In March 2010, a fire ripped through McMahon's Pub on East Lake Street, killing six people in the apartments above the bar. The victims included two adults and three children who were staying with bartender Ryan Richner at the time.

The fire was a tragedy for the Longfellow neighborhood, which lost residents, as well as a well-known hangout and music venue, formerly called the Poodle Club.

After the fire, the building's owner settled a lawsuit in 2014 for an undisclosed amount and the Minneapolis City Council voted to change its housing inspection program. The city also cracked down on similar units — small apartments or rooms above bars — to avoid more fire-related tragedies.

But the stiffer laws caused the displacement of many borderline homeless people, mostly single men, who relied on the rooms and apartments as cheap alternatives to the streets. That included several people who lived above Lee's Liquor Lounge on the near North Side.

The McMahon's owner initially talked of rebuilding the bar, but the lot has been empty ever since.

But the location, at 3001 E. Lake St., will be rising from the ashes over the next couple of years in a fitting way.

Alliance Housing purchased the site from the original owners and will build a 43-unit apartment building for extremely low-income seniors who have experienced homelessness, sheltering the same kinds of people who relied on rooms above bars before.

"The empty lot has been a reminder of the fire for years," said Melanie Majors, executive director of the Longfellow Community Council. "Out of something really tragic is something really good."

"East Lake could use more housing," said Majors. "I think this is going to be really terrific. Alliance Housing's management of their properties is stellar. It really creates a standard for future developments."

Alliance Housing is a nonprofit that grew out of the work of St. Stephen's Community and the Alliance of the Streets. They work with people who either can't afford the high market-rate rents, or who have difficulty renting because of a prior eviction or criminal background.

"We are second-chance housing," said Alliance's Bob Bono, property manager. "We don't believe in judging people on the worst moments of their lives."

Bono said the building has been financed through a combination of low-income tax credits, housing infrastructure bonds and deferred loans from the state, county and city. The project has gotten $700,000 from the Minnesota Department of Human Services' Live Well at Home funds, $925,000 from the city of Minneapolis' Affordable Housing Trust Fund, $500,000 from the Federal Home Loan Bank of Des Moines and $250,000 from Hennepin County.

Bono said most of the residents will be living on Social Security payments, disability checks or general assistance. Some may be disabled or have health problems. The minimum age requirement for residence will be 55.

"This is a segment of the population that we should not be afraid of," said Bono. "They are getting to the twilight years and they've been kind of kicked to the curb."

In fact, seniors are the fastest-growing segment of the homeless population, according to Barbara Jeanetta, executive director of Alliance Housing. In 2009, 11 percent of people who stayed overnight in shelters in Hennepin County were 55 or older. In 2015, the percentage had doubled. As baby boomers continue to age, that number will only grow.

"Homelessness is particularly cruel to the aged," said Jeanetta. "A life of deferred health care and social isolation exacerbates the physical and psychological challenges we all face as we age."

Jeanetta said that giving stable housing to this population is cost-effective because they tend to drain resources through shelter stays and emergency visits. Alliance will work with Touchstone Mental Health to provide voluntary services. The one-bedroom and efficiency units will rent for between $500 and $693 per month.

Bono, who has worked for Alliance since 1995, said he sees how people in the nonprofit's more than two dozen apartment buildings form a close community, often sharing the holidays and meals together.

"People can just lead their lives, contribute to the community and be good members of society," said Bono. "We don't see nearly the amount of drug abuse we did 10 years ago."

"The market is not going to solve this problem, and it's not their job to solve this problem," Bono said. "We have to solve this problem."

jtevlin@startribune.com • 612-673-1702 Follow Jon on Twitter: @jontevlin