A Twin Cities apartment developer plans to convert one of the last undeveloped warehouses in the North Loop neighborhood into the area’s biggest income-restricted rental building.

Plymouth-based Dominium wants to turn the historic Duffey Paper building and an adjacent parking lot and buildings at the corner of Sixth and Washington in Minneapolis into upward of 200 rentals in one of the most expensive rental markets in the city.

“A vibrant neighborhood needs to have housing for everybody,” said Tim Bildsoe, a North Loop resident and president of the North Loop Neighborhood Association (NLNA). “It’s the right thing to do and it’s what we believe in and it’s one of our priorities.”

The project is one of at least five income-restricted rental projects planned or under construction in the area, including two innovative projects aimed at dramatically underserved renters.

The Dominium project is by far the most ambitious. The company wants to convert the Duffey building and two adjacent warehouses into about 140 units. A building with an additional 60 or so units and parking would be constructed on what is now a surface parking lot on the north side of the warehouses.

The project received a preliminary review by the NLNA’s planning and zoning committee in late June. A formal review is planned for August when the developer will ask for a letter of support.

Dominium plans to use historic building tax credits and affordable-housing credits to build about 200 affordable apartment units around the historic Duffey Paper site in the North Loop.

The project, which is being called the Iron Store, will be financed in part with federal historic tax credits and low-income housing tax credits, and it will be one of the first to make use of new federal legislation passed this year that allows low-income tax projects to employ “income averaging.”

Before the new rules, a developer might structure a project with all the units being affordable at 60 percent of the area median income (AMI). The new rules allow the project to be affordable to a wider income band ranging from 30 to 80 percent of AMI. In this case, that means rents could range from about $500 to $2,000 per month.

Nick Andersen, a vice president and project partner at Dominium, said it is extremely difficult to develop affordable housing in a neighborhood like the North Loop without a subsidy from the local municipality.

“We see this as a great opportunity to make housing in the North Loop attainable for a large pool of Minneapolis residents,” he said. “The unique nature of this project can make that happen.”

The project qualifies for those historic tax credits because the Warehouse District is recognized as a historic district by the National Park Service and these buildings are “contributing structures” to that district. Andersen expects the project cost to be in line with other historic preservation projects they have done in the area, which have all been more than $400,000 per unit.

“It is important to note that comparing a historic rehab of this nature to the per-unit cost of new multifamily construction or single-family homes is comparing apples and oranges,” Andersen said. “We’ve seen with the A-Mill and Schmidt Brewery; these rehabs can transform a neighborhood for the better while preserving the historic fabric of our neighborhoods.”

The Duffey buildings have been vacant since 2016 when the Duffey Paper Co. was sold. Since then, there has been considerable speculation about the fate of the buildings, which received multiple offers from local and national developers.

“The North Loop has become one of the most sought-after places to live in Minneapolis,” Andersen said.

Dominium made its initial offer on the building about three years ago, but when the winning bidder failed to close the deal, the Duffey family approached Dominium and others. The deal is expected to close next summer. Terms aren’t public.

The return of less-expensive rentals to the North Loop is something of an about-face for the area. Long before the North Loop was named one of the top up-and-coming retail destinations in the country, the area was a go-to place for cheap digs.

During the past decade, hundreds of upscale apartments and condominiums have been built, making it one of the most coveted — and expensive — neighborhoods in the city.

A recent analysis by the Minnesota Housing Partnership showed that renters in downtown Minneapolis faced the biggest rent increases among neighborhoods with the most rentals in the city. Since 2010 downtown rents, including the North Loop, have increased 25 percent.

In 2015 when North Loop-based Schafer Richardson announced plans to convert the Cameron Transfer and Storage Co. building into 44 rentals, it was the first new income-restricted rental housing since at least 2001.

Since then, the firm said it plans to convert the former Zuccaro’s warehouse into more than 100 low-income rentals. In April, Beacon Interfaith Outreach and Better Futures Minnesota started construction of a 40-unit rental building for former felons. And YouthLink and Project for Pride in Living are completing construction of Downtown View, a 46-unit rental building for homeless youth. That project received a $200,000 grant from the NLNA, Bildsoe said.

Bildsoe also said the NLNA will ask the developer to participate in a pilot project aimed at asking developers to be more transparent about their development plans. For example, the city now requires developers to notify landowners within 350 feet of a site of a proposed land-use application. The group would like to expand that notification to within 750 feet of the site, and to provide better signage.

“I think the whole city should be adopting this,” Bildsoe said. “We’re excited about trying to lead the charge on that issue.”