Early fallout of budget reductions, a discussion of the upcoming Affordable Housing Plan, and approval of the tax credit priority plan were before the Minnesota Housing Finance Agency board at its March meeting.
Budget Cuts in Action**
Commissioner Mary Tingerthal began the meeting by informing board members of a change stemming from the upcoming budget cuts to Minnesota Housing. She said that the Agency recently notified nonprofit providers of tenant-based rental subsidies funded by the Agency of a freeze on new vouchers. Tingerthal attributed the Agency’s new policy to the budgets before the legislature, with cuts ranging from the Governor’s 5% to 7.5% in the Senate and 10.8% in the House, compared to budgets planned last session.
Two-Year Agency Plan in the Works
Deputy Commissioner Patricia Hippe and Assistant Commissioner Tonja Orr provided an overview of the upcoming work on the 2012-13 Affordable Housing Plan (AHP). The AHP provides a spending plan integrating all of the funding available to the Agency from the Agency reserves and bond sales, state appropriations, and federal funds. The plan is likely be adopted this coming September. Orr said that the plan will reflect the strategic priorities of the Agency, adopted last fall, and follow principles similar to those used this year for deciding the Agency’s state budget priorities.
Orr said that the process will commence with an “environmental scan,” identifying trends and other key indicators drawn from census data. The Agency will also seek input from stakeholders and hold a series of Greater Minnesota and Metro meetings starting in April. Commissioner Tingerthal added that the Agency is also looking at how to engage the business community. The results of the stakeholder outreach will come before the board in May.
Chair Mike Finch asked about how the Agency can foster innovation through its investments, even in this tight budgetary period. He suggested that the financial plan include resources to be so designated. Orr responded that several of the Agency’s existing programs provide the flexibility needed to advance innovative efforts. She used as an example the resources available through the Challenge program, the flexibility of which enabled the Agency to create the land acquisition account.
The board intends to host a retreat prior to adopting the AHP to consider the environmental scan and other input.
Prioritizing Tax Credit Applications
The board approved the 2012 Qualified Allocation Plan (QAP), the point system used in evaluating applications for federal low income housing tax credits. Prior to coming before the board, staff revised the draft QAP in several ways as a result of the public review process.
For instance, the new plan shelves a point increase for mixed income housing contained in the draft. Commenters were concerned that mixed income housing works in high rent areas, but that low income areas where mixed income housing does not work as well financially would be hurt by this scoring system. Staff responded that economic integration is an Agency priority; however a tax credit proposal supporting mixed income housing was recently put forward by the Obama administration. Staff advised the board to wait to see how Congress deals with that proposal before setting state policy.
Also, the impact on rural communities of awarding points for housing sited near transit was handled in an additional staff recommendation. In past meetings, the board has spent considerable time discussing whether staff proposals to award points for housing located near transit stops hurt rural communities without bus lines. The staff proposed the following modification to the draft QAP in response to this concern: in the final QAP, for Greater Minnesota communities to receive transportation related points, a development must be within five miles of areas with 2,000 jobs, and either be located within one mile of multiple community services or have access to a “dial-a-ride” service.
Barb Sanderson from Grand Rapids, the board member who first voiced concerns about rural impact, expressed her appreciation for the staff listening to community concerns and being open to change. Staff intends to publish the RFP for tax credits on April 25, with a proposal deadline of June 14.
Projects Reserves Too Low?
Finally, an interesting point about the lack of adequate project reserves surfaced in the context of the board’s approval of $639,000 in deferred asset management loans to projects in Hopkins and Bemidji. Staff informed the board that the recession and resulting vacancies in non-subsidized units left the mixed income Hopkins property low on reserves. The Bemidji project is in need of elevator replacements, and does not have enough income to cover costs and also build reserves for other needed repairs of the exterior and new bathroom fixtures. Board member Joe Johnson asked how many of the rental projects funded by the Agency have adequate reserves. Staff responded that they believe that only about 30 percent of the state’s affordable rental projects have an adequate reserve level. Low interest asset management loans are made from Agency foundation resources, a funding source that will be lower for the next few years due to reduced Agency earnings over last several years.
**Correction: the original posting mentioned incorrectly that nonprofit providers of rent subsidies funded by the Agency could not increase their caseloads, but could issue new vouchers in the case of attrition. However, a freeze has been placed on new admissions for tenant-based rental subsidy programs. Only the rent subsidies that are project-based can be extended to a new tenant when there is a move-out. See a copy of the memo from Minnesota Housing, as well as affected grants and exempted grants. For a comparison of budget proposals for Minnesota Housing this legislative session, see MHP's budget table and Capitol Connect blog posts on March 23 and Feb 16.**