This year, the state enacted $37.5 million in bonding to be used for housing and homeless programs through the Minnesota Housing Finance Agency. Both the amount of the bonding award and the scope of activities broke new ground in meeting the state’s growing housing needs.
The legislation contains $30 million in housing infrastructure bonds, $5.5 million in general obligation bonds for public housing rehab, and $2 million for the Harriet Tubman Women’s Shelter. This is the first year Minnesota Housing has been awarded more than $30 million in bond proceeds by the state. The state has appropriated an amount over $5 million in bond proceeds to the Agency only 5 times in the last 22 years.
This legislation is significant because it expands the use of bonds for housing. Historically, bonds approved by the legislature have been general obligation bonds. General obligation bonds are backed by the full faith and credit of the state and must only be used for publicly owned properties. General obligation bonds passed by the legislature for housing have usually been applied to properties serving the homeless such as emergency shelters and transitional housing.
In contrast, the majority of the bonding for housing passed this year are appropriation bonds. While the state has no binding obligation to pay the future debt service on appropriation bonds, a failure to pay the bonds will likely result in a lowering of the state’s bond rating. Although appropriation bonds carry slightly more risk, they can be used for additional types of projects rather than being limited to publicly owned properties. View a chart that depicts recent expansions to housing bonds by clicking here.
In 2008, Minnesota Housing first received the authority to use appropriation bonds to fund $30 million in nonprofit owned supportive housing. The success of these bonds set the stage for expanding Minnesota Housing’s use of appropriation bonds, which were called “housing infrastructure bonds” this year.
For the first time, the legislature authorized the agency to use the proceeds from the new housing infrastructure bonds for federally assisted properties owned by for-profit companies, in addition to those owned by nonprofits. This is especially important because so much of the federally assisted affordable housing stock is owned and managed by the for-profit sector. Regardless of ownership this stock often fails to generate enough revenue to ensure long term viability and requires an infusion of funding to preserve the quality of the housing.
In addition to preservation, the Agency is authorized to use the appropriation bonds for supportive housing and foreclosure recovery activities. Some of the funding will be used to acquire and rehabilitate foreclosed and vacant rental properties. The bonds may also be used for placing the land under foreclosed and vacant homes into community land trusts.
Another achievement this session is the state’s investment of $5.5 million in general obligation bonds for rehabilitating Minnesota’s public housing stock. This is the second time the legislature has demonstrated commitment to shoring up the state’s public housing. The state invested $2 million in bonding for public housing stock in 2009. MHP estimates the current rehabilitation needs of Minnesota’s public housing to exceed $400 million.
This legislative victory was accomplished with strong bi-partisan support. The governor and Republican and Democratic legislators responded to the needs of their constituents. Congratulations to all who helped with the enactment of the bonding in 2012.