On the southern edge of East Harlem sits an abandoned school building in the shadows of glimmering high-rise apartments.

Residents of the surrounding El Barrio neighborhood have long worried about the building's fate. With development pressures creeping into the area, Public School 109 could have been demolished or converted into expensive housing.

Instead, it's being sold to Artspace, a Twin Cities nonprofit that transforms neglected buildings and litter-strewn lots into affordable housing for artists. In the wake of the Great Recession, demand for such projects has never been stronger. Cities across the country are reaching out to the group, hoping that artists, musicians and performers will be a catalyst for growth in their languishing neighborhoods.

"Communities across the U.S. are just looking for hope and a sense of rebirth," Artspace President Kelley Lindquist said.

During the next five years, the group expects to double the number of projects it owns and manages. Work is underway in New Orleans, Los Angeles and more than a dozen cities across the country. In Dearborn, Mich., city leaders have called on Artspace to buy its stately but woefully obsolete City Hall.

"We want a place where artists can have affordable living space and do their art," said Dearborn Mayor Jack O'Reilly, who has already seen the positive impact artists and musicians can have on a community.

The city recently built a performing arts center that has been a major draw for people who might not otherwise visit downtown. "Hotels and restaurants have definitely seen the benefit," he said.

So when the city got an opportunity to move its municipal operations into more modern digs, Mayor O'Reilly called on Artspace to buy the old city hall and convert it into 41 live-work spaces.

In many cases, creating artists-only housing is a more palatable way of establishing affordable housing in communities that might otherwise oppose such efforts. Experts on the topic say artists, especially those who have home studios, are also more likely to engage in the community because the creative process tends to be collaborative.

In a 2010, Ann Markusen, a professor at the University of Minnesota, co-authored a study that said arts communities have the "potential to radically change the future of American towns and cities" by generating jobs and income, and by attracting and retaining businesses.

Those goals are a high priority for Artspace, which started about 30 years ago with a much more modest mission. The group began as a clearinghouse for studio and living space information for Twin Cities artists. But as development and high rents forced artists out of the Minneapolis Warehouse District and other enclaves, its purpose evolved. In 1990, the group tackled its first major development project, the Northern Warehouse in the Lowertown neighborhood of St. Paul, converting it into 52 live-work spaces and commercial and retail space on the first two floors. At the time, only about 700 people lived in the neighborhood. Today, Lowertown has more than 2,000 residents and dozens of restaurants and shops.

"The private market follows the artists," said Wendy Holmes, vice president of consulting for Artspace.

Traditionally, Artspace has sought out its own work, but as communities began to recognize the potential of such projects, more have reached out to the nonprofit. That's why Holmes spends much of her time traveling the country and visiting prospective sites.

"The number of calls from new communities has increased exponentially during the last few years," she said. "Communities of all sizes are thinking about this kind of thing."

Once Artspace identifies a building with potential, in almost every case the nonprofit buys it, conducts the renovation, owns and manages it. The group has its own team of experts that can assess the feasibility, scope and cost of the work, but it hires local contractors to do the restorations.

Artspace is adept at working with historic buildings because of its access to historic and low-income housing tax credits, which are used to provide gap funding for projects that would otherwise be cost-prohibitive.

At PS109, nearly $37 million of the $50 million renovation cost will be paid for using state and federal tax credits. New York City Council Member Melissa Mark Viverito said that without the tax credits, the building would have been torn down. Or, it would have to become luxury housing to justify the high cost of restoration. "We saw this as a great opportunity for the community," she said.

The project will be expensive and complicated because of the condition of the building. When the school was decommissioned more than a decade ago, crews began deconstructing the building, scraping hand-carved terra cotta trim elements from its facade and piling them inside. Because the Gothic Revival-style building has historic status, Artspace will be required to conduct a restoration rather than a renovation.

Lindquist said such projects were once in jeopardy. Several years ago the Internal Revenue Service began considering whether the tax credits were appropriate for such projects. Specifically, it was unclear whether fair housing rules that ban creation of housing for specific occupations applied to artists. So the group went to Washington, D.C., to lobby in favor of a 2008 housing bill that helped clarify what Holmes called "vague language."

"We argued that artists have many different occupations," Holmes said. "Having the language changed to specifically say that people who have literary or artistic pursuits was a huge victory."

The bill passed, and by all measures, it was a coup for housing developers across the country. And for artists, too. Matthew Rucker, a painter, moved into the Northern Warehouse five years ago. He has a sunny 1,600-square-foot live-work space on the sixth floor of the building with expansive windows and 10-foot ceilings. Certainly, the converted warehouse has been a catalyst for redevelopment in Lowertown, but it's also been a boon for Rucker both creatively and financially.

Like most people who live and work in Artspace buildings, his rent is based on his income. Not long after moving into the building he was able to quit his full-time job and focus solely on painting, earning enough money from commissions to support himself. That likely wouldn't have happened, he said, if he were still living in his former suburban home.

There are intangible benefits, too.

"When the spirit in your building revolves around art and you see it every day and hear it through the walls and doorways, it just pushes you to do more of your art and to improve it and to pursue it," Rucker said.

Jim Buchta • 612-673-7376