To save public housing in Minneapolis, city housing leaders say it must go private.

The landlord for more than 10,000 people, the Minneapolis Public Housing Authority wants to transfer its aging high-rises and townhouses to a nonprofit subsidiary. It believes the move will enable it to find alternative ways of paying for overdue repairs.

The executive director of the housing authority, Greg Russ, hopes it will be the biggest overhaul of public housing in the city's history. St. Paul's housing authority is pursuing the same goal.

Public housing managers will have to overcome resistance from residents, many of whom fear that privatization means they will be evicted from their homes. In recent years, the Minneapolis authority backed off its plan to renovate the Glendale housing complex under the program after residents organized to oppose it.

As public housing agencies across the nation face federal funding instability, many of them have turned to private funding for the redevelopment of their housing units. A federal program called Rental Assistance Demonstration (RAD), created by Congress in 2012, allows housing authorities to attract private investors, who will qualify for tax credits in exchange for providing the cash needed to build new subsidized housing units.

RAD is not available under traditional public housing systems, which need billions of dollars of maintenance to keep them habitable.

In May, the board of the Minneapolis Public Housing Authority approved a plan to shift its units to project-based Section 8 housing, which sets rents at 30 percent of tenants' annual income and provides a subsidy to pay the landlord the difference. Before it launches any renovation project, the agency is required to hold extensive resident consultations and public hearings, which are scheduled in early August. It also needs approval from the U.S. Department of Housing and Urban Development (HUD).

"We are trying to raise enough money to reinvest in these units without changing the underlying program structure for the residents," Russ said. "It's exciting to start something, and I'm hoping that we can set in place a good foundation to drive preservation forward for the rest of all this stock."

The St. Paul Public Housing Agency has applied to convert 90 percent of its 4,274 housing units under the program. The agency said it will get more predictable and reliable federal funding over 20 years, with an option to borrow private money in the future. Agency officials said they won't do major rehabilitation to its housing stock.

"Other housing authorities aren't in the same position that we are," said Angela Holm, the agency's assistant controller and RAD coordinator. "Other housing authorities don't have the reserve that we do. Their properties are in much worse condition than us. We really prided ourselves since inception to take the best care that we can of the property we have."

Russ said decades of federal underinvestment in public housing is leading to untenable living conditions as housing units deteriorate. In 2018, the agency received $14 million in capital funding from HUD, just over a tenth of what the housing authority says it needs to maintain its public housing. That maintenance need is expected to exceed $500 million in the next 20 years, according to data from the agency.

"Over time, without the ability to put capital in these buildings, they will reach a point where it may be difficult for us to continue to occupy them," Russ said.

Russ, who faced a similar scenario in his previous role as the director of Cambridge (Mass.) Housing Authority, said he knows how to fix the problem: Rebuild the city's 6,000 public housing units, one at a time.

The first major public housing units to be renovated under the RAD program will be the Elliot Twins, a pair of high-rises near downtown Minneapolis that are among the agency's oldest buildings. To avoid displacing hundreds of residents at once, the agency will renovate the units in phases, while relocating residents to other public housing units or giving them vouchers to rent in the private market.

In the first phase of the project, which is expected to start in 2019, the agency will also rebuild some of its single-family and duplex homes scattered across the city. In about 15 years, agency officials say they will rehabilitate all housing units.

"There's fear in town that there are developers waiting in the wings to swoop up public housing," Russ said. "We are not in the business of selling public housing units to private developers."

This is not the first time the Minneapolis Public Housing Authority has attempted to overhaul its units. In 2016, the agency retreated from redeveloping the Glendale Townhomes using RAD after it faced a visceral opposition from a group of tenants who call themselves Defend Glendale.

The tenants, who have long opposed demolition in favor of improvements to the 64-year-old townhouses in south Minneapolis, said that the RAD program will give private developers the license to buy or lease public housing.

"We believe that the low-income tax credit will create paths to the destruction of public housing, displace residents, push families out of Minneapolis, and totally gentrify this city," the group said in a May 2017 e-mail to MPHA.

Eric Hauge, executive director of the tenant advocacy group HOME Line, said the agency has lost some trust among residents when the RAD process started a few years ago.

"It's understandable for people to be fearful and not trusting of a government agency," he said. "People should not have to be put in a position where they are fearing their home is going to be privatized and no longer affordable."

Mary McGovern, president of the residents' council at the Elliot Twins, said many residents don't fully understand the Rental Assistance Demonstration program. The scheduled community meetings in August, she said, will help explain the conversion process, which sometimes "goes over people's heads."

"The biggest fear is that they are going to lose their apartments," said McGovern, who supports Russ' vision. "Nobody has to worry about losing their homes."

In the fall, Russ plans to take a group of public housing residents and board members to Cambridge, Mass., to show how the privatization program has worked there.

Michael Johnston, executive director of Cambridge Housing Authority, said the redevelopment of the agency's housing stock, which began under Russ, has not displaced residents and the rent stayed the same.

But residents were skeptical when the process started. "It's scary," Johnston said. "It's not public housing anymore."

Mukhtar M. Ibrahim • 612-673-4689 Twitter: @mukhtaryare