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How Minneapolis Mayor Jacob Frey plans to spend $40 million on affordable housing

Right now, a growing number of Minneapolis renter households are spending more than half their incomes on housing.

Minneapolis housing
The Minneapolis-St. Paul metro area has added 83,000 households since 2010 while building less than 64,000 new homes to accommodate those newcomers.
MinnPost file photo by Karen Boros

Minneapolis leaders are scrambling for answers to solve the city’s housing affordability problems.

Right now, a growing number of Minneapolis renter households are spending more than half of their incomes on housing, city and federal data show, and a growing number of people can’t afford homes at all. Meanwhile, median home values are rising fast, topping $260,000 as of July. Minneapolis Mayor Jacob Frey has called the shortage of affordable housing a historic crisis for the city.

That’s why he wants to commit a record-high of $40 million in city funds to a variety of programs next year to lower the burden of housing costs, as part of his $1.55 billion budget proposal. The investments — which fit within a broader effort to diversify the city’s housing market and accommodate its growing population — would range from tenant legal services to tax incentives for landlords to keep rents stable to emergency help. The City Council will have the last say on his ideas and will finalize the 2019 budget in December.

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The local push comes as leaders at the region and state levels grapple with similar problems, amid a housing crunch across Minnesota that only 10,000 additional homes per year can fill, according to a state analysis. The Minneapolis-St. Paul metro area has added 83,000 households since 2010 while building less than 64,000 new homes to accommodate those newcomers, according to the Metropolitan Council.

“We’re blessed that a whole lot of people want to live in Minneapolis. … But when we don’t have the prices and housing to accommodate them, prices get jacked up and so does the rent,” Frey said in an interview.“Now the time is right to put our money where our mouth is,” he added.

But where, exactly, does Frey plan to put the money? Below is a breakdown of the affordable housing numbers in the mayor’s budget proposal.

New programs: student homelessness, housing court

Millions of dollars in Frey’s budget plan would go toward new programs.

Most expensive of the new ideas: The country’s first-of-its-kind program, according to the mayor, to help homeless children and teens in Minneapolis Public Schools. About 3,600 students enrolled in the district searched for a place to sleep at some point last year, slightly less than the year prior (about 3,670), according to the school district. The similarly sized St. Paul school district, meanwhile, has around 2,000 homeless students.

The new Frey-sponsored initiative, dubbed “Stable Homes, Stable Schools,” would try to put a dent in his city’s totals with $3.3 million annually to help pay rent bills or provide emergency assistance for hundreds of families over three years. “Kids aren’t walking into the classroom with a blank slate; they’re walking in with all the successes and failures of society, and some of those failures” Minneapolis can have an effect on, he said. “Housing is the best indicator of success for life — educational attainment, incarceration prevention.”

Affordable housing spending in Frey’s budget proposal

Minneapolis Mayor Jacob Frey proposes spending $40 million in city funds (and an addition $13 million in non-city funds) on a variety of affordable housing programs. Some programs will see maintenance or an increase in their base level of spending, while others are getting a one-time infusion of cash.
Source: City of Minneapolis

Frey also wants Minneapolis to join a handful of U.S. cities with a new program to help renters facing eviction get legal representation. He’s proposing $150,000 in city dollars, which the city estimates would help 100 to 125 low-income households. New York City created the first such fund last year, basing the change off research that shows tenants with attorneys fare better in housing court — but the majority of the renters don’t use them. “The scales aren’t exactly balanced,” said the city’s housing policy director Andrea Brennan. Cities such as San Francisco and Philadelphia have followed NYC’s lead, too.

Another funding experiment totals $1.5 million — money Frey wants to put toward acquiring, remodeling and helping tenants in buildings to which landlords haven’t made quality repairs. Dozens of tenants each year are forced to find new homes because property owners aren’t making necessary repairs to keep buildings up to city code, for example.

That’s not to be confused with the “Missing Middle” pilot program — this one costing $500,000 in Frey’s budget — that aims to diversify the market by building more affordable multifamily housing that’s not large apartment buildings in certain areas.

The city’s long-term guide for future development, infrastructure and housing, called Minneapolis 2040, is in the backdrop of that proposal (and most of Frey’s ideas on affordable housing). City planners are set to release a final version of that policy document later this month, which the City Council will take up before the end of the year.

“We’ll see what works, what doesn’t, and then create policy going forward,” Frey said of the pilots.

More investment in existing programs

For years, Minneapolis has committed money to the “Affordable Housing Trust Fund Program,” a pool of federal and city dollars that help large-scale developers who want to maintain — or build more — affordable rental units. This year’s budget carved out $6.5 million for the program. Frey wants to more than triple that investment next year.

For perspective, at least 16 applicants have asked for entry into the program so far this year with funding requests totalling $23 million. “The good news is that people want to build affordable housing here,” Frey said during his budget presentation last month. “The bad news is that this year we didn’t have the resources to support many of those requests.”

Applicants may also apply for other tax credits, and Frey said that process may slightly delay his sum from being spent next year alone. “The goal is to have 21 million allocated; that’s a huge endeavour.”

Frey also wants to more than double the city’s dollar commitment to a program that aims to protect 15,000 units of affordable housing from investors who view the sites as ripe for remodeling and higher rents. “That causes displacement for tenants currently living there,” Brennan said. City planners call those type of rental units free from market-rate prices “naturally occurring affordable housing” or “NOAH.”

Part of the money would help “preservation buyers,” or prospective property owners who have an interest in working with the city to keep housing affordable, compete for the properties against buyers who are counting on increasing rents and can offer more in their bids. “We have a limited supply in NOAH property, and it’s kind of the point in time to act now,” she said.

Beyond that, the mayor wants to invest millions in existing programs that hasten the development of vacant lots; help prospective homeowners with down payments; give tax breaks to property owners who build at least some affordable units; give renters on-the-spot help over the phone (HOME Line); and build taller, larger buildings near public transit lines, among other initiatives.

Going forward

Some community groups and residents in the past have criticized Frey and city planners for not going far enough in their policy proposals, including Minneapolis 2040, to prepare for the city’s impending growth.

Looking forward, regional and local leaders are preparing for another 25,100 new people making Minneapolis home by 2030 alone.

A coalition of social-justice community and advocacy groups, called The Alliance, for instance, has pointed to a long-term goal by the Metropolitan Council to produce thousands more housing units — roughly one-third of which needs to be affordable. The coalition says the city is not on track to meet that.

Some have voiced concerns over Frey’s plan wasting public dollars when market rates, alone, will drive the city’s housing trajectory. To those critics, the mayor said: “I’ve been accused of many things, but I always say what I’m going to do. A budget is a moral document. It would be wrong for us not to address our affordability crisis, especially when I said during the campaign that I would do exactly this.”

Nothing in Frey’s budget is final — yet. Council members are reviewing his ideas and collecting input from the public and department heads. The council members are likely to propose changes to his plan over the next two months, before agreeing on a final 2019 spending plan in December.

In its current form, available online in a 650-page PDF, the mayor’s proposal requires a hike to the city’s property tax levy by 5.63 percent, up from a 5.5 percent increase this year. That means someone with a home value of $249,000, which is slightly below the city’s median, for example, would face an annual increase of about $88, or 6.7 percent, according to city estimates. The city’s Board of Estimation and Taxation, which has authority to set the maximum levy, will hold a public hearing Wednesday.

“One of the strengths of this budget proposal is it employs multiple strategies. There’s a lot of complexity to the housing challenges that we’re facing today,” Brennan said. “We need to attack them from multiple angles to be more successful.”