MN House proposes cuts, inefficient housing policy

Workforce housing has been a key policy priority for MHP, along with strong support for affordable housing through Homes for All. However, the MN House of Representatives’ budget proposal for housing, released last week, funds workforce housing at the direct expense of programs that serve lower-income Minnesotans. The House proposal cuts key housing and homelessness programs, potentially pits Greater Minnesota against the Metro, and is likely to be inefficient and poorly targeted. The Senate proposal for housing will be released tomorrow (Wednesday). Neither chamber has released proposals for services dollars for homeless Minnesotans yet.

Cuts to affordable housing and homelessness programs

Overall, the House cuts to Minnesota Housing total $10.55 million compared to FY 2014-15. The Family Housing Prevention Assistance Program (FHPAP), which serves households at risk of losing housing, or transitioning out of homelessness, is cut by $1.3 million; the Housing Trust Fund, which provides rental assistance to previously homeless, is cut by $2.4 million; and the Challenge Fund, which finances affordable and workforce housing, is cut by $5 million. Single Family Rehab, Bridges, and the Capacity Building program are not cut, but do not include any of the increases recommended by Homes for All.

Finally, $5 million is committed to the Department of Employment and Economic Development (DEED) for a workforce housing program for Greater MN communities with 18,000 people or fewer.

From MHP’s perspective, the House proposal threatens affordable housing, potentially pits Greater MN against the metro, and includes some of the most undesirable elements of workforce housing proposals that have surfaced.

Approach pits Greater Minnesota against Metro

The House bill requires that half of the Challenge Fund be set aside for Greater Minnesota workforce housing for 2016-17. Also for the 2016-17 budget, 50% of the remaining half of Challenge dollars are set aside for regular projects in Greater MN. Thus, for the next two years, three-quarters of Challenge funding would be earmarked for Greater Minnesota.

Advocates have voiced concern that legislating a geographic split for housing funds not only pits the Metro against Greater MN, but it also sets poor precedent, as the tables could turn with each election. Lawmakers and developers in Greater MN have also asserted that Minnesota Housing has not always funded Greater MN equitably. Minnesota Housing testified that the agency would prioritize Greater Minnesota and set aside some funds for in the coming biennium to better meet those needs.

Workforce housing proposal inefficient, poorly targeted

House leaders have made it clear that they would like to prioritize market-rate workforce housing, and prohibit income targeting of funds to low- and moderate-income households to the extent possible. In the proposal,

  • Income limits are removed from the portion of the Challenge program designated to workforce housing in Greater Minnesota in 2016-17.
  • The proposed new DEED program prohibits use of dollars in conjunction with any other state or federal resources that have income restrictions.
  • During the hearing on Friday, an amendment was introduced that similarly prohibits pairing Challenge funds for Greater Minnesota workforce housing with income-restricted resources, in an apparent attempt to close this “loophole”.

These policies represent an inefficient, ineffective way to use limited state resources.

It’s worth noting that the vast majority of Minnesota renter households have incomes that fall below the current $62,000 income limit for Challenge for rental housing. The statewide median renter household income is only $32,300. 

Minnesota DEED testified in committee that funding for housing programs is best located not in DEED, but in Minnesota Housing, which has far more expertise and capacity to make multi-million dollar project investments. Without expertise, in the case of DEED dollars, developments might be left with financing gaps and unable to break ground, or could be awarded more public subsidy than required to move forward.

Proposals on the horizon

Stay tuned: the Senate budget for housing will be released tomorrow (Wednesday).

CORRECTION: a previous version of this blog post reported that the House proposal removed income limits from the entire Challenge Program, and disallowed pairing Challenge funds with other income-restricted sources. However, the removal of income limits and disallowing pairing with income-restricted sources applies only to the carve out of funds within Challenge for workforce housing in Greater Minnesota for 2016-17.