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With Seward Towers, advocates see a rare win for affordable housing in the Twin Cities

The buildings fill a demand in the metro area at a time when more and more affordable housing projects are being converted into market-rate properties.

The two 21-story buildings, which host 320 units each, have provided the Seward neighborhood with subsidized, Section 8 housing for nearly half a century.
Courtesy of Seward Redesign

It’s not often that affordable housing gets painted with positive strokes, but that’s just how residents and Seward community members are viewing what’s taking place at Seward Towers in south Minneapolis.

The two 21-story buildings, which host 320 units each, have provided the Seward neighborhood with subsidized, Section 8 housing for nearly half a century. Earlier this year, the owners closed a nearly-$100 million refinancing deal that will extend that status for an additional 20 years.

The facelift is a rare win for affordable housing, which has seen a significant slowdown in recent years. Both CommonBond Communities and the Seward Towers Corporation, who have co-owned the Towers since 1990, said that ensuring the buildings remain Section 8 helps to fill a growing demand in the metro area at a time when several affordable housing projects are being converted into market rate housing.

“You’re kind of seeing across the city,” said Amanda Novak, CommonBond Communities’ associate vice president of business development, “where the money that’s going to those redevelopments is really increasing rent substantially.”

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According to a 2015 Metropolitan Council report, only 6 percent of housing added in the Twin Cities in 2013 was considered affordable housing — down 29 percent from the previous year. This despite the fact that 100,000 households in the metro who don’t live in affordable housing could qualify under the state’s criteria.

Alan Arthur, CEO of affordable housing nonprofit AEON, said those numbers reflect a real estate market that’s at odds with current government incentives. The result, he said, is that building owners are finding it more profitable to convert their properties to market rate apartments than to reapply for subsidies like Section 8 housing credits.

“This is happening all over the metro,” Arthur said. “We’re losing as many affordable housing units as we’re gaining.”

Last year, for example, AEON tried to acquire Alden, a 68-unit building in downtown Minneapolis that had operated for more than 20 years with tax subsidies. But the building was sold to another owner who is going to charge market-rate rents. The Crossroads apartments in Richfield (now the Concierge), which housed almost 700 affordable units, was also sold to developers last year. Its new owners also plan to rehab the building and charge market rents.

Preserving affordable housing

In 1990, the owners of Seward Towers planned to let their Section 8 contract expire so they could start charging market rate prices. When neighborhood housing organization called Seward Redesign caught wind of the move, however, they worked with CommonBond Communities, the Greater Metropolitan Housing Corporation and the Seward Neighborhood Group to maintain the building as affordable housing.

“The Seward Towers have always been part of the fabric of the neighborhood,” Novak said. “It was important to the neighborhood overall that the quality of that housing be maintained.”

Together, the groups purchased the buildings under a new entity called the Seward Towers Corporation, she said, and renewed the Section 8 contracts.

Seward Redesign Executive Director Brian Miller said the move took a lot of time and energy, but in the end the efforts paid off. The new management organization worked out new contracts for each building to renew their Section 8 contracts either annually or every three years, he said, which is how it’s been operating until this January.

Now CommonBond has managed to refinance both buildings for just over $91 million, Novak said, with the majority of that funding coming from banks and commercial lenders, though the City of Minneapolis, Hennepin County and the Metropolitan Council also contributed funding.

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Novak said the refinancing allowed them to make major renovations on the buildings without sacrificing affordable rents.

“We were able to invest over $60,000 per unit in updates,” Novak said. “It truly is the convergence of neighborhood and like-minded [community development corporations] and developers.”

‘Connected to the community’

Seward Towers Corporation President Diann Anders said residents and community members didn’t just want to preserve affordable housing in their neighborhood, they also wanted to ensure it was done right. “Good affordable housing has to be connected to the community or it becomes a problem,” Anders said.

Novak said the renovations, which began in January, involve major updates like replacing water and sewage lines, forcing CommonBond to temporarily relocate around 40 units off-site during construction. But by getting regular input from their residents, they’ve managed to keep complaints to a minimum, she said.

Seward Towers resident Tariku Belay agrees. Belay sits on the Seward Towers board of directors and said every tenant he’s spoken with so far has been happy with how the process has been going — even those who have been relocated. “When you are relocated, they do everything for you,” Belay said. “You don’t have to touch anything … and if you want to move on your own, they will pay you money [for moving costs].”

Novak said the majority of the residents at Seward Towers are East African immigrants, so they’ve also hired translators to help act as liaisons between residents and construction management. “This is their home,” Novak said, “so we need to be respectful of that and be very open in terms of communication.”

Construction is about 25 percent complete, she said, and they hope to wrap things up by next fall.

Miller said he believes the project never would have been successful if they hadn’t relied so heavily on resident and community input, and it’s helping the neighborhood view affordable housing as an asset.

“My personal belief is the community being engaged has resulted in a strong relationship,” he said, “and a totally different attitude on the part of the community towards affordable housing.”