May 20, 2024

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Twin Cities Spotlight: Meeting Affordable Housing Challenges

3 min read

Laura Russ, Aeon’s Laura Russ, offers insight into the challenges operators face today.

St. Paul’s strict Rent Control Policy, the eviction ban and the general economic volatility following the pandemic boom have made it difficult for Twin Cities Multifamily Operators to manage their properties. This is especially true for those in the affordable housing sector.

Laura Russ is the Chief Real Estate Officer at Aeon , and she told Multi-Housing News that there are several strange phenomena going on in the market.

She admits, on one hand, that she is concerned about the high number of vacancies in affordable Twin Cities housing, while, on the other, she acknowledges that there is a high demand for well-managed, efficient, and quality affordable housing. The nonprofit developer currently owns and operates approximately 6,000 affordable apartment units in the Minneapolis-St. Paul region. Russ is primarily focused on stabilizing the portfolio of the company and improving its operations. Here’s why.

Recently, you joined Aeon’s leadership team. What are your goals in this new role?

Russ : My top priority is to stabilize and rebalance our portfolio. Aeon purchased a number of affordable housing properties that were naturally occurring right before the pandemic. The properties needed a much larger capital investment than expected, and the immediate environment after the acquisition made it impossible to implement the plan. These properties require a reinvestment of the entire property, comparable to a construction project.

The improvement of our operational performance is my second priority. We have seen high vacancies in our affordable housing over the past two years, as has been true for many other affordable housing providers. This is due to a number of factors, including the unintended effects of the eviction ban and the increased social distress in our residents and geographical areas.

I understand that you also want to contribute to Aeon’s new strategic plan, which will guide the company’s work for the next decade. What will the plan include?

Russ : Our strategy is to build a bridge for our organization towards a stable portfolio. We’re not prioritizing new developments or acquisitions. Instead, we are looking for ways to recapitalize the existing portfolio by utilizing more direct capital sources and to focus on improving and modernizing our operations. It could be finding new ways to reward or incentivize residents. We must express our gratitude and appreciation to our tenants who have paid their rent for many years and contributed to the community.

You have a background in affordable housing. What is the biggest problem in the Twin Cities when it comes down to the affordable housing crisis, according to you?

Russ : In general, I believe that affordable housing is underappreciated. The fee structure is designed to encourage the completion of the transaction over the success of the community as a whole. While new developments are important, poorly run operations lead to policies that make housing more difficult and expensive to operate. Security is a hot topic in many of our properties. This is a tax on our properties due to the additional spending. Local Policies make it difficult for us to remove tenants who engage in dangerous behaviors, which are sometimes necessary to protect our other residents.

What are the biggest problems facing Twin Cities developers of affordable housing today?

Russ : The most challenging issues at the moment are finding renters who can successfully live in our housing and finding affordable housing that is not overly concentrated in one area.

What do you think the best way to meet the high demand for affordable housing in the Twin Cities is given the current market conditions?

Russ : The market is experiencing a number of strange phenomena. The first is the high number of vacant units in affordable housing. This is due to a number of factors, some of which are related to the mismatch in housing barriers and market supply. Many residents who are in need of housing look in areas with less affordable housing. Sometimes residents aren’t ready to live independently. Housing Link will be used to test new programs to reach these residents. It is crucial to provide much deeper support for these residents, and find new ways of serving them.

In general, the most important policy change that policymakers can make is to create the conditions for a new housing supply. This is a cost-free policy. This includes changes like reducing zoning, regulatory barriers and not adding operational constraints by poorly constructed policies.

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