 30, 2001, there were 16 improved residential sales in Hill City that were considered to be “arms length” transactions, according to the County Assessor. Sales that are not “arms length” include, but are not limited to, sales between relatives, forced sales and foreclosures, and estate transfers that are not available on the open market. Only the “arms length” transactions have been reviewed for this study.

►          The median sales price for the residential sales reviewed was $43,500. The highest valued sale was for $100,000 and the lowest valued sale for $16,500.

Table 20 Residential Sales By Specified Value Range -
Dec. 1999 - Nov. 2000

Value Range

Number of Residential Sales

Percent of Residential Sales

$0 - $77,540

Eligible for first-time buyer

Affordable at median family income


15


93.8%

$77,540+

Above limits for first-time buyer

Above affordable level at median income


1


6.2%

Source: Aitkin County Assessor; Community Partners Research, Inc.

Note: This table reflects “qualified” sales as determined by the County Assessor. Sales for less than fair market value have not been included.

►          Sales data show that nearly 94% of the sales occurred in a price range that is eligible for first-time home buyer mortgage assistance through the MN Housing Finance Agency. This same percentage is considered to be affordable to households at the Hill City median household income level of $30,515.


County-wide Home Sales - Historical Data:

The Minnesota Demographer’s Office has compiled County-level data on median home sales prices over the last 17 years to analyze price trends for single family houses. This data is only available for all of Aitkin County. The median sales price has been obtained from sales ratio reports submitted by the Aitkin County Assessor’s Office to the Minnesota Department of Revenue. It is important to note that houses sold in a given year may not be a statistically valid sample of all home values in the County. However, this annual sample does provide insight into home values over a number of years and information on those units that are turning-over in the County.

Table 21 Median Value of Residential Sales - 1984/85 to 1999/2000

 

Median Sale Price

Percent Change 1990-2000

Percent Change 1998/99-1999/2000

1984-1985

1989-1990

1995-1996

1998-1999

1999-2000

Aitkin County

$31,000

$32,250

$54,200

$70,000

$75,000

132.6%

7.1%

Minnesota

$64,000

$70,000

$87,500

$112,500

$124,500

77.9%

10.7%

Source: Minnesota State Demographer; Community Partners Research, Inc.

►          The median home sales price in Aitkin County has increased at a rapid rate over the last decade. From the 12 month period ending October 1, 1990 to the 12 month period ending October 1, 2000, the median sales price increased by nearly 133%. This percentage increase was well above the State-wide increase of approximately 80% during the same time period.

►          While the percentage increase is significant, it is explained in part by the relatively low median sales price in the County. The County’s median for the 1989-1990 sales period was $32,250. This was less than half of the State-wide median sales price in that year of $70,000.

►          For the 1989-1990 sales period, Aitkin County had the 31st lowest median sales value of 87 counties analyzed. For the 1999-2000 sales period, the County had the 44th lowest value of 87 counties reviewed.

►          The median income data for Aitkin County provided earlier in this Study estimate that the median household income level and the median family income level have increased by approximately 52% between 1989 and 2001. In this same time period the median home sales price has increased by nearly 133%.


Housing Condition:

In May 2001, Community Partners Research, Inc. representatives conducted a visual ‘windshield’ survey of single family/duplex houses in Hill City. Houses that appeared to contain 3 or more residential units and mobile homes were excluded from the survey. The visual survey looked at 157 single family/duplex structures.

The visual survey also identified and rated 30 mobile homes in the City. The ratings for mobile homes are provided separately in the following table.

Houses were categorized in one of four levels of physical condition, Sound, Minor Repair, Major Repair, and Dilapidated as defined below. The visual survey analyzed only the physical condition of the visible exterior of each structure. Exterior condition is assumed to be a reasonable indicator of the structure’s interior quality.

Dilapidated houses need major renovation to become decent, safe and sanitary housing. Some Dilapidated properties may be abandoned and may be candidates for demolition and clearance. Major Rehabilitation is defined as a house needing multiple major improvements such as roof, windows, sidings, structural/foundation, etc. Houses in this condition category may or may not be economically feasible to rehabilitate. Minor Repair houses are judged to be generally in good condition and require less extensive repair, such as one major improvement. Houses in this condition category will generally be good candidates for rehabilitation programs because they are in a salable price range and are economically feasible to repair. Sound houses are judged to be in good, ‘move-in’ condition. Sound houses may contain minor code violations and still be considered Sound.

Table 22 Windshield Survey Condition Estimate - 2001

 

Sound

Minor Repair

Major Repair

Dilapidated

Total

Single Family/Duplex

49/31.2%

57/36.3%

45/28.7%

6/3.8%

157

Mobile Homes

10/33.3%

9/30.0%

10/33.3%

1/3.33%

30

Hill City Total

59/31.6%

66/35.3%

55/29.4%

7/3.7%

187

Source: Community Partners Research, Inc.

►          The visual condition survey identified most of the houses in the City as needing repair, although most of these houses required only minor repair. The survey did identify 45 single family/duplex structures and 10 mobile homes as needing major repair.

►          Many of the houses that were rated as needing major repair are larger, old houses that have not been well maintained. Because of the amount of available square footage in these larger houses, they could be very attractive to families if significant rehabilitation is completed. However, Costs associated with rehabilitating larger houses will also be higher, with higher materials costs.

►          The analysis rated 6 single family/duplex homes and 1 mobile home as dilapidated. These structures may be beyond repair, and could be candidates for demolition and clearance.


Land and Infrastructure Availability:

In order to accommodate future housing development activity, the City will need adequate land suitable for residential development, and will need municipal sewer and water capacity sufficient to support additional residential users. While this study did not obtain independent verification of land or services availability, it did attempt to collect general information on the City’s physical ability to accommodate future residential growth. This information was most often obtained from either City staff or elected officials.


Land Availability - Single Family Development:

Hill City has had almost no new housing construction over the last 10 years. No new residential subdivisions have been created for many years. According to City officials, Hill City has a limited supply of developed land that is available for new home construction.

A visual inspection of the City identified a number of vacant, “in-fill” parcels around the City. However, these vacant lots were not identified as being for sale, and the availability of these lots for new housing construction is not known.

There are larger parcels of land available that would be suitable for residential development, but municipal infrastructure would need to be provided. With low demand for new housing construction, it is doubtful that a private developer would find it economically feasible to develop a new subdivision unless it could be developed in small phases to eliminate a large, up-front cash outlay for municipal services.


Land Availability - Multifamily Development:

It is probable that any future multifamily rental housing development would be modest in scale. It may be possible to construct a small rental project on an in-fill parcel, provided some redevelopment occurred to remove existing structures. City staff have also identified an approximate 11 acre parcel on the edge of the City that would be suitable for higher density development.


Municipal Services:

According to City officials, improvements to the City’s public facilities systems are needed. The City has recently received funding to dredge the sewage treatment ponds. The City is planning to apply for grant funds for replacement of clay collection pipe in the City and to connect some additional existing houses to the municipal sewer system.

The water system is generally in good condition, with some ongoing distribution improvements planned. The City is seeking Small Cities Development Program funds for water system improvements.

Public facilities are not viewed as a barrier to future housing development.


Rental Housing:

At the time of the 2000 Census, 29.1%% of the occupied housing stock in Hill City was renter occupied. This represented 62 rental units. Hill City’s percentage of rental housing was higher than the State-wide average of 25.4%.

Since 1990, there have been no new units constructed specifically for renter occupancy. However, the 2000 Census reported 11 fewer occupied rental housing units than existed at the time of the 1990 Census. The 1990 Census reported 13 vacant units available for rent, and 14 “other vacant” units. The 2000 Census lists 48 vacant units available for rent, and 16 “other vacant” units.

It does not appear that these Census numbers can be easily reconciled. We are aware of persistent vacancy problems in some of the City’s apartment buildings, but 48 vacant rental units, as reported by the 2000 Census, is not easily explained. It would appear that the number of rental units in the City has remained stable, or increased slightly, and that the number of vacant units has increased since 1990. It is also probable that some of the 48 vacant rental units in the 2000 Census may be housing at Quadna resort, or another facility.


Rental Housing Survey:

As part of this housing study, a survey was conducted of multifamily buildings in the City. The survey included larger rental properties with 4 or more units.

Information was collected from 58 rental units, including 44 of the estimated 62 occupied rental units in Hill City. For purposes of new unit construction, it was assumed that most future development would be oriented towards larger buildings and developments, and properties with 4 or more units offer the best comparison.

The survey was conducted by Community Partners Research, Inc., during the month of September 2001.


Market Rate Rental Summary:

No market rate rental properties in Hill were included in the survey. There is at least one building with 4 rental units, and another with 3 units, but we did not contact either building. Most of the City’s market rate rental housing is in single family houses, mobile homes, or two unit structures. We did not attempt to contact this segment of the market.


Subsidized Summary:

There are three subsidized properties in Hill City. Two of these properties are public housing owned by the Aitkin County HRA. The HRA has a 30 unit apartment building designated for occupancy by senior, handicapped and disabled households, and the HRA has 12 scattered site single family homes for general occupancy. There is one Rural Development subsidized general occupancy apartment building with 16 units.


Occupancy/Vacancy:

The HRA reported 14 vacant units in the senior apartments. According to the HRA, this building has never been at full occupancy since it was constructed in 1976. In an attempt to boost occupancy rates, the HRA has designed an assisted living component for the building. To date, this has had no impact on the vacancy problem.

Although the scattered site public housing units are fully occupied at this time, this project has also had persistent vacancy problems. The HRA reported that there is frequent turn-over in the scattered site houses. In March 2001, the HRA had 4 vacant units in the scattered site houses. To improve occupancy in these large family units, the HRA has marketed their availability to tenant household in neighboring Itasca County that have Section 8 Existing rent assistance, but are unable to find three or four bedroom units available for rent in Itasca County.

Hill City Apartments, the Rural Development subsidized project, also reported full occupancy in September 2001, but a poor occupancy history for the building. The manager indicated that there are typically vacant units, and in the recent past, as many as 4 vacant units have existed.

All but two of these subsidized units have deep subsidies that allow rent based on 30% of the tenant household’s income, so rental rates are not viewed as a reason for the number of vacancies. Hill Lake Manor, the senior project, can allow senior tenants of any income to live in the building, with a maximum ceiling rent of $348 per month, so a shortage of income eligible tenants does not explain the persistent vacancy problems.

The vacancies that we found equate to a vacancy rate of 24.1%, although this may be low given the fact that other vacant units would normally exist in the general occupancy subsidized units. The Census Bureau’s reported vacancy rate of 43.6% in 2000, or 48 vacant rental units, is difficult to validate. While as many as half of these vacancies could have potentially existed in 2000 in the 3 subsidized projects, it would also imply that 20 to 30 additional vacancies existed elsewhere in the rental housing market. It is possible that some of the reported vacancies may have existed at Quadna Resort, but were treated as normal rental units.


Rental Rates:

There was no meaningful information collected on area rental rates, since all of the units in the survey were federally subsidized. The HRA has implemented “ceiling rents”, as listed below, that are intended to prevent moderate income tenants who pay 30% of their income from paying more than the prevailing rental rates for the community.

         HRA Ceiling Rent Levels

            1 Bedroom - $348

            2 Bedroom - $419

            3 Bedroom - $571

            4 Bedroom - $640


Section 8 Existing Rent Assistance:

The Section 8 Existing Rent Assistance Program also provides subsidized housing. This program provides tenant-based rent assistance and can be used in any suitable rental unit in Hill City. The Aitkin County HRA manages the program and reported 34 households receiving assistance in Aitkin and Mille Lacs Counties. There is one Hill City household receiving rent assistance at this time.

Table 23 Hill City Multifamily Rental Housing Inventory

Name

Number of Units/ Bedroom Mix

Rent

Vacancy/

Wait List

Tenant Mix

Comments

Subsidized



Hill Lake Manor



29 - 1 Bedroom

1 - 2 Bedroom




30% of income

flat rent of $348



14 vacant units



Senior, HC, Disabled

HUD Public Housing apartments for senior, handicap and disabled occupancy built in 1969 . Tenants pay 30% of income for rent. Flat 1 bedroom rent of $348 for moderate income households. Long history of vacancy problems. Recent designation of some units for assisted living in an attempt to improve occupancy rates. To date, no assisted living tenants have moved in.



Hill City Apartments



1 - 1 Bedroom

15 - 2 Bedroom



$310-$420

$340-$450



No vacancies



General occupancy

Rural Development subsidized apartments for general occupancy. 14 of 16 units have rent assistance available that allows tenants to pay 30% of income for rent. Tenants in remaining units pay 30% of income but not less than basic or more than market rents listed. Although building is currently full, manager reports that it has had a poor occupancy history, with vacant units usually available. In recent past, as many as 4 vacant units have been available.


Scattered Site Public Housing


12 single family houses with 3 and 4 bedrooms



30% of income



No vacancies



General occupancy

Public Housing scattered site houses. All tenants pay rent based on 30% of income. Flat rents of $571 for 3 bedroom and $640 for 4 bedroom units prevent moderate income households from paying more than prevailing rates in the area. Although units are currently full, manager reports that they have had a poor occupancy history, with vacant units usually available.

Section 8 Existing Program

1 household in Hill City

30% of income


N/A

General occupancy

Section 8 Existing Program serves Aitkin and Mille Lacs Counties. Currently 22 households in Aitkin County receive assistance, including 1 household in Hill City.

Source: Community Partners Research, Inc.

 

City of Hill City


Findings and Recommendations:

Key Statistics:

The first number represents the City of Hill City/the second number, when provided, is for the Hill City Market Area which includes the City of Hill City and the Townships of Ball Bluff, Cornish, Hill Lake, Macville and Verdon; and the Unorganized areas of Northeast Aitkin and Northwest Aitkin.

2000 Population = 479/1,850

2000 Households = 213/745

Projected household changes from 2000 to 2006 = 1 to 10 households in Hill City

Projected household changes from 2000 to 2006 = 23 to 84 households Market Area

2000 tenure rates = 70.9% owner, 29.1% renter

2001 Median owner-occupied house value = $25,515

Median value of recent sales = $43,500 (16 sales)

2001 Median Household Income = $25,026 Market Area

2001 Median Family Income = $30,515 Market Area

2000 Average number of persons per household = 2.25/2.48

Monthly rent payment ability (Market Area median income household) = $626

Affordable rent payment ability (50%of Market Area median income) = $313

Affordable ownership (Market Area median income household) = $60,000

Affordable Ownership (Market Area median income family) = $76,800


Growth Projections:

Both the City of Hill City and the surrounding rural areas that form the Hill City Market Area, as defined in this Study, have grown over the last decade. After experiencing population and household losses during the 1980s, the City of Hill City has added population and households since 1990. While the City has grown over the last 10 years, the 2000 Census reported that the City has only 4 more households and 54 fewer people than it did 20 years ago.

Growth patterns in the Townships that form the Market Area have been similar. After losing population and households in the 1980s, there was a rebound in the 1990s. While the Market Area has 70 more households than it did in 1980, there are 119 fewer people than the area had at the time of the 1980 Census. While none of the individual jurisdictions forming the Market Area lost households between 1990 and 2000, the largest numeric household growth occurred in Northwest Aitkin Unorganized area, which stretches from Hill City to Aitkin Township. While this household growth may have occurred in the Hill City vicinity, it is more likely that much of the household increase occurred in the Aitkin portion of the Unorganized area.

Our traditional projection methods yield a wide variation in the growth potential for the City and the Market Area through 2006. The 1990s were extremely strong economic years for the nation, and part of the population rebound in Aitkin County and much of Greater Minnesota can be attributed to strong growth in employment, wages and wealth. A prolonged economic slow-down or recession could alter the growth patterns that became established in the area in the 1990s.

Much of the growth in the Townships around Hill City can be attributed to the popularity of lake shore living. After Northwest Aitkin Unorganized, the largest numeric increases in year-round households, according to the 2000 Census, occurred in Hill Lake Township and Ball Bluff Township, both of which offer lake shore residential options. The Market Area still contains more than 470 seasonal use residential units. This inventory of seasonal use housing still offers significant potential for conversion or re-use as year-round housing, and the prospect that an increase in permanent residents can be expected for the foreseeable future.

The near-term projections for household growth that we have used for this Study anticipate that growth will continue to occur although at a slower pace than experienced over the last decade. We believe that household growth in the City of Hill City will be approximately 1 to 10 additional households between 2000 and 2006, although the most realistic projection would be near the middle of this range. This would equate to an annual average of 1 new household per year.

For the Hill City Market Area, we would expect between 23 and 84 permanent households to be added between 2000 and 2006, with the most realistic projection again near the middle to slightly below the middle of this range. This equates to an annual average of between 6 and 9 new households per year. We would expect that some of this household growth will utilize existing, seasonal-use housing units, and this growth will not require a commensurate level of new unit construction.

We are projecting slower household growth in the near-future for three primary reasons. First, some of the household gains over the last decade were due to the availability of lower-cost housing units. After population and household losses in the 1980s, there were housing units available for sale or rent in the early part of the last decade. These units were available and affordable to new households that were looking to move into the Hill City area. With household growth since the early 1990s, the supply of good quality vacant units has decreased, and many households will find it more difficult to move into the area in an affordable housing unit.

Second, the availability of prime lakeshore sites continues to decline in Aitkin County. The availability of high-amenity sites in the townships surrounding Hill City has been one of the primary factors generating strong household growth over the last decade. As the number of prime sites decreases, and the price of sites increases, there will be fewer opportunities in the immediate area to attract new residents.

The third reason for slightly reduced growth rates is the economy, both locally and regionally. The 1990s represented one of the strongest periods of economic growth in our nation’s history. As documented in the Employment and Local Economic Trends section of this Study, Aitkin County shared in this economic growth through job creation and gains in average wages. With a slowing economy in recent years, we would expect less growth in the near-term generated by employment opportunities in the immediate area.

With relatively limited household growth projected through 2006 for the area forming the Hill City Market Area, we would expect to see only slight movement in the number of households in most of the age ranges.

Our projection sources identify the most significant increases by age group that are projected to occur by 2006 will be among households age 45 to 59 years old, reflecting in part the movement of the “baby boomers” through the aging cycle. Households in these age ranges tend to be predominantly home owners and will probably be looking for high amenity housing locations, such as lakeshore sites. The growth expected in these age ranges will primarily demand owner-occupied housing production. As households in these age groups grow older, they may increasingly look for lower maintenance housing options, such as townhouse developments, that fit with their lifestyle.

There is also a projected increase among younger households age 34 years old and younger. Households in the younger age ranges tend to rent with much greater frequency, and also form the majority of first time home buyer households. Although growth is expected in this age cohort, it will probably be 20 or fewer additional households.

While there is some growth projected among senior households, this increase is not expected to be as large as in some other parts of the County. There are relatively few services in the Hill City area that cater to the needs of older seniors, such as a hospital or senior life-cycle housing. As a result, while there is an above average number of younger senior citizens, there is a below average number of older seniors in the area.

These growth projections will be incorporated into the specific housing recommendations that follow.


Strengths For Housing Development:

The following strengths of the community were identified through statistical data, local interviews, previous research and on-site review of the local housing stock.

►          Hill City serves as a small regional center for the surrounding Market Area - Although Hill City is relatively small, it is separated from larger regional centers such as Grand Rapids and Aitkin, which allows for a more developed commercial/retail base.

►          Hill City benefits from tourism - There is a seasonal/tourist population around Hill Lake, and in the Itasca County lake areas just north of the City. Hill City’s economy benefits from this seasonal influx of population.

►          Attractive location for seniors and retirees - With its nearby lakes and natural amenities, the area around Hill City has been a popular location for retired and semi-retired households. The percentage of seniors in the in the age ranges between 65 and 79 years old is above the State-wide average.

►          Commuting distance to Grand Rapids - While Hill City is far enough from Grand Rapids that essential retail activity can exist in the community, the commute to Grand Rapids is reasonable for workers.

►          Affordable existing housing stock - A large majority of the existing single-family houses in Hill City are very affordable, priced at $50,000 or less. However, some of these houses are older, and may need maintenance and rehabilitation to remain desirable options.

►          Proximity to recreational areas - Hill City is close to a number of desirable recreational lake opportunities. Lakes in the Market Area have had a major impact on the area’s growth over the last decade. These high-amenity locations not only attract permanent residents, but they also add to the quality of life for all local residents and add to the tourism economy.


Barriers or Limitations to Housing Activities:

Our research also identified the following barriers, or limitations, that hinder or prevent certain housing activities in the City of Hill City.

►          Competition with other jurisdictions - Although the area has grown over the last 10 years, most of this growth has occurred outside of the City limits, in the surrounding townships. This is especially true of higher valued homes and higher income households. While Hill City still benefits economically, the City does not capture the expanded tax base resulting from this rural growth.

►          Value Gap Deters New Owner-Occupied Construction - Based on market values for property taxes and recent residential sales, we estimate that the median priced home in Hill City is valued at $25,000 to $44,000. This is well below the comparable cost for new housing construction, which will generally be well above $100,000.00 for a stick-built house with commonly expected amenities. This creates a significant “value gap” between new construction and existing homes. This is an obvious disincentive for any type of speculative building, but also serves to deter customized construction, unless the owner is willing to accept a potential loss on their investment.

►          Condition of the Housing Stock - While the existing stock is very affordable, much of it is old and may need substantial improvement to meet expectations of potential buyers. Units lost to deterioration or obsolescence cannot be replaced in a similar price range. Our survey of housing conditions rated a majority of houses and mobile homes in the City as needing repair, although most of these structures only required minor repair.

►          Staff Capacity Limitations - The City operates with limited personnel. It is very difficult for existing staff with current responsibilities to develop new housing initiatives. The County HRA is also available to assist the City but also has limited staff availability to initiate new projects.

►          Economic difficulties - Although the City’s economy has improved over much of the last decade, the County’s unemployment rate was more than double the State-wide rate in 2000.

►          Lower incomes limit housing choices - Income estimates for Hill City and the surrounding market areas indicate that incomes are relatively low. The Market Area’s estimated median household income for 2001, $25,026, translates into an approximate ownership affordability level of $60,000, and an affordable rent level between $313 and $626 per month. While these affordability levels match up well with prices for existing housing in the City, they are generally not well matched to the prices for new housing construction.

►          Limited land availability - Hill City has only a limited supply of improved land for residential development. Although land can be annexed, the cost of providing public utilities may be cost prohibitive for some types of housing development.

►          High rental vacancy rates - The City’s 3 largest rental projects all identify poor occupancy patterns for their units. The rental housing vacancy rate may be greater than 20%.


Recommendations, Strategies and Housing Market Opportunities:

Based on the research contained in this study, and the housing strengths and barriers identified above, we believe that the following recommendations are realistic options for the City of Hill City. They are based on the following strategies:

►          Focus heavily on the preservation, maintenance and improvement of the housing stock that already exists in the City - While some housing construction will occur in coming years, most of the housing opportunities will continue to be provided by the housing stock that is already on the ground. This is especially important for affordable housing opportunities, as it will almost always be less expensive to offer an affordable unit through rehabilitation versus new construction. Units that are lost due to deterioration and obsolescence cannot be replaced for a similar price. Evidence suggests that the existing stock is generally being well maintained. Emphasis on continued improvement will be important to meet future housing needs.

►          Promote home ownership - Home ownership is the preferred option for most households. Home ownership assists in creating community stability and commitment to the community. Rental housing demand appears to be very weak in the City. Attracting new people and households to Hill City will probably be most achievable through desirable, affordable ownership options.

►          Be realistic in expectations for new housing development - Large scale residential growth has not occurred in the recent past, and is not likely to occur in the near future. The City has averaged less than 1 new housing start per year over the last 20 years. With the exception of Aitkin, there has been very little housing development activity in any of the Cities in the County. The scale of activities proposed for Hill City in the future should be compatible with the City’s growth potential.

►          The market for new housing development will generally not occur without proactive community involvement - Much of the housing development that has occurred in the smaller cities in Northeastern Minnesota in the recent past has involved some form of public involvement or subsidy. Cities have been active developers of rental housing and residential subdivisions. Hill City has been at a competitive disadvantage compared to the surrounding townships when it comes to new home construction. To attract a substantial amount of new home construction in the City of Hill City, subsidies or other assistance will probably be required.

►          Take advantage of housing subsidy opportunities - In addition to competing more successfully with rural locations, some form of public subsidy will probably be required to make new housing development affordable for low and moderate income residents. With relatively low incomes in the area, new home construction is beyond the financial means of most area households.

►          Prioritize community housing goals - Many of the recommendations in this Study will require staff-intensive efforts. The City should prioritize its housing plans and should establish goals to achieve its plan.

Recommendations:

1.         Monitor the need for future affordable rental housing development

Findings: Our findings indicate that Hill City has an over-supply of rental housing units. Our survey of rental properties found an extremely high vacancy rate in the City. The 2000 Census reported an even higher vacancy rate, although the accuracy of the Census information may have been impacted by the inclusion of some housing units at Quadna Resort.

All of the vacancies that we found were in the Hill Lake Manor Senior Apartments. In its 25 year history, this building has never been able to maintain a full occupancy rate. This building has ceiling rents that prevent moderate income tenants from paying too much for rent. The building also has income waivers that would allow tenants at any income level the ability to move into the building. Most recently, some units were designated for assisted living for seniors needing services with their housing. None of these efforts to improve occupancy rates has provided significant help in attracting tenants.

The City’s other larger rental projects, 16 units of subsidized general occupancy housing in Hill City Apartments, and 12 scattered site public housing houses, both reported poor occupancy histories. While these units were fully occupied in September 2001, both project’s managers stated that they usually had vacancies.

As part of Hill City’s Small Cities Development Program application, a survey of residents was completed during the summer of 2000. While this survey did not contact every occupied housing unit in the City, a response rate of 80% or better was achieved. This survey identified only 12 renter households living in single family homes or duplex units. The 1990 Census reported 35 renter households living in single family or duplex units. While the SCDP survey did not attempt to collect occupancy/vacancy data, the small number of renter households that were found appears to give some support to the 2000 Census results, which listed 48 vacant rental housing units in the City.

Recommendation: With the high number of vacant units, and the poor rental history reported by area property managers, we would not recommend the development of any new rental housing units in Hill City at this time. If occupancy rates improve, and a history of good demand can be documented, it would be appropriate to consider a small, rental development project to add to the diversity and quality of rental housing units available in the community.

2.         Consider the future development of market rate rental housing units

Findings: As outlined in the previous recommendation, we do not believe that it would be appropriate to develop additional rental units in Hill City at this time. However, if the City continues to grow, and the demand for rental housing improves, it may be appropriate to construct a small rental project in the future.

Nearly all of the City’s rental housing units are more than 20 years old. Periodic additions to the housing stock would help to keep the community vibrant and attractive to potential residents. While the City has a good supply of subsidized housing, nearly all of the market rate housing exists in single family homes, mobile homes, or other small one to four unit properties.

We are not aware of any high quality, multifamily rental housing in the City that has the amenities expected by higher income renters. A moderate to higher income senior citizen household that wanted to move from home ownership to rental housing would probably move to Grand Rapids or Aitkin to find a high quality unit. Adding new, market rate rental housing would diversify the housing options in Hill City, and may help the City retain households that would otherwise move out of the City.

Recommendation: Other small cities around Minnesota have been active in the construction of small rental housing projects. While most communities would prefer to see the private sector construct and own rental housing, a combination of high construction costs, property taxes, and low return on investment has severely limited the amount of privately funded rental construction that has occurred in the last 15 years.

Public agencies, using their access to tax exempt financing, reduced property tax rates and non-profit motivation have been successful in developing affordable rental housing. These projects can be further enhanced by general obligation tax pledges, or other forms of subsidy that allow below-market rent levels. While these projects are publicly owned, and often involve other public subsidies, any tenant income restrictions are usually fairly high, and most area tenants can qualify to live in the units.

While there are a number of examples of publicly developed projects to look at as a model, we are aware of one that is currently under construction that can provide a realistic look at estimated construction costs. The Douglas County HRA is constructing 10 units in a twin home configuration in the City of Alexandria. There is a mix of two and three bedroom units. Two bedroom units have one bathroom and attached double garage. With the garage, there is 1,415 square feet. The three bedroom units have one bathroom and an attached double garage. With the garage, there is 1,627 square feet in these units.

The estimated gross rent for the three bedroom units is approximately $680 per month, or approximately $.70/square foot for the unit living space. The estimated gross rent for a three bedroom unit is $750, or approximately $.65/square foot.

If adequate demand develops, we would encourage the City to explore the possibility of developing 4 to 6 rental housing units, primarily designed to serve active senior households with moderate to higher incomes. If a private developer is not available to construct these units, the City should explore the possibility of a publicly owned rental project. More specific recommendations have been provided for a similar development in the City of McGregor. This recommendation should be reviewed for additional ideas on rental housing development.

3.         Continue with housing rehabilitation efforts

Findings: Hill City has a tremendous asset in its existing housing stock. Existing units, both now and into the future, will represent the large majority of the affordable housing opportunities. Existing units generally sell at a discount to their replacement value. Units that are not maintained and improved may slip into disrepair and be lost from the housing stock. Efforts and investment in housing rehabilitation activities will be critical to offering affordable housing opportunities.

At the time of the 1990 Census, approximately 44% of the City’s owner-occupied single family housing was identified as pre-1940 construction. State-wide, 25% of the stock was pre-1940 housing. While age is not always an indicator of physical condition, older housing generally requires more repair and maintenance to remain in standard condition. When maintenance and repair is deferred, this older housing can often slide into disrepair.

Our windshield survey of housing conditions found 57 single houses needing minor repair, and 45 single family houses needing major repair. We also identified 10 mobile homes needing minor repair and 9 mobile homes needing major repair.

Many of the single family houses needing repair are large, older houses. Because of the size of these structures, rehabilitation costs may be higher than normal due to increased materials and quantities. However, these houses, once repaired, offer a considerable amount of living space for families.

Recommendation: The City is planning to submit an application for the 2002 Small Cities Development Program. If selected for funding, this program would provide a concentrated rehabilitation effort with a goal to repair 25 owner-occupied houses.

While this SCDP program will have a significant impact on the quality of the older housing stock, we recommend continued emphasis on housing rehabilitation activities to address on-going housing rehabilitation needs and to upgrade the existing housing stock. The City of Hill City, Lakes & Pines CAC and AEOA should continue to seek local, state and federal funds to assist in financing the housing rehabilitation programs.

4.         Consider the development of affordable housing on in-fill lots

Findings: Over the last 20 years, the City has averaged less than 1 new housing start per year. Most new housing that has been constructed in the immediate area has been oriented to the lakes and wilderness locations. Estimated market value data indicate that there are only 5 houses in Hill City valued at $100,000 or more, and these are probably lake shore properties. The lower values for existing homes acts as a disincentive for the construction of new, higher valued homes within the City.

Although there are no new residential subdivisions in the City, a visual inspection of the community has identified a number of in-fill parcels that would be suitable for small-scale residential development. Many small communities have used innovative housing products to produce affordable housing on in-fill lots. Since City sewer and water will generally be accessible to in-fill parcels, the total development cost for new housing can be lowered.

Recommendation: While the City may never attract a large volume of new home building, encouraging construction that is consistent with existing home values and area incomes will help to facilitate new units. Affordable ownership options can help the City attract new people and households.

Other Cities have used modular housing, stress-panel housing products, prison labor/sentence to serve labor, or local Habitat for Humanity Chapters to construct affordable units on in-fill lots. We would encourage Hill City to maximize housing development on existing residential parcels.

5.         Explore the potential sale of some scattered site public housing units

Findings: The Aitkin County HRA has 12 scattered site single family homes in Hill City that are used to provide affordable rental housing for lower income families. While this is a valuable resource for the community, and offers a good share of the City’s better quality rental housing, the units have at times experienced occupancy problems. In September 2001, all of the units were rented. But in March of 2001, there were 4 vacancies in these units.

Some Public Housing Agencies have been allowed to sell single family public housing units. Often the units are sold to the current tenant, or another low income home buyer. Proceeds of the sale can then be applied to other community housing activities.

Recommendation: While we would generally recommend that a City work hard to preserve its supply of affordable rental housing, there is evidence that some of the scattered site units in Hill City could be sold, without negatively impacting the affordable housing stock. There have been periodic vacancy problems with these units, and a high rate of tenant turn-over.

Along with the units in Hill Lake Manor and Hill City Apartments, more than 21% of Hill City’s households live in subsidized housing. If all of the units in Hill Lake Manor were occupied, this percentage would be even higher.

If it is determined that excess capacity exists, some of the scattered site units could be sold to lower income home buyers. This would increase the rate of owner-occupancy in the community, and lower the number of potentially vacant rental units.

6.         Work with rental property owners on tax issues and rehabilitation programs

Findings: Minnesota’s property tax structure for rental housing has been a barrier to both new rental construction and the provision of affordable units. Legislative changes in the past few years related to rental property tax reductions may represent an opportunity for the City to work cooperatively with rental property owners to assist them in lowering their property tax burden. To qualify for lower tax rates, there will need to be some certification to the State of direct benefit to low and moderate income tenants.

The City’s Small Cities Development Program application, being prepared for submission for funding in 2002, will include a rental housing rehabilitation program. The goal of this activity will be to rehabilitate 5 single family houses used as rental property.

Recommendation: We recommend that the City work with rental property owners to promote the property tax reduction option and to assist with the qualification requirements. This will help to provide affordable rental housing options. From the City’s perspective, this program may reduce the amount of property tax collected from rental parcels. However, the increased cash flow for property owners may help to improve the physical condition of some buildings and help landlords cope with costs they may incur due to rehabilitation.

The availability of rental rehabilitation funds will allow the City to also promote assistance to help improve the quality of some of the City’s rental units.

7.         Acquire and clear dilapidated properties as needed

Findings: The City may contain houses that are too deteriorated to rehabilitate. The windshield condition survey rated 6 houses and 1 mobile home as dilapidated and possibly beyond repair. To improve the quality of the City’s neighborhoods, and to maintain the appearance of the community, a program should be developed to acquire and demolish dilapidated structures as needed.

Recommendations: The City should look for resources to acquire and demolish severely dilapidated structures, with affordable home redevelopment on the available lots. Possible sources include the Minnesota Housing Finance Agency and the Minnesota Department of Trade and Economic Development.

Some communities have been able to offer affordable home ownership through modular homes on lower priced lots. In-fill building sites created through acquisition and clearance activities may provide appropriate sites for modular homes or other lower priced options.

Habitat for Humanity has been active in creating housing in Aitkin. Acquired properties could be donated to Habitat for the development of lower priced homes.

8.         Utilize the MURL Program

Findings: Hill City has a large stock of older, lower valued homes, with many in need of repair. Our analysis of estimated market values for property taxes and recent sales activity indicates that the median priced home in the City is valued between $25,000 and $44,000. As homes below the median price come up for sale, they may not be attractive options for potential home buyers because of the amount of repair work that is required.

The Minnesota Urban and Rural Homesteading (MURL) Program is funded by the Legislature through the Minnesota Housing Finance Agency. Under the program, the City or a housing agency purchases an existing home that needs rehabilitation, rehabilitates the home, sells the home to a low income family and provides a mortgage with no down payment, no interest and a monthly payment that is affordable for the family. The MURL Program accomplishes many community goals, including the promotion of home ownership for lower income people, and the repair of substandard housing units.

In many cases, the cost of acquisition and rehab will exceed the house’s after rehab value. Although a public subsidy may be involved, the costs to rehab and sell an existing housing unit are generally lower than the subsidy required to provide an equally affordable unit through new construction.

Recommendations: As part of rehabilitation efforts, we recommend that the City continue to promote and utilize the availability of MURL Program funds through MHFA to purchase, repair and re-sell lower valued houses to low and moderate income people. In addition to MURL funds, other possible funding sources include SCDP and other MHFA programs.

9.         Continue to coordinate relationships with area housing agencies

Findings: The community will need staff resources to plan and implement many of the housing ideas advanced in this study. The City has an active County Housing and Redevelopment Authority (HRA), Lakes and Pines CAC, the Central Minnesota Housing Partnership (CMHP) and the Arrowhead Economic Opportunity Agency (AEOA), all providing housing programs and technical assistance. These agencies all have proven track-records with housing program development and delivery.

Recommendation: While the City is fortunate to have multiple agencies for housing activities, this arrangement could result in no single agency having responsibility to coordinate and implement the housing initiatives recommended in this Study. While there has traditionally been a good degree of staff interaction between these agencies, it will be important that a coordinated approach be used to prioritize and assign responsibility for certain housing programs.