The Minneapolis/St. Paul region has seen a dramatic increase in the number of investors who are targeting naturally occurring affordable housing (NOAH); in other words, properties that have aged into affordability. With the lowest vacancy and unemployment rates in the country, real estate speculators recognize that NOAH properties can command much higher rents, and investors are purchasing these properties by displacing the existing low-income residents. Aeon, a nonprofit owner and manager of affordable housing in the Twin Cities, has an entirely different strategy for the NOAH properties it acquires. “We made a mission-driven decision to aim for zero displacements in the properties we acquire,” said Alan Arthur, President, and CEO of Aeon.
In 2018, Aeon received an $8.7 million acquisition loan from Community Housing Capital (CHC) to purchase the Carrington Drive Apartments. Aeon plans to keep the 128 units affordable with a Land Use Restriction Agreement (LURA) that restricts renters to those at or below 60% of area median income. The LURA will also qualify the property for a tax reclassification, which will give Carrington Drive an estimated 40% lower annual tax rate. But as demand and the cost of funds increases, it has become more challenging to compete for these properties and keep rents affordable. “Even six years ago, we could purchase a NOAH property for about $50 thousand per door, but now they are more than $100 thousand per door,” said Arthur. “At this price, it is difficult to arrange sufficient equity capital and tax breaks to compete with speculators and keep rents low. CHC’s loan was a critical component in acquiring Carrington Drive. CHC stepped in with interim financing to allow us the time we needed to pull in long-term equity sources,” added Arthur. The key partners in the acquisition included CHC and the Housing Partnership Network (HPN). HPN and CHC combined their funds to provide the first mortgage for the property, which will preserve all 128 apartment homes as affordable for more than 300 residents.
Carrington Drive Apartments, located on the northwest border of Minneapolis, are easily accessible and within two miles of schools, major retailers, restaurants, and amenities. Close to downtown Minneapolis, Carrington Drive is a very reasonable distance to the most significant employment hub in the area. There is a bus stop in front of the property, and the apartments have easy access to walking trails, lakes, and parks.
Since 1986, Aeon has been committed to strengthening lives and communities by helping people create a home where they feel safe and connected to the community around them. Aeon has built, purchased, or renovated 4,440 apartments and townhomes where 8,500 residents call home each year. Aeon’s Resident Connections staff help residents increase their housing stability by connecting them to community resources. Through partnerships with social service providers, several Aeon properties offer added support to formerly homeless individuals, individuals in recovery, individuals with disabilities, and others facing barriers to housing.