Affordable housing was one of those issues that was expected to get some attention during the 2018 session of the Minnesota Legislature. It had been a prime issue in city elections in St. Paul and Minneapolis, not to mention something likely to come up during elections this fall.
So housing advocates came to the Capitol with a record-high bonding request: $140 million. Meanwhile, a bill to create an affordable housing tax credit on state income taxes, like North Dakota, had bipartisan support.
But with the number of days in the legislative session approaching single digits, what’s actually been accomplished?
Study of tax credit still alive
On Wednesday, House Republican budget writers produced a bonding bill that included $50 million for new housing projects as well as money to help rehabilitate existing public housing. It wasn’t as much as housing advocates — or Gov. Mark Dayton — had requested, but it showed a willingness to do something, and offered a starting point for negotiations between legislators and the governor.
Then, on Thursday, state Sen. Carla Nelson (R-Rochester) was able to amend the Senate tax bill — a measure primarily meant to address how the state will mesh its tax code with the new federal tax law — to require Minnesota Housing, the state’s housing finance agency, to prepare a study of the tax credit.
Patterned after what’s called the Housing Incentive Fund in North Dakota, the bill would allow donors to give money to a specific project that has been approved by the state or to a central pool that is allocated by the state. A taxpayer could contribute anything from $100 to $5 million to an affordable housing project in their community while claiming a dollar-for-dollar credit on their state taxes. As with other state tax credits, it could still be claimed on a state tax return even if the taxpayer is not itemizing deductions on their federal form.
While a study is not what was desired — the credit bill itself, Senate File 3301, didn’t pass — its inclusion in the tax bill keeps the issue in play when it gets to House-Senate conference committee discussions. “I’m hopeful that we will be able to do more in conference committee,” Nelson said. “So right now this is, yes, a study. But it’s also a toehold in the conference committee where we can further address this.”
Nelson said the credit itself has been helpful in North Dakota, where 79 percent of the donors have been individuals. “It’s an innovative way to leverage private sector dollars for a growing public issue, which is there just isn’t enough workforce and affordable housing,” she said.
She said the shortage of affordable housing in Minnesota has both economic and social implications, from employers not able to get enough workers to students not able to succeed in school due to a lack of stable housing. “As our budgets get increasingly tight and as their is increasing competition for public dollars, we have to start being innovative,” she said.
Libby Murphy, the deputy policy director for the Minnesota Housing Partnership, which advocates for low-income and affordable housing, said the credit project would be another source of money as housing projects gather funding. It might encourage employers to contribute and could bring in smaller community lenders who have not yet been partners on affordable housing projects.
“This credit would promote new relationships that don’t currently exist,” Murphy said. “Currently in affordable housing, the lenders are big lenders. There’s not a way for smaller businesses, local businesses and even smaller financial institutions to become investors in affordable housing.”
And for small businesses and individuals, Murphy said, there is an element of community pride to be able to say, “I contributed to that project.”
The bonding bill: ‘a good starting point’
Dayton had proposed to set aside $115 million for affordable housing in his bonding bill. Of that, $100 million would go to Minnesota Housing to help fund housing projects around the state, while $15 million would go toward rehabilitating existing public housing.
The House bonding bill provided less than half of that total: $50 million in construction and $6.7 million in rehab money. Yet housing advocates were still pleased with the House GOP numbers.
“I think we feel good about it,” said Elizabeth Glidden, the director of strategic initiatives and policy for the Minnesota Housing Partnership. “It’s a good, substantial portion of this bonding bill, recognizing this bonding bill is substantially smaller than the governor’s proposal, so we take that in context.”
The total for the House’s bonding bill is $825 million. Dayton wanted a $1.5 billion bonding bill, and when he was asked about the House total Thursday, he quipped: “Where’s the other half?”
Glidden said housing advocates knew this short session was going to be a challenge for funding anything but still felt it was necessary to come in with a record-high request for affordable housing funding in the bonding bill. That $140 million request would develop or preserve 4,650 housing units, the partnership estimates.
“We think this is a good starting point,” Glidden said of the House bonding total. “We feel there will be more negotiation and we want to continue to let these legislators know that their constituents care a lot about housing and have a expectation of a greater investment than what’s now appearing in the House bill.”
