When rising rent makes affordable housing unaffordable

About a year and a half ago, 63-year-old Pam MacDonald decided to sell her house. She was a recent amputee, and the upkeep that came with homeownership was too much.

That's when she found River North, a new senior living complex in Coon Rapids that boasts affordable rents.

"I saw this new building come up, it was listed at $888 a month, and I thought 'that's not too bad,'" MacDonald said.

One-bedroom units in the area cost more than that. But because River North's developer, Dominium, used a federal tax credit to help finance the project, Dominium must keep rents below market rate. Rents are based on a federal formula tied to the median household income for the area.

But even before she moved in, the property manager called MacDonald to tell her that rent would be going up by $51 a month.

"By then I had already sold my house, had no other place to go," MacDonald said. "So I came in at $939 instead of $888."

That increase was followed by another $45 per month increase this spring.

As the state grapples with how to expand its inventory of affordable housing, MacDonald's situation underscores another problem at play: Renters already living in affordable housing say unexpected rent increases could force them to move. With the rental market so tight to begin with, there are few places for them to go.

MPR News spoke with eight tenants at four of Dominium's 51 Minnesota properties, and they have similar stories: They knew rents might go up when the federal government announced new rent ranges — even in the middle of their leases.

But these tenants also said that when they signed their leases, Dominium property managers initially explained those increases would be small — $5 or $10 a year.

The larger increases can strain the notion of "affordability" for some renters. MacDonald picked up part-time work to keep up with the 10 percent increase in her rent.

Since she and her neighbors started to question the most recent increase, Dominium refunded tenants the additional rent they started to pay this spring, but said rent will go up when leases renew.

Representatives from Dominium declined an interview request. But in a statement, the company said it raised rents to the legal maximum because demand for affordable housing is so strong in the Twin Cities and in Rochester.

The company also said midlease rent increases are standard industry practice.

Mid-Minnesota Housing attorney Luke Grundman disagrees.

"I think a lease provision that gives the landlord the right to raise rent in the middle of a tenancy, for me, at least, creates some serious doubts about whether it would be enforced by a judge," he said. "And it might violate consumer protection statutes in this state."

This summer, a Dominium property tenant in Rochester won temporary relief in court after his lawyer argued that a $244 rent increase threatened to put him and his mother on the street. The judge ordered the tenant pay his original rent until the case is settled.

Nearby, single mom and full-time student Rebekah is on a month-to-month lease in an affordable housing apartment complex, and has seen two rent increases since she moved in about a year ago.

Rebekah didn't want to give her last name because she worries she and her son will be evicted from their two-bedroom apartment.

Rebekah's rent increases have been relatively small. And according to state documents, the $799 she pays monthly for her two-bedroom apartment is still low compared to other rentals in the area.

It's the uncertainty of whether her rent will become so expensive that she has to move that causes her anxiety.

"It's really hard not knowing where you're going to live," she said. "It's very unstable, and it stinks to be relying on something unknown."

Rebekah says she has looked for a less expensive place. But affordable housing in Rochester is scarce and competitive. And because she's a student with a part-time job, proving she can afford a place is difficult, too.

So for now, she's going to stay put and hope her rent remains manageable until she graduates next year.