Spike in rent slams low-income residents in Fairmont, Minn.

FAIRMONT, Minn. – The mostly poor, disabled or elderly tenants of a nearly 50-year-old apartment building here are reeling from a steep rent increase that they fear will force them to move in a region with few affordable housing options.

The 64-unit, three-story building known as Fairmont Square was built in 1972. Four partners bought it several years ago, one of whom has died. In June, partner David N. Olshansky, a Twin Cities businessman, bought out the remaining partners and began a long-overdue rehabilitation project, tearing off the old cedar siding with plans to replace it along with the windows.

On July 9, the property manager slipped a letter under tenants' doors notifying them that for many, rents would more than double when they renew their leases. For those on monthly contracts, that could mean as soon as September.

"There's nothing in town that's within the price range of most of the residents here," said Brandon White, a longtime tenant. "We are in the middle of nowhere."

Today, one in four households across Minnesota pays more than they can afford for shelter, forcing them to cut back on necessities such as food, education and medicines, according to a recent assessment by the Minnesota Housing Partnership. That problem is exacerbated in southern Minnesota, an area with the second-largest number of renters and where wage depreciation has made housing even harder to afford.

In Martin County, where Fairmont is located, median rents increased 22% from 2000 to 2017 while renter income increased just 8%.

Olshansky, a Russian immigrant and former dentist who owns Home Health Care Inc. in Golden Valley, among other investments, declined to comment on Fairmont Square.

Several Fairmont Square residents, meanwhile, are rallying tenants to see if the rent hike can be softened. They've counted 67 to 70 residents in the building, including about 20 children. Some residents have lived there for decades. They said at least 20 have home health care or personal care attendants, and 26 get Section 8 rental assistance.

Haley Beyer, who lives with her boyfriend and her 2-year-old son in a two-bedroom unit that costs $429 a month, including utilities, faces an increase to $815 a month, excluding utilities.

"I'm from the Twin Cities. I moved down here for the cheaper rent, the cheap cost of living," she said. "I moved down here to avoid exactly what is happening."

Beyer works as a recovery advocate for a substance abuse and mental health provider in Fairmont. Her boyfriend, Michael Thomas, works at a group home.

"We're paycheck to paycheck," Beyer said. "We're already on the SNAP [food assistance] program and we're barely making it."

The carpets in their apartment are badly worn, and the caulk in their shower wall has so many cracks that water has rained down into the apartment below. Beyer said management asked her to tape a garbage bag over the wall until it can be repaired. That was nearly a month ago.

"We know we're just low-income families," Beyer said. "We don't carry a voice in this world — but we are people."

Brandon and Crystal White live with their6-year-old daughter, Raylee, and 15-year-old son, Issy, in a three-bedroom unit. Brandon White lost his job when the Marketlink call center in Fairmont closed and now works at a gas station. Crystal White works for a public transit agency.

They said their rent is $526 a month, including utilities, plus a monthly surcharge of $45 for air conditioning in the summer. The rent when their contract renews next April would jump to $941 a month, excluding utilities, according to the notice they received.

"We were expecting it to go up $100, $200 even, but including utilities," Brandon White said. He figures Olshansky jacked up the rent knowing there's an affordable-housing shortage in the area and the tenants would be forced to come up with the money.

"Because we don't have nowhere else to go," Crystal White said.

REM Heartland supports eight disabled Fairmont Square tenants who will have to move after the rent is increased and the utilities are excluded from their rent, said Lori Larson, regional director.

"Fairmont, like many communities, does not have a lot of affordable housing options, but we are hopeful that we will be able to help each person we serve find a new home," Larson said.

Linsey Preuss, Fairmont's economic development coordinator, said the rent increase took the city by surprise.

"We were actually informed of it from a different landlord in town who ended up getting floods of calls from Fairmont Square residents looking for rentals," Preuss said.

Fairmont Square's original owners used a tax-credit financing program when it was built, Preuss said, so she reached out to the Minnesota Housing Finance Agency, which oversees the program, to see if anything can be done. She said of the 64 units in the building, 35 must follow program guidelines. A representative with Minnesota Housing said the new rental rates technically meet area guidelines — but only if they include utilities, Preuss said.

"So that's a little bit of something," she said. "I'm recommending tenants contact legal aid."

Josh Nguyen, a Minnesota Housing spokesman, said the agency is working with Olshansky "and we don't know if any residents will be displaced at this time. … Any significant increase in rent, especially on short notice, would have a devastating impact on the residents and community."

The population of Fairmont, a city of about 10,000 residents near the Iowa border, has been declining for decades. A number of retailers closed in recent years. The city recently created a housing committee that includes lenders and real estate professionals to brainstorm ways to build more affordable housing. Strategies include offering home ownership classes — in English and Spanish — and a class on improving credit scores.

Peggy Wiese, executive director of the South Central Minnesota Multi-County HRA, oversees the region's Section 8 program. She said the agency has not received any official notice from Olshansky or Paramark about the Fairmont Square rent increase. Until it does, "we're not going to react to it," Wiese said.

In general, she said, a Section 8 recipient must pay 30% of their income toward rent, so their share of the rent should not change as long as the rental rate isn't excessive. If the rate exceeds program standards, then their rent would increase, Wiese said. Without conducting a rent study, she couldn't say if the new rents were excessive.

Fairmont Square residents say the new rates compare to two newer buildings in the area with greater amenities.

Dennis Draime is a single father with three teenagers who has lived in Fairmont Square for 10 years. He has applied for Social Security disability payments because fibromyalgia keeps him from working the heavy manual labor jobs he's relied on in the past. He and his children get by on county assistance and Section 8 vouchers.

His rent without Section 8 would be $465 a month. He pays $192; taxpayers pay the difference. When his lease expires in February, Draime said, the rent would jump to $941. He said he was told that Section 8 might be able to continue his assistance, "but it was made clear that the amount of assistance they would be able to give wouldn't be near enough to make it worth staying because we would have to make up the difference."

Draime said he's afraid he'll end up homeless.

"I can't afford to move right now," he said. "There's no way I'll be able to afford anywhere else."

Dan Browning • 612-673-4493