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reserves are sometimes used to preserve the affordability of existing units, and loans are available for the rehabilitation of affordable rental housing, keeping affordable units from being lost to building closings and condemnations both in tt~e Twin Cities metro area and in Greater Minnesota. The success of these programs brings challenges along with the benefits, however. Ann Norton of the Housing Preservation Project, a nonprofit organization based in the Twin Cities that works on housing preservation nation-wide, notes that more people know about housing preservation efforts in Minnesota today than in the past. Owners are much more willing to consider preservation as a first option, instead of prepaying their mortgages and raising rents. Unfortunately, Norton also notes that the increased public familiarity with preservation programs and successful preservation deals has led to a perception that the worst is over and preservation has been '--- taken care of, much like the increasing vacancy rates in the state have caused many people to think the housing crisis is over, even though vacancy rates for affordable units are still Iow. While preservation has been successful in the Twin Cities, and most developments there are not in imminent danger of losing their affordability, Greater Minnesota communities are not receiving the preservation attention they need. Norton stresses that "state funders need to allocate more resources to Greater Minnesota for housing preservation, especially in rural areas." The small scale of many housing developments in rural areas makes preserving those units time consuming and expensive. While the nonprofit housing organizations in Greater Minnesota consider preservation projects a high priority, the lack of resources and the high costs resulting from low development density make it difficult to complete the work that needs to be done. The Southwest Minnesota Housing Partnership (SWMHP) has received 30 requests over the years to rehabilitate subsidized properties or purchase them from owners who wanted to opt out of their mortgages, and the Central Minnesota Housing Partnership (CMHP) has received eight requests since 2002. Shed Harris of CMHP reports that property owners in larger cities like St. Cloud ask for transfer prices higher than the organization can afford, so taking over these properties and preserving the affordable rents is almost impossible. In more rural areas, the barriers are different, but still substantial. Staff from SWMHP, 0MHP and other nonprofit housing organizations say that typically, the ownership transfer and potential rehabilitation ora subsidized property take two years, ~'~For more information on affordable housing~ preservation, visit the following Web sites: National Housing Trust, at: www. nhtin¢.org (go to Public Polic_y and Data Clearinghouse) "Housing Facts & Findings," a publication of the Fannie Mae Foundation. is available at: www, fa nniem aefounda tion.o.rg/ programs/hff, shtml (go to Volume 4, Issue and funding sources like MHFA§ HOME Rental Rehabilitation Loans and USDA Rural Development~ Housing Preservation Grants do not allow the organizations to take a developer fee making it hard for the organizations to coyer'their Another issue concerning housing preservation in Minnesota and beyond is the fact that many of the subsidized mortgages used to finance affordable developments will run out in the next fewyears. This problem has received relatively little attention from policy makers and the affordable housing industry, but presents an even greater challenge than current preservation efforts. Unlike situations in which an owner wishes to prepay a mortgage, where there are restrictions and incentives working to keep units in the subsidy programs, when the mortgages are satisfied, all restrictions on.the rents owners can charge end. Norton identifies this issue as a major obstacle for Minnesota, where many of the subsidized developments were built in the late 60s and 7Os, meaning their 40-year HUD mortgages will be satisfied in the next few years. No work has been done in the state to address the issue, however, and that needs to change. The National Alliance of HUD Tenants (NAHT) is one ofth~ few organizations thinking about how affordable units will preserved as the subsidized mortgages run out. NAHT Director Michael Kane is considering several possible measures that could help preserve these housing units. Can Congress be convinced to forward enhanced Section 8 vouchers to the tenants affected by satisfied subsidized mortgages? Can a regulatory framework preventing markebrate rent increases or providing incentives for owners to keep their rents affordable be developed? These are important questions for Minnesota to consider in the next fewyears. The problem of preserving developments funded with Iow- income housing tax credits is similar to the problem of HUD mortgages being satisfied. During the first three years of the tax credit program, affordable rents were required for only 15 years. (The terms have since been lengthened.) The affordability of these units is now in danger, as the 15 years have passed, and they must be preserved along with HUD- subsidized developments. The potential loss of these affordable rental units threatens to deepen the state~ housing crisis, as current levels of affordable development cannot keep up with new demand for affordable housing. Luke Avery is the Grant Writer and Communications Technician al Con[act Luke at 651.649.1710 ext. 109 or lavery@mhpontine.org Minnesota Housing Partnership 2