New Minnesota rule locks in rents for some low-income tenants

Low-income Minnesota residents living in homes that used a federal tax credit program for affordable housing are getting a reprieve from having their rents raised in the middle of their lease.

Property owners will only be able to raise rents once a year for tenants living in units that used funds from the federal Low Income Housing Tax Credit Program. Property owners will have to wait at least a year to raise rents, regardless of whether new federal income guidelines come out after a lease is in effect. The Minnesota Housing Finance Agency's new rule took effect earlier this month.

Under the program, property owners can raise a tenant's rent over the course of their lease after the Department of Housing and Urban Development releases income guidelines for rent prices. They're not required to make the rent increase change right away but some do, causing low-income tenants in Minnesota to see their rent increase when they thought their lease expenses were locked in for the year. Tenant advocates say that's led to older or disabled adults who rely on public assistance or limited incomes for their living expenses — a key market for LIHTC properties — moving back in with family, being evicted or taking on part-time jobs to afford the higher rent.

Pam MacDonald, a resident at River North Apartments in Coon Rapids, moved in three years ago after selling her home. She said as an amputee it was difficult to maintain her property so she moved to the senior living community. When she signed her lease with the property owned by Dominium Apartments, she thought she would pay $888 per month.

"I thought 'that's not bad,' " MacDonald, 64, said. "Before I moved in they called me and said there's a $51 increase so it would be $939. Well then I was trapped already."

The LIHTC program offers investors a 10-year reduction in tax liability in exchange for funds to build affordable rental housing units.

"The big deal about it is basically this is an affordable housing program and there's millions of dollars going to some of these developers in exchange for affordable housing and you have them doing business practices that is counter to the idea of affordable housing," said Eric Hauge, executive director for Home Line, a nonprofit focused on tenant advocacy and legal services.

Local and state officials are continuing to grapple with how to manage Minnesota's affordable housing crisis as rent prices continue to outpace incomes.

Some of the most vulnerable Minnesotans caught in the fray include low-income households, older adults, people with disabilities and people of color.

MHFA officials said the new rule is meant to be another way to stabilize rents, particularly for low-income residents who rely on this monthly cost to remain the same during their lease.

"I think it's the state looking for ways to bring predictability and stability with rent but part of a broader conversation about how to increase the stability of people," said Ryan Baumtrog, MHFA's assistant commissioner of policy and community development.

For MacDonald and her neighbors, everything is now "about survival."

She is now paying $1,047 in rent and working a part-time office assistant job through a seniors program with Anoka County to supplement her disability benefits.

The rising rent is also why she started a petition among the tenants — more than 80 signatures and counting — to cap rent increases. They're hoping to get a meeting with state legislators in the coming weeks.

She has money left from when she sold her home, but she's now worried about what happens when those funds run out. People in her apartment community are also taking small jobs or moving in with family — "it's either that or be homeless," she said — to stabilize their housing situations. She said part of the problem is seniors in the community have not rented in years and are not used to the constant increases.

"We just can't afford this no more," MacDonald said. "It's so bad people are breaking down because it's a new year, new numbers are coming out, people are panicking. ... We're stuck because a lot of us can't move and don't want to move."

Tenant advocacy groups have estimated in the Dominium portfolio alone, there are 40 apartment complexes and more than 5,000 households directly affected by the MHFA policy change.

Maddie Renneke, a spokeswoman for Dominium, said in an e-mail statement that the company "calculates rents annually in accordance with standards set by the Federal Department of Housing and Urban Development" and historically kept similar affordable homes on the same rent schedule, creating rent increases that happen before the end of the lease.

"We will adhere to the recent changes made by the Minnesota Housing Finance Agency," Renneke said. "Dominium is committed to providing affordable housing in communities that need it, and providing high-quality homes for our residents is our top priority."

Marissa Evans • 612-673-4280