The July meeting of the Minnesota Housing board featured several interesting developments and lively discussion. With $3 million in new National Housing Trust Fund dollars coming to Minnesota next year, the Agency has been tasked with envisioning how these dollars will be awarded and used. The Agency is also considering how to update its formula, currently still based on 1990 population data, for distributing tax credits among the sub-allocators, which make local tax credit awards. Board members raised questions about the staff's proposal. Also covered were the Agency's predictive cost model, planning documents, and a closed session on a HUD meeting about a fair housing complaint.
Concept for awarding new National Housing Trust Fund dollars approved
The board also approved the program concept for the Agency’s administration of the new federal Housing Trust Fund block grant program. The trust fund had been enacted by Congress in 2008 with the expectation that initial funding would come from Freddie Mac and Fannie Mae. The financial crisis and subsequent receivership of the two mortgage agencies precluded any distribution of dollars to states under the formula-based allocations. In 2014, the federal overseer of the now profitable mortgage agencies ordered the distribution to begin.
Starting in 2016 Minnesota Housing expects to receive $3 million annually in trust fund monies to develop or preserve housing for extremely low income renters. Board approval of the program concept was required so the Agency can identify the trust fund in the annual Action Plan -- a plan required by HUD for use of its block grant resources. Although federal law allows 10% of Trust Fund amounts to be used for homeownership, the compliance burden for this use led the staff to limit program use to rental, as the Agency has done with HOME funds. The Action Plan, including the proposed use of housing trust fund resources, will be available for comment between August 21 and September 22.
Controversy around sub-allocating federal tax credits
The staff’s proposal to use current population data in calculating how federal housing tax credits would be distributed to sub-allocators became contentious when Board Member George Garnett objected to the proposed formula. The credits, by state law, are to be distributed under a formula established by Minnesota Housing to county and local governments serving larger populations and the balance of the state. (The “state balance” credits are awarded to housing developments by Minnesota Housing.)
The current formula, adopted in 1990 near the start of the tax credit program, is largely based on several population characteristics. Because population growth since 1990 has largely occurred outside of the Metro area’s central cities, when the new data is applied to the formula, the shares for Minneapolis and Saint Paul are relatively smaller (reductions of 19 and 32%, respectively, in credits) than in the formula using the 1990 data. Garnett argued that housing cost burden should take greater prominence in the formula, an approach which could potentially reduce the loss of credits in the central cities. The board ended the discussion by tabling the recommendation and asking staff to bring alternative formulae to the August or September meeting.
In the discussion, Garnett said that an analysis of the recent Supreme Court fair housing ruling would likely be instructive in the allocation of housing credits. Assistant Attorney General Tom O’Hern responded that the court ruling will have less effect than the new HUD rule for Affirmatively Furthering Fair Housing. HUD is to provide the state with a data analysis tool to help the Agency understand its obligations under the new rule, but the tool will not be available for several months. Tingerthal added that the Agency will not be required to develop its Affirmatively Furthering Fair Housing Assessment under the new rule until 2022.
Predictive cost model policy discussed
The board had an extensive discussion on the Agency’s “predictive cost model” before approving a staff recommendation to invest an additional $1.5 million of HUD HOME funds in the preservation of CommonBond’s Seward Towers (Minneapolis). The staff report showed the proposed project to be 7.8% above what was predicted under the model based on location and construction type. Staff said that this was within the 25% variance. Board member Craig Klausing asked staff for the source document on the cost policy. Staff responded that the model was not official policy but a defacto one. After board discussion, staff agreed to bring a proposed policy on the use of the predictive cost model to the subsequent board meeting. With respect to the Seward project, the board agreed to increase the Agency’s 2014 commitment to $5.3 million to enable the resyndication of the project this year and avoid additional costs should the $94 million project be further delayed.
Plans approved, proposed, and in creation (2016 Affordable Housing Plan; 2016-19 Strategic Plan; Olmstead Plan)
The board gave final approval to the Agency’s 2016-19 Strategic Plan. In his presentation, John Patterson, Director of Planning, Research and Evaluation, highlighted several proposed clarifications to the draft plan. Patterson said that the plan now emphasizes the critical need for new rental housing, and that workforce housing is clearly identified in the action steps. Also, more emphasis is placed on homeownership counseling. Board member Garnett said he appreciated the clarifications and encouraged the Agency to think more about public policy changes as it pursues plan strategies.
Commissioner Tingerthal informed the board of the schedule for adoption of the Agency’s 2016 Affordable Housing Plan (AHP). This will be the first AHP implemented under the newly-adopted Minnesota Housing 2016-19 strategic plan. The anticipated schedule includes posting the draft AHP on the Agency’s web site on August 14, a deadline for public comments on August 28, and adoption of the plan by the board at its September 24 meeting.
Tingerthal also informed the board that, as the Chair of the state’s Olmstead Subcabinet (to ensure that those with disabilities are housed in the least restrictive setting), she is focused on meeting a court deadline for creating a revised plan by August 10. The prior state plan was deemed by the court as inadequate due to its lack of sufficient measurable goals.
Meeting with HUD officer on Fair Housing complaint
The board ended its meeting by going into closed session to hear the Commissioner’s summary of the meeting Agency staff had the prior week with the Chicago-based HUD fair housing officer. The HUD official was in town that week to collect information in connection with the fair housing complaint filed by several government and nonprofit bodies that had been working with Myron Orfield.