At its May meeting, the board of the Minnesota Housing Finance Agency discussed a major policy change in the draft 2019 tax credit Qualified Allocation Plan (QAP), extending affordability for 9% tax credit projects; the reach and impact of the Family Homeless Prevention and Assistance Program (FHPAP); a move to forgive the debt on a foreclosure response initiative; the latest developments at the state legislature and more.
In her opening remarks, Minnesota Housing Commissioner Mary Tingerthal reported to the board on the PBS Frontline program, “Poverty, Politics and Profit.” She said that, contrary to industry expectations, reactions to the program were muted. To ensure that any questions or concerns that may have surfaced as a result of the program were addressed, Agency staff contacted Minnesota Congressional delegation offices. She also noted that, the Agency's office move to the former St. Paul Macy’s store will occur over a several week period in September.
2019 Qualified Allocation Plan (QAP)
The board voted to release for public comment the draft 2019 tax credit Qualified Allocation Plan (QAP). Staff highlighted numerous changes from the 2018 plan, however they reminded the board that most of the changes were intended to simplify and clarify the tax credit application process, and the draft QAP included very few policy changes.
A major policy change in the QAP, staff said, was to encourage longer term affordability for 9% tax credit projects — longer than the 30 years of income and rent restrictions now required as a minimum. Seven competitive scoring points were added for projects promising 40 years affordability, with three points for 35 years affordability. Staff said that the 2019 QAP would also further encourage large family housing over single room housing for homeless people. Greater Minnesota will be divided into two geographies for access to transit points: one for the larger cities and the other for small communities. The points given for minority- and women-owned businesses are proposed to extend to nonprofits whose executive directors are people of color and/or women.
Board member Craig Klausing asked about the balance between awarding credits to projects being located in areas of higher opportunity versus areas of concentrated poverty. Staff responded that the scoring system encourages development in areas with high performing schools and other attributes of opportunity; however, this would be balanced with support for projects that preserve affordability of existing affordable housing regardless of location.
Board chair John DeCramer asked who paid for the required appraisals. Staff responded that they would ultimately be covered by the funding sources supporting a project. Tingerthal concluded the discussion by saying that comments on the proposed 2019 QAP would be accepted until June 14, and the QAP would be back to the board for adoption at its July meeting.
2017 housing tax credits
In action related to 2017 housing tax credits, the board accepted staff’s recommendation to award $3.9 million in supplemental deferred loans to six stalled projects. This action reflected the Agency’s interest in advancing projects selected during the Agency’s 2016 RFP that were subsequently impacted by the reduction in tax credit pricing following the presidential election and announcement of the Trump Administration’s tax reform proposals. The pricing on one dollar of tax credits had dropped between 4 and 15 cents on the six properties receiving extra assistance. Greater Minnesota Housing Fund and Minnesota Housing would assist eight properties through loan increases. Commissioner Tingerthal said that when staff reached out to the developers of these projects using 2017 tax credits, she thought the need for Agency assistance would have been a lot higher than it turned out to be.
Family Homeless Prevention and Assistance Program
Contingent upon the governor signing the Agency’s funding bill, the board awarded 2018-19 grants under the Family Homeless Prevention and Assistance Program (FHPAP). Staff said that they expect about 14,000 households to be assisted by FHPAP grantees. This will either prevent a family from becoming homeless or support the rapid rehousing of families losing their homes. Tingerthal highlighted the great savings to the state from keeping these families from becoming homeless. She said that program grantees report that 80% of participating families become stably housed. Starting with this funding round, tribal nations have become eligible program administrators. This year Minnesota Tribal Collaborative, representing five northern Minnesota tribal entities, is being awarded funds. Because of concerns about the accuracy of Census data on reservations, Agency staff said that they relied on the Wilder survey of homeless persons to provide data on need within reservations. Funds were also awarded for the Bridges rental assistance program for persons with severe mental illness.
Family Housing Fund
The board gave staff the go-ahead to negotiate forgiveness of $3.4 million in debt owed by the Family Housing Fund. This initiative was taken in response to losses that surfaced in loans that the Fund had provided Greater Metropolitan Housing Corporation (GMHC) as part of a foreclosure response initiative in the wake of the 2006-2008 financial crisis. Agency Chief Financial Officer Kevin Carpenter stated that because of initiatives taken here by groups such as the Fund and GMHC, the Twin Cities recovered from the crisis better than the recovery experienced in other communities around the country. Carpenter said that the Agency had three objectives when considering the debt forgiveness.
- First was to help revitalize the two organizations (Family Housing Fund and GMHC).
- Second was to provide a conceptual framework for how it would consider similar support to other organizations that invest in affordable housing.
- And third, was to develop a prudent and reasonable standard for the Agency to employ when considering similar requests.
Carpenter said that before recommending the forgiveness, the two organizations would need to meet seven conditions. The Family Housing Fund would need to forgive its loan of like amount to GMHC, and GMHC would need to take a number of steps to strengthen its management and reach agreement with other lenders. Board member Stephanie Klinzing encouraged staff to be very clear in identifying the extraordinary circumstances in which the Agency would consider this type of debt forgiveness.
Legislative session update
Agency policy staff, Ryan Baumtrog and Katie Topinka, updated the board on the status of housing proposals being considered during the almost completed legislative session. Housing was included in one of three budget bills passed by the legislature at the time of the board meeting and awaiting the governor’s signature. However, the governor is not expected to sign any funding bill until all of the major bills reach the governor’s desk and the session-ending agreement between the governor and legislative leaders is realized. At this juncture, staff was happy with the outcome — all Agency programs were funded at their full base budget. The legislature also funded two additional initiatives, increasing the Agency’s budget over base by $6 million, or 6 percent.
One of these additional initiatives passed by the legislature is a workforce housing program ($4 million), formerly housed in DEED. In moving the program to Minnesota Housing, the legislature eliminated the prohibition of combining state workforce housing funds for any property also using funds that require income and rent restrictions. The other $2 million initiative was for Homework Starts with Home, a program providing rent assistance to homeless and highly mobile families with school age children.
Staff said that while a bonding bill was not yet completed, the legislature was considering a bill that included $77 million in bonds for housing and related projects. This includes $35 million in Housing Infrastructure Bonds (HIB), $10 million in General Obligation bonds for public housing repairs, and $12 million for non-residential portion of the St. Paul Dorothy Day project. The final $20 million are Housing Infrastructure Bonds with bond repayment coming from previously committed debt service appropriations.
Housing Infrastructure Bonds
Tingerthal concluded the meeting by asking for board concurrence on a proposal to commit up to $20 million in HIB using prior approved debt service to projects on an early award basis. Tingerthal believed that there might be a few stalled projects that would have gone forward had a bonding bill passed in 2016. To enable any such projects to start construction this season, the Agency would provide up to $20 million in advance of the current year’s consolidated RFP funding awards (which will be made this October). To qualify, these projects must meet the requirements for HIB, have all other funding and approvals secured, demonstrate that they would lose other funding commitments if they could not start early and demonstrate that they can close and start construction by October. Developers would let the Agency know whether they would seek such funding by June 1 when the upcoming consolidated RFP multifamily “intent to apply” form is due, and then make full application with other RFP applications by June 15.