The Minnesota Housing November board meeting covered several recent developments, including new sources of funds, new programs, and innovation for the Agency. From multi-family development to preservation of federally assisted housing, to rehab of ownership housing, new ideas are percolating. The meeting ended with a program review for 2013, including highlights and performance areas to monitor.
New capital sources for housing
In her opening remarks, Commissioner Tingerthal paid tribute to new capital sources for affordable housing from United Health Group and the Minnesota Equity Fund. The public introduction of these sources was made at the ribbon cutting for The Seasons Townhomes in Ramsey, sponsored by Podawiltz Development Corporation. This fifty unit development, reflecting the investment priorities for the new funds, is connected to the Northstar Commuter Rail line and in an area of job growth.
United Health Group purchased the low income housing tax credits for the Ramsey development through the Minnesota Equity Fund. Tingerthal said that the Equity Fund, a recently created subsidiary of Greater Minnesota Housing Fund, will be very important in generating stronger tax credit bids for rural and supportive housing developments, housing types that do not command as high a level of tax credit pricing as do other affordable housing developments.
New ownership rehab program to launch
The board approved a new ownership rehab program pilot intended to serve Minnesotans with incomes too high for the Agency's rehab loan program, but not high enough for the Fix Up Program loan product. The program, Targeted Home Improvement Pilot (THIP), has a goal of serving 200 households. The program income limit of 80% of the Metro area median will apply statewide (currently $66,000), but households with incomes between $20,000 and $49,500 will be targeted for participation. The Agency expects a 3% interest rate for the loans; the interest will be subsidized by $500,000 from Agency Foundation resources. Local program administrators will be selected through an RFP process with a February program award.
PINES Preservation Pilot Program to begin in January
Background information was provided to the board on a new initiative to preserve federally assisted housing. The Agency intends to launch Preservation: Identifying Needs, Exploring Strategies (PINES) Proactive Preservation Pilot in 2014 to preserve affordability and the physical condition of highest priority federally assisted developments. Minnesota has 11,000 developments with more than 40,000 Section 8 and USDA Rental Assistance units. Staff explained that preserving the entire inventory is not possible with the available resources, so investment prioritization strategies are critical.
The intent of the PINES pilot is to provide incentives for properties to remain in a subsidy program when there is likelihood of conversion to market rate apartments, and to meet capital improvement needs of properties which have not received Agency funding within the last 15 years. PINES will direct $12 million in state PARIF and federal HOME funds towards these high priority developments before their loans mature or rent subsidy contracts expire. Project selection will follow priorities established for preservation in the Qualified Allocation Plan for the Low Income Housing Tax Credit (LIHTC) program. Funding amounts will be set aside for the Twin Cities and for Greater Minnesota. Agency staff will reach out to owners of priority developments and seek to negotiate long term commitments to affordability.
The pilot will launch in January 2014 with an intent to commit the funding by September. This timing will enable the Agency to learn from the program investments and decide next steps prior to adopting the 2015 Affordable Housing Plan. The staff expects that five to eight properties will be funded though the pilot.
Board member Gloria Bostrom asked whether community groups had been apprised of the new approach to preservation. Agency staff responded that the Interagency Stabilization Group and fellow participants of the MacArthur Foundation-funded Preservation Plus Initiative had been informed and were supportive. Bostrom encouraged the staff to reach more broadly into the housing community with its proposal.
Tingerthal informed the board that the multifamily staff was doing a major revision of the rental housing loan programs offered by the Agency. The kick-off for these programs will occur in January, she added.
Year end review: rental construction benchmark exceeded; loan delinquencies high
Finally, Planning, Research and Evaluation Director John Patterson provided the board with a 2013 program year-end review. The Agency met most benchmarks established for the year. The Agency significantly exceeded its benchmark for funding new rental construction, with 870 rental units under construction. Patterson told the board that challenges existed in making home repair loans, but the entire market was down for this type of lending. Also troubling were single family loan delinquencies and foreclosures. The delinquency rate was 6.69% (where the industry benchmark was 3.57%), and foreclosures were at 1.64% (where the benchmark was 1.01%). Patterson said while the Agency expects its rates to be above industry benchmarks in difficult economic times, staff is concerned about these higher actuals in an improved economy.