Angela LaCluir’s deadline to find a new apartment was approaching and, after more than two months of searching, she was worried.
LaCluir, 59, is one of more than 250 residents of Nicollet Ridge Apartments in Burnsville who have been scrambling to find new homes because the property’s new owner — an investment business based in Philadelphia — will no longer take renters who use the Section 8 rent subsidy program. The change affects 94 of the complex’s 339 apartments, many of them occupied by disabled tenants like LaCluir.
Finding an apartment in today’s tight rental market can be tough for anybody, but it’s getting a lot tougher to find one that accepts Section 8 vouchers. When rents are rising as they are now, there’s less economic incentive for landlords to participate in the program, a longtime pillar of rent support for low-income people used by about 30,500 households in Minnesota, about two-thirds in the metro area. Higher rents put more apartments beyond the reach of Section 8 tenants because the program limits how much of their income they’re permitted to pay in rent.
Market conditions are ripe
Housing industry experts say market conditions are ripe for more displacements, often when properties change hands. “I would be surprised if we didn’t see more of this,” said Chip Halbach, executive director of the Minnesota Housing Partnership.
Complaints about “notice-to-vacates” from Section 8 renters throughout the Twin Cities have become more frequent on the hot line at HOME Line, a statewide tenant advocacy organization, according to executive director Beth Kodluboy. “We can always tell when there’s a tight market, because we start seeing a ton of them,” she said.
Resource Residential, the new owner of Nicollet Ridge, is part of a wave of out-of-town investors that have bought and rehabbed apartment complexes throughout the Twin Cities in the past couple of years. After the properties are updated, the units can command higher rents.
Representatives of Resource Residential declined to be interviewed. But the company has told officials at Dakota County’s Community Development Agency (CDA) that renovation and rent increases are in store at Nicollet Ridge. The complex’s 262 Section 8 tenants, about 30 percent of whom are disabled, must vacate as their leases expire in the coming months, according to Jennifer Keogh, CDA director of outreach. LaCluir is one of 28 tenants who must move by the end of this month, and so far only a handful have found new apartments, Keogh said.
Under the Section 8 voucher program, low-income people pay a share of their rent. The government pays the rest, with the amount based on the size of the apartment, where it’s located and fair market rents in the area.
When the overall market is sluggish and it’s harder for landlords to fill units, Section 8 provides building owners a reliable, modest stream of income. But it’s much different when demand for apartments rises, buildings fill up and landlords can charge more.
Feeling the pressure
Kodluboy and other housing experts say the same situation occurred in the late 1990s. Then, the rate of landlords accepting Section 8 renters fell to a fraction of normal levels, Kodluboy said. “They don’t have to deal with the program, and they can be a lot more picky about their tenants,” she said.
The housing crisis also created a “shadow market” of houses, townhouses and condos in foreclosure rented out by bargain-hunting investors. “Traditional landlords had more competition,” said Mark Ulfers, executive director of Dakota County’s CDA. “Some of these shadow market landlords also were open to leasing their property to [Section 8] participants.”
“Now you have all these pressures on rental housing — the improved economy where young people who were living with their parents [are] getting their own apartments, baby boomers who can now sell their houses, families whose credit was trashed during the recession and can’t buy, people who have jobs now but want to stay mobile,” Halbach said.
Al Hester, housing policy director for the St. Paul Public Housing Agency, said some landlords are keeping their existing Section 8 voucher holders but not accepting new ones.
Hester also said the agency is getting more requests from building owners to increase rents above fair market levels set by local government bodies that oversee Section 8. Government-set fair market rents have risen since 2012, but they are not keeping pace with the steep climb in rents in the overall market. In 2012 there was a $133 gap between the government’s monthly fair market rent and the average rent for a two-bedroom apartment in the metro area, according to figures from MHP and Marquette Advisors. Last year the gap had grown to $149.
“We’ve approved some [rent increases] but we try to keep a tight lid on them,” Hester said.
Ray Gunn, who has used Section 8 vouchers at Nicollet Ridge for seven years, said he was shocked when he learned he would have to move. Gunn, 50, uses a wheelchair and appreciates the complex’s proximity to the commercial area near Burnsville Center. Access to shopping and mass transit can be important to Section 8 renters because they often do not have cars.