Santos Mejia, a maintenance technician with a couple of jobs, almost broke down Friday while he described the importance of the safe, affordable apartment he and his family rent from developer-manager Aeon in Richfield.
“If Aeon hadn’t bought the building my family would have been displaced,” Mejia said. “The stability has helped me be a good father.”
Aeon recently bought a Brooklyn Center building, the 127-unit Carrington Drive Apartments, for $8.7 million and a promise to keep it affordable for the working-poor folks who comprise most of the renters.
“Without a home, there’s no homework that gets done,” said Aeon CEO Alan Arthur.
Aeon has joined with Sunrise Banks and other partners on a $19.4 million, equity-debt affordable-housing fund that, when leveraged, will bring an estimated $62 million to preserve affordable homes in the region.
The initial goal of Sunrise Banks Community Development Corp. (CDC) is to acquire 600-plus apartments in the Twin Cities.
Sunrise CEO David Reiling said developers created about 8,000 affordable-housing units in the Twin Cities between 2011 and 2017 but at least 9,000 units were lost to investors who bought workforce-housing buildings, upgraded them and raised rents markedly.
The Minnesota Housing Partnership said median wages decreased 4% in the Twin Cities area between 2000 and 2017, while median rent increased 13%. And rents continue to climb faster than wages.
“Sunrise felt an obligation to create this pilot model,” starting with the $19 million investment, said Reiling, who noted that his family has built a profitable bank thanks to its working-to-middle class customers in neighborhoods where the cost of housing has skyrocketed. “This is an example of what we can create when we put our heads together.”
Arthur said up to 100 homes weekly in the Twin Cities are lost to investors who upgrade them and charge rents that usually price out lower-wage renters.
In addition to Aeon and Sunrise, the partners in the venture rolled out Friday include the Frey Foundation, the Minneapolis Foundation and the St. Paul & Minnesota Foundation.
The nonprofit Sunrise CDC is accepting contributions, as well as investments through these foundations that will pay them and individual investors up to 2% annually on investments that also have a community impact. And that’s a better return than deep-pocket investors can get on big-bank money-market funds.
“We believe a safe and stable home is a human right,” said vice president Carol Frey Wolfe of the Frey Foundation, an Aeon partner for a dozen years that is stepping it up with the expanding Sunrise CDC.
R.T. Rybak of the Minneapolis Foundation noted that no funds from existing donors will be diverted from other causes.
The Sunrise CDC is raising significant contributions for housing through the Minneapolis Foundation’s “InvestMPLS” fund, known as “impact investing,” which the foundation trustees invest in housing and other causes supported by donors in return for a modest return. It’s a significant growth area for outfits such as Minneapolis Foundation and the St. Paul & Minnesota Foundation.
Invest MPLS and other impact funds essentially make very low-interest loans to capital-poor nonprofit developer-managers such as Aeon, which otherwise rely on philanthropy or more-expensive bank loans.
Gov. Tim Walz this week recommended to the 2020 Legislature that Minnesota borrow $276 million to pay for affordable-housing projects across the state. Walz said it would go a long way in “addressing a need that all Minnesotans know is real.”
Affordable housing generally is considered that which a renter can get by with paying 30% or less of monthly income.