The owner of the Calhoun Beach Club has notified its Section 8 tenants it does not intend to renew its contract.
The move by AIMCO, Apartment Investment and Management Company, could displace 16 low-income and/or disabled Section 8 tenants by early next year.
"We got our one-year notice, which they are required to do by law," said Susan Reyes, one of the tenants. The tenants have attorneys who are fighting AIMCO's efforts to terminate its Section 8 contract, she said.
The Calhoun Beach Club's previous owners got below-market-rate multi-million-dollar government loans, the first dating back to 1978, said Bob Odman, MHFA's director of multifamily housing for the Minnesota Housing Finance Agency.
In return, the apartment owners agreed to participate in the Section 8 program, providing 16 inexpensive units to people the federal government deemed eligible.
The contract renews in 5-year increments, Odman said. The loans are repaid. AIMCO has asked to opt out of the program.
"All I am at liberty to say, as part of a legal settlement, we have agreed that they do not have to renew," Odman said.
The Housing Preservation Project, which represents the tenants, has a different opinion on whether MHFA can force AIMCO to stay in the program.
It argues MHFA could choose to require AIMCO to stay in the program through the length of the contract -- to 2018.
"We had tried to negotiate a resolution to this. AIMCO wouldn't budge," said Ann Norton, an attorney with the Project. "We don't think they have the right to terminate unilaterally."
The units in question are six efficiencies that rent for $539 a month and 10 one-bedroom units that rent for $642 a month. Odman said. The units rent for roughly $1,000 a month less than what AIMCO could charge on the open market.
As part of the process to terminate the Section 8 contract, AIMCO is doing a market rate study to find comparable units.
The MHFA can then ask the U.S. Department of Housing and Urban Development if it would increase the Section 8 rents at the Calhoun Beach Club to market rate.
Eric Galatz, an attorney for AIMCO, said if HUD is willing to raise the rent, "AIMCO is happy to keep them."