Retool housing aid to meet outstate needs

Published 8:56 am Tuesday, March 24, 2015

Star Tribune

Distributed by Tribune Content Agency

For most of its 44-year history, the Minnesota Housing Finance Agency (MHFA) has operated to good effect but with little notice, even among many of the legislators who approve its annual general fund appropriation of about $50 million.

Email newsletter signup

But at the 2015 Legislature, pleas for more housing help for Greater Minnesota cities are drawing new attention to the MHFA and challenging a decades-old consensus about state government’s role in putting roofs over Minnesotans’ heads. That consensus has held that state help should be directed at low- and middle-income people who otherwise might not be able to afford decent or stable housing and that, to the extent possible, state funds should leverage other sources of assistance, both public and private.

That’s a policy that the Star Tribune Editorial Board and, we suspect, a majority of Minnesotans favor. But as applied by the MHFA to date, it has not done enough to respond to a new housing problem that has emerged as the economy has recovered in Greater Minnesota — a shortage not just of affordable housing, but of any housing for the new workers.

That would seem to be a problem that the private market could correct without taxpayer assistance. Not so, say lobbyists for the Greater Minnesota Partnership, a leading voice for a new approach to state aid. The pattern of low rents and property values make private financing difficult to obtain, even for developers intending to charge market-rate rents. That’s because property appraisals are based on past patterns, not projected growth.

The MHFA has been slow to respond to this problem, but it appears to be catching up. Its long-standing preference for leveraging other sources of housing assistance has impeded the agency’s response, Housing Commissioner Mary Tingerthal acknowledges. The MHFA’s frequent funding partner has been federal housing tax credits, which can be used only for projects that serve tenants with incomes below 60 percent of the regional median income. That’s too low to meet emerging workforce housing needs outstate.

The agency is planning to decouple its funds from federal tax credits, Tingerthal says. An income limit will still apply to its aid, but it will be a generous one — 80 percent of the state, not regional, median household income. This year that amounts to $62,000 — more than 94 percent of new jobs in Greater Minnesota pay, Tingerthal says.

Targeting state housing help to households below that income level evidently appeals to Gov. Mark Dayton. His budget recommendations for 2016-17 include an additional $10 million for an MHFA forgivable-loan fund that already expects $26 million in the coming biennial budget. Dayton’s increase would be enough to finance 650 new rental units.

The Legislature may decide that’s not enough. But we’d advise lawmakers to think twice before enacting the Greater Minnesota Partnership’s alternative — a whopping $100 million package of tax credits and grants to developers to be administered not by the MHFA, but by the state Department of Employment and Economic Development. As envisioned by the partnership, there would no income limit for tenants.

That approach would be a departure from four decades of consensus about the purpose of state housing aid and who should receive it. Soon enough, we fear, it would lead to competition at the Legislature between people at risk of homelessness and politically connected developers and employers. We don’t like the odds for the homeless in such a fight. Legislators should be loath to go there. Instead, they should encourage the MHFA to adapt to meet the outstate housing need.