City establishes affordable housing trust fund

At the December 16, 2019 Council meeting, the City launched a $15 million Affordable Housing Trust Fund and approved a $7 million loan for nonprofit affordable housing developer Aeon to purchase Village Club Apartments. This move immediately preserved 306 units of naturally occurring affordable housing (NOAH) in Bloomington, which are residential rental properties that are affordable without government-subsidized rents. 

The City identified a strategy to raise the needed capital for the affordable housing trust fund without placing any financial burden on taxpayers, leveraging existing City resources along with assistance from Old National Bank. This is a significant and innovative investment in retaining economic diversity in Bloomington. Few suburban cities have trust funds dedicated to preserving and creating affordable housing. Hennepin County only recently approved $15 million for a similar countywide trust fund.  

“We are proud to work with the City of Bloomington as it provides groundbreaking leadership to preserve and create affordable housing for all residents,” Aeon CEO Alan Arthur said.

The Twin Cities metro area is losing affordable housing faster than new affordable units can be built. Many NOAH properties are being purchased and converted to higher market rate rents. The owners of Village Club Apartments received multiple offers to acquire the property, mainly from national institutional investors likely to raise the rents and potentially displace current renters. 

“This process gets at the heart of the difficulty of preserving NOAH properties. Cities and nonprofits typically can’t compete with national private market investors. It’s not only the risk of being significantly outbid, it’s the inability to bring in public funds within the private market timeframe,” Community Development Director Eric Johnson said. “Because of our strong commitment to affordable housing preservation, we moved mountains to act immediately to support Aeon in purchasing this property and securing housing stability for the hard working families who have made Village Club their home.” 

The City had been working to establish the Affordable Housing Trust Fund in early 2020 under the goals of the opportunity housing ordinance, providing incentives to preserve and develop new affordable housing units while furthering private market development. With Village Club up for sale with a closing deadline of December 27 and 306 NOAH units at risk, the City moved up its timeline in an effort to preserve them. 
The Village Club complex is in need of rehabilitation and is considered a challenge due to deferred maintenance. Upon acquisition, Aeon plans to address health and safety repairs first, and then begin rehab. 
Aeon will also apply for other public funding to construct up to 300 additional affordable units on the property to assist with long-term stabilization.