The Greater Minnesota Housing Fund, which helps finance affordable housing for the swelling ranks of the working poor, will announce Tuesday a $25 million fund that is expected to acquire up to 1,000 units of rental housing and make them available at discounted rents for up to 15 years.
“The crisis is that speculators, some from out of state, and institutions and international investors are buying existing housing,” said CEO Warren Hanson of the fund. “They do some shiny improvements and flip them, essentially, after a dramatic increase in rent.
“We’ve spent the last year designing a new ‘impact-investment’ fund called NOAH Impact Fund, or ‘naturally occurring affordable housing’ in the Twin Cities area. We want to preserve 1,000 units. And we’ll announce a partnership with McKnight Foundation and other investors. And we’re acting in partnership with nonprofit developers and managers such as Project for Pride in Living (PPL), Aeon and CommonBond.
This is more good news on the affordable rental housing front for workers, the elderly and disabled.
Much of the new construction has been targeted at the luxury market and thousands of units for professionals who make $75,000 or more.
There have been experiments in north Minneapolis, with lower-cost modular homes and the like. But new construction is expensive and must meet stringent building codes. Plus, the more space and amenities, the more profitable for the builders. That’s capitalism.
Meanwhile, the wages of the $10-to-$20 an hour crowd have not kept pace with inflation or housing costs since the 1990s.
So, outfits like Habitat for Humanity, CommonBond, Otto Bremer Trust, McKnight and Bush foundations and affluent individuals pool funds for “impact investments” in affordable housing.
For example, nearly a dozen local foundations have pooled money in a Minnesota-focused multimillion-dollar fund, managed by RBC, for affordable housing and small business loans in areas of need. That includes Gus Johnson Plaza, a 108-unit subsidized apartment complex in Mankato.
The investors in such funds typically agree to accept a less-than “market” return on money.
In the Twin Cities area, hundreds if not more residents of old apartment buildings or other complexes — from downtown Minneapolis to Apple Valley — have been forced out of their apartments by big rent increases after new owners pay for old buildings.
In 2015, an institution acquired 700-unit Crossroads at Penn Apartments — now known as the Concierge. Hundreds of low-income tenants were out. As a result, 38 students in the Richfield school district went homeless. And the district lost dozens of other students, resulting in a $2.3 million budget shortfall because state-student aid is tied to the number of students.
In April, amid fears when another Richfield complex went on the market, Aeon moved to buy Seasons Park, a 422-unit complex near Interstate 494 and Hwy 77. Aeon President Alan Arthur plans to remodel Seasons Park and keep rents as close to current rates as possible.
CommonBond Communities, Minnesota’s largest owner of affordable housing, paid $16 million to buy 112-unit Boulder Ridge Apartments in Apple Valley last fall that the organization intends to preserve for its working-class clientele. Government resources for affordable housing are limited. It’s tougher to rent for maintenance and day-care workers, beginning teachers and families struggling on $33,000-to-$50,000, according to CEO Deidre Schmidt of CommonBond.
Nonprofit managers try to keep two-bedroom apartments under $1,000 a month in a market where $1,500-plus for new construction is the norm.
“Our NOAH fund is $25 million and we’ll raise another $25 [million] within 30 months,” said Hanson of Greater Minnesota Housing. “We see properties going for sale on a weekly basis. These are selling for $20 to $70 million for 400 or 500 units.
“We should be raising $50 million or $100 million. We could invest it all.”