Sometime at the end of March a building in Minneapolis’ Whittier neighborhood that has been home to some of the region’s hardest to house people will close.

Since 2001, 2011 Pillsbury has been part of the housing supply by Alliance Housing with up to 27 single adults trying to move from homelessness to permanent housing. Over that time, about 1,200 people have been helped. But the cash flow from the residents on fixed income or low-wage jobs hasn’t kept up with the costs, a situation made worse by the pandemic and now hit hard by inflation, higher insurance premiums and increased costs of security and maintenance.

“In the end I had to recognize that the stability of our organization and the ability to continue to serve residents in our other buildings was at risk due to the level of financial reserves we were having to put into this one building,” Jesse Hendel, executive director of Alliance Housing nonprofit in the Twin Cities, told a Senate committee last month. Annual losses increased from $100,000 in 2020 to $250,000 last year.

2011 Pillsbury is a wood-and-window illustration of problems facing many of the state’s affordable housing providers, both nonprofit and for-profit. They are sounding the alarm with policy makers, newly armed with an analysis called the Distressed Property Data Project that looked at the finances of thousands of units across the state.

“Based on operating statements from providers, average cash flow among 11,408 units with available data showed a decline of $1,875 per unit between 2018 and 2023,” concluded the report by O’Neil Consulting that was released in February. “Extrapolating this per-unit figure to the entire 26,000 units in this report would have produced a cash flow decline at the property level of nearly $50 million between 2018 and 2023.”

While the data stopped with 2023 figures, the consultant, Tom O’Neil, thinks the problems continue.

“Many housing operators report continuing distress into 2025 from such factors as lower payments from tenants, insufficient supportive services funding, depleted repair and maintenance funds, rising insurance, materials and labor costs, shortages in qualified staff, and continued neighborhood instability in certain areas of the Twin Cities and select areas of Greater Minnesota,” concluded the report.

“Put simply, the math doesn’t math,” Scott Cordes, the chief operating officer of Project for Pride in Living, told the Senate Housing and Homelessness Prevention Committee last month. Cordes told the committee that before the pandemic, 60% of the nonprofit’s housing portfolio had positive cash flow and newer housing helped subsidize older units, which had higher costs.

“In 2024, only 25% of our properties have positive cash flow, and the losses on older properties were substantially greater than they were before the pandemic,” Cordes said.

Ellen Sahli, president of the Family Housing Fund, was a member of an interim legislative task force looking into issues facing affordable housing. She said the data analysis on distressed property shows there are “no outliers.” The O’Neil analysis backs that up.

“The data in this analysis — covering nearly 26,000 units in 456 regulated properties — shows that a high level of distress has occurred among regulated housing properties and provider organizations of all types, not just mission-driven nonprofit organizations serving those most in need,” the report stated. “This analysis included at least 88 regulated properties owned by for-profit entities, with more than 4,100 units. This group did not find immunity from the distress that affected nonprofits.”

Regulated affordable housing refers to projects that are subsidized through grants or tax credits that can keep rents lower. They must follow rules that protect affordability such as rent limitations that don’t allow hikes due to market conditions.

Said Sahli: “All affordable housing providers, nonprofit and for-profit, metro and across Greater Minnesota, are struggling in the current environment. We are at risk of losing these critically important and publicly funded homes and displacing families who reside there.”

Threats to affordable housing were among the topics an interim task force created by Sen. Lindsey Port and Rep. Mike Howard was directed to tackle. Port, DFL-Burnsville, chairs the Senate housing committee, and Howard, DFL-Richfield, co-chairs the House housing committee with Rep. Spencer Igo, R-Wabana Township.

The testifiers, several who were task force members, late last month endorsed a handful of recommendations they said could help. One would give housing providers more flexibility in how they spend public housing preservation money to keep distressed buildings open. Another would better sync housing with the social services that help people stay out of homelessness such as educational support, employment readiness, health care, mental and chemical health services and aging and disability services. 

The task force also called on the state Housing Finance Agency to coordinate work among funders and housing providers to direct money toward stabilizing housing at risk of closing.

Related, from 2022: Bipartisan plan for housing support for seniors, disabled and veterans still may not make it out of Minnesota Legislature 

Port said the new report highlights just one of the issues facing housing affordability and availability in all parts of the state.

“The 10,000-foot view is, there is not enough affordable housing in Minnesota, and we haven’t maintained what we already have,” Port wrote in response to questions raised to her committee by the housing providers. “We’ve seen decades of federal disinvestment in existing housing, and the state has had to pick up the tab; and rising labor and materials costs, on top of delays from permitting and design and zoning restrictions, has made it too expensive to build new housing.

“The section titled ‘Distress Factors are Largely External to Providers’ is a short but devastating read, and it shows that Minnesotans are being pushed to the edge in so many ways: inflation, evictions and a tough job market; and a surge in substance abuse and social isolation. It’s not just one thing — it’s everything,” Port wrote.

What can the Legislature do about it in the current budget environment? Port said a tighter budget that could be made worse by the economic impacts of federal tariffs on imports makes more money less likely. Some of those tariffs on building materials from Canada could also make housing construction more expensive, she said.

A bill she is sponsoring with bipartisan co-sponsors would create another task force to look for ways to make insurance more affordable

“The task force would help identify the forces behind the rise in property insurance costs and provide insight to lawmakers as we create policy solutions,” Port wrote.  Another bill, based on the task force recommendations, will attempt to gather more information to help guide future legislation.

Peter Callaghan

Peter Callaghan covers state government for MinnPost. Follow him on Twitter @CallaghanPeter or email him at [email protected].

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