{modal url=”https://mhponline.org/images/TEB-final.jpg”}{/modal}How should the state allocate its bonding resources for housing to have the biggest impact — and take full advantage of federal funds? Last year, a new proposal came forward (supported by MHP) that sought to amend Minnesota bond statute to develop more rental housing. After much discussion among organizations across the affordable housing sector, MHP, along with the Family Housing Fund and Greater Minnesota Housing Fund, convened a facilitated process to gather stakeholder input and work toward common ground on the allocation of tax-exempt bonds.

Last month, that process concluded with a number of positive outcomes, most notably five significant agreements that will be advanced in the upcoming state legislative session. In addition, MHP will be continuing a conversation around an area that the stakeholder steering committee did not reach agreement: aligning those agreements with the state’s Qualified Allocation Plan moving forward.

“With such significant need and so many Minnesota families paying more than they can afford for housing, we need ensure that the resources we have are used in a way that provides the most impact, especially for those with the lowest incomes,” said Anne Mavity, Executive Director of MHP. “This process not only paved the way for more effective use of tax-exempt bonds, but convened the type of robust conversation and diverse input we need to come up with solutions that truly move the needle.”

PROCESS

Facilitated by WJS Consulting, a steering committee of 15 leaders representing government, non-profit and for-profit housing organizations held nine meetings over three months to discuss improvements to the tax-exempt bond process. Beyond that group, input was solicited from many stakeholders statewide through several meetings and an online survey. While this process didn’t resolve all the issues brought to the table, it did result in five important agreements supported by all committee members.

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Moving forward, MHP will be working with the Family Housing Fund and Greater Minnesota Housing Fund to draft these agreements into legislation for the 2018 session. If you’re interested in participating in further conversations on the QAP for 4% credits and how they are allocated to projects that receive bond funding, please sign up here for notifications on upcoming stakeholder calls.

FIVE AGREEMENTS

The agreements focused on five key areas:

• 55% limit for bond use
• Priority for affordability, long-term, and Greater MN
• Random selection, not pro rata
• Inclusion of senior housing projects
• No “parking” of bonds

Click here to download the overview PDF.

55% Limit for Bond Use: Incentive to use bonds efficiently means more projects get funded.

Current: Projects using bonds for 50% to 100% of costs means fewer projects get bonds.

Agreement: Projects using bonds for 55% of costs or less are FUNDED FIRST.

Details:

1. All projects in Housing Pool must issue at 55% or less of basis.
2. All projects in the Unified Pool must issue at 55% or less of basis, up to Sept 1. From then over-55% projects would be allowed, but at a lower priority than projects at or below 55% of basis.

Priority for Affordability, Long-Term, and Greater MN: Bonds are more likely to go to people most in need, across the state, and for a longer term.

Current: Priority factors include only preservation and multi-family.

Agreement: Increased priority for projects with deeper affordability, longer term, and located in counties with lower average incomes.

Details:

1. Any Preservation of Project-Based Section 8 (including Seniors as defined) at 30-year affordability
2. Multi-Family Projects (including Seniors as defined) that utilize LIHTC on 100% of the units where:  
   1. 100% of the units are under 30%  AMI on average (e.g. a project  could have 50% of units at 40% AMI and 50% of units at 20% AMI), OR
   2. Projects located in a county or metropolitan area that has a household Area Median Income below the median income for the state as defined by HUD
   3. For projects covered by either a) or b) above, the term of affordability is at 30 years 
3. Multi-Family Projects (including Seniors as defined) that utilize LIHTC on 100% of the units where:  
   1. 100% of the units are affordable at or below 50% AMI on average (e.g. a project could have 50% of units at 60% AMI and 50% of units at 40% AMI), and
   2. Term of affordability is at 30 years 
4. All  Multi-Family (including Seniors as defined) that falls below criteria above that utilizes LIHTC on 100% of the units
5. All other Multi-Family rental that is using LIHTC on at least 20% of the units
6. All other remaining multifamily rental housing

Note: Projects requesting bonds that exceed 55% of eligible basis will not be considered within this priority scheme until after the date of the Unified Pool, and then only within their own priority and behind projects that use 55% or less.

Random Selection, not Pro Rata: Selected projects get their full request and can proceed, resulting in less uncertainty for all.

Current: Over-subscribed allocations award a pro rata share to all competing projects, with no assurance that projects will secure full funding.

Agreement: Random selection for qualified competitors fully funds those selected.

Details:

1. When there are funds remaining, but not enough for the last project selected, that project will then be the first project funded when and as bonds next become available within the same Priority in which the project originally competed (whether in the Unified Pool, or the next year’s Housing Pool.)
2. The partial allocation amount that was available for the last project selected in any random selection will be reserved for that project within its Priority, whether in the current year’s Unified Pool, or as a carry forward in the next year’s Housing Pool.  
   1. Note: In the case that allocation is not available for a project within its Priority in the next round it will be reserved for that project in its Priority in future round(s). However, in no case will this allocation be reserved for more than 24 months from the original random selection.
3. MHFA will be deemed the “carry forward issuer” for any carry forward into subsequent years. 
4. Any carry forward from this provision will not be subject to MHFA’s “Debt Management Policy.” Instead, MHFA will have the fiduciary duty to treat that project as the original issuer intended, as related to bond issuance. 

Inclusion of Senior Housing Projects: Communities that need low-income senior housing have greater access to bonds.

Current: Senior projects are prioritized below non-age-restricted, and Senior Section 8 applicability for preservation is unclear.

Agreement: Senior projects compete based on revised priority list, and Section 8 applicability for preservation is clear. 

Details:

1. Clarify statute to ensure that Section 8 “Preservation” priority applications clearly include age-restricted / senior projects.

No “Parking” of Bonds: Bonds that can’t be used are freed up sooner for allocation to projects that can successfully close.

Current: “Parking” takes the pressure off projects to close, while idling bonds that could be used for projects ready to go forward.

Agreement: Firm 18-month limit on closing, and increased refundable deposits.

Details

1. The required deposit for the initial time period (180 days)  will be increased to 2% of the bond allocation.  A one year (365 day) extension will require an additional deposit of 1% of the bond allocation.
2. 50% of any deposit(s) above will be refunded when the bonds are issued, and the other 50% will be refunded at completion, when the 8609 letter is filed.
3. The Unified Pool creation date will be moved to July 1, so that any project would have at least 180 days to complete within the calendar year. 
4. MHFA will be the single “carry forward issuer” for any carry forward at year’s end from potentially forfeited bonds.
5. Any carry forward from this provision will not be subject to MHFA’s debt management program. Instead, MHFA will have the fiduciary duty to treat that project as the original issuer intended, as related to bond issuance.
6. Mechanisms will be created to ensure that the oldest bonds are used first, in order to preserve maximum bonding capacity. 

Click here to download the Powerpoint and view the video from the December 13 stakeholder presentation.