Housing developer Alan Arthur balks at the idea the Twin Cities’ housing boom will, on its own, create apartments affordable to refugee families and other members of the working poor.

As CEO of Minneapolis-based Aeon, an affordable housing developer, Arthur has been buying weathered old buildings — mixed-income or unsubsidized properties like St. Paul’s 81-unit Larpenteur Villa apartments near Rice Street, the 99-unit Como By the Lake Senior Apartments on Como Boulevard, and the 146-unit Parkview Villa in Columbia Heights.

His goal is to keep rents as affordable as possible for as long as possible.

“Just look at Seattle,” Arthur said. “Look at Portland. They’ve lost all their naturally occurring affordable housing. It’s all gone. They’re telling us ‘save as much of it as you can.’ ”

But even he recognizes that property taxes, utilities, maintenance and other costs go up with time.

“We are heading toward the worst housing situation for lower-income people since the Great Depression,” said Arthur, whose organization houses nearly 8,000 people in 56 properties. “A lot of my buddies in the for-profit development world will say if we just built more housing in general, prices will plummet. But there’s no reasonable amount of building that’s going to happen in St. Paul or Minneapolis in the next 20 years that will make apartments more affordable for the lowest part of the market.”

DOES DENSITY DELIVER AFFORDABILITY?

For years, housing and public transit advocates in and around St. Paul have called for greater housing density — more apartments in taller buildings. The goal: to improve pedestrian access in a city where housing and commerce operate side by side.

Part of the rationale has been affordability. Developers can charge less rent per unit when they’re allowed to build more units.

Critics, however, point to the experience of other metro areas such as New York City, San Francisco and Boston. Those cities are as unaffordable as ever. One-bedroom apartments in San Francisco now average $3,400 per month.

In the Twin Cities, growing rent pressures have sparked renewed interest in old approaches, such as rent control, “inclusionary” zoning, buying and preserving old properties, and government housing.

Housing advocates note that while affordable housing production recently picked up, the Twin Cities region lost as much affordable housing in 2016 as it gained, in part because older units are being redeveloped or inching closer to market prices.

What little net affordable housing has been created through tax incentives tends to be aimed at families earning 60 percent of area median income — or $51,480 for a family of four. In short: the most well-off of the poor.

And to the dismay of housing advocates, the tax incentives that created them allow many of those affordable developments to go market rate in 15 to 20 years.

CURA STUDY: A Center for Urban and Regional Affairs at the University of Minnesota study on rising rents and changing demographics in five low-to-moderate income census tracts in the Twin Cities is available at gentrification.umn.edu.

“The private market place has never produced affordable housing just because the community needs it, and will never,” Arthur said. “The only time the private market has produced affordable housing is when government has offered significant incentives — sometimes totally giving away money — to do so.”

AUSTRALIA BUILT HOUSING AND IT ISN’T CHEAP

The expectation that new housing would satisfy demand and help lower rent prices never really happened in Sydney, Australia, at least not to a degree that has helped that city’s working poor.

A recent study from the University of New South Wales in Sydney raises concern about “equitable density,” or the role of lower-income housing in increasingly dense cities.

The study cites urban “renewal-led gentrification processes” such as government subsidies aimed at increasing the construction of high-density apartments in central urban areas that end up displacing, rather than housing, low-income renters.

Across Australia, the study says urban growth has pushed lower-income residents to city outskirts, or even to working-class suburbs outside the city, where there are fewer job opportunities.

“Over time, there has been a gradual withdrawal of direct government support for housing, in favor of demand-side subsidy measures,” the report states. The result: An increase in public housing wait lists and lower-income households forced into the cheaper end of the private rental market.

A LESSON FOR MINNESOTA

Those findings strike a chord with Myron Orfield, director of the University of Minnesota’s Institute on Metropolitan Opportunity, who worries about similar trends in the Twin Cities.

“Most cities are very interested in getting high-value housing and a greater tax base,” said Orfield, a frequent critic of the Metropolitan Council’s housing policies. “But all the stuff they’re building has high rents.”

He believes the only way to ensure new affordable housing keeps up with demand is to make it mandatory — particularly in affluent suburbs and popular, increasingly high-income urban neighborhoods like Minneapolis’ Uptown area — rather than subsidize housing in already low-income areas such as St. Paul’s Frogtown or North Minneapolis.

“The way you increase the supply of affordable housing would be to force the whiter, more affluent neighborhoods to build affordable units,” Orfield said. “You could move the housing subsidies there. You could also do what’s called ‘inclusionary housing.’ ”

INCLUSIONARY ZONING, AND ITS LIMITS

The concept of inclusionary housing has been around since the 1970s, with varying degrees of success and some notable failures.

Boston, Denver, San Francisco and St. Cloud, Minn., all have experimented with policies that allow more units or more square footage if a developer reserves at least a certain percentage of apartments for affordable housing.

“You say to a developer, if you want to build a 15-unit development in a neighborhood that’s only zoned for 10, then … some portion have got to be affordable,” Orfield said. “They get more density. But you need a hot market to do that. We’re doing everything totally backwards in terms of land use. In Uptown, the rents are going up. And the city has a moral obligation to leverage that market power and build more affordable housing.”

But it doesn’t always work. As a mandate, it effectively functions as a tax on new market-rate housing, which can have the ironic consequence of driving housing prices further up or discouraging construction altogether.

And it doesn’t always produce much affordable housing. The inclusionary housing effort launched in the St. Cloud area in 2002 was canceled in 2007 after limited participation.

In the years before the recession, easy access to financing and the rush to buy higher-end housing left many lower-valued homes vacant in and around St. Cloud, effectively creating a product that competed with demand for new affordable housing construction. Affordable housing grants, both public and private, also were difficult to come by at the time for the mixed-income developments.

In cities like Denver and Boston, inclusionary housing policies have allowed developers to pay a certain fee toward housing efforts, rather than actually construct affordable units.

And developers were sometimes exempted from the program requirements altogether. After limited results, Denver is moving away from inclusionary housing policies. Instead, the city is using its housing fund to buy up vacant properties for lease as affordable units.

And throughout Boston, there’s been a recent uptick in affordable housing construction, but “affordability” is relative. For instance, a Boston couple earning $58,000 per year would still be expected to pay more than $1,200 per month in rent for an “affordable” one-bedroom apartment.

700,000 MORE PEOPLE BY 2032

Many housing advocates are less worried than Orfield about whether affordable housing is too targeted to certain areas. And they doubt that enough affordable housing is being built anywhere, in poor neighborhoods or wealthier ones.

“Frankly, we don’t have enough resources to concentrate it,” said Anne Mavity, executive director of the Minnesota Housing Partnership, a housing advocacy organization. “Even in the communities that have affordable housing, that needs to be kept up and preserved. We need more resources to add affordable housing everywhere.”

Arthur, the affordable housing developer, said the rental market is about to get tighter at all price points.

His organization buys older, unregulated housing developments — or “naturally occurring affordable housing,” or NOAH — that have accepted federal Section 8 housing vouchers to help tenants with their rent but are in danger of becoming market rate.

He encourages policies that require the community to be notified 90 days before the sale of an apartment building, so organizations like his can make an offer.

Aeon attempts to keep the developments affordable as long as it can. But Arthur acknowledges it’s an uphill battle.

Related Articles After man sentenced to 40 years in St. Paul murder, courthouse locked down and shots fired nearby

Midway Fund offers $840,000 in damage, rebuilding and relocation grants

Carter, Frey declare Sept. 21 RBG Day in the Twin Cities

Choo Choo Bob’s in St. Paul chugs to a permanent close

St. Paul PD highlights surveillance photos of looting suspects, seeks tips “A couple of years ago, there were about 30,000 ‘naturally occurring affordable housing’ units in the Twin Cities,” said Arthur, in a recent memo shared with suburban housing planners. “Aeon believes NOAH apartment units are being lost at the rate of 100 per week. In 6-10 years none of these types of properties will be affordable to families with incomes below 60 percent of area median income, unless preserved by organizations like Aeon.”

“The Minnesota state demographer projects that we’re going to add at least 700,000 people by 2032,” Arthur said. “They will need to live somewhere, and will be competing with the folks who already can’t find quality affordable housing. Secondly, almost half of the jobs we create are closer to minimum wage than they are to levels that can afford the average rents, even in today’s marketplace.”