Report on maintaining an affordable place for artists

For years, Artspace, based in Minneapolis, has tried to address what it calls “the SoHo Effect”: Artists move into a dilapidated neighborhood, make it vibrant, and then get priced out as more affluent people arrive.

The phenomenon of artists “losing their toehold in the very neighborhood they had helped to create” unfolded in Minneapolis when artists helped turn a desolate warehouse district into “a hot destination to live, work, eat, and explore” and then had difficulty dealing with the rising rents, recalls Artspace President Kelley Lindquist.

As a result, in the late 1980s Artspace tried a new approach to creation of quarters for artists — it became a nonprofit developer. At the invitation of the City of St. Paul, Artspace redeveloped a six-story warehouse into 52 affordable live/work units for artists and their families, plus two floors of office, studio, and commercial space for arts organizations, commercial artists, and other tenants. That project, in a section of St. Paul known as Lowertown, became the model that Artspace has since implemented in cities across the US.

Now Artspace has released a report on its Lowertown experience: “Artspace’s Northern Warehouse: 1990-2041; a Case Study in Sustainable Creative Placemaking.” The eight-page report says the Northern Warehouse “has spurred population growth, job creation and complementary development — without displacing current residents.”

Built in 1907-08 by the Northern Pacific Railway, the massive brick warehouse was converted at a cost of $5.6 million and renamed the Northern Warehouse Artists’ Cooperative. Most of the funds for the project came through federal Low-Income Housing Tax Credits.

“We weren’t able to do everything we or our artist residents had hoped, but our disciplined approach ensured that the Northern opened with a manageable debt load and appropriate operating reserves,” Artspace says. The project paid taxes, generated modest revenue for Artspace, and provided reasonably-priced living space without requiring continuing philanthropic support or subsidy.

Projects financed with low-income tax credits are subject to an extended-use agreement that requires them to remain affordable for 30 years, says Artspace Senior Vice President Greg Handberg. The Northern Warehouse conversion was completed before that restriction was put in place, Handberg says. Consequently, Artspace had the right to sell the building or convert it to upscale apartments in recent years. Rather than use that right, Artspace refinanced the building in 2011 with $4 million of new low-income tax credits plus another $6 million in Artspace contributions, philanthropic support, city-backed loans, and tax-exempt city bonds. The Northern is guaranteed to remain a building that artists and arts organizations can afford for another three decades.

Artspace and the tenants restructured their partnership, giving tenants control over matters important to them, such as management of artist programs within the building, and giving Artspace the responsibility for financial management of the real estate. Building upgrades were made, including a new roof and new windows.

“A notable feature of this model is that it requires no additional fundraising for general operations,” the organization says. Artspace has pledged to make all of its future buildings conform to the sustainable design goals of LEED or Green Communities or both.

The buildings next door to the Northern Warehouse has also been converted by Artspace, and is known as the Tilsner Artists’ Cooperative. In about three decades the population of Lowertown has grown by nearly 400 percent. The St. Paul farmers market has been established across the street from the Northern, and a new light-rail station sits two blocks away.

Artspace, with offices also in Los Angeles, New Orleans, New York, and Seattle, now has 30 projects operating in 13 states. They contain more than 1,000 affordable live/work units and a million square feet of nonresidential space for artists, arts organizations, and creative enterprises. To get the report, click here.

Is there is any downside to a program of this sort? Perhaps one. Theoretically, long-term preservation of inexpensive space for artists in one neighborhood might reduce the likelihood that artists will pioneer the revival of other neighborhoods. In New York, many artists were priced out of SoHo, but in seeking inexpensive quarters elsewhere, they brought new life to a succession of rundown areas.
That process involves treating artists essentially as pawns in neighborhood revitalization; the city benefits, but artists who don’t become commercially successful suffer continual uprooting.

“I think that most communities recognize the value of artists and are interested in preserving [a place for them],” says Handberg. “And I think that artists value the opportunity to continue to live and work in the vital communities that they have helped establish.”