Edina, Minn., April 26, 2019 – The Edina Housing & Redevelopment Authority at its meeting April 25 approved a $350,000 grant to support Aeon’s acquisition and rehabilitation of an apartment building 7008 Sandell Ave. and keep it affordable for 30 years. The source of the grant is pooled funds from the Southdale 2 Tax-Increment Financing (TIF) District.
Aeon, a Minnesota nonprofit affordable housing operator and developer, intends to acquire a portfolio of 220 units in 16 properties that are considered naturally occurring affordable housing (NOAH). Of the 16 properties, one 11-unit property is in Edina at 7008 Sandell Ave. The rest are in Minneapolis. Aeon views the portfolio as a single mixed-income preservation project with the goal of preserving the units’ affordability and avoiding displacement of current residents.
“Affordable housing” is defined as that for households with incomes less than 60 percent of Area Median Income (AMI). Currently, none of the 11 units have rents that are at or below the limit. In exchange for financing from the Edina HRA, Aeon has agreed to reduce the rents on five of the units to the 60 percent AMI limit and enter into a Declaration of Restriction Covenants to keep them at 60 percent AMI with the remaining six priced at or below 80 percent AMI for at least 30 years.
“The only way that nonprofits like Aeon can pay the fair market value for these properties that sellers demand and still keep rents affordable is through public financial participation,” said the City of Edina’s Affordable Housing Development Manager, Stephanie Hawkinson. “Since they are competing with value-add investors who make purchase offers assuming large rent increases, non-profit developers frequently require public resources to achieve a sustainable net operating income.”
The City of Minneapolis has committed $4.5 million toward the preservation of the 209 Aeon units there. Along with the $350,000 from Edina, these funds allow Aeon to compete for the portfolio against investors who otherwise could achieve a higher net operating income by displacing the current residents and increasing the rental rates.
“The preservation of naturally occurring affordable housing properties is a key component to addressing the need for affordable housing in Edina,” Hawkinson said. “Generally, private developers do not create enough new units of affordable housing to keep up with the loss of affordable units lost to market conversion. Aeon has taken an active role over the last few years to compete for these properties and stabilize rents. The preservation of existing affordable units is an important part of the City’s strategy to make sure Edina offers high-quality housing opportunities at a variety of income levels.”
The City will use pooled TIF funds from the Southdale 2 TIF District. This district was created in 2012 to jumpstart new employment and investment in an around the aging Southdale Center after the recession. In 2014, the State Legislature
granted the City authority to pool a limited amount of new incremental property taxes from within the Southdale 2 TIF District to support affordable housing. Legislation is currently pending that would extend the authority to use TIF monies to coincide with the expiration of the TIF district in December 2021, and allow the use of a greater percent of the incremental property taxes for affordable housing, including the preservation of NOAH properties.
For more information, contact Hawkinson, 952-833-9578, or shawkinson@EdinaMN.gov.