Minneapolis looking to move hundreds of public-housing properties under nonprofit

Nestled in neighborhoods across Minneapolis is the city's least visible public housing: nearly 650 homes occupied by low-income families.

Better known for its high-rise apartment towers, the Minneapolis Public Housing Authority (MPHA) has also accumulated one of the largest portfolios of single-family homes in the city. But the cost of maintaining these "scattered-site" homes is far outpacing what the federal government is providing to the housing authority. Now the agency wants to transfer ownership of the properties to a nonprofit it would control.

The housing authority thinks the arrangement, which must be approved by the U.S. Department of Housing and Urban Development (HUD), will free more federal funding for the homes while keeping them under their management. Tenants will not be displaced or see an increase in rents, according to public housing officials.

"The main impact that families will see from it is over time, as we're able to make more repairs to the homes," said Jeff Horwich, MPHA's director of policy and external affairs. "There's not going to be any disruption to their lives because of this."

It's the latest example of MPHA looking for creative ways to receive more funding by changing the ownership structure of its housing. Last year, it received approval from HUD to add two aging high-rises, the Elliot Twins, to a program that brings in private investment for renovations.

MPHA started buying ­single-family homes in the late 1950s and is now the largest owner of residential properties in the city, according to property records.

Its properties are concentrated on the North Side and neighborhoods south of downtown. They are practically indistinguishable from other houses and duplexes and are a way for low-income families with children to live side-by-side with homeowners and private renters.

The houses, which are an average of 71 years old, need repairs to roofs, floors, kitchens, plumbing and more. MPHA estimated the properties had $28 million in unfunded repairs last year and could expect $16 million more over the next five years, the result of decades of underfunding by HUD, according to documents.

HUD has encouraged local housing authorities with scattered-site units to avail themselves of Section 18 of the national Housing Act of 1937, which allows housing authorities to dispose of or demolish properties with approval from HUD.

Currently, federal funding for public housing is dependent on "year-to-year fluctuations" from Congress and the Trump administration, Horwich said. By transferring scattered-site properties over to their nonprofit, he said, the housing authority would be able to apply for project-based vouchers that could be worth up to 50 percent more than current subsidies and secure funding in 20-year periods.

"You get off this … roller coaster and you know exactly what your subsidy is going to be for those units," he said.

Minneapolis Mayor Jacob Frey and City Council President Lisa Bender expressed their support for the property transfer in a letter to HUD.

"Current federal operating subsidy and capital funding — combined with the inherently varied, dispersed nature of these houses — puts them at great risk of becoming uninhabitable in the coming years," the letter read. "MPHA's scattered sites need a change in approach if they are to continue providing safe and stable homes to the families they serve today."

MPHA sent out a letter informing tenants about the Section 18 program earlier this year, stating they would not have to move out and that their rents would remain at 30 percent of their adjusted income. Tenants would have to sign a new lease, this time with the nonprofit listed as the owner instead of the housing authority.

About 75 people attended three community meetings on the subject in February. One of them was Abubakarr Turay, who is from Sierra Leone and has lived in a North Side duplex with his family for almost two years.

Turay, who works part-time at a food-service plant in Chanhassen, said he barely makes enough to support his wife and five children. He was supportive of the change if his rent stayed the same, and hoped the city would be able to add a second bathroom to his home.

"If the [rent] is not going to go up … that's fine," he said. "Anytime they're ready, we're ready, too."

Still, tensions flared during a housing authority board meeting in February, when commissioners voted to submit the Section 18 application. Some members of the audience, which claimed the housing would be privatized and that residents had not been consulted, were removed from the building, according to video of the incident.

MPHA has made several "public promises" to tenants that they will retain their housing protections, Horwich said. An upcoming agreement between the authority and the City Council ensures that homes stay affordable and that the housing authority remains the responsible party.

Deborah Thrope, a supervising attorney at the California-based National Housing Law Project, said Section 18 is typically used by housing authorities across the country to unload public housing stock. In Minneapolis' situation, she said, it's important that tenants retain similar protections they had under traditional public housing.

"Maintaining some type of public ownership is really important to maintaining the long-term affordability of these properties," she said. "With a nonprofit owner that maybe is controlled by the local housing authority, you're likely to see longer-term preservation of affordable housing."

Miguel Otárola • 612-673-4753