ROCHESTER - Officials here are kicking off a renewed housing push by planning to spend $4 million on a 201-unit housing development in the northwest part of town.

It's the first major housing investment using money from Rochester's $205 million local sales tax referendum voters passed last fall. Irene Woodward, Rochester's community development director, said the money is part of the city's goal to incentivize housing projects with higher numbers of units.

"What we're trying to do is find how we increase overall supply," Woodward said.

The Prairie Ridge housing development, off of 50th Avenue NW. and Valleyhigh Drive NW., is set to wrap up construction by the end of 2027. It consists of about 50 single-family homes and 152 townhomes according to developer North Rock Real Estate. The developer also plans to build about 100 townhomes for rent and explore apartment opportunities on nearby land.

The city's investment is part of a new homeownership creation program that stipulates at least 1 out of 5 homes built there will be sold within area median income guidelines — about $370,000 to $420,000. The remaining homes will be listed at less than $500,000, according to city officials.

Woodward said Prairie Ridge was chosen because it's the furthest along among developer applicants, but the city expects to spend about $50 million all-told on housing using local sales tax money.

About $33 million of that will be spent on new housing, including street and sewer infrastructure to pave the way for more developments. Another $14 million will go to programs geared toward rehabbing existing homes.

The city plans to spend at least $22 million over the next five years on housing issues while tracking how many new units are built to measure the plan's impact on the housing market.

JoMarie Morris, executive director of the Coalition for Rochester Area Housing, lauded the city's plans as vital to opening up other funding sources for future projects.

"It really takes leveraging funding, stacking types of funds in order to make some of these affordable housing projects work," Morris said.

Rochester's push comes amid skyrocketing demands for more housing, in part due to Mayo Clinic's ongoing $5 billion downtown expansion. Yet the city was falling short of its new housing goals even before Mayo announced its expansion last year.

A 2020 housing study found Rochester needed 14,000 new housing units by 2030 to keep up with anticipated growth in the region.

Rochester only built a little more than 200 single-family homes in 2023, about half of the city's typical annual goal. City staff told the Rochester City Council in January that Rochester would need to add about 1,000 new single-family homes every year to meet 2030 expectations.