At the May Minnesota Housing Finance Agency meeting, the board awarded funding to preserve affordable housing and approved plans and selections while staff reported on the Greater Minnesota Rental Rehab Demonstration Loan program and the homeownership capacity initiative. There was also an update on the legislative session and what Minnesota Housing could expect for funding in the special session.
Housing preservation funding awards
Several funding awards were made to preserve existing affordable housing. One, for the Cathedral Hill development in St. Paul, raised board questions about the cost of preservation and whether the Agency’s predictive cost model enabled the fiscal discipline that had been envisioned for the model. Agency staff is required to report to the board whenever the total development cost for a project receiving funding from Minnesota Housing exceeds by 25% the predictive cost, based on the type of property. In the case of Cathedral Hill, a historic rehab project, this reporting would have only been required if the per-unit cost reached $300,000, and this concerned the board. Agency staff responded that the information on project costs needed to be better communicated, and the cost model itself would be reviewed prior to its use for Fall 2015 funding awards.
A second preservation property approved was for Aeon which is acquiring Parkview Villa, public housing in Columbia Heights, and converting it to project-based Section 8 housing. This is being done under the rules of the federal Rental Assistance Demonstration (RAD) and represents the first time Minnesota Housing has funded a RAD project. Parkview Villa includes 146 apartments currently occupied primarily by elderly and physically disabled tenants. The Agency will provide $2.2 million in permanent mortgage, $1.4 million in gap funding, and a $7 million bridge loan. The bridge loan will finance pay-in of tax credit equity funded through U.S. Bank, and will also be repaid by the Agency’s permanent mortgage and gap funding.
The board approved a plan to accommodate the separation of Family Housing Fund from Twin Cities Community Land Bank. The land bank has been a wholly owned subsidiary of the fund. The Minnesota Housing staff report states that the two organizations intend to separate over the next 18 months to three years in order to better position them to raise equity funds. Minnesota Housing has extended $20 million in loans to the Family Housing Fund for use by the land bank. The Minnesota Housing board approved making the land bank the borrower for these funds with the Family Housing Fund providing a guarantee for $10 million of that amount. The land bank will use the funds for foreclosure remediation, strategic acquisitions, and interim lending.
The board also approved selection of agencies for participation in the Family Homeless Prevention and Assistance Program (FHPAP). $17 million was awarded to 20 agencies, with their combined service areas covering the entire state. The board also approved a set aside of $149,500 to reward agencies that combine FHPAP with “mainstream” emergency and financial assistance programs, such as TANF.
Staff clarified that FHPAP does serve singles. 55% of funds are reserved for the metro area and 45% for Greater Minnesota. Board members asked whether there was a sharing of approaches to address homelessness in the decentralized program, where each administrator develops its own strategy. Staff informed the board that program administrators frequently share approaches at Minnesota Housing hosted meetings. Staff also reported that while FHPAP is very successful, the hardest populations to keep from returning to homelessness are singles, people with disabilities, and victims of domestic violence.
Agency staff reported on the status of the Greater Minnesota Rental Rehab Demonstration Loan program (RRDL) and received board concept approval to modify and extend the pilot through October 2017. In the report, staff said that 40% of Minnesota’s rental housing is in Greater Minnesota. About 60% of Greater Minnesota rental properties have fewer than nine apartments and 51% are 1-4 unit properties. Most of these properties are older, built before 1980, and in need of repair, historically having not been very well assisted by the Agency.
Under RRDL, the Agency currently uses 8 regional administrators to make loans on its behalf for smaller properties, while directly making loans on properties with 8 or more units. Staff said that through the pilot, a substantial level of success had been achieved with the larger properties, but not 1-4 units. They heard that the application process was still too challenging for the owners of smaller properties. To address this challenge, staff is proposing a change to the current structure where all owners receiving RRDL loans would repay 75% of the no-interest loan after 10 years. For 1-4 unit properties with loans under $100,000, the entire loan would be forgiven after 10 years (they noted that this could amount to a per unit-month subsidy of $200, an amount comparable to a very shallow operating subsidy made over the same period). For larger properties, 10% of the loan is forgiven after 10 years.
Staff said that they hope to commit $7.5 million over the next biennium through RRDL. In response to a board question, staff said that RRDL is often paired with small cities block grant funds or lead removal grants. The program will be run on a pipeline basis to make the funds more accessible. The RRDL pilot will be back to the board in June for the approval of the program guide reflecting the proposed changes. For the next funding round, program administrator applications will be due in August with selection in November.
Homeownership capacity initiative
Staff updated the board on the homeownership capacity initiative targeted to increase homeownership among households of color. The board approved contracts for ten agencies providing coaching under the program. So far 336 households have entered the program with 74% being households of color. Board member Garnett asked whether there were interim benchmarks, understanding that the ultimate success of households won’t be known for years. Staff responded that they do not have benchmarks but can already report that 40 participating families had achieved homeownership.
Legislative session update
Commissioner Tingerthal updated the board on the Agency’s status in light of the gubernatorial veto of its funding bill. Tingerthal said that the governor and MMB accepted the Agency’s argument that because state appropriations do not pay for its operations it will not need to provide the June 1 lay-off notices to staff. Three agency positions however will be subject to the notices. They are related to implementation of the Olmstead settlement and their salaries are paid through appropriations.
In the legislative session report, Agency staff said that they felt positive about the session because both the Agency’s appropriations exceeded $100 million and harmful language, such as elimination of income limits for the Challenge program, was not included in the final bill. Even though the bill was vetoed, staff felt comfortable in describing the funding the Agency should be receiving. Above the base budget, the legislature appropriated $2 million each for the Housing and Jobs initiative and for rental assistance to address homelessness connected to highly-mobile students.
Because the governor’s veto message expressed concern about lack of funding for the Olmstead settlement, staff said there was a chance that the special session would include $2.5 million of additional funds for the BRIDGES program. They added that the bonding bill, which passed the Senate but ran out of time for House passage, included $5.3 million in G.O. bonds for public housing; this too might come back in the special session. Staff also pointed out that the Department of Human Services bill was not vetoed and that bill included additional funding for homeless services, homeless youth housing, and supportive services.