or 
lines to the right of the URL bar at the top of your browser
Focus on New Laws: Local Affordable Housing Aid and Statewide Affordable Housing Aid
Two new housing aid programs, now in effect, provide direct formula-based funding to cities with populations of more than 10,000 to help develop and preserve affordable housing.
As a part of the 2023 housing finance and policy omnibus bill, now Chapter 37 in 2023 Session Law, and the 2023 omnibus tax bill, now Chapter 64 in 2023 Session Law, two programs were created the provide direct funding to eligible cities for affordable housing production and preservation.
Local Affordable Housing Aid
Chapter 37 in 2023 Session Law included a new formula-based aid program effective July 1, 2023, for all seven counties in the metropolitan area and cities of the first, second, and third class (populations over 10,000) within the metropolitan area counties.
The aid, payable to cities and counties in 2024, is funded by a new 0.25% metropolitan area sales tax imposed by the Metropolitan Council on retail sales made in the metropolitan counties or to a destination in the metropolitan counties. The fee went into effect on Oct. 1, 2023.
The aid will be certified and paid to eligible cities based on each local government’s share of cost-burdened households. The number of cost-burdened households will be determined using the most recent estimates or experimental estimates provided by the American Community Survey, which is conducted by the U.S. Census Bureau.
Much like Local Government Aid (LGA), the Department of Revenue will distribute funds in two equal installments in the year aid is calculated beginning in 2024 with the first half paid on July 20 and the second half on Dec. 26.
Use of Local Affordable Housing Aid
Funds distributed through this aid program must be spent on a qualifying project by Dec. 31 of the fourth year after the aid was received. Funds will also be considered spent if a city demonstrates to the Minnesota Housing Finance Agency that the city cannot expend funds on a qualifying project by the deadline due to factors outside the control of the city. The funds will be transferred to a local housing trust fund to be spent on a qualifying project at a later date.
Qualifying Projects
While the program is extremely flexible, the legislative intent is to aid cities in the production and preservation of affordable housing and the provision of emergency rental assistance. Qualifying projects include:
- Emergency rental assistance for households earning less than 80% of area median income as determined by the United States Department of Housing and Urban Development (HUD).
- Financial support to nonprofit affordable housing providers.
- Construction, acquisition, rehabilitation, demolition or removal of structures, construction financing, permanent financing, interest rate reduction, refinancing, and gap financing for:
- Homeownership projects, 115% of the greater of state or area median income as determined by HUD.
- Rental housing projects, 80% of the greater of state or area median income as determined by HUD.
- Emergency rental assistance for households earning less than 80% of area median income as determined by HUD.
- Use of funds for new construction or substantial rehabilitation of a building containing more than four units. It must include the greater of at least one unit or 5% of the buildings units as accessible units and meet sensory accessible standards.
Reporting requirements
All aid recipients must submit a report annually by Dec. 1 of each year, after aid is received, to the Minnesota Housing Finance Agency on depicting qualifying projects that are planned or completed with the use of aid and a detailed report of any unspent funds.
Statewide Affordable Housing Aid
Like the Local Affordable Housing Aid program, the Statewide Affordable Housing Aid program authorized in Chapter 64 of 2023 Session Law provides direct formula-based resources for eligible cities and counties outside the seven-county metropolitan area.
Statewide Affordable Housing Aid will be paid directly to all counties, cities of the first, second, and third class (those with populations above 10,000) based on the same cost-burden formula as the Local Affordable Housing Aid program.
Cities in Greater Minnesota that are under 10,000 in population, will be eligible to participate in a discretionary grant program administered by Minnesota Housing for grants of at least $25,000 to be used for the same eligible expenditures as the direct aid. Aids will be paid in two installments on July 20 and Dec. 26 of each year except in 2023, when the entire amount of aid will be paid on Dec. 26.
Use requirements of the Statewide Affordable Housing Aid as well as reporting requirements are identical to the Local Affordable Housing Aid Program.
Qualifying projects are also identical with one exception — cities receiving aid under the Statewide Affordable Housing Aid program are eligible to use the funds on market rate residential rental housing so long as the city submits a resolution with its report to Minnesota Housing that the vacancy rate for rental housing in the project area has been 5% or less for the past two years, and a business within 25 miles of the proposed project with at least 20 full-time employees provides a letter indicating that lack of housing has impacted their business.