DULUTH – A Minneapolis nonprofit is planning a housing development in Duluth that could bring up to 120 affordable units to the west side of town.

Aeon is eyeing a vacant city-owned property at Wadena Street and W. 52nd Avenue near Menards for a two-building, multiphase development that promises at least 60 units of affordable housing. The city has put a $500,000 price tag on the property.

"The city of Duluth and the Spirit Valley neighborhood in particular is in need of additional affordable housing and … the property is a suitable site for such housing," reads a purchase option agreement with the Duluth Economic Development Authority. "Through this development, it will again be on the tax rolls, assessed as a multifamily residential property."

The authority's board will vote on the agreement next week.

The development hinges on the Minnesota Housing Finance Agency awarding Aeon low-income housing tax credits by the end of 2021 and Aeon's own feasibility study. The purchase option expires at the end of June 2022.

Founded in 1986, Aeon has built, bought or renovated more than 5,500 apartment and townhouse units. The nonprofit declined to comment on the Duluth project, saying details are still being worked out.

Duluth is in dire need of more affordable housing — units that cost less than a third of monthly income for households making less than the median $50,000 — but the shortage is felt at all income levels.

The most recent city housing report said that even as the city added 493 new housing units in 2019 — more than the previous three years combined — the overall rental vacancy rate was 2.6% in 2019. That's the lowest vacancy rate in a decade and well below the national average of 6.8%.

"Vacancy on some level is necessary for a healthy housing market and economy that work for both potential tenants and property owners," the report said.

Another 2019 report from Maxfield Research showed Duluth "could absorb up to 3,509 additional units of affordable housing from 2019 to 2024, not including the demand for 126 new single-family homes."

Several projects are in the works to address the shortage of housing at all income levels. The 194-unit market-rate Vue at BlueStone complex is expected to open next summer near the University of Minnesota Duluth, while Decker Dwellings and Birchwood Apartments near the Miller Hill Mall will bring 72 new units of affordable housing in the next several years.