A developer proposing townhouses in the heart of Grand Marais faces pushback, as the small tourist town on Lake Superior's edge wrestles with a housing crisis.

With a project estimate of $10 million, Jon Petters hopes to build 19 Scandinavian-influenced townhouses on a largely undeveloped bedrock-filled block on the city's hillside. Five of them would be designated for buyers who meet income requirements and are employed in Grand Marais, a stipulation that helped Petters secure more than $400,000 in local grants and apply for a larger state housing grant. That money would be lost if the Grand Marais City Council rejects an official rezoning request Wednesday, after initially denying the project earlier this month, Petters said.

"I don't know if it was the attack of the NIMBYs [not in my backyard] or what," Petters said. "They just don't want it."

Neighbors of the proposed project site say they are anything but NIMBYs, arguing that it's a fight to preserve cherished green space and avoid long-term changes to the fabric of the community, which also serves as the gateway to the Boundary Waters Canoe Area Wilderness. Allowing projects of this type to begin filling Grand Marais neighborhoods would lead to more second-home owners and subsequent vacation rentals, resident Linda Bauer said, threatening the town's tight-knit feel.

"At what point do we draw a line in the sand and say 'no'?" she asked. "Because now we've become the official playground for everybody else, and we've got to move because we can't afford to stay here anymore."

Mayor Tracy Benson declined to comment for this story but said during an Aug. 14 meeting that she had uncertainties about the project and whether what's envisioned will help the community, with concerns about a narrow nearby street accommodating more traffic. The city's planning commission had earlier approved the project.

The 1,100-square-foot townhouses that would make up the development, called Bjorkberg, are of the denser infill sort that would be relatively new for Grand Marais, where many people build at greater distances to the city center. A 2022 Cook County Economic Development Authority study showed a housing shortage of all types both countywide and in Grand Marais — about 600 units are needed through 2026 in the county that is home to fewer than 6,000 people. It also found that more than half of the county's homes are seasonal properties.

Jason Hale director of the county's Housing and Redevelopment Authority, said only one building permit for a single-family home in Grand Marais had been pulled so far this year. Construction costs are about $300 per square foot, Hale said, making it tough to build a home for less than $400,000, considering other expenses. Most Cook County homes being built are high-priced and outside city limits, on an inland lake or along Lake Superior, making Petters' project an opportunity to offer something different, he said.

"If we actually want to make a dent, we're going to have to think differently about how we do this," Hale said, adding that because the council is generally receptive to new projects, it'll be critical to learn what it wants in future housing.

Petters said his project would keep 60% of the land open, and he would pay for infrastructure. While new zoning wouldn't allow more units, it would allow builders to work around difficult terrain. Requirements of a homeowners association would protect the city's dark sky initiatives, he said, and he intended to widen the road near the development, something he agreed to after hearing negative feedback.

Benjamin Olsen, who has worked on infill housing in Duluth, is the architect for the Bjorkberg project. He is puzzled by the city's opposition, he said, because of the financial support from public agencies such as the Iron Range Resources and Rehabilitation agency and the city's "progressive" goals to attract housing development.

Cook County Commissioner Ann Sullivan said at a recent City Council meeting that the project is the right mix of housing to address one of the county's most pressing issues. It would allow older residents to downsize, freeing up single-family homes in the city and making room for workers.

"It will strengthen the community for years to come," she said.

Neighbors have said they are concerned about a lengthy construction period, blasting of the region's signature bedrock and increasing density in the neighborhood. And the project doesn't truly address a lack of affordable housing, said resident Tala Marxen, who works in vacation rental management.

Workers are in short supply because of that problem, she said, and a project with a majority of market rate homes isn't likely to help. Rentals more than anything are needed for the city's workforce, including the large percentage who are international, she said.

"There are about 10 reasons why this is the wrong spot," Marxen said. "But the main thing is being smart and strategic about growth."

Petters said if the council issues a final rejection, his project could change to conform to residential zoning requirements, but it would still need certain city approvals to go forward. He's unsure whether he could feasibly sell a portion of the homes at a lower price without aid.