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DAN KRAKER: Building a new home is a very expensive proposition these days, and so is fixing an old home to make it livable. The average purchase price of a home in Minneapolis is in the range of $50,000. And if you're trying to beat that cost by purchasing an old home that needs work, you must often be prepared to spend thousands, even tens of thousands of dollars, to repair it.

We have as our guest today in the studio two people who know a lot about where to get money for homes, and also how to repair them. Mark Korell is with the Minnesota Housing Finance Agency, and he will be with us in a bit later in today's program. We also have with us Ron Soderberg, a private developer and contractor whose business is rehabilitation. He works in the Twin Cities and he lives in Saint Paul.

During his eight years in business, he has rehabilitated close to 100 homes, and his firm also does new construction. Well, as I mentioned a bit later, we'll be talking about some sources of state money for home rehabilitation and the building of new homes as well. But first, we want to quiz Ron Soderberg on some of the pitfalls of rehabilitation of homes.

And as we mentioned, Ron, some people are interested in getting out of the rut of thinking of new homes and are more interested now in looking at the existing stock of housing and determining whether or not it's feasible for them to become involved in the ultimate do it yourself operation, I suppose. And that's the repair or rehabilitation of an older home. And I wanted to ask you, first of all, do you think it's wise or safe for the average home buyer to even consider buying a home that is in poor repair with the intent of fixing it up?

RON SODERBERG: Well, certainly, Dan, it's wise. It's wise simply in terms of economics. The reason for rehabilitation and the new interest in rehabilitation is because rehabilitation provides housing at a lesser cost than new construction. So certainly, there's more than ample reason to justify rehabilitation.

In terms of individuals, you've got to consider individual capabilities, the least of which is financing capabilities, and any mechanical aptitude that one might possess. Indeed, individuals can rehabilitate their own homes. They can act as their own general contractors, doing some of the-- performing some of their own work as a sweat equity to provide their housing at a lower cost, but that does depend on those individual considerations.

DAN KRAKER: Now you bring up a very important point that I wanted to stop you at there, and that's the issue of mechanical aptitude. And you also mentioned dealing with general contractors. And that's a part that many of us may not associate with rehabilitating an older home.

We think that all we have to do is go out and buy the toolkit with a hammer and saw and some nails and begin taking care of it. What are some of the problems associated with approaching general contractors? Because certainly some of the Rehabilitation work does have to be done professionally, is that right?

RON SODERBERG: Well, that is correct. Rehabilitation, of course, is very complicated. It's also a new industry. It's information and knowledge that is not possessed by most new builders. It is information and knowledge that is not possessed by most homeowners. The pitfalls are the unknown factors of an existing house, what happens when you uncover a wall and open up a part of a structure.

That has to be dealt with by the homeowner. And it's a particular problem when dealing with contractors. If a contractor is not familiar with existing housing, the bidding process and the work scheduling can be very badly estimated. And this can cause, of course, a great deal of frustration, if not financial difficulty, for the contractor and the homeowner. It's important then to have a contractor that is knowledgeable with existing housing and have a contractor that is knowledgeable with the restructuring of existing housing.

DAN KRAKER: Do you think it's reasonable, Ron, for the home buyer to assume that he or she can save money by buying an older home and trying to renovate it, or should they simply plan on spending a lot of money to bring that home into the shape they want it in?

RON SODERBERG: Well, I think it's reasonable to assume that they can save money. They can save money with great deal of concentrated effort at saving money. It's not a simple process. To have a general contractor perform all of the work is clearly the most cost efficient method for most homeowners with the least effort, if, of course, they have a qualified contractor.

DAN KRAKER: Now, is there a way of targeting a figure that a person can expect to pay for renovating a home? In other words, is there an average price that a person could expect to pay in terms of repairs and rehabilitation for a home that might be in poor repair?

RON SODERBERG: Basically, we have been able to document that rehabilitation can provide housing for 30% to 50% less than the cost of new construction. So when you quoted earlier the average cost of a new home in Saint Paul and Minneapolis at $50,000, we expect that we can provide a rehabilitated house equivalent to new construction for 30% to 50% less than that.

The frequent pitfall is that the consumer, now purchasing an existing home for rehabilitation, assumes that they can do that rehabilitation for far less than 50%, and they are not prepared for those expenditures. We feel, however, that 30% to 50% less than the cost of new construction is more than ample reason and justification for doing rehabilitation.

DAN KRAKER: Now, let's talk for a minute about some of those little adventures that the new homeowner can discover when they have purchased a home that needs some substantial rehabilitation. You mentioned, for example, uncovering a wall or discovering some other major defects in a home or major items that need help. Let's take a foundation, for example. How serious should a foundation problem be before a person should decide they would not have anything to do with it and should call in a contractor, for example?

RON SODERBERG: Well, basically, any individual should not be dealing with a structure that does not have complete integrity. In fact, they should not be dealing-- an unskilled individual should not be dealing with a house that does not have a complete solid foundation or that does not-- a structure that does not have a complete solid framing integrity. For instance, one that an outer framing and structural wall has been damaged by fire should not be done by an individual, requires structural rebuilding, and that should not be done by an individual.

Basically, homeowners and those who are industrious homeowners should be looking at buildings that have solid foundations, solid framing members and good structural basis so that they can, in fact, make some mistakes in their process without affecting the integrity of the structure. They will, in fact, make some mistakes. We expect-- and if I can draw back to the process of rehabilitation, the reason we should be saving housing and the reason anybody should be looking at rehabilitation as an affordable option is to have a complete home as structurally sound and as substantial as new construction.

In order to do that, we must replace the essence of the structure. We must have new mechanical systems. So those should be-- after structural systems, our second consideration should be mechanical systems. The structure should have new wiring, new plumbing, new heating systems. Frequently, there's degrees of deterioration of those systems, and frequently, we can adjust a rehabilitation program or homeowner can adjust that program to the degree of deterioration of the systems.

Plumbing may be allowed to be-- may be allowed to remain in the structure if it's expected to have an additional 15 or 20-year life on that system. It may be found, however, that once those walls are opened, that a lot of unexpected problems have happened with plumbing.

Plumbing and water pressure might be fine when it comes out of the faucet in a dwelling. But when you open up the wall, you may find that there's been-- each pipe has been wrapped in band-aids, which has happened, and gauze and cloths and rags and vent pipes have been disconnected. Waste pipes are glued together with any number of makeshift remedies. And then we end up replacing those systems.

The danger is not anticipating replacement. We categorically anticipate replacement of mechanical systems in our rehabilitation. We feel that it's essential not only in cost considerations, but in the prime consideration of extending the life expectancy of a piece of property.

DAN KRAKER: Is there a set age at which a home is beyond repair, a home built at the turn of the century, for example, 1900 or any set age at which a person should simply not consider touching that home?

RON SODERBERG: No, I don't believe it has anything to do with age, Dan. There is a degree of deterioration that affects that consideration. One of the surprising facts, I think, to most people, and of course, to most of the listeners, is that there are very few homes that cannot be rehabilitated economically and economically in relation to new construction. I have to qualify that because we are now dealing with housing on a square footage basis, not on a personal desire level, but strictly as a commodity and strictly in terms of physical dollars in economics.

One of our interesting experiences has been the Milwaukee Avenue Restoration in Minneapolis. It's a 4-square block redevelopment sponsored by the Seward West Community. If there ever was housing that could ostensibly not be rehabilitated, it was Milwaukee Avenue Housing. It was housing that had no foundations, simply small cisterns under the center of a house.

Because of the lack of foundation, the brick veneer on the houses had started to slide off the house since the 1870s when it was originally built. Because of that shifting of the house, the roof rafters had snapped across the entire roof, and the houses had many times shifted over a foot and a half out of plumb. However, we have rehabilitated it.

Today, it stands as some of the finest restored housing in the country, in my opinion, and it was rehabilitated for approximately $26 a square foot. Taking a new construction replacement cost of $40 a square foot. I think that says quite a bit about what we can do in rehabilitation.

DAN KRAKER: How have you found lending institutions reacting to this prospect of rehabilitation of older homes, Ron? Are they easing their stance somewhat? Because I am under the impression that they do not view very sympathetically an average potential homeowner approaching them with the prospect, I have a beautiful older home in such and such a neighborhood that I'd like to buy and really spend a lot of money fixing it up just right. Won't you give me some money? What have you found is the reaction?

RON SODERBERG: Well, as a zealous contractor and as many zealous homeowners who are involved in this rehabilitation process, and it clearly is an exciting process and a rewarding process, I think we've all felt at times that it's the bankers and the lending institutions who have held us back. I think in all fairness to the lending institutions, we have to consider their fiduciary responsibilities, and that includes justifying appraisals, new appraisals for a piece of property in an inner city community.

For instance, how do we justify appraising a rehabilitated home at $60,000 when it's surrounded by deteriorated properties selling for $20,000? How do we justify asking a lender to put out their cash and hold it in their portfolio when perhaps their financial practices are to sell that paper and get it out of their portfolio? How do we ask them to do that, when they could just as well put their money into new property and sell it out?

There's a lot of considerations in that lending. We clearly have not been able to justify until recently, the movement in the inner city. We clearly have not been able to justify new value that is now coming around, and we are now getting a great deal more support from lending institutions than we've ever had before.

DAN KRAKER: I suspect we're going to cover that very same topic in a bit more detail with Mark Korell from the Minnesota Housing Finance Agency, who has just joined us. And we're pleased to have you with us, Mark, because now that we've talked with Ron Soderberg, Saint Paul developer, about some of the problems of rehabilitating dwellings, we want to turn to a somewhat related topic, and that is the topic of where do people get money. And of course, money most often comes from banks, because very few of us have a large nest egg with which to work with. And so we must approach the lending institutions to ask them for some kindness.

Now, there is an option available to many of us that some people don't know about, and that option, of course, is the Minnesota Housing Finance Agency. You are by no means the great sugar daddy in the sky, but you do have a fair amount of money to work with, thanks in part to what the legislature has done in granting you money. And I wonder if, first of all, you could begin, Mark, by describing a little bit what the Minnesota Housing Finance Agency does and just how much money it has available for persons in certain income brackets.

MARK KORELL: Fine. The State Housing Finance Agency was created in 1971 by the Minnesota Legislature in part as a response to the recognition that the private lending community could not solve all the problems, some of the problems that Ron just referred to. There needed to be an alternative for many moderate income people and low income people that were just priced out of the private sector.

So the legislature created this statewide agency, and we currently have $900 million in bonding authority, which means that we can sell agency bonds, which are exempt from taxes. And they are revenue bonds. They're not obligations of the State of Minnesota. But we can sell that many bonds and then turn around and loan that money out at below market interest rates to people wanting to rehab old homes, to buy old homes, or buy new homes, build new homes and construct apartments.

DAN KRAKER: Now, there are some strings attached to that. There are some income qualifications. Is that right?

MARK KORELL: Yes, that's right. We have several programs. But specifically talking about the rehabilitation area this morning, we do have a loan program, which can make funds available up to $10,000 for a single dwelling to families with incomes under roughly $16,000. There's a formula that you adjust down to $16,000 and under. In addition to that, there is a grant program, which is for very low-income people under adjusted gross incomes of $5,000 with no repayment provision on the loan, which can be up to $5,000 unless the person moves within seven years.

DAN KRAKER: Now, that sounds pretty good. And I can imagine a lot of people rubbing their hands in glee and thinking that they know now where there is some additional money available, but there may be some other problems associated with that, despite how good it sounds. And we'll get to that in just a moment.

But I wanted to remind our listeners at this point, at about 18 minutes after 10:00 now, that we have four phone lines that we're going to make available for you to call in on, because Mark and Ron, we think are exceptional sources of information, exceptionally good sources of information, we should say, for information on money in Mark's case and on home renovation and repair in Ron's case. And we'll give out some numbers now that you can call them at to ask your specific questions about those two areas.

In the Twin Cities listening area, we are at 291-12-22. That's 291-12-22. And if you're not on vacation or out in the yard washing the car or whatever, you can give us a call, or maybe you should take time out from either of those two activities. Listeners outside of the Twin Cities call area can call us toll free at 1-800-652-9700. That number again is 800-652-9700. We'll be giving out those numbers again in just a little bit.

And before the calls start coming in, we want to get to a couple of other points. First, Mark, I wanted to ask you about the grant program that you talked about. As you said, that is designed especially for lower income citizens. Is that right? Maybe you could give us a little bit more detail about what that grant program amounts to.

MARK KORELL: Well, we have had $9 million over the last year, Dan, to loan or grant to very low-income families. There's been a special emphasis on elderly who oftentimes own homes, perhaps they're entirely paid for, but they just don't have the continuing income to be able to maintain those homes. But we're also very concerned about lower income families.

So this coming two years, we have a total of $21.5 million to make available for those grants throughout the state. About one-third of the dollars will be in the Twin Cities area, and about two-thirds will be spread around the rest of the state because we have a great housing problem in the rural areas of Minnesota as well as in the cities.

DAN KRAKER: All right. Now, we have some calls on the line. And in a moment, we're going to be opening our line so you can talk with Mark and Ron. I have to hand Mark a pair of headphones here. All right. We'll reach those. That way we can listen to what you, the callers, are saying. All right. We'll take our first call. Go ahead. You're on the air. Mark and Ron are listening.

AUDIENCE: OK. My question is, in regard to finding reliable contractors that have had experience in rehab work, how do I go about finding them? And my particular interest is in, at the moment, a six plex that we're talking about rehabilitating?

RON SODERBERG: Well, I think that there are home builders associations here that they know of available contractors who's specialized in rehabilitation. I think the best source in many instances is, of course, satisfied customers.

Now, whether that's communities, and the communities, especially in Minneapolis, are very active in rehabilitation, or individual homeowners or other building owners who have had experience with contractors, there are a great number of very qualified remodeling contractors. Those remodeling contractors differ from rehabilitation contractors that they have not been as extensive. That does not mean they aren't qualified or capable. And I think those would be the first contractors to discuss a potential project with.

DAN KRAKER: Ron, maybe we should point out here whether or not there is an association or a place that a person can go to begin getting names or references of these people other than satisfied customers, for example.

RON SODERBERG: Well, there is the General Contractors Association and the Homebuilders Association of Saint Paul and Minneapolis.

DAN KRAKER: All right. Very good. Well, thank you for calling. We'll move on to our next question now. Go ahead. Ron and Mark are listening to your question.

AUDIENCE: Good morning, gentlemen. I'm interested in finding out if the money that's available for the homes that you're talking about is limited at all in terms of geographic area in the Twin cities.

MARK KORELL: No, sir, it's not. It's available in every-- virtually, every community in the state as well as in the Twin Cities. There are 175 different private lending institutions and some local public housing authorities that are actually taking applications and making these loans available.

If you could call the number I'll give you, we could send you a list of those various institutions as to where you would apply for one of these loans. But they are available throughout the state. That number would be 296-76-15. If you call that Monday morning, we should be able to send you a brochure and a list of those lenders within a week or so.

DAN KRAKER: That's 296-76-15 and that's Monday morning. And we might take just a moment, Mark, to follow-up that question a little bit. How extensive a process is this of applying for a home loan or a grant through the Minnesota Housing Finance Agency? Is it a lot more red tape than any other loan application procedure?

MARK KORELL: Not really, Dan. We've tried to not establish a big bureaucracy on this. We've attempted to work through local bank savings and loans and housing authorities with a much simpler process than what you might ordinarily find through a federal program, for instance. So in general, it only takes a few days to put an application in. There are only two separate applications. And it usually takes only a few days to a week or so in most cases. So we tried to keep it real simple and fast.

DAN KRAKER: All right. We have other callers waiting on the line with questions, and we'll go ahead with them. Go ahead. Ron and Mark are listening to your question.

AUDIENCE: OK. Hello.

DAN KRAKER: Yes, go ahead. You're on the air.

AUDIENCE: OK, thank you. I have kind of a two pronged question. First, I'd like to ask, how do you compute the income? For example, I have a very small disability income. Would that be included in the $16,000? That's one. And two, can you get money specifically to remodel a house for the handicapped, as would be towards myself, in this case?

MARK KORELL: Yes, all sources of income would be included, including disability income. And there are some deductions that could be explained to you when you make the application. But yes, we certainly encourage improvements to homes that are occupied by handicapped or impaired individuals or families, and there certainly is no restriction on that. Although there's not a separate program. The money is available for those types of improvements, such as ramps and counter lowering and things like this that could be helpful. So that shouldn't be a problem.

AUDIENCE: OK, thank you very much.

DAN KRAKER: All right. Thank you for that question. And we'll take another question now. Go ahead. You're on the air.

AUDIENCE: Good morning. My question is for the financing end of it. And I missed your name. I'm sorry. Does this program or do you have a program that applies to commercial property? I'm an artist, and I'm anticipating buying a building that would provide me both living quarters and a studio space. And it will need not really rehabilitation yet, but some extensive remodeling and repairing.

MARK KORELL: We do not generally have a lot of interest in the commercial area. And we are really authorized only to deal in the housing area. Although if you're combining a space like that, there may be a possibility that some of the money would be used-- that would be used to improve the residential area could also be applied to the commercial area, for instance, such as heating units or insulation and things like this.

It sounds like it would be kind of a special case, which could-- would have to be dealt with on an individual basis when you would make an application to one of the participating institutions. So I wouldn't rule it out. But primarily, we aren't able to get into too much commercial rehab.

AUDIENCE: OK. What-- to whom would I direct more detailed questions then, so you can-- during the week, so you can get on to other listeners?

MARK KORELL: Again, if you could call the number I mentioned, 296-76-15, there should be some staff people there that could help you out with this or direct you to one of the participating financial institutions. If we are not in a position to help you, my other recommendation would probably be just a normal private lending institution or a credit union, for instance.

AUDIENCE: OK, thank you very much.

DAN KRAKER: All right. Thank you for your question. That was Mark Korell of the Minnesota Housing Finance Agency, and that was the state's point of view, of course. But since we also have Ron Soderberg, private developer with us, we might just throw the question to Ron to ask you if there is any suggestion you might have for this gentleman based on your experience in this area of commercial rehabilitation, Ron.

RON SODERBERG: Well, I think it's an interesting concept, of course, that's about to come to fruition here in the cities, and that is living working space, basically or primarily in warehouse space. One of the advantages to that is it can be very economical. In other words, it can be done without much outside financing.

Basically, you're talking about raw space for living use, and it would simply require mechanical systems, which are typically inherent in a good commercial structure or a good warehouse building and which can be lived with and especially plumbing systems and so forth to meet residential living code. It is the kind of thing that can be done on home improvement loans, high interest, short-term loans that are obviously not the most advantageous, but because of the small amount of money necessary, it can be-- a lot can be accomplished on them.

DAN KRAKER: This just occurs to me, Ron. Any unique code problems that crop up with people trying to rehabilitate a warehouse, for example, for living space?

RON SODERBERG: Well, the code problems are simply the adaptive reuse of that space for residential. So they do-- there are requirements for mechanical-- for plumbing facilities and so forth.

DAN KRAKER: We have other callers on the line waiting to ask questions of Ron and Mark, and we'll go to the next caller now. Go ahead. You're on the air.

AUDIENCE: Yes, sir. Hello.

DAN KRAKER: Yes, go ahead with your question. You're on the air.

AUDIENCE: OK. I'm from out of Twin City area. I picked up this telephone number, 296-76-15, to call after Monday morning. Would I still use the same number looking for financing for rehabilitation?

MARK KORELL: Yes, sir, you would.

AUDIENCE: OK, I've started in on the house that I'm in-- that I'm on. I've taken off some of the rough-- the actual building work I've done myself until it gets down to the roofing part, then a roofer comes in. But in digging around, I feel that I should be lifting the house or holding it up and putting foundation under it. Contractors out in the out area, do I use them or do I have to come in Twin Cities for a contractors?

RON SODERBERG: No, the choice of contract is entirely your own, and you could choose whoever you felt was qualified in your area or wherever else. But it would be entirely a local thing, if possible.

DAN KRAKER: Very good.

AUDIENCE: But I would arrange the financing through-- possibly through this number that you-- out of the Twin Cities that I have, right?

MARK KORELL: We could send you a list of the participating institutions throughout the state where you could make applications, those that are working with this program. So hopefully, there would be one in your community or nearby, so you wouldn't have to come into the Twin Cities.

AUDIENCE: I see. OK, thank you.

DAN KRAKER: Very good. Thank you for your question. The time is 10:30 now. We're talking with Mark Korell of the Minnesota Housing Finance Agency and Ron Soderberg, private developer and rehabilitation from Saint Paul. And we want to take just a moment now to give out our telephone numbers once again for callers, because a few lines have opened up. In the Twin Cities area, our number is 291-12-22. That's 291-12-22. And for listeners outside of our local call area, you can call us toll free at the following number. And that is 1-800-652-9700, 1-800-652-9700.

And I want to reemphasize the fact that we haven't been getting as many questions as I would like to see for Ron Soderberg, who I regard as something of a gold mine of information when it comes to rehabilitation. And frankly, if the questions don't start soon, since I am a fairly new homeowner myself, I have a few personal questions that I'm going to put to Ron regarding some repair and rehabilitation problems. So that might work out all right anyway. But we do have some questions on the line right now, so we'll take them. Go ahead. You're on the air.

AUDIENCE: I have a question regarding the Housing Finance Agency money. Last spring, we tried to get some money. We heard that they were loaning money for houses at 79% for existing structures. And we sent for the list of banks and so on. And as soon as we got the list, we called every bank on the list that was in our area. But all the money that-- every banker told us, all the money was already committed. Now, am I correct in understanding that those are a new program, that there's going to be more of this same kind of money available?

MARK KORELL: This is an ongoing program that we've had for the last two or three years, but it goes in annual cycles. We sell an issue of bonds, and then we make that money available over roughly a nine month period. There was roughly 10,000 inquiries for that last batch of roughly $70 million, which will only be able to assist a little over 2,000 families this year.

But we do expect the program to have additional money available toward the beginning of next year, probably early spring, late winter of 1978. So I would encourage you to keep in touch with your own financial institution. Unfortunately, the demand is much greater than the supply, but we're attempting to help as many people as we can.

AUDIENCE: So I would-- with regard to Ron Soderberg, we would be interested in rehabilitation, but we want to buy using our GI. And we don't seem to be able to get any-- that doesn't seem to be a possibility. Is there any way that a person who wants to get a GI loan, is there any way that a person who's doing that could go into this rehabilitation?

RON SODERBERG: Well, yes, there's-- VA and GI loans are available on rehabilitated structures. It is more difficult to rehabilitate the structure as individuals and then place GI or VA loan. It would be, of course, available to purchase a home, rehabilitate it under VA.

DAN KRAKER: All right. We have other callers on the line waiting to ask questions of our guests, Ron Soderbergh and Mark Korell. And we'll take the next call now. Go ahead. You're on the air.

AUDIENCE: Yes, what kind of legal problems does one run into in doing one's own work in terms of wiring and plumbing standards?

RON SODERBERG: A legal problems in the terms of uniform housing code, you shouldn't have problems. There is a state uniform housing code, and there are city codes which govern the rehabilitation of any structure or the building of any structure. If you're to perform your own rehabilitation, you would have to receive a permit for that work, and your work would be inspected by local inspectors who would authorize certain repairs and improvements.

AUDIENCE: So I'm qualified to do the wiring and plumbing on a unit that I was rehabilitating and I'm not a licensed electrician or a plumber, I could still do it?

RON SODERBERG: The city of Saint Paul, Minneapolis, both have a program where you can take a test and be qualified to do your own electrical and plumbing systems for your own individual use on your own structure. You would not be qualified to do work on others-- other structures, but they do have programs where you can be qualified and licensed for your own structure. Yes.

AUDIENCE: Are wiring and plumbing the only two areas that I'd run into that with?

RON SODERBERG: Wiring and plumbing are the two main areas that require licensing. That's correct. You would be able to do your own carpentry without a special license.

AUDIENCE: OK, thank you.

DAN KRAKER: Thank you for that question. And it brings up another question. And that was the test you mentioned, Ron. How difficult is that test? Is that something that many people can expect to pass without difficulty or there's a fair degree of skill involved?

RON SODERBERG: I think clearly many people can pass it that have mechanical aptitude. It is not a difficult test. You're given a booklet by the city of Saint Paul and Minneapolis to study, and then you subsequently take the exam. But I would expect that you'd have some need for mechanical aptitude.

DAN KRAKER: All right. We have other callers waiting on the line with questions for our guests. We'll go to the next one. Go ahead. You're on the air.

AUDIENCE: Hello, I expect this question should go to Mr. Soderberg, I think. Do you know if there's any money, preferably grant money, but loan money as well that I could tap into for the use of-- for use to insulate my home? I'd like to do a complete insulation job. I have a home that's I built in 1900. It needs in the walls and in the roof. And secondly, do you know of any money that might be available if I wanted to test out some solar energy, insulation use?

DAN KRAKER: Well, we can perhaps have both guests respond to that. Maybe Mark Korell first.

MARK KORELL: On the insulation financing, yes, clearly, the money that's available from the state housing finance agency, one of our main priorities is insulation and energy saving improvements to older homes. So we would strongly encourage this. And the loans would be available if you're adjusted family income is under $16,000 and grants could be available if it's under $5,000.

DAN KRAKER: Now, what's your experience with that same situation, Ron?

RON SODERBERG: Well, we're dealing basically, Dan, with bulk financing of a total restructuring. So we have not been involved in the individual finances.

DAN KRAKER: Now, there was a question about solar heating and solar projects as well, Mark. Do you know anything about that aspect of the question?

MARK KORELL: It's a brand new area, as we all know, and they're just beginning to get standards established, which I think are going to be very important for the protection of the consumer in this area. It is possible to finance through our state program solar water heating equipment, which has been approved by standards set up through the federal government, Federal Housing Administration.

With respect to space solar heating and cooling, we are currently not in a position to finance that yet because the standards have not really been set up and a lot of the products have not been fully tested so that we know that they're going to be effective and the consumer is going to get a fair product for his price.

DAN KRAKER: All right. We have-- I think we have that caller back on the line with an additional question.

AUDIENCE: Gentlemen, my mother is a situation where she has about a monthly or yearly income of about $3,600. And we're currently trying to move her from the suburbs into the city for obvious reasons, the services. Upon the sale of the house that she does own, she'll get about $15,000 to $18,000 cash money that she'd have to invest back into a home. Would that work against her in terms of qualification for this minimum income you talked about?

MARK KORELL: No, it wouldn't. That would be considered an extraordinary one time income, which could be deducted from the calculation. So that shouldn't prohibit her from qualifying for a grant if she were to buy a new home and have that low of an income to do some repair work on that home.

AUDIENCE: Thank you very much.

DAN KRAKER: All right. Thank you for your questions. And we have a couple of other callers waiting on the line with questions. We have some lines open as well. So if you have questions of Ron Soderbergh, Saint Paul developer, or Mark Korell from the Minnesota Housing Finance Agency, jot down these numbers and give us a call.

We are at 291-12-22 in the Twin Cities. That's 291-12-22. And for listeners outside of the local call area, you can call us toll free at 1-800-652-9700, 800-652,9700. We have some callers waiting with questions. We'll take the next one. Go ahead. You're on the air.

AUDIENCE: Yes, I had heard the number on the radio. I just wanted to get some questions. And I didn't know I'm being broadcast, but my income fluctuates quite a bit. And would this be based on a one year income or would it be based on an average of the last five years?

For example, I just heard on the news that President Carter had an income of $38,000 or so peanut warehouse. And with credits and everything, it was down to zero income. Now, would income like that qualify? Would that be on the $16,000 base you're talking about?

MARK KORELL: You would have to include all sources of income. If you're self-employed, for instance, there may be certain deductions that could be taken, which it'd be tough to go into right now on the radio. But yes, if the income is not a steady income, you would average the last two years, for the purposes of this program.

AUDIENCE: OK. And if I need more information now, is there a number or person I can talk to later, or could this transcript be printed out and could we send for copies of it? As I said, I'm not listening to the radio. I'm not in a phone where there is a radio.

MARK KORELL: Yes, the number I'll repeat again, where you can get more information, is 296-76-15. If you could call that during the week, there would be people at that number to be able to help you or refer you next week for more information on this.

AUDIENCE: Would you give that number again?

MARK KORELL: 296-76-15 and that's--

AUDIENCE: Who would I speak to there?

MARK KORELL: There are a number of people that can help you, if you just--

AUDIENCE: That's are code?

MARK KORELL: That's area 612. It's in Saint Paul.

AUDIENCE: OK. Well, thank you very much.

DAN KRAKER: Well, thank you for your question and sorry you didn't have a radio to listen to because the first part of the program has been pretty good. And I think the last part here will contain some more information that might be useful. A little earlier on, developer Ron Soderberg was talking about some problems of rehabilitation and renovation.

And I know, Ron, that when I thought first of renovation and rehabilitation or repair of a home, I had assumed that it could be done only on a home that had a very sound exterior, say, brick or stone, for example. And that wood frame homes are essentially out of the picture, that wood homes from around the turn of the century, for example, have deteriorated to a point where they can't be salvaged. But then you pointed out the Milwaukee Avenue renovation project, and maybe you could talk a little bit more about why you think some wood structures can be saved.

RON SODERBERG: Well, in fact, Dan, brick structures can frequently be deceiving and their appearance of solidarity. Frequently, that's a brick veneer that has suffered deterioration in the framing members behind it and has caused a lot of very, very expensive repair problems. Wood frame, of course, was and still is, the bulk way of building housing.

Wood frame houses with proper maintenance in their history can be restored up to 100 or 150 years old, and of course, in other parts of this country up to 200 years. There is a problem with moisture, there is a problem with deterioration from insects and mildew and so forth. And that's because of a lack of maintenance. Those are things that have to be noted on a structure before you can anticipate the actual replacement cost or repair cost.

DAN KRAKER: Now, another question somewhat related to that, Ron, is specific repair question. And I think over the next few months, because summer seems to be a big or a popular time for this sort of activity, thousands of men and women hours will be spent on the process of stripping wood, especially interior wood, that fine woodwork that the many Scandinavian carpenters were so fond of putting in the single family and multifamily dwellings in Minnesota, especially, I think we'll find them. And what are your secrets for wood stripping if indeed, you have dealt much with that question?

RON SODERBERG: Well, I wish there was a secret. It is strictly a labor of love. Clearly, there is a grand reward at completion, but the process is painstaking. We have allowed our homeowners the opportunity to strip their own woodwork simply because of the intense energy and labor that that's required to do that.

DAN KRAKER: Now, some have bought gallons of stripper and bought the rubber gloves and everything. Then I understand that there are electric coil devices that will heat the paint and take off wood. And then, of course, you can use sanding devices too. Is a mix of all that the best recipe or one or the other?

RON SODERBERG: I think it's really individual preference. There are those basically three methods for homeowner use. There is, of course, the other alternative, which is commercial stripping. There are commercial strippers available in the Twin Cities. It requires removing the woodwork, pulling the nails from the backside as not to damage the woodwork, and then taking it to a commercial stripper to have dipped and cleaned, and then, of course, piecing it back in and putting it back in place.

DAN KRAKER: Chimneys and fireplaces are another issue. There are lots of old ones in these older homes, and sometimes they're falling into a bit of disrepair with bricks coming out at the top of the chimney, and sometimes the chimneys not operating properly. What sorts of pointers do you have in that area?

RON SODERBERG: Well, that's a pretty important consideration, too, in most of the existing housing in the Twin cities. When we're talking about turn of the century housing, early 20th century, we're dealing with fireplaces that were originally designed for coal and gas burning. They have smaller flues than are required for burning wood. They have shallower hearths than are required for burning wood. They do not adapt easily to wood burning.

One of the chief desires of today's market is to have a wood burning fireplace. It's one of the grand amenities of these older homes. Frequently, those fireplaces that are very decorative in a home are simply that decorative and should not be used for wood burning without extensive rebuilding. That would mean a widening of the chimney or a replacement of the chimney complete from the fireplace through to the roof line, and additionally, deepening of the hearth to give depth for wood burning.

DAN KRAKER: Now, we have another caller on the line with a question for Ron Soderberg and Mark Korell of the Minnesota Housing Finance Agency. And we'll take that call now. Go ahead. You're on the air.

AUDIENCE: That's me, I assume.

DAN KRAKER: Yes, that's you.

AUDIENCE: OK. Is there any way of arresting dry rot in wood or siding and such that you want to salvage or use for one reason or another? Once you've eliminated the source of water and leakage and all that, is there a chemical treatment that can arrest the rot?

RON SODERBERG: Well, clearly, once you have eliminated the cause of the dry rot, you should not have additional dry rot.

AUDIENCE: So it doesn't grows of continuing-- it doesn't continue to grow by itself?

RON SODERBERG: That's correct. It should stop with the elimination of the cause. It should be cut out and replaced. If you have deteriorated siding or joists in a house, that should be cut out and scabbed on or replaced to eliminate.

AUDIENCE: These are decorative panels, which I refer to as carpenter frenzy period of architecture that would be almost probably be prohibitive to replace them up in the corners and things, hand carved things that have rotted somewhat from the back side, through leaking roofs and water backups over the winter time. And if these are taken off and cleaned, I guess that was my question, can they be replaced or put back on? I'd rather not throw them away. I'd rather use them.

RON SODERBERG: Depending on the degree of deterioration--

AUDIENCE: To the front side. It started from the back side.

RON SODERBERG: OK, you may be--

AUDIENCE: Sheeting.

RON SODERBERG: You may be taking a chance if you remove the detail, because it may deteriorate in your hands. It may be easier to maintain the decorative detail just by preserving it with special sealants like, a creosote full stain that would--

AUDIENCE: Creosote full stain?

RON SODERBERG: Right. There's any number of products available in full stains, but that permeates the wood and seals it, in a sense. It would be sealing, however, something that has already gone through a deterioration process. So the short of replacement, you could only be looking at maintenance of that existing piece of deteriorated wood.

AUDIENCE: It's not going to regenerate. The second question, on older buildings like this one where you have poured concrete foundations or basement walls and they tend to seem crumbly in the inside and brushing away, is it possible to fur those for insulation, to fur-- to put fur stripping on that sort of thing? And I realize I'm asking specific questions that are difficult to answer on the air.

RON SODERBERG: No, that's fine. I guess I need a clarification of the poured concrete foundation that has deterioration on the interior. Is it poured concrete over limestone, or is it--

AUDIENCE: No, it's a solid concrete wall, inches thick.

RON SODERBERG: And it was originally poured concrete?

AUDIENCE: It was originally poured concrete. Yes. It's an exposed-- it's a walkout basement sort of thing.

RON SODERBERG: I see.

AUDIENCE: Potentially. And it's exposed to the outside and been stuccoed over on the outside. It isn't falling in great huge chunks, but there's an inch and a half of sand when we got into the place, up into the corners of that.

RON SODERBERG: OK, basically, that problem is caused by too much lime in the mixture of concrete when it was originally poured. And that inner surface is deteriorating. Yes. In fact, you can scrape that loose mortar off, and you can patch it with basically concrete patch using a concrete adhesive and regular ready mixed concrete. And you could frame out in front of that wall for insulation. You could do it with any number of products, first, with glued on styrofoam to which you can apply any number of panelings or gypsum board or any number of other surfaces.

AUDIENCE: So you need to put furring strips if you're gluing styrofoam on for anything other than leveling it?

RON SODERBERG: Not as long as you have a clean, solid surface. And so if you've patched it properly and prepared it properly and you've cleaned it down, you should not have any additional problem with that.

AUDIENCE: So assuming that you don't want to go to the expense of patching this thing, which is the entire wall, can you fur out-- will this-- can you just dry furring strips in there or nail furring strips in and then to put your paneling on and put your styrofoam in between, or will this deterioration eventually loosen the nails and the furring strips all fall out?

RON SODERBERG: Well, it's always difficult to apply furring strips to concrete. It would be far simpler for the average homeowner to simply build a new wall in front of the concrete wall, to build a new 2 by 4 framed wall with plate on the floor and ceiling.

AUDIENCE: To the wall itself.

RON SODERBERG: That's correct.

DAN KRAKER: Very good. Thank you for your questions. And we have now eight minutes before 11:00. And we have just a little time to close out the program with what is a bit of a change of pace, really, because I want to close it out with some details about new homes from both Ron and Mark.

First from Mark, the Minnesota Housing finance agency, of course, as we have talked about a little bit earlier, makes loans for new home construction. And that is something that, as you mentioned, takes place around the state available to every citizen in the state.

And one of the unique aspects of that program, I think, because I heard about it from you, Mark, is the Affordable Homes Program, whereby homes that have a few less frills can be built. They cost a little bit less to live in, but they look pretty nice, according to the description you gave me. I wonder if you could give us a few of the details about that program.

MARK KORELL: Yes, I could. Again, I think the legislature recognized that the cost of new housing is getting very, very high. The average price of a new home is over $50,000 in the Twin Cities area and indeed around the country. We felt that it was important to try to demonstrate that smaller homes with less amenities can be built, number one, by contractors at a reasonable price. And number two, that people will buy them, that they can provide decent living quarters for many, many families, that you don't need a 2,000 square foot rambler in the suburbs.

So we've embarked upon several programs to encourage the construction of new homes that are, say, 1,000 to 1,200 square feet. Not only in the smaller communities in suburbs around the state, but also in the center cities. There is a lot of vacant land that needs to be rebuilt and clearly, many people throughout the state cannot afford that average new price home. So we're attempting to encourage the construction of smaller homes that at lower prices and then provide a below market interest rate mortgage on that house, too.

DAN KRAKER: As I understand it, though, not every community is receptive to the concept of an affordable home. In other words, there are some communities that have zoning restrictions that essentially make the possibility of an affordable home out of the picture. And I wonder if you could give us some detail on that.

MARK KORELL: Well, that's right. The zoning laws do differ from community to community around the state. And in some cases, it's just accidental. In some cases, it's more deliberate. But we're attempting to encourage a mix of housing, a mix of opportunities for families, not only in single family, but also in multifamily rental housing throughout the state in all communities. And we don't have the capability to change local zoning laws. So we can offer an incentive through financing, and so on.

DAN KRAKER: Now, an example of a local zoning law would be one where a community, for example, requires that every home have a driveway, that would be restrictive, for example, to an affordable home. Is that right?

MARK KORELL: Well, even take it one step further. Driveways are fairly important, but garages are things. Some communities require two car garages. Some communities require at least a minimum square footage on the lot as well as on the house, which then run up the cost to $50,000, $60,000, $70,000. And this is just obviously hurting many, many families that may want to live in that community that just can't afford that.

DAN KRAKER: Now, we want to turn that subject of new homes around for a moment and put it to Ron Soderberg. And that's the issue for the homes that have building materials that some are not salvageable, others are salvageable. There may be timbers in the home, for example, that can be used. What, Ron, is the feasibility of using some of the materials from older homes for new home construction?

RON SODERBERG: Well, certainly we have a lot of salvageable materials. And clearly, one of the primary reasons of the cost of new construction today is material cost, lumber. And we fully expect that lumber costs will double within the next five years as we run out of-- as we deplete our natural resources. There is such possibility it is not yet proven to be cost effective.

I would not anticipate it would be until the point where we have reached that five-year point of inaccessibility of new construction-- of new building materials. Because of labor intensity and recycling, it can be done by homeowners if they do not pay themselves a wage, but to pay a prevailing wage to pull nails and recycle lumber is prohibitive at the present time. I would not anticipate, however, that it would remain that way.

DAN KRAKER: Now, you mentioned that lumber prices will very likely double in the next few years as they have doubled within the past few years. I wonder if you have come upon any solid alternatives to lumber, for example, in some building processes. Are there things that can be used in new home construction, for example, or even renovation that people frequently overlook?

RON SODERBERG: Well, clearly, Dan, the reason we are dealing with rehabilitation is because it is that alternative to using new resources. No, at the present time, we are not concentrating in that area. There will be alternatives. I would suspect that there are concrete systems. I would suspect that that's what we will be dealing with in new construction systems. That will require, however, a great deal of market change and a great deal of attitudinal change in the industry before we can-- and code changes before we can be building a great deal of residential property in concrete.

DAN KRAKER: All right. Very good. Well, gentlemen, I want to thank you for being with us this morning and answering questions about rehabilitation and also money for homes and home rehabilitation. Mark Korell from the Minnesota Housing Finance Agency based in Saint Paul, Ron Soderberg, Saint Paul area developer. Thank you again. And also Thanks to our many callers who had excellent questions for both guests today and some good points to make as well. Technical director for this broadcast has been Michael Moriarty and our thanks for his help as well.