The Greater Minnesota Housing Fund, a nonprofit affordable housing lender, has created a $25 million fund to preserve affordable housing units in the Minneapolis-St. Paul area, the Star Tribune reports.
To that end, GMHF has brought together a group of affordable housing advocates, nonprofit and philanthropic organizations, and private firms to develop the nation's first regional fund designed to provide low-interest loans for the purchase of apartment complexes that come up for sale. When it activated early next year, the fund expects to provide about $25 million in equity, with the goal of funding up to 20 percent of the purchase of affordable housing stock that comes to market each year in the seven-county metropolitan area. Investors so far include Hennepin County and the McKnight Foundation, with others expected to join later this fall. To qualify for the fund's low-interest loans, buyers of buildings must agree to keep rents for those buildings affordable and pledge to serve a low-income population for at least fifteen years.
Apartment vacancy rates in the Twin Cities have fallen below 3 percent, according to a recent report from the Minnesota Housing Partnership, while both rents and the cost of buying apartment buildings have gone up. Indeed, the average unit purchase price of an apartment building in the area jumped more than 80 percent between 2009 and 2015, as real estate investment firms have capitalized on the red-hot housing market by purchasing buildings, fixing them up, raising rents, and instituting new rules designed to squeeze out low-income tenants.
"If we just let the marketplace deal with this, there will be a catastrophe," said Rick Kahn, a consultant to the 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."