‘Local control for a local issue’ – Affordable Housing Trust Funds in rural communities

Guest blog by: Randal Hemmerlin, Executive Director at Red Wing Housing and Redevelopment Authority

Randal HemmerlinIt is no longer much of a secret that a housing shortage exists throughout Minnesota. The State’s population continues to grow as business is growing its workforce. So much so, that places like Red Wing show a rental vacancy rate of 0.9 % overall and 0.0% in affordable housing in 2014.  Complicating this further, the annual new construction of Single Family owner occupied housing in Red Wing is not near the levels of construction as in the 1990s or early 2000s.  The result is that 6,600 people commute into Red Wing to work each day and seniors have few options as to where they may like to move to from their single family house.

Other communities in Minnesota report similar findings. 

One idea that came in 2015 that the City of Red Wing HRA is using to promote new housing or rehabbing existing housing was the establishment of an Affordable housing Trust Fund (AHTF). An AHTF is not a new concept and has been used in Minnesota before by cities such as Minneapolis. It is not common, however, to see AHTFs in rural communities.  Organizations such as Minnesota Housing Partnership and Greater Minnesota Housing Fund would like to see that to change so that the AHTF is one more source of funding that can be used in housing. Since all housing needs are local, it makes sense that local jurisdictions have a stake in the matter financially and an AHTF would allow that to happen.

In 2015, the Red Wing City Council authorized the HRA Tax Levy to be increased to its maximum statutory limit with the difference going into the AHTF. This was about $97,000 for the fund.  The HRA is working to find other sources to increase that AHTF, such as employer contributions and foundation donations.

Throughout the state, it is estimated that we have $34 million in unused HRA Tax levies that could be used to create AHTFs.

To increase the chances of AHTFs being created statewide, a matching state fund could be developed to match the local dollars 1 to 1, or even 3 to 1. Another idea is that Minnesota Housing or DEED housing fund applications that come from jurisdictions with an AHTF would receive a priority over applications from jurisdictions that do not have an AHTF.

A local AHTF could also decentralize the funding of housing. Right now, funds come mainly from St. Paul to fund housing. Local control for a local issue should carry well with the local jurisdictions.

With the housing shortage being so critical in our communities and the pressure for funding sources so great, an AHTF may be just the ticket that a local community can use to increase its housing supply.

Randal Hemmerlin, Executive Director Red Wing HRA