Securing Minnesota s Housing Future The Governor s Task Force on Housing

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Securing Minnesota s Housing Future The Governor s Task Force on Housing Rental Housing Work Group Meeting #6 June 4, 2018 1:00 p.m.

com/register/3846333957635763201 1:00 p.m. Welcome and introductions 1:05 p.m. Review agenda and key meeting goals 1:10 p.m. Final discussion of ideas not yet thoroughly vetted Service Enhanced Multi

1 Securing Minnesota s Housing Future The Governor s Task Force on Housing Rental Housing Work Group Meeting #6 June 4, :00 p.m. to 4:00 p.m. Minnesota Housing, Lake Superior Room 400 Wabasha St N, Suite 400, Saint Paul If you are attending remotely, please follow this link: 1:00 p.m. Welcome and introductions 1:05 p.m. Review agenda and key meeting goals 1:10 p.m. Final discussion of ideas not yet thoroughly vetted Service Enhanced Multi family Mortgage Program (See attached brief) Impact Investors Equity Fund for New Affordable Housing Development (See attached brief) Prioritizing underutilized public land for affordable housing (See attached brief) Any others? 2:00 p.m. Exercise: Comparative Assessment of Recommendations and Actions Consider comments from May 29 th Taskforce meeting and complete exercise Review the following documents in advance: Assessment screening tool template Framing the Recommendations and Actions Rental Housing Work Group Recommendations :45 p.m. Discussion on results of assessment exercise 3:45 p.m. Public Comment 3:55 p.m. Wrap up 4:00 p.m. Adjourn 400 Wabasha St. N., Suite 400 St. Paul, MN

2 Securing Minnesota s Housing Future The Governor s Task Force on Housing Parking / transportation Parking: Treasure Island Center Ramp (connected to our building). Parking can be difficult due to the ongoing building construction, however an option. Lawson Parking Ramp Surface parking is available across the street from our building on Wabasha Street Meter parking available near building If you enter our building on street level, you will want to take the elevators to 4 th floor. If you park in the Treasure Island Center Ramp, you will want to enter our space on Level 6W of the ramp. Do not take the elevators in the ramp as they will not take you directly to our floor. Transit: Minnesota Housing is served by buses that travel through downtown St. Paul. Find your route using Metro Transit s Trip Planner. 400 Wabasha St. N., Suite 400 St. Paul, MN

3 Service Enhanced Multifamily Mortgage Program Objective: Provide a dependable stream of funding for proven social services that help households maintain stable housing and reach their aspirational goals. Need / Problem: During taskforce meetings we have heard much reference to the intersection of housing and other areas of a families needs and aspirations for success. Services and social supports are necessary to make the most of housing as a platform for overall prosperity. There are currently very few dependable streams of funding for services provided in conjunction with housing. Some housing providers raise money from philanthropic sources to provide services, which leaves them subject to changing funder priorities and requires considerable staff time in donor relations and reporting. Rationale: For some Minnesotans, remaining stably housed may require service supports. These may come in the form of emergency eviction prevention, mental, physical or chemical health interventions which enable households to maintain housing stability and be good neighbors to those around them. These are services which support people to maintain housing. Once housing stability is secured, additional supports can be particularly effective at accelerating individuals progress toward other goals like homeownership, career laddering, sending kids to college, etc. These include financial planning, job search and training, youth education and leadership, health and wellness programs whose effectiveness can be amplified in the context of affordable housing. Tool: Minnesota Service-Inclusive Mortgage Program which would be created to provide a dependable funding stream for proven social services offered in conjunction with affordable housing. How it would work: Available on first mortgages originated by MN Housing under this program, with no additional fees, underwriting or reporting required Available to certified service providers (consider using the Fannie Mae / SAHF certification) Properties meet affordability requirements with regard to income and rents that make them eligible for MN Housing mortgages Up to.5% interest refunded at the close of any year of successful debt service Funds available without restriction to offer services at the site(s) MN Housing would likely see more mortgage volume

4 Impact Investors Equity Fund for New Affordable Housing Development Cecil Smith May 12, 2018 Objective: Establish a source of lower cost equity for leveraging capital in new affordable housing developments, specifically oriented to private market development with light or no subsidies, in exchange for rent and income limits in those developments for at least the term of the investment. Mechanisms: Existing federal securities law and state blue sky laws permit the creation of such a fund. In particular, SEC Regulation D Rule 506 provides a means of offering securities to raise unlimited capital from accredited investors. In particular, the JOBS Act of 2012 led to the creation of Rule 506(c) which permits general solicitation and advertising for a private placement offering for accredited investors. This could be targeted to Minnesota investors and an even lower equity return could be offered to impact investors if coupled with a tax credit, similar to the Minnesota Angel Tax Credit program that ended in 2017, which was a 25% tax credit on invested capital. Other mechanisms exist to establish funds, but not without fund caps. Housing focus of these funds could be broad, or have geographical focus, or a housing product type focus that would appeal to the investors. Example: (1) Capital invested at 5%, qualifying for a 25% state tax credit, meaning the effective rate of return is 6.67%. (2) Capital invested at 8%, qualifying for a 25% state tax credit, meaning the effective rate of return is 10.67%. Affordable Housing Development: If this equity-raising strategy is coupled with discounted Agency debt programs, and perhaps by registering as a Housing Impact Fund with the State (with appropriate qualifying performance criteria), receives discounts or forgiveness of government imposed fees related to the development then development costs can be reduced significantly. In addition, with new construction technologies and expedited entitlement processes for these projects, development time lines can be truncated further significantly reducing cost. Furthermore, with affordable housing operational incentives such as LIHTC (4d) property tax status or even utility discounts, these light subsidies, with simplified and low-cost compliance, enable a new development model to emerge for private capital to create self-sustaining affordable housing at scale.

5 Prioritizing Underutilized Publicly-Owned Lands for Affordable Housing Housing is of vital statewide importance to ensuring sustained economic growth, and the health, dignity and safety of residents in urban and rural communities. The provision of a decent, affordable home for every Minnesotan is a priority for all of those involved in the Governor s Task Force on Housing. The State s growing affordability crisis is the result of complex factors contributing to rising rents, increasing construction costs and housing shortages in different parts of the state. A myriad of policy, funding, and legislative approaches is required. Among these is the more strategic use of public lands those held by various state agencies, county governments and local units of government to achieve affordable housing goals. Local governments have the greatest control over housing production and preservation. Adopting statewide legislation or policies to clarify and articulate a priority for using suitable surplus public lands for affordable housing provides a powerful complimentary approach. Roughly a quarter of land in Minnesota is publicly held by the state or federal government, 1 however, not all this land is suitable for development or for affordable housing. Each public land site has its own unique attributes. One-sizefits-all policies or cookie cutter approaches to development won t work. Individual development solicitations should be tailored to the unique site characteristics and reflect community input. The latter is especially important both in that vacant public lands can be viewed as a community asset or nuisance. Publicly-owned lands offer a rare opportunity to support development that the market may not be providing such as sites for community health clinics, affordable housing, grocery stores or other community-identified needs. Public agencies should minimize approval redundancies or inconsistencies and support processes that prioritize community participation and maximize developer participation. Defining Publicly-Owned Parcels The following definition is provided by Enterprise Community Partners and refers to any site that is owned by a governmental or government-chartered entity. Such entities include (but are not limited to): units of state or local government, government departments (including housing and public works), transit agencies, school districts, and public institutions of higher learning. Publicly own parcels, often referred to as public sites, public land and surplus land can include but are not limited to: vacant or underutilized parcels, parcels with existing community/public facilities with redevelopment potential, and/or land being purchased by a public agency for the development of community / public facilities including roads and transit corridors. Public Benefit from Publicly Owned Parcels (2017) The State of Minnesota Property Management Policy provides a process for disposal of state property, but it is insufficient. Minnesota lags behind other states such as Washington and California in adopting legislation that clarifies and articulates a priority for using surplus public lands to increase the supply of housing affordable to lower-income households as part of larger comprehensive housing funding and policy approaches. In 2015, 1 An inventory of state-owned public lands is available through

6 California passed legislation (Assembly Bill 2135) that amended its surplus land statute to specifically prioritize these properties for affordable housing. Among other changes, AB 2135 requires: The qualified entity proposing purchase or lease of the surplus land for affordable housing to agree to make available to lower income households a minimum of 25% of total units at an affordable housing cost for a period of at least 55 years, and Requires any surplus property developed with 10 or more residential units to include at least 15% of the units as housing affordable to lower income households. In February 2018, Washington state passed House Bill 2382 to streamline the approval process for developing publicly-owned lands and create a state inventory of real property that is owned or administered by each agency and is vacant or available for lease or sale; and then assess properties and provide a consolidated list of those sites that are suitable for affordable housing development. Activating publicly-owned lands requires making information accessible to the public about the characteristics and location of sites. Analysis by state agencies and other public-sector partners regarding the suitability of surplus land parcels for multi-family or single-family housing would accelerate their reuse. Clarifying policies and procedures for their disposition and preferred use by private for-profit and not-for profit developers further helps to activate these sites. In 2015, the Metropolitan Council released an inventory of publicly-owned lands on existing and proposed transitway corridors. 2 This inventory includes over 11,500 acres of public lands owned by the Met Council, by Ramsey, Dakota and Hennepin Counties and by numerous cities along the transitways. It provides a useful model and starting point for shaping a larger inventory of publicly-owned lands across the Twin Cities region and statewide. Recommendations to the Governor s Task Force Request that all state agencies provide an inventory of surplus public lands with an analysis of their suitability for housing development. Publish on-line a cross-agency inventory of state-controlled public lands suitable for housing development, ideally this should be done through a GIS-platform that allows for information to be mapped and details key parcel characteristics such as acreage, existing land use, years vacant, existing building structure or infrastructure, brownfields or other environmental hazards. Pursue state legislation that amends state property land disposal to prioritize its use for affordable housing where suitable. Encourage cities to develop an asset management plan for their public land sites that utilize market analysis of sites to identify the highest and best use of specific parcels and determine whether market strength and financing conditions are significant to require or incentivize affordable housing on individual sites. Provide technical assistance to local communities and counties through the Minnesota Housing Finance Agency on preferred ways to structure RFPs for publicly-owned sites for sale or lease to support affordable housing redevelopment through public-private partnerships or through direct disposition process. 2 Information on Metro Transit s publicly-owned land along transitways and other development guidance materials is available through the TOD Office s website:

7 Recommendation or Action statement inserted here High IMPACT* Medium * breadth and depth of impact Low High Medium DIFFICULTY* Low **eg. Cost, Political feasibility, Clear leader Directions: Rate recommendation or action on the grid above using two measures -- potential level of IMPACT to improve the situation being addressed AND potential level of DIFFICULTY to implement it.

8 Framing the Recommendations and Actions As a Task Force, you will deliver key messages to the community about housing. The Elements we have been using to organize the recommendations in the past month, express the main messages that the Task Force wants to deliver about BIG actions we need to take as a Minnesota community to achieve our vision. The statements below were drafted by staff to more fully articulate what we have heard from task force members about these BIG actions. The one or two word phrases that we have used to describe these Elements are in parentheses. The Enhance Stability Element has been split into two statements based on feedback at the recent Task Force meeting that there was not enough focus on services. We need to build a broader public sense of urgency and commitment to getting more housing, especially housing that is affordable. That can happen by setting and committing to big public goals for housing, which then can lead to creating more investment in housing by all sectors. (Change Systems) We need to build more affordable housing to meet the needs of all Minnesotans. The shortage of supply and the cost of new construction are driving costs to where they are beyond the reach of many households. (Expand Production) We need to preserve the existing housing and the resources (various forms of rental assistance and rent restrictions) that make and keep housing affordable for people at the lowest incomes. (Preservation) We need to get more people with very low incomes or significant barriers into stable housing. For those with the potential for economic mobility, we need to provide avenues toward housing choices in the unsubsidized market, including homeownership and market rate rentals. (Increase Access) We need to reduce the rate at which people lose their housing. This can include landlordtenant issues, eviction rates, predatory landlords, dislocation from NOAH properties and tenant screening. (Enhance Stability) We need to build stronger links between housing and services for those people who need services to live stable lives. This can include housing for seniors who may need health care resources to stay in their homes, as well as people with disabilities and people who have experienced trauma who need services either short-term or long-term to stabilize their lives. (Enhance Stability) As you prepare for the upcoming Work Group meetings, we encourage you to consider whether each of the recommendations and actions being considered by your Work Group is an effective and compelling action that will advance one of these six bigger actions. Those that are not compelling as written may need to be strengthened or set aside. After this consideration, Work Group members will be asked to evaluate each recommendation and action to assess the degree of difficulty that will be encountered in accomplishing the action and the level of impact that the action is likely to have.

9 CHANGE SYSTEMS Rental Housing Work Group Preliminary Recommendations for discussion by Task Force DRAFT May 31, 2018 R1. Formalize assessment of housing needs and projected growth; planning; and engagement to create a common narrative on Minnesota s current and future housing needs. A) Biannually, the Governor s Office should convene a multi-agency group to publish a projection of need for housing preservation and production in three major categories: current need, future growth, and preservation of federally subsidized housing. The analysis should include regional geographies and the micro markets that exist in our state. Task Force Feedback: Itasca Project Real Time Talent is a good model. Housingcounts.org is a good online resource/tool to house information and share best practices. Attainable goals build more momentum within the community. Annual convening to share best practices? R2. Create dedicated and permanent affordable housing funding source at the State and local levels, sized to meet the projected affordable housing production and preservation need and rental assistance need. A) Explore a broad range of possible state financing tools to create to a dedicated funding source for affordable housing. The exploration should include a careful analysis of who bears the cost to fund more housing, careful not to put upward pressure on rents. B) Create sources of funding for affordable housing within local government and philanthropy that can leverage additional public and private investment to support deeply subsidized affordable rental units (affordable to households earning 30% AMI or less). o Innovation Fund: Provide flexible financial and technical support for housing innovation and market testing responsive to local needs and conditions. o Provide statutory authorization to local jurisdictions to adopt an increase in sales tax for the purpose of supporting local housing funds. o Provide statutory authorization to allow local jurisdictions to increase the maximum levy limit that can be utilized by housing and redevelopment authorities, economic development authorities and port authorities for affordable housing development and preservation. C) The State of Minnesota funds/supplies technical assistance to local jurisdictions to set up Affordable Housing Trust Funds. While Affordable Housing Trust Funds have been used by larger cities, smaller cities and towns have not tapped into the potential to use this resource. The State can help create new revenue streams for affordable housing by providing technical assistance to counties, cities, and towns for the one-time project of setting up Affordable Housing Trust Funds. Task Force Feedback: TA should be a partnership 1

10 Rental Housing Work Group Preliminary Recommendations for discussion by Task Force DRAFT May 31, 2018 EXPAND PRODUCTION R3. Expand affordability through mechanisms aimed at unlocking financing options, speeding up delivery of housing developments, and creating cost efficiencies that improve access to housing for all Minnesotans. Task Force Feedback: Energy around making it easier for small developers and new developers to build affordable housing A) Establish Minnesota as the entrepreneurial center for the advancement of housing technology, such as modular housing, manufactured housing and 3D construction. Task Force Feedback: Energy for this idea B) When using the Low Income Housing Tax Credit for new development, ensure that the new Income Averaging (IA) provision is used to create more units for households earning 30% AMI. Task Force Feedback: Combine with identical recommendation from Stability and Opportunity Work Group. C) Expand supply of workforce rental units (affordable to 60% - 120% AMI) located near job centers in partnership with major employers. Task Force Feedback: Employers can support in other ways, such as writing letters of recommendation or providing rental assistance to employees. D) Enable municipalities to increase investment in housing through direct funding or increased development entitlements or policy changes, such as increased density, TIF expansion, and ensuring that publicly owned land is prioritized for affordable housing. E) Monitor and support formal process to appeal local decisions that are in conflict with goal of increasing affordable housing. Task Force Feedback: Energy and concern for this recommending option to appeal local decisions. Suggested combining with Homeownership recommendation to streamline local processes in the final report. F) Create statewide review panel to evaluate regulations and recommended changes and impact on affordability. 2

11 Rental Housing Work Group Preliminary Recommendations for discussion by Task Force DRAFT May 31, 2018 INCREASE ACCESS R4. Expand rental assistance programs and maximize federal resources to meet the needs of Minnesota s lowest income and most vulnerable renters. A) Create new or expand existing rental assistance program(s) to complement the federal programs that, while valuable, are insufficient to meet need. This could include supplementing administrative funds to ensure the more families are served by federal dollars. Task Force Feedback: Energy around the need for new sources of rental assistance. B) Conduct statewide research study of Housing Choice Voucher porting, its net impact, and potential related funding loss to inform advocacy. Task Force Feedback: Excitement on this action. We need more information on porting. C) Partner with local public housing authorities and HRAs to match project based rental assistance with development in opportunity areas to create stable choices for low income families. 3

12 Rental Housing Work Group Preliminary Recommendations for discussion by Task Force DRAFT May 31, 2018 PRESERVATION R5. Incentivize private market owners to maintain, expand, or make rental units available to those most in need without significant increases in rent using targeted support from local and state government and private market. Task Force Feedback: Energy around engaging private landlords A) Support the modification and expansion of existing rental rehab programs throughout the state to simply and efficiently address the conditions of existing rental properties. Task Force Feedback: Excitement, but acknowledgement that this is hard to make work. B) Consider changes to the property tax regime that would reduce upward pressure on rents and free up capital for owners to make critical repairs and stay current with maintenance needs. C) Shield properties that deliver affordability from growing utility costs. Task Force Feedback: It might be easier to incentivize energy efficiency, especially in buildings where renters pay their own utilities. D) Create new insurance mechanisms or products to reduce costs for property owners. 4

HOUSING ELEMENT I. GOALS, OBJECTIVES AND POLICIES

HOUSING ELEMENT I. GOALS, OBJECTIVES AND POLICIES GOAL 1: IN ORDER TO ACHIEVE A BALANCED HOUSING SUPPLY (AND A BALANCED POPULATION AND ECONOMIC BASE), EVERY EFFORT SHOULD BE MADE TO PROVIDE A BROAD RANGE