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Ramsey County is the latest contributor to a $33.5 million fund that will be used to save as many as 700 naturally occurring affordable housing units in the Twin Cities.

The County Board this week voted to contribute $350,000 to the NOAH Impact Fund II created and managed by the Greater Minnesota Housing Fund (GMHF), the state's largest nonprofit lender for affordable housing.

NOAH stands for "naturally occurring affordable housing," typically modest apartments that receive no public subsidy. The Hennepin County Board, acting as the Housing and Redevelopment Authority, in December approved $2 million for the fund as part of its 2020 HRA budget. Hennepin invested $3 million in the first NOAH fund, but this was the first time that Ramsey County has participated.

GMHF plans to start disbursing money in the spring in a variety of ways, including the outright purchase of properties by nonprofit and for-profit landlords. All must agree to deed restrictions designed to keep rents affordable for 15 years.

"This is the last stop before homelessness," said GMHF President and CEO Warren Hanson. "This is the most affordable market-rate housing in the Twin Cities."

The fund has amassed $27.5 million from local, state and federal governments, philanthropies and banks, with $6 million more in the works from foundations, Warren said.

Hanson said they are competing with real estate speculators who have flooded the Twin Cities market, buying affordable apartments, flipping them into higher-end rentals and in the process often displacing existing families.

Ramsey County Commissioner Trista MatasCastillo said that contributing to the fund is a way to address the housing crisis now while the county formulates a long-range plan that could include creating a permanent affordable housing fund.

"The need is high. This is an opportunity for us to step into the space and take action. This is a way to fight gentrification," said MatasCastillo, who represents Falcon Heights and parts of St. Paul's Frogtown, North End and East Side.

The first NOAH fund, deployed in 2017-19, preserved more than 700 affordable housing units, including nearly 250 in Ramsey County. It included 72 units at the Fountain Terrace Apartments in New Brighton, 118 units at Provinces Apartments in Little Canada and 52 units at the Hyacinth Apartments in St. Paul.

"It was a wild success," Hanson said.

Even with that kind of cash, it's still hypercompetitive. Speculators, who have exhausted buying options in places like Seattle and San Francisco, are now active in the Twin Cities. GMHF made offers on 17 affordable apartments last year and got outbid on all but one, Hanson said.

"In recent years, real estate speculators have been aggressive in their acquisition of these developments, upgrading a few amenities, and converting these once-affordable homes to higher-market rents," according to a Ramsey County report. "Recent 'market' transactions in the seven-county metro have severely curtailed or eliminated the use of the Federal Section 8 housing choice vouchers."

The vacancy rate in the seven-county metro is 2.3%, with the average monthly rent at more than $1,200. That's nearly an 8% increase over last year, according to a report from Marquette Advisors.