In the latest repercussion of the tight Twin Cities rental market, low-income tenants at a Burnsville apartment complex stand to lose their homes as renovations lead to higher rents.

Upgrades to apartments at the 339-unit Meridian Pointe mean rent increases of a few hundred dollars per month, threatening to price out more than three dozen tenants who use vouchers to help pay for housing.

Renters who use the Section 8 vouchers — federal rent assistance for low-income people — pay about a third of their monthly income toward rent, and a capped federal contribution covers the rest. In the tight Twin Cities rental market, demand has led landlords to raise rents higher than what vouchers can cover — or to simply not accept vouchers at all.

“There’s a bigger story here about how the economics of housing are working,” said Tony Schertler, executive director of the Dakota County Community Development Agency (CDA). “We can’t control the private market.”

In Minnesota, landlords can choose whether to accept vouchers or not. Two years ago, Philadelphia-based Resource Residential bought Meridian Pointe — then called Nicollet Ridge, at McAndrews Road and Nicollet Avenue — from Plymouth-based Dominium.

Resource Residential had planned to upgrade the property, raise rents and stop accepting Section 8 vouchers. Dozens of people moved out before the company decided to let remaining voucher recipients stay, but not accept any new Section 8 tenants.

Building renovations started with vacant units. Now, 70 percent of the units have been renovated, and the remaining 30 percent — which includes tenants with and without vouchers — will all be completed at once.

Tenants living in unrenovated units were notified this spring that their leases won’t be renewed, starting with those that expire at the end of June. Tenants who want to stay will have to pay for a more expensive renovated unit.

In interviews with the Star Tribune, tenants living in renovated two-bedroom units said they pay less than $1,200 per month in rent. Meanwhile, tenants facing nonrenewal of their leases said they were told that the same type of unit would cost more than $1,400 per month.

That increase is in response to the market, said Meridian Pointe asset manager Lucas Perl.

“Our market rents have increased drastically at this property as occupancy has increased,” Perl said. “If someone were to rent an upgraded unit a year ago, their price that they paid for that unit is very different than the price that someone would pay today.”

It’s possible that tenants could see significant rent increases across the board as market rates rise, he said.

For now, there’s a group of people unsure of where their home will ultimately be. At the county CDA’s request, Resource Residential is allowing tenants to move before their leases are up. It’s unclear whether the company will allow any flexibility for those who don’t find a new place in time.

A county event earlier this month connected Meridian Pointe residents with resources such as housing crisis assistance. But with a countywide vacancy rate under 2 percent and a yearslong waiting list for local public housing, housing advocates are worried that tenants may end up without anywhere to go — or else far from the community where they’ve established roots.

“Yes, this is all market-driven and yes, absolutely, businesses have the ability to make business decisions, and we all want to be able to do that,” said Madeline Kastler, housing manager at Dakota County Social Services. “But there are consequences for the individuals and the families and the kids that are a part of those households.”