Real estate lender leads effort on affordable housing

Dan Braam

In 2007, Dan Braam was a member of the Economic Development Authority in New Ulm, Minn., when it decided to tackle affordable housing. Their initiative began just as the housing market imploded. When Braam re-joined the EDA in 2016, not much progress had been made.

Braam has worked as a community banker for 32 years, with 23 of them in New Ulm, where he is vice president and manager of real estate lending at the $596 million Alliance Bank, headquartered in Lake City, Minn. It comes as no surprise, therefore, that Braam was one of more than 80 people to attend a two-day retreat, co-sponsored by the New Ulm Chamber of Commerce and a local foundation, designed to get the community talking about the most pressing issues facing the town of 13,500 people.

“Housing just kind of captured the day,” Braam said. A number of the town’s employers were at the meeting. New Ulm, located approximately 75 miles southwest of Minneapolis, is the site of 3M and the Kraft Heinz Company’s manufacturing plants. Companies trying to recruit workers were struggling due to a low inventory of affordable housing, Braam explained.

Since Braam had been involved in real estate lending for two-and-a-half decades, he seemed a natural fit to lend his expertise to such an initiative. Others at the meeting recognized his potential; when Braam stepped out of the meeting for just a minute, he was nominated to chair a newly formed Housing Needs Initiative task force.

As HNI worked to complete a housing study, it was approached by the Community Housing Development Corporation of Minneapolis, a nonprofit developer of affordable housing. The CHDC wanted to convert the former New Ulm Middle School into affordable housing. The building, which turns 100 this year and is on the National Register of Historic Places, sat unused except for its 800-seat auditorium, used for community theatre.

The historic New Ulm Middle School building is being converted to affordable housing.

The proposed budget to renovate the school was $15 million, prohibitive in a community of the size of New Ulm. Yet the CHDC urged HNI to pursue tax credit financing for affordable housing. CHDC representatives attended the task force’s second meeting offering to help it put together a plan to take to the Minnesota Housing Finance Agency, Braam explained. When pursuing tax credits, Braam said the MHFA wants a comprehensive strategic plan that looks at housing issues from several perspectives. The group’s research revealed New Ulm had fewer than 20 tax credit rentals in town. A town of comparable size should have more than 100, Braam said. “A lot of the existing tax credit [properties] had been converted to market rate housing,” he said. They also discovered there were a number of seniors who wanted to sell their houses but were unable to find affordable rental alternatives. Demand was driving rents up.
The task force developed its plan to convert the school into 55 units of one, two and three-bedroom apartments with rents between $471 and $771 per month. To price these as “affordable,” the CHDC took household earnings of 60 percent or below the median income of Brown County, and adjusted for household size. The Economic Development Authority and the city council signed off on the plan and sent it to the MHFA. Unfortunately, the task force was told their plan didn’t receive enough points to even be considered.

“We had the ability to appeal,” Braam said. So appeal they did. They also launched a grassroots campaign to increase their chances. Residents and business owners alike were encouraged to write letters, call or email the MHFA asking to give the proposal another look.

Much to Braam’s surprise, the proposal was accepted. “We felt like we’d won the tax credit lottery,” Braam said. He credits community members for standing up and saying, “We really do need this,” he said.

With approval in hand by last November, the CHDC acquired the building. It now is working through the historic tax credit process, which will ensure the building’s historical integrity is preserved. Renovations are not likely to begin until autumn.

“This has been my first foray into tax credit properties,” said Braam, who worked with retired community banker Mary Ellen Domeier to sway the CHDC to allow New Ulm community banks to participate as equity partners in the tax credit financing of the project. While the CHDC expressed willingness to consider local financing, the opportunity failed to materialize. “It is unfortunate because tax credit financing is a wonderful way for banks to meet their CRA objectives,” Braam said.

He is hopeful that, at the very least, local community banks will be involved with interim financing for the project. While tax credit financing is complex, community bankers “get really fired up about projects like these in our communities,” he said. “It speaks to our core values.”