Cottage Grove Approves 186 Unit Apartment Project on Long Challenging Site
After nearly 20 years of stalled proposals, a difficult site in Cottage Grove is finally moving forward. The Cottage Grove City Council recently approved a $45.6 million apartment development that could reshape housing options in the east metro.
A Challenging Site at East Point Douglas Road
The project, led by Yellow Tree Development, will bring 186 market rate apartments to a steep and wooded property at East Point Douglas Road South and Hardwood Avenue South.
The six story building will include four levels of residential units and two levels of covered parking. Planned amenities include a sky lounge with roof deck, outdoor pool, and grilling stations.
What makes this site unique is its complexity. The land includes shallow bedrock and significant slopes that require excavation into the hillside. A Minnesota Land Trust covenant restricts grading beyond the 860 foot elevation point, and a future trail and overlook must be preserved.
Development proposals for this property date back to 2007, but none advanced due to cost and engineering challenges.
Why the City Approved a 10 Year Tax Abatement
To help bridge the financial gap created by site constraints, the city approved a 10 year tax abatement valued at $1.24 million. Unlike traditional tax increment financing, this abatement applies only to city taxes.
City officials cited the significant topographical and infrastructure challenges as justification for the incentive. Without assistance, the project was considered economically unfeasible.
Housing Demand in Cottage Grove and the East Metro
A 2024 Housing Needs Analysis by Maxfield Research found Cottage Grove’s rental vacancy rate at 2.7%, well below the 5% equilibrium level typically considered balanced.
The study projects the need for 855 new market rate rental units by 2035. This 186 unit project moves the city closer to that target.
Most units are expected to be affordable at 80% of area median income or below, offering options for working professionals and families who want to stay in the Cottage Grove and Woodbury area.
Construction could begin as early as fall.
If you are watching east metro development, considering a move to Cottage Grove, Woodbury, or anywhere in the Twin Cities, or thinking about selling in today’s market, I would be glad to talk through your options.
