Duluth’s 195k tiny house faces likely foreclosure in affordable housing fiasco

Photo credit: CBS

The now infamous tiny house that was supposed to be a prototype for the city’s Rebuild Duluth affordable housing program has instead turned out to be a massive and expensive flop for local taxpayers. The brand new small-scale structure raised eyebrows earlier this year when it went on the market for a whopping $195,000, which works out to roughly $750 per square foot for the newly constructed little building.

Not surprisingly, there’ve been no takers for the miniature domicile, which was built on a small tax-forfeited lot donated by the city, along with a $190,000 taxpayer-backed loan. Instead, the Duluth News Tribune notes the project has become something of a cautionary example for potential buyers and developers alike.

In all likelihood, the city will be out that money, aside from any funds it can recoup through a possible foreclosure, according to Chad Ronchetti, Duluth’s director of planning and economic development.

“We are evaluating the next legal steps before we move forward,” Ronchetti said, describing the property as being “in a little bit of legal limbo.”

The best shot for convincing anyone to move into the spartan structure appears to be converting it into a rental property. Yet that option involves additional expense and construction to revamp the building to meet city rental codes.

But Jill Keppers, executive director of the Duluth Housing and Redevelopment Authority, holds out hope that her organization can help ensure the structure is put to positive use as rental housing.

“We’ve offered to make lemonade,” she said. “If we can find a way to get a rental license for it, the HRA would be willing to acquire it and keep it as a rental for affordable housing,” she said.

Duluth Mayor Emily Larson held out high hopes for the Rebuild Duluth initiative unveiled in her 2018 state of the city address.

“….We will identify and secure 10‐15 parcels and make an offer: If you come up with a good, achievable idea that can provide affordable housing on the land, it’s yours. For free. The City will help with all the tools at our disposal, but what we need from you are new ideas and your drive to change the math and create new ways to imagine building affordable housing.”

The overpriced, undersized $195,000 unit has certainly “changed the math” for affordable housing in Duluth, but hardly for the better. Yet city officials maintain the loss of taxpayer funds is effectively a drop in the bucket.

If the city does foreclose on the property and then transfer ownership to the HRA, tax dollars will be sacrificed.

But Ronchetti said that a loss of $190,000, while regrettable, is not a great deal in the scheme of things, considering the trust has invested more than $3.5 million in projects to date. That’s a little more than a 5% hit to the fund.

“This is part of the risk we take by having these alternative lending programs. We know when we’re lending these alternative funds that a traditional financier won’t bankroll that we’re taking on risk, and that’s just the role of the fund,” he said.