February's Minnesota Housing board meeting touched on an array of items of impact for the future. The board was briefed on the public comments received about the new proposal for distributing Minnesota's federal housing tax credits. Also discussed was how the agency's Strategic Plan will be constructed, as well as the launch of a new contract for deed program for areas of high foreclosure. Awards for the new rental rehab pilot program for Greater Minnesota were confirmed. Finally, the board will be joined by a new member, Steve Johnson, and board members received an update on bonding for housing at the state legislature.
Public Comments Received on Plan for Allocating of Tax Credits
The board was briefed on public comments submitted in response to the Agency's draft of the 2013 tax credit Qualified Allocation Plan. This plan will guide the allocation of credits that will attract approximately $80 million in equity for rental housing developments in 2013. Staff said 27 written comments were received this year, many more than usual. (For more about what's in the proposed QAP, see this post or view the full proposed QAP.)
Most comments concerned an element in the proposal to better contain costs of tax credit developments. The National Council of State Housing Agencies is strongly encouraging state agencies to take steps to reduce the per-unit cost of housing development, partly as a result of concerns that have recently surfaced in the media in other states about exorbitant development costs.
Other topics receiving multiple comments this year were: adequacy of funding for homeless units, level of support for the projects receiving commitment from local tax credit administrators, the type of projects that would receive extra credits (basis boost), and the requirement that new construction projects use a floating tax credit rate (due to the scheduled expiration in 2013 of the fixed credit rate in federal legislation).
Staff said that they would look closely at the comments, which Tingerthal called "thoughtful," and bring recommendations for board approval at the March meeting.
Regarding board questions about the cost containment comments, staff responded that many were concerned that the quality of Minnesota's affordable housing might be sacrificed and, in particular, inclusion of extra cost items, such as those associated with supportive housing, might hurt the competitiveness of a project. Tingerthal also said that the agency would review costs attributed to developing in different geographic areas. Currently, there are scoring differences in the draft QAP for the Metro vs. Greater Minnesota due to differential regional development costs. The agency might consider creating additional geographic breakouts.
Agency's Strategic Plan
Deputy Commissioner Barb Sporlein presented the agency's upcoming strategic planning process. This plan will update the prior strategic plan adopted in 2010. Sporlein said that the new plan will provide a statement of the agency's vision, mission, values and primary strategies.
The strategic plan serves as a guide to other documents, such as the agency's Affordable Housing Plan – in this context the AHP was characterized by Tingerthal as Minnesota Housing's business plan. Sporlein said that the agency does not intend to undertake any new research as part of the planning process but will emphasize stakeholder engagement. Agency staff will host a series of regional dialogues around the state in April. A draft version of the plan will be presented to the board in June, with the final version to be adopted in July.
New Contract for Deed Program for High Foreclosure Areas
The board approved in concept a new initiative to help homebuyers acquire homes in high foreclosure areas through contracts for deed. With this program, entitled Bridge to Success, home purchasers who are not able to obtain traditional financing can obtain a contract for deed with a 7.5% interest rate, amortized over thirty years, with a ten year balloon. A number of safeguards including financial counseling and a "good neighbor policy" will be built into the program to help ensure home buyer success. The program is targeted to areas with high concentrations of foreclosures.
Board members asked about the ten year balloon. Assistant Commissioner Mike Haley responded that the forerunner of this program had a three year balloon; this was to encourage participants to transition quickly into the traditional mortgage market. But the program sponsors found that many households needed longer than three years to repair their credit and, because of falling real estate values, to build equity in their homes.
The initial funding pool would include $10.4 million from Minnesota Housing and $2.6 million from the Family Housing Fund. Tingerthal added that the agency was hearing from interested investors and that the program could grow to $50 million.
Rental Rehab Pilot Program Awards Made
Under another new agency initiative, Greater Minnesota applicants received funding commitments for rehab of rental units, as the board approved commitments for the first time under the Rental Rehab Pilot Program. This program is designed to serve areas in Greater Minnesota and projects too small to compete well under the agency's competitive funding process. Staff was pleased with the geographic distribution of the applicants and the type of projects and programs that agency funds would support. Some of the funding will preserve Section 8 and Rural Development funded properties. Staff plans to issue a second Rental Rehab request for proposals in July of 2012.
A New Board Member; Bonding at the Legislature
Commissioner Mary Tingerthal announced the appointment of Steve Johnson as a new board member. Johnson was appointed by Governor Dayton to fill the seat of long time board member and former chair Mike Finch. Johnson lives in Apple Valley and is the CFO of Westwood Professional Services, a multi-state land and energy consulting firm headquartered in Eden Prairie. Johnson's term will end in 2014.
Tingerthal also informed board members that legislators have been responding positively to the housing portion of the governor's bonding bill. However, there is concern that the overall size of the bonding bill is larger than legislative leaders want, and that the housing portion might be reduced as part of an overall reduction in the final state bonding commitment.