Two issues stood out at the March Minnesota Housing meeting: the adoption of the 2013 plan for allocating federal low income housing tax credits, and the proposed restructuring of the agency's home improvement loan program. Aside from these items the meeting was memorable in its composition: with the first time attendance of new board member Steve Johnson, half of the board members present were businessmen with the last name of Johnson. The board composition is really starting to sound Minnesotan.
Tax Credit Allocation Plan for 2013 Approved; Agency to Revisit Some Issues
The board gave its approval to the revised rules for the distribution of federal low income housing tax credits. The approval of the credit rules, the 2013 Qualified Allocation Plan or QAP, followed a long process of deliberation. After comments were received in February, the staff recommended a number of changes to the previous draft plan.
The item receiving the most comments was a proposed cost containment method intended to reward project proposals with the lowest development costs. Many people commented to the agency that this might lead to the construction of lower quality affordable housing. Others suggested that cost rules would place at a disadvantage projects in higher cost areas or supportive housing developments that bear added costs for items such as offices or meeting space for social services.
Ultimately, the agency decided to postpone adding this cost containment feature so that staff can consider issues related to supportive housing and geography, such as whether cities like Rochester with higher development costs should have a higher limit than other Greater Minnesota communities. Also, staff will review comments from tribes that federal rules drive up their development costs. After considering the relevant issues, in July 2012 Minnesota Housing will issue the new proposed cost standards for the 2014 QAP.
Probably the sharpest criticism of the proposed plan came from Myron Orfield of UM's Institute on Race and Poverty. Orfield wrote:
The Minnesota Housing Finance Agency (MHFA) has a duty to "affirmatively further fair housing." This affirmative duty is "more than an obligation not to discriminate," it is an obligation for MHFA to use its "immense leverage" to further "integrated and balanced living patterns." Minnesota's propose Qualified Allocation Plan (QAP) does just the opposite. It encourages racial segregation by encouraging the placement of projects in segregated or unstably integrated areas and discouraging projects in high opportunity white or stably integrated areas.
Agency staff responded that they had mapped location of tax credit projects that they award (as opposed to tax credit awarded by other sub-allocators in Minnesota) and integrated schools and found that the agency had been investing tax credits in a manner that was consistent with integration objectives. Commissioner Tingerthal added that the agency will make its mapping available so that developers can use this information in selecting locations of proposed projects. (See p. 65-75 of this document for Orfield's comments and p. 137 for agency response. As of April 12, school integration information and mapping is available in the agency community profiles under "Add Sites.")
After the board's vote, the proposed QAP will go to the governor's office for review and approval. Staff expects to post the final 2013 QAP on April 22. Tax credit applications will be due June 12, with board approval of award recommendations expected in October.
Changes Proposed to Fix-up Fund
The board also gave concept approval to a restructuring of one of the agency's oldest programs, the Fix-up Fund. Through this program, introduced in 1976, the agency makes home improvement loans to homeowners with incomes up to $96,500. Staff told the board that the agency's program is widely regarded as the most successful state program of its type in the country.
Under the new Fix-up Fund program rules the agency will allow loans under $10,000 to be unsecured. This should help underwater borrowers complete needed repairs and increase usage as a home maintenance financing tool for credit-averse seniors. These unsecured loans would be available only to borrowers with a solid credit score (i.e., 680 or above). Board member Joe Johnson was concerned about unsecured loans going to households with debt to income ratios of 48% as allowed in the proposal. Staff said that they would review that point before bringing the program back for final approval.
Staff said that the expected interest rate charged on unsecured Fix-up loans would be 6.99% (versus 5.99% for secured loans). A one percent discount would be offered on loans made for the purposes of energy improvements or accessibility. Board member Stephanie Klinzing suggested health related improvements like preventing and remediating mold as a purpose eligible for the discount.
The final Fix-up Fund program guidelines will return to the board for approval in April, with proposed changes in effect in early May. Member Barb Sanderson thanked the staff for their "nimbleness" in fine tuning this long-standing agency program.