Local context

Brooklyn Park is a suburban community near Minneapolis with approximately 86,000 residents, most of whom are people of color. A significant portion of the rental housing stock consists of naturally occurring affordable housing (NOAH), which the city defines as unsubsidized residential rental properties that are affordable at or below 60 percent of the Area Median Income (AMI). Most rental units in Brooklyn Park are in NOAH apartment buildings. In 2019, the city’s apartment building stock consisted of 24 NOAH properties, seven subsidized affordable properties, and six non-NOAH market-rate properties, while the rest of the city’s housing stock consisted primarily of single-family homes. Nearly a quarter of the housing stock was built before 1970, including most of the city’s NOAH apartments. 

Program development

John Kinara, the city’s housing and redevelopment coordinator, explained during an interview that the NOAH preservation program emerged after years of discussions between city staff and resident groups about the need to reinvest in existing, aging rental housing stock. Residents living in NOAH units frequently reported deteriorating rental units to city officials, and neighbors often raised concerns about how substandard housing could negatively impact local property values. A staff report also revealed that the city identified rising rent trends and increasing shares of cost-burdened households within Brooklyn Park and around the region. In addition, recent high-profile sales of several apartment buildings resulted in significant reinvestment in the properties, rent increases of several hundred dollars per month, and the displacement of almost every household.

The program was established in 2017 by the Brooklyn Park Economic Development Authority (EDA), which works on various housing issues and has implemented several affordable housing-focused policy actions. State support for the program has been an important factor in the program’s success, as the State of Minnesota provides a critical  funding source for the program. Since 2020, EDA staff have participated in a NOAH Working Group hosted by Minnesota Housing, the statewide housing finance agency, to work on the regional preservation of NOAH. 

Program goals and requirements

The program’s primary aims are to prevent resident displacement and loss of affordable housing, improve the physical quality and management of existing apartments, and disperse funding to projects throughout the city. To advance these three goals, the program offers loans to developers and rental property owners to acquire or rehabilitate multifamily NOAH properties with four or more units. The program incentivizes participation by providing flexible loan terms with low interest rates and significant tax reductions on units with affordability restrictions. In exchange, the preserved NOAH units must remain affordable for at least 30 years. Each multifamily property preserved is required to have 40 percent of its units affordable to households earning 60 percent of AMI or 20 percent of its units affordable to households earning 50 percent of AMI. According to the U.S. Department of Housing and Urban Development (HUD) 2024 income limits, a four-person household in Brooklyn Park has an income threshold of $74,520 for 60 percent of AMI and $62,100 for 50 percent of AMI.

Owners and developers applying for funding must meet program standards for development experience and financial capacity. Applications must include a tenant engagement plan for acquisition and rehab phases to ensure current residents are adequately informed of upcoming renovations.

The EDA prioritizes funding projects with active resident engagement and property management practices, as well as projects that do not result in displacement. The program minimizes temporary displacement at the project level by prioritizing funding for projects with no or limited voluntary moves. For minor rehabilitation projects, residents tend to remain in their units during construction, while for major rehabilitation projects, tenants may move temporarily to a vacant unit in the same building. The 30-year affordability requirement mitigates the risk of displacement after rehabilitation. 

Program funding

The program relies on several funding streams. The primary funding sources are the city’s Housing Set Aside Fund, which consists primarily of leftover federal Neighborhood Stabilization Program funding and EDA general funds. Another critical funding stream comes from the state. Minnesota provides Local Affordable Housing Aid (LAHA) for qualifying development projects, which localities can transfer to their housing trust fund. The state also provides matching grants for every dollar of local income placed in the local housing trust fund, up to $150,000. State funding is directed to the Brooklyn Park Local Housing Trust Fund, which allocates funding to the NOAH preservation program. In addition, Brooklyn Park takes advantage of Minnesota’s 4D tax incentive to provide a property tax reduction of up to 80 percent to rental owners participating in the program on units with affordability restrictions. Minnesota has a property-use classification for low-income rental properties  —class 4D(1)— that allows qualifying units to benefit from a lower tax class rate. The city markets the tax break as a benefit to developers and landlords considering participating in the program. 

Program challenges

Throughout the program’s evolution, the EDA has encountered several challenges. For example, post-COVID-19 increases in construction costs have required the EDA to approve an increase in per-unit funding amounts. Additionally, deferred maintenance backlogs can be so severe that developers may need another loan or a loan extension if they must complete unexpected additional work not identified in the initial capital needs assessment.

Involving owners and residents in the program has also posed challenges. Despite the program’s low cost, flexible loans, and tax incentives, many developers or multifamily property owners would prefer to keep their properties at market rates rather than accept the affordability restrictions that come with EDA funding. Developers sometimes struggle to collect resident feedback to meet EDA requirements for robust tenant engagement.

Additionally, the EDA knows that utilizing 4D tax reductions may adversely affect the city’s tax revenue. Once owners enter into an affordability agreement, they are enrolled in the 4D program. As a result, the city could see reductions in tax revenues from multifamily apartments of up to 80 percent. The EDA is increasingly interested in expanding the commercial tax base to make up for tax revenue losses from multifamily apartment owners. Without expanding the tax base, taxes are shifted to other taxpayers in the city through future tax increases.