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Why the Minnesota Legislature couldn’t get a deal done on rental assistance. Or affordable housing.

And how one proposal — linking the two issues to regulatory reform — may offer a possible preview of a deal to be had when the Legislature convenes for a special session. 

South Mpls apts
MinnPost photo by Peter Callaghan
A bill passed in the Minnesota Senate has offered a possible preview of how the issues of affordable housing funding and rental assistance amid COVID-19 might be debated when lawmakers return for a special session of the Legislature in mid-June.
Republicans in the Minnesota Senate thought they had a deal — one they believed DFL lawmakers would have a hard time turning down.

The GOP proposal, in a bill that appeared just before the end of the 2020 legislative session, combined something DFLers wanted with something those same DFLers weren’t too excited about. 

What Democrats wanted was a $100 million rental assistance fund for low-income Minnesotans impacted by the fallout from COVID-19 to help make rent and mortgage payments. They also wanted a sizable investment in affordable housing, which was also part of the legislation. 

The part of the GOP proposal DFLers weren’t crazy about? A series of measures that sought to reduce regulations on housing construction that have been sought by housing developers, ideas that had come out of an interim committee chaired by Sen. Rich Draheim, R-Madison Lake.

Though the bill passed the Senate, it didn’t attract significant support from DFLers, and it was not taken up by the DFL-controlled House. Even so, the proposal has offered a possible preview of how the issues of affordable housing funding and rental assistance amid COVID-19 might be debated when lawmakers return for a special session of the Legislature in mid-June.

Let’s make a deal

Linking affordable housing to regulatory reform didn’t happen until the end of the regular session. Before then, Draheim’s proposal on easing regulations hadn’t even been heard in the Senate. Only when it became clear that the Senate bonding bill contained no housing infrastructure bonds — the mechanism the state uses to finance the acquisition, rehabilitation or construction of housing for low and moderate income people — did GOP leadership acknowledge that the regulatory issues were part of negotiations.

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“We have a number of policy provisions for reform that we feel are very, very important,” Senate Majority Leader Paul Gazelka said Sunday afternoon. “That’s what we’re having conversations about: Is there any reform? Why are we dramatically higher in our costs” than Wisconsin? 

Gazelka said the dollar amounts for housing bonds and rental assistance were higher than the GOP might have preferred, but they were included as a way to make the other aspects of the bill more attractive to DFLers. “We really wanted it to be something that could be worthwhile for both sides,” he said.

Gazelka also said that because housing infrastructure bonds are what is termed revenue bonds — in that they are repaid with a designated source of revenue, not out of state’s general revenues — they only need a simple majority of votes in both chambers. And because the amendment was put onto a bill that had already passed the House, it could have been taken up by the House and passed Sunday night, had there been interest by the DFL.

There wasn’t. Sen. Jeff Hayden, DFL-Minneapolis, said he objected to combining the two issues into one bill. “It’s often said around here, ‘Let’s do the things we agree upon,’” Hayden said. “And we all agree that $100 million in housing infrastructure bonds is at least a start, and $100 million in rental assistance is something we can agree upon.

“But there’s a ton of things that we don’t agree upon. There’s a ton of things that the House and the administration say they don’t agree upon,” Hayden said.  “When we’re in a crisis, we should stay focused on the crisis.”

Draheim said the regulatory reforms are needed, not just to reduce construction costs in market-rate housing, but to make housing affordable to low-income people. He had introduced the provisions during an early March press conference under the banner “Legalize the American Dream.”

Darrell Dorr of Marvin Windows demonstrates a fall-prevention safety latch during a March press conference on housing regulations. Sen. Karin Housley, R-St. Marys Point, looks on.
MinnPost photo by Peter Callaghan
Daryl Doehr of Marvin Windows demonstrates a fall-prevention safety latch during a March press conference on housing regulations. Sen. Karin Housley, R-St. Marys Point, looks on.
“Having energy codes and building codes change every year doesn’t work,” he said. “Adding thousands of dollars to the cost of a home doesn’t work. In Minnesota, we do one thing very good: We have a very high home-ownership rate. One thing we do really terrible, and that is non-whites’ homeownership consistently is in the bottom two or three in the whole nation.”

Cities object to changes sought by builders

The prospect of securing housing bond money and a rental assistance fund was tempting for DFLers. While $100 million in housing infrastructure bonds was half of what Gov. Tim Walz has requested — and one-quarter of what affordable housing advocates had been pushing — it was still welcome. 

And the rental assistance language was mostly the DFL position: $100 million vs. the $30 million in a previous Senate DFL bill, and without the condition that the state’s current eviction moratorium be lifted at the end of June. The funding would be drawn from federal CARES Act money already sent to the state.

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But $100 million wasn’t enough for DFLers to swallow the regulatory language in the Draheim bill. “They are linking the money to what we and others perceived as bad policy,” said Rep. Alice Hausman, the St. Paul DFLer who chairs the Housing Finance and Policy subcommittee.

Hausman said there has been extensive negotiation on both issues, but they weren’t connected in talks until the very end, something she called “very, very frustrating.”

That language included changes sought by builders and GOP lawmakers. It would freeze changes to the state building code for six years unless approved by the Legislature; block any changes to the energy code unless those changes could be shown to pay for themselves within five years; prevent local governments from conditioning approval of projects based on the “use of specific materials, design, amenities or other aesthetic conditions that are not required by the state building code”; and exempt single-family homes from a state requirement for fall-prevention latches that prevent windows from opening widely.

The proposal also included a passage that drew positive attention from urbanists who have argued that many city codes favor single-family housing and make it difficult to add density. The GOP language said cities and counties should be encouraged to include in their comprehensive plans new policies “authorizing smaller lot sizes for single-family homes, allowing for construction of duplexes through fourplexes on lots that would otherwise be zoned exclusively for single-family houses and allowing for mixed-use development.”

The GOP bill also tried to change how state housing infrastructure bonds were distributed, giving preference to projects that can be built quickly and to those with the lowest cost-per-unit. It also would allow bond proceeds to be spent on single-family homes that could be affordable to lower income people and to rehabilitate what is known as naturally occurring affordable housing (NOAH). The latter two provisions have support among affordable housing advocates.

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But the GOP amendment drew opposition from organizations representing city governments around the state. 

Their primary complaint is that the changes would preempt local decision making.“The proposal would shift the provision of housing to a uniform, one-size-fits-all approach, eliminating local authority in housing and zoning related decisions,” stated a letter from the League of Minnesota Cities, Metro Cities, the Municipal Legislative Commission, the Minnesota Association of Small Cities and the Coalition of Greater Minnesota Cities. 

In the letter, the cities also objected to a freeze on energy code changes. “The proposal is contrary to a recent statewide and regional focus on resilient communities and sustainability in design, goals shared by the development community and cities.”

Walz said there has been bipartisan agreement around affordable housing before the pandemic hit and that only increased afterward, but he lamented the way the Senate bill was presented so late in the session. “It was virtually impossible, that’s not even a pun with the ‘virtual’ part,” Walz said Monday. “We weren’t even in the room working straight together.” 

Lt. Gov. Peggy Flanagan echoed Walz, saying that while she was grateful that people on both sides were at least talking about bonds and rental assistance, it happened too late in the regular session. “I’m hopeful we can come to a solution,” she said. “It continues to be a top priority for this administration.”