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The February Minnesota Housing Board meeting played host to several important conversations. The board voted to fund rehabilitation of 35 public housing developments with proceeds from the 2014 bonding bill. Staff presented the 2017 draft Qualified Allocation Plan (QAP), for scoring applications for Low Income Housing Tax Credits, which is now also open for public comment. A housing development approved by the Agency has run into opposition and incurred changes and additional costs, which meant the board needed to revisit the project.

Funding of public housing rehab

The board voted to fund 35 applications to rehab public housing using bonding proceeds made available from the $100 million 2014 bond appropriation for housing. $17.7 million of the $20 million in bonding approved for public housing was committed (the other $80 million was for housing infrastructure bonds). With 79 requests for funding, the Agency prioritized proposals that focused on health and safety repairs as well as energy conservation. Forty-one percent of the funds went to Twin Cities agencies and 59% to those located in Greater Minnesota. The 35 properties receiving funding contain 2,438 units, more than 10 percent of Minnesota’s public housing. The largest award of $2.257 million goes to the Kandiyohi County HRA in Willmar, and the smallest, $62,000, to the Greenbush HRA.

2017 draft Qualified Allocation Plan

The 2017 draft Qualified Allocation Plan (QAP, the scoring rules for award of tax credits under the federal Low Income Housing Tax Credit program) was approved for public comment. Staff reviewed for the board the major changes in the draft QAP. For instance, the program will be better aligned with the Olmstead and Heading Home Minnesota initiatives for the people with disabilities and people experiencing homelessness, respectively. The temporary emphasis on foreclosure remediation in the wake of the foreclosure crisis is being replaced with support for community development efforts in which multiple stakeholders collaborate to meet a pressing community housing need. Also, staff said that the proposed rules will make it easier for workforce housing developments to compete for tax credits. The definition of "job growth" communities would be broadened, while the Agency’s priority for preservation would be de-emphasized, since it led to fewer new construction projects receiving credits.

In response to the draft QAP presentation, auditor Rebecca Otto questioned de-emphasizing preservation since it enables the state to maintain housing contracted to utilize federal rent subsidies. Staff said that preservation would remain a high priority, and that other funding mechanisms are available for preservation, including the non-competitive 4% tax credit program.

Board member Gloria Bostrom asked how much of the proposed QAP is mandated by federal law. Staff said some items were set by Congress, such as priority for projects in qualified census tracts, but most is up to state administrators. Bostrom also asked whether the state was trying to do too much through the program (e.g., green building requirements) thereby placing too many burdens on developers. Staff responded that they were in the process of streamlining the application process, and that upon examination, prior years’ project costs have been holding steady, even with the increased requirements.

Minnesota Housing will take comments on the QAP through March 23, at which time there will be a public hearing on the document. The board will adopt the final 2017 QAP at its April meeting, and it will take effect for development proposals due in June 2016.

Medina Woods project revisited

In what also became a review of the impact of NIMBY opposition, the board approved a continuation of its loan commitment for the Medina Woods project, in spite of a significant increase in per unit costs. This project proposed by Dominium is to be built in western Twin Cities suburb of Medina, and has been considered an economic integration priority by Agency staff. Thirty-two units of large family housing had been approved for funding by the Agency, and the development had also received local government support for waiver of sewer and water fees (amounting to $11,000 per apartment), a needed zoning change, and grants.

However, after the Agency’s initial funding commitment, individuals living near the development site raised major concerns about the appropriateness of the housing (e.g., residents wouldn't have access to good public transportation). In the face of strong opposition, Dominium withdrew its requests for city zoning and financial support, and redesigned the project to keep it in compliance with existing zoning. The number of apartments was reduced from 32 to 26, and building costs increased from $216,000 to $302,000 per unit, due to the delay. The increased cost per unit placed the development above the Agency’s predicted cost, which required board approval to proceed.

Commissioner Tingerthal spoke in favor of the Medina project, emphasizing the importance of its four homeless units and four deeply affordable units. She pointed out that because of strong tax credit pricing and the developer deferring more of its fees, no additional tax credits or deferred loan money would be needed for the development to move forward. Board members expressed support due to the need for affordable family housing in Medina, but concern about the high per unit costs. Member George Garnett suggested that large family housing would fare better under the Agency’s analysis if costs were viewed on a square foot basis as opposed to per unit basis.

Updates on topics previously covered

Commissioner Tingerthal informed the board that her presentations on the Agency budget were very well received in both the House and Senate. She has been advising the governor’s office on a supplemental appropriation with the expectation that the state’s February 27 financial forecast would be positive.

A footnote to the Agency’s review of the first quarter of the 2015 fiscal year: staff pointed out that the use of 4% tax credit financing is soaring. Last year, Minnesota developments utilized $14 million in 4% syndication proceeds. This year, the Agency expects $70 million in proceeds to be used. This increased equity infusion in affordable housing reduces the need for deferred loans and lowers the per unit cost to the Agency.