Affordable housing rehab gets a boost from county

By Brian Johnson

Staff Writer

With an assist from Hennepin County, a Utah-based developer that targets “underperforming assets in stable or improving locations” plans to acquire and rehab a 223-unit affordable housing development in north Minneapolis.

The Hennepin County Board agreed Tuesday to issue up to $28.8 million in multifamily housing revenue bonds for DeSola Capital’s estimated $45 million project. With a primary address of 1121 12th Ave. N., the complex includes a 12-story building, three 3-story buildings and surface parking. Other funding sources include 4 percent low-income housing tax credits and developer equity, according to the county.

DeSola Capital, doing business as Parkview Apartment Associates LP, declined to comment. But DeSola’s website says the developer seeks out “challenges presented by tired, worn, mismanaged or underperforming assets in stable or improving locations that have the potential for solid, reliable cash flow and appreciation.”

The developer is expected to close on financing this fall and complete the rehabilitation over the following 12 to 15 months, Hennepin County communications specialist Kyle Mianulli said in an email.

The project, which includes one- and two-bedroom apartments, addresses a big need for affordable housing, Mianulli said. It includes a commitment to keep the units affordable for at least 30 years.

All but one of the units will be affordable for households at or below 50% of area median income and the remaining unit will be for households at or below 60% AMI, according to the county.

As established by U.S. Housing and Urban Development guidelines, 50% AMI in Hennepin County equates to $35,000 for a one-person household or $50,000 for a four-person household. The range for 60% AMI is $42,000 to $60,000.

Roughly 60,000 households in Hennepin County are between 30% and 50% AMI. Of those, 25,225 households are paying more than 30% of their income toward housing costs, and 14,665, are paying more than 50%, according to the county.

“Housing affordable at this level is in high-demand in the metro area, yet there are relatively few existing units to meet the demand,” Mianulli said.

Spencer Agnew, Hennepin County’s principal planning analyst, said rehab of existing affordable units makes sense in part because it’s very challenging to develop new housing at that level of affordability.

“It typically requires a lot of subsidies,” he said.

Built in 1972, the apartment complex needs rehabilitation to remain “in good condition for another 30 or 40 years,” Agnew said.

The rehab includes bathroom renovations and replacement of roofs, siding, windows, kitchen cabinets, counters, appliances, and flooring, among other things, Agnew said.

The bonding from Hennepin County’s Housing and Redevelopment Authority is not paid for through tax revenue, but is “repayable from revenues pledged by the borrower,” Mianulli said.

Housing revenue bonds are available to the Hennepin County HRA to “fund eligible projects that are determined to be in the public interest, including the development and/or rehabilitation of affordable housing,” according to a county staff report.

The Hennepin County HRA has issued $158.6 million in conduit financing since 2000. That encompasses seven projects supporting 1,066 affordable housing units, the county said.

Including DeSola’s project, another five projects have obtained preliminary or final approval from the county for future issuance. Those projects represent $170.8 million in revenue bonds and 752 affordable housing units.