At its June meeting, the board of the Minnesota Housing Finance Agency discussed resources for supportive and workforce housing, a rental pilot program aimed to help exploited families suffering gender-based violence, and suggestions for the 2018 Affordable Housing Plan. 

To start the meeting Commissioner Mary Tingerthal introduced the newest addition to the Minnesota Housing board: Damaris Hollingsworth. An architect and native of Sao Paulo, Brazil, Hollingsworth shared that she studied in this country and worked for several firms before her current position as Vice President for THOR Design Plus. Hollingsworth said she values affordable housing for the stability it brings families and communities.

Resources for supportive and workforce housing

From its consent agenda, the board approved $3 million in operating subsidies for supportive housing units. In its annual budget the Agency sets aside a portion of Housing Trust Fund resources to cover revenue shortfalls and unique costs associated with operating supportive housing. Applicant agencies are required to show that they have first sought funding from other sources, such as foundations. Agency funds are joined with $2.1 million from the Department of Human Services (DHS), providing funding for 44 supportive housing developments and amounting to $1,738 per unit per year of assistance.

A workforce housing project being developed by CommonBond in Mankato is receiving $5.7 million in short term tax exempt bond funding; this enables the project to obtain $2.7 million in equity from the sale of 4% federal housing tax credits. The 50-unit project will also receive $5.8 million in Agency deferred loans and 15 units will have project based rent assistance.   

Rental pilot program through the Hmong American Partnership

The board agreed to a staff recommendation to commit $210,000 for a pilot program funded by the legislature in 2016. This program provides rent assistance for exploited families where there is gender-based violence. The legislature further specified that the assistance should be delivered through an “emerging community” agency, one unfamiliar with mainstream resources. The recipient of the awarded funds is Hmong American Partnership (HAP). Their program should be up and running in October.

Board member Stephanie Klinzing asked about funding for the social services that would be needed with the pilot program. Staff responded that DHS funds were being sought, but HAP would commit its own resources to cover service costs should outside funding not be available. Board member Terri Thao asked why the legislature wanted Minnesota Housing to administer the program since Public Safety and Human Services already have domestic violence programs. Staff said it was because Minnesota Housing has expertise in rent assistance.

Commissioner Tingerthal said that the legislature appropriated a total of $500,000 for the pilot program. The Agency would wait six to nine months to see how HAP performs before determining how to award the remaining $290,000. If the concept does not prove viable, the Agency would likely return to the legislature and ask that the remaining rental assistance funds to be used in a different manner.

2018 Affordable Housing Plan

The major focus of the June meeting was providing board members the opportunity to have input in the development of the Agency’s 2018 Affordable Housing Plan (AHP). This plan specifies how resources distributed by the Agency will be allocated during the year beginning October 1, 2017. A draft of the plan will come to the board at its August meeting, and staff will ask the board to approve the final version in September.

In introducing the planning topic, John Patterson, Director of Planning, Research and Evaluation, reviewed for the board a number of documents. These included “2017 Key Trends for Affordable Housing,” a report on a partner and stakeholder survey (conducted in May of this year), a report from outreach to 16 agencies representing historically underrepresented communities, and a report on major themes coming out of the 2016-17 Housing and Community dialogues. [Note, all these materials are included in the June 2017 board packet found on the Agency’s website.]

In addition to the need for affordable housing as the economy continues to grow, Patterson identified a number of key themes for the Agency as it develops its plan.

1. Housing costs will likely continue to increase with limited supply available, but rent increases may slow.
2. Incomes may struggle to keep pace with expected housing cost increases.
3. Millennials’ decision to own or rent will be a key driver of the housing market.
4. Affordable housing is needed in areas with a growing workforce.
5. Disparities in homeownership are significant.
6. The number of people experiencing homelessness is declining, but more work is needed.
7. The aging Baby Boom generation will create new housing needs and challenges.
8. Minnesota has a large stock of affordable housing that needs to be preserved.
9. New resource constraints are emerging.

In response to the staff overview board members made a number of comments.

• Stephanie Klinzing comments:
  • Senior and manufactured housing are very important and need to be in the mix. 
  • Small communities need help rehabbing older homes. For example, the one contractor who did that in Elk River (where Klinzing was mayor at one time) retired and new contractors are hard to find. 
  • We need to look at needs of each community individually. Central MN Housing Partnership (CMHP) used to do housing studies they helped the communities become aware of their current needs and what new needs would be coming.
  • Small rental buildings are needed in Greater Minnesota. 
• Terri Thao comments:
  • Older market rental housing is not being maintained, leading to a situation where new buyers come in to do the rehab but substantially increase the rents. 
  • There is the opportunity to consider how Minnesota Housing can and should influence the overall rental market. 
• Damaris Hollingsworth comments:
  • Production of modular housing could be promoted as both a means to produce quality housing at lower costs and to provide living wage jobs. 
• Joe Johnson comments:
  • The cost of construction continues to outpace incomes, with ever-more people needing help. Can we get contractors to reduce up front costs?

In response to board comments, Patterson said that controlling costs has been a major focus. However, the Agency found through the Minnesota Challenge effort of a few years ago that they were only addressing the problem around the edges. In response to a question, Tingerthal added that the federal effort to reduce costs by combining federal/state inspections had little impact when HUD departments could not agree on protocol.

Staff and board also discussed the challenge of maintaining the quality and safety of existing rental housing, particularly the increasing numbers of single family homes being rented short term or permanently. They agreed that this was a local issue, but that it was very hard for local governments to overcome community opposition to more effectively regulate this housing.

Rebecca Otto, State Auditor, asked about senior housing, saying it’s very important throughout Minnesota though she’s wary of pitting the needs of one population group against another. Tingerthal said that research shows a growing need among low-income seniors, especially since the demise of the federal 202 program. She added that developers, however, are promoting a financial model that focuses on serving middle-income seniors in suburban communities; this is a need but not to the extent of low-income seniors. Patterson spoke about the Agency pilot program for low-income seniors, noting that construction is expected to start later this year, but it does not look like any great innovations have been found. The greatest senior need is to help people stay in their homes, Patterson added. Otto asked, if funding appears, are there developers who would want to house low-income seniors? Tingerthal responded affirmatively, pointing to work of Episcopal Homes and Presbyterian Homes.

MHFA administration discussion

The final board meeting items were presentations on staff structure and the Agency’s administrative budget. Single Family and Multi-family lead staff described new organizational charts for their divisions. These changes are to both increase efficiency and facilitate inter-departmental work. For example, on the multi-family production side, led by Diana Lund, the staff leads are Ann Heitinger, preservation manager; Susan Thompson, chief underwriter; Devon Pohlman, manager of housing programs (including the QAP and the Consolidated RFP), and Julie Tarlizzo, manager for closings.

Deputy Commissioner Barb Sporlein presented the Agency’s operating budget for the year starting July 1. Sporlein said some additional staffing (one new position and three contract positions are being converted to payroll at lower costs) is required as the Agency now distributes $1 billion annually and is responsible for $3.5 billion in assets. The big new expenditures for the coming year are space and technology costs associated with the move to new offices in September. The Agency’s cost of operation is about 3.7% of housing assistance distributed by the Agency, and none of this, except for the cost of the Olmstead Office, is paid by legislatively appropriated funds.

Learn more and access the Agency’s board records here.