Last month, Minnesota Housing awarded $92 million for affordable housing development projects across the state. These investments will finance new construction and rehabilitation of single family and multifamily housing projects, increasing affordable housing options for Minnesota families.

$92 million of investment in affordable housing will have a significant impact for the over 120,000 cost-burdened Minnesota families (those spending 30% or more of their annual incomes on housing). However, there was a significant reduction this year in total funding awarded to multifamily projects due to a reduction in Housing Infrastructure Bond (HIB) proceeds and Housing and Job Growth Initiative funding. The reduction in HIB funding also means projects will leverage $61 million less in private equity from four percent tax credits this year as compared to last year. Accordingly, Minnesota Housing will fund 1,090 units this year compared to 3,423 units in 2014.

The funding shortfall means that Minnesota Housing denied applications amounting to $97 million for 20 multifamily developments in Greater Minnesota and $273.5 million for 31 metro-area developments. Overall, the agency denied $3,670,086 million to 11 single family project applicants.

Key Facts

Below is a breakdown of Minnesota Housing’s funding allocations. Similar to previous years, the majority of awards go to multifamily rental projects. However, there is a marked increase in awards for single family development this year.

56 .5 percent of selected projects are located in Greater Minnesota compared to 45 percent last year. Overall, 714 new multifamily units and 117 single family homes will be constructed in Greater Minnesota. The Economic and Housing Jobs Initiative funding will finance 215 new rental units that will be constructed in Greater Minnesota communities experiencing job growth, where there is a shortage of housing that is limiting job expansion or where future expansion is expected.

*Nine multifamily units are supported with HUD Section 811 Rental Assistance. These units do not show up in Minnesota Housing’s 2015 Multifamily Funding Selections spreadsheets.

This year the agency funded more multifamily new construction (57 percent) than preservation when compared to last year (44 percent).

Also worth noting is that Minnesota Housing awarded more new construction projects in higher income suburbs located in the Twin Cities metro, including 139 new affordable units in Edina, Chaska, Dayton and Mound, where median rents range from $759 to $1156 and median household incomes range from $70,199 to $84,211.[1] Of 10 metro area multifamily developments, four are located in Minneapolis and St. Paul and six in suburban locations.

Multifamily Takeaways

Minnesota Housing received applications for 78 proposals, requesting $217 million in deferred loans, permanent first mortgage financing and Agency-administered tax credits. Within those proposals, Minnesota Housing and its funding partners awarded 23 projects with deferred, bridge and permanent first mortgage loan financing, tax credits and rental assistance. Of those 23 projects receiving multifamily housing financing, 10 are located in the seven-county metro-area and 13 are located in Greater Minnesota. 714 units will be built in Greater Minnesota – 215 of which the Agency considers workforce housing – and 386 will be built in the metro. 

The agency awarded $8,300,794 million in nine percent tax credits to 12 projects; $39,322,979 in deferred loan capital to 17 projects; $18,316,000 in permanent first mortgage financing to 11 projects; $14,775,000 in bridge loan financing to four projects; $1,135,080 in Section 811 Rental Assistance Grants to four projects; and $2,627,000 in funding partner contributions to seven projects.

Of the 12 projects receiving $8,300,794 in housing tax credits, six are located in the metro and six are located in greater Minnesota. Minnesota Housing estimates that syndication will bring over $40 million in equity to the metro and over $42 million to Greater Minnesota.

Multifamily projects that were awarded funding will:

• Preserve 249 units of federally-subsidized rental housing.
• Construct 624 new and preserve 217 affordable units without federal assistance.
• Generate 287 supportive housing units to prevent and end homeless. (*This year’s RFP selections award all HIB proceeds to supportive housing).
• Support the agency’s efforts to prevent foreclosure and support community recovery with 76 units.

Single Family Takeaways

Minnesota Housing received 39 single family applications requesting $17,881,741. 71 percent ($12,783, 911) of the requested funds were for projects serving parts of the Twin Cities metro area and 29 percent ($5,097,830) of the total amount requested were Greater Minnesota projects. Minnesota Housing was able to meet $7,919,375 of the overall need.

39 percent of the Impact Fund ($2,782,700) will fund 12 projects in Greater Minnesota and 61 percent of the Impact Fund ($4,821,675) will serve 16 projects in the Twin Cities metro area. Overall, the agency and partner funding awarded $3,037,700 to Greater Minnesota and $4,881,675 to the metro area.

Minnesota Housing funds allocated to single family projects will help:

• Six Twin Cities metropolitan area and five Greater Minnesota organizations focus outreach efforts to reaching underserved populations.
• Enhance Community Economic Integration efforts (i.e. areas have higher median family incomes and greater access to jobs).
• Invest $3,462,539 to develop new homeownership opportunities for areas in need of workforce housing. This represents nearly half of the total awarded resources. According to Minnesota Housing, Impact Funds can accommodate more than 90 percent of new jobs growth throughout Minnesota.
• Invest $526,500 of HIB funds in two metro area and one Greater Minnesota community land trusts.

[1] MN Compass and City Data