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HPP Leads Work Group on Potential Strategy to Minimize Displacement in Gentrifying Areas
05.27.2014 - HPP

"What happened to all the people who used to live here?"  This is the question that St. Paul Mayor Chris Coleman recently voiced as a question he hopes he never has to ask about the Central Corridor and the new LRT Line opening in June 2014.   He was articulating a widespread community concern—that with light rail comes escalating land values and escalating rents, leading to the forced displacement of vulnerable lower income residents, who suffered through the hard times along University Avenue but will then not get to share the benefit of the good times to come.   While no one knows for sure how big a problem this will be, there is enough evidence both locally and around the country, to justify this concern.  

The problem is that for areas like the neighborhoods along the St. Paul part of Central Corridor, the local government toolbox to deal with escalating rents is pretty empty.   Traditional strategies to address anticipated gentrification are to acquire the affordable project here or there on behalf of a nonprofit committed to long term affordability, or to build new affordable developments in anticipation they will replace units that will naturally become unaffordable for lower income residents.   Both those strategies lack the scale needed to offset the rising rents of market rate properties in the area, however.  What if there was a way to restrain rents for those units?

A couple years ago HPP identified a potential strategy—expanded use of the state property tax program known as "4d," which provides a 40% property tax break to subsidized rental properties.   The potential exists to extend this program to certain unsubsidized affordable rental properties, without legislative change—as long as the landlord agrees to rent and income restrictions and the property receives some form of local "financial assistance."  This presents the possibility of creating a local 4d program in which landlords would agree to limit rent increases in exchange for receiving property tax breaks.  

There is a host of challenging issues to work through to assess the viability of this idea, but funders have deemed it promising enough that the Central Corridor Funders Collaborative and Twin Cities LISC have provided funding for a work group led by HPP to work through the issues and make a set of recommendations.  If the idea turns out to be viable, it could apply to both the Central Corridor and parts of the Southwest Corridor with similar challenges, and would help ensure we never have to ask the question, "What happened to the people who lived here?"