After years of watching the Twin Cities' affordable housing market grow increasingly tight, a group of affordable housing advocates, nonprofits and private companies has decided to take the problem into its own hands.

The Greater Minnesota Housing Fund, a nonprofit affordable housing lender, is developing the nation's first regional pool of money to help buyers who want to preserve affordable housing buy apartment complexes when they come up for sale.

It's an effort to counter a national issue that housing advocates say has reached a crisis point: a booming rental market in which buildings that have served low-income tenants for decades are being sold and upgraded, with rent increases that push tenants out.

"If we just let the marketplace deal with this, there will be a catastrophe," said Rick Kahn, a consultant to the Housing Fund and Minneapolis-based Aeon, a nonprofit developer, owner and manager of affordable housing. "The goal is to not [buy] them all, but to do enough to change the outcome," Kahn said.

The fund, which is expected to be activated by early next year, initially will offer about $25 million in equity. The goal is to fund purchases of 10 to 20 percent of the affordable buildings that come up for sale each year in the seven-county metropolitan area, with the potential to spread to other counties.

Investors so far include Hennepin County and the McKnight Foundation, and more are expected to join this fall. These contributions will fund low-interest loans, and investors will receive tax benefits, according to Warren Hanson, president of the Greater Minnesota Housing Fund.

"It's a very valuable approach, and it will certainly help with the problem," said Chip Halbach, executive director at the Minnesota Housing Partnership. "Of course, the overall problem is just that there's an inadequate supply of lower-cost apartment buildings."

Priced out by rehabs

The vacancy rate for apartments in the Twin Cities has sunk to less than 3 percent. According to a report out Monday from the Minnesota Housing Partnership, the fastest-growing group of renters is those earning between $50,000 and $99,000 annually.

In response, real estate investment companies — including some from outside the region — are buying buildings, fixing them up and putting new rules in place that make it difficult for low-income tenants to stay. In addition to rent increases, landlords are ramping up screening criteria and deciding not to take housing assistance, such as Section 8 vouchers, that enable low-income tenants to live in unsubsidized buildings.

Meanwhile, construction of new affordable housing isn't keeping up with demand. Tim Thompson, president and senior attorney at the Housing Justice Center, points to this example: In 2014, about 700 new affordable housing units were built in the Twin Cities. The next year, the sale of the Crossroads apartment complex in Richfield resulted in rent increases that made 698 affordable units unaffordable.

Myesha Williams lived at the Crossroads for six years. Her mother and brother lived there, too. When the building was sold, Williams said, "they basically made my entire family homeless."

Higher rents, lower quality

A caseworker found units for Williams and her family at another complex in Bloomington, but it's not ideal. Transit is sparse, the neighborhood lacks diversity, and the building's walls are so thin, Williams said, that she can hear her neighbors sneeze.

Yet, just last week Williams and her family learned that the rent is going up.

Rents are rising, in part, because the cost of buying apartment buildings has gone up. According to the Minnesota Housing Partnership report, the average unit price jumped more than 80 percent between 2009 and 2015, from less than $50,000 to nearly $90,000.

"As owners are paying more and more for these properties, over the long run there's just no way they can get their money back unless they continue to increase rents," Halbach said.

To qualify for low-interest loans through the regional fund, buyers must agree to keep rent affordable and serve a low-income population for 15 years. Getting low-cost capital and avoiding major upgrades will help, Hanson said.

"What you do is you leave the orange Formica countertops, and you make repairs," he said. "It's not going to be a remarkable transformation of any property, but it will keep people housed."