The midrange and luxury rental housing markets are hot in the Twin Cities — largely driven by demand from those earning $50,000 or more a year. They have the means to live in the new and renovated, amenity-filled buildings that are quickly rising across the metro area.
Yet as more upscale rental buildings open, fewer affordable units remain. That’s why the creation of a $25 million regional fund to help preserve affordable housing is welcome.
The Greater Minnesota Housing Fund, a nonprofit affordable housing lender, is establishing what is believed to be the nation’s first regional pot of funding to help affordable housing stay that way. It could result in a kind of voluntary rent-control system that would keep more reasonably priced units in the metro-area housing mix.
To start, the fund is expected to offer borrowing opportunities to public, private and nonprofit developers. The goal is to attract developers to purchase 10 percent to 20 percent of the affordable buildings that come up for sale each year in the seven-county area. To qualify for low-interest loans through the fund, buyers and developers must agree to keep rents down and serve a low-income population for 15 years. Over time, the fund could expand to include additional counties in the region.
Early fund investors include Hennepin County and the McKnight Foundation. More are expected to join by the end of the year, and loans should be available in 2017.
Incentives to keep rents affordable are necessary because buildings that have housed low-income tenants for years are being bought and upgraded to bring in higher rents. In the process, many renters are forced out of places they can no longer afford.
Metropolitan Council researchers report that the number of households paying more than half of their incomes for rent doubled between 2000 and 2013, and that affordable housing construction is not keeping up with the need. The council found that only 1 in 16 new housing units in 2013 was affordable for low- to moderate-income households.
According to Marquette Advisors, a real-estate consulting firm, average rent in the Twin Cities metro during the last quarter of 2015 was $1,055 per month. Meanwhile, the federal standard of housing affordability shows that a family or individual would need $42,200 annually (roughly $20 per hour) to comfortably afford that average rent.
The new fund is a sensible addition to local affordable-housing efforts. It can help preserve and expand decent, lower-cost places to live for thousands of people who need it.