WASHINGTON, D.C. – (RealEstateRama) — The City Council has approved revisions to the City’s investment policy in an effort to help preserve affordable housing in Minneapolis.
The policy change allows the City to invest in mortgage backed securities where the underlying mortgages are for properties that are “naturally occurring affordable housing” (NOAH) properties in Minneapolis. Naturally occurring affordable housing generally refers to unsubsidized multifamily rental housing affordable to households with incomes at or below 60 percent of the area median income ($51,480 for a family of four.)
Rents in NOAH units average between $500 and $1,200 per month. Minneapolis has about 23 percent of these affordable units in the seven-county metro area, roughly 38,000 units. The strong real estate market has made these properties more attractive to investors and subsequently led to dramatically higher rents at many buildings and a displacement of tenants who can no longer afford these increased rents.
Investments in NOAH properties would be limited to 10 percent of the City’s investment portfolio, which could help finance 800 to 1,100 rental housing units in Minneapolis, depending on purchase prices. The investments would be guaranteed by agencies of the federal government, which have strict underwriting criteria. The guarantee of the federal agencies is necessary to make the mortgages eligible investments under state law. The goal is to help NOAH property owners reduce rents for tenants and invest in additional capital improvements in buildings.