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

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.

“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.

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.

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.”

Comments (15)

  1. Submitted by Bill Lindeke on 05/20/2020 - 11:33 am.

    The energy code stuff is especially vexing IMO, because it’s the simplest way to move the dial on CO2 emissions.

  2. Submitted by Ray Schoch on 05/20/2020 - 11:39 am.

    Not every regulation is a good one – something that will benefit the public and continue to do so over a fairly lengthy time span – but in my experience, builders and developers seldom (i.e., virtually never) lobby for fewer regulations out of a spirit of altruism. Fewer regulations usually means, in words that even non-developers will understand, lower cost, and with rare exceptions, lower costs too often accrue to the developers’ or builders’ bottom lines, not to the wallets or bank accounts of buyers and/or renters.

    And, lest I cast all the blame on builder and development corporations, it should be noted that there’s very little reason why most housing could not be built – with equal or better quality, usually the latter, and at far lower cost – in a factory, where modular design and construction can closely monitor quality control in both materials and construction techniques, and where weather, especially in a climate like this one, can be limited in its effects on the whole construction process. A primary reason – not the only reason, but an important one, nonetheless – why we don’t build houses like we’ve proven we can build vehicles and other “durable goods” is uniform resistance from various trade unions. They see the incomes of their members dropping significantly as factory workers, where some skills, or at least some skill levels, would be required far less because many of the quality control issues could be resolved at the very beginning with computer-assisted design, cutting, fitting, etc.

    A fair comparison, I think, is comparing the cost of a factory-built car from a major manufacturer to a specialty vehicle from one of the more exotic brands that’s partly – sometimes almost entirely – hand-built. There are still hundreds of models on the market from dozens of manufacturers, so the argument that factory building would limit consumer choice doesn’t hold much water. Like many other things, people would buy what they could afford, but building housing in a controlled environment, with strict quality control and standards, would dramatically lower at least that part of housing costs.

    In a society as inequitable as ours, the wealthy would still be able to afford McMansions as trophies to display their success, but the rest of us might be much better housed than we are, with lower energy use and costs. As automobile production has proven over several decades, manufacturers can be very flexible about both what they offer and what it costs. I can think of no reason why home manufacturers couldn’t do the same thing.

    One major component left out, of course, is the cost of land, of which there continues to be a limited supply. Another major component that’s often ignored in these kinds of discussions is outmoded zoning, which is often under the control of local authorities who carry around with them buckets full of housing and building prejudices, a few of which have some validity, many of which do not.

    • Submitted by lindalee soderstrom on 05/26/2020 - 11:44 pm.

      BUILDING IN WAREHOUSES all year round is an awesome suggestion, in MN – but those warehouses would need to be regionally set up close enough to city centers or clusters of towns – to be transported at feasible cost financially. If Micro apartments are coming down the pike, maybe micro or tiny homes as well could be set up in side yards and back lawns of single family homes. I have heard of something else too. Its called called Hemp-crete which lasts longer and breathes better than Con-crete and might lower costs in foundations etc. Thoughts?

  3. Submitted by Alex Schieferdecker on 05/20/2020 - 12:37 pm.

    Not an expert on how the Minnesota legislature works, and obviously this past session was held under unusual circumstances, but coming up with sweeping legislative changes on the penultimate day of the session does not seem like a recipe for good governance.

    There’s some merit to the GOP proposal, which is really a rare thing, but I think it could clearly use some fine tuning. At the risk of being reductive, some material regulations are Good and some are Bad, and the legislature should distinguish between them. Material regulations that aim to provide greater energy efficiency, for instance, should not be preempted.

    Material regulations that focus on aesthetics, on the other hand, can ensure better urban design, but are also often abused to impose silly costs. It would probably be a net benefit to preempt those. Architects and developers will still be bound by popular taste in building projects that people will want to inhabit.

    • Submitted by lindalee soderstrom on 05/26/2020 - 11:51 pm.

      As a community member interested in Homes for All, I listened to every committee meeting last year and this. The minority of the house of representatives were always very anxious and bothered about our MN costs vs Wisconsin’s costs per unit. They also mentioned regulations so strict in winterized window seals here that Black Mold results, so Yes to their own fine tuning before they land with their draft plans. As well, I am a foster and adoptive parents and our kids with special needs will always need windows that have safety mechanisms, just another thing that might have arisen in public comment – had there been any.

  4. Submitted by Gene Nelson on 05/20/2020 - 12:38 pm.

    It’s true…as a manufacturer, I can make more money if I can just dump my industrial waste anywhere and the same applies to building codes.
    But is it reasonable to expect rationality from repubs whose hero is the trash talking trump?
    Truth is that repubs place no value on the workers or the environment. Shucks…we can’t even get them to wear masks during this coronavirus pandemic.

  5. Submitted by Rod Loper on 05/20/2020 - 01:24 pm.

    Good for the DFL..Republicans are great fans for local control except when it gets in the way of Trumpian agendas for deregulation.. They don”t give a damn about housing for the poor.

  6. Submitted by Betsy Larey on 05/20/2020 - 01:30 pm.

    So the big city Democrats refuse to work together for an acceptable bill. I guess I’m not surprised. They want all the regulations that the 2040 comp group insisted on, and now it has to be state wide? This state reminds me so much of New York. They think they sun rises and sets on them. There’s a whole bunch of people “outstate” who don’t want this stuff rammed down their throat.
    My neighbor in white bear just built a house on land I sold him. First, the city said he could connect to city water through my line. Then, without explanation, they told him he had to go to the street. At a cost of $22,0000. Want to know why it costs so much? Every stupid level of government taxes the daylights out of utilities. And they do it per foot. He built as close as he could to the street to save money. He would have gone even closer, but the city has required “setbacks”.
    And you don’t think all the changes to the energy codes matter? And developers now have to pay a fine if they don’t set aside 10% of any project for affordable housing.?
    After 42 years of living here, I am giving up. This is my last summer, going to stay in FL full time and travel in the summer months. This state as gone so far left it takes my breath away. BTW, I’m a Democrat.
    If this continues on, the people with money will move. They already are. Add to forcing kids in Kenwood to go to schools on the north side. You’re going to be Chicago before you know it. How incredibly sad.

    • Submitted by Larry Moran on 05/21/2020 - 11:39 am.

      “Add to forcing kids in Kenwood to go to schools on the north side.” My kids went to Kenwood. They played with kids from the north side, both in our neighborhood and in theirs. The experience seems to have broadened their outlook and understanding of life. And it didn’t hurt their education–they both did well in high school (one valedictorian) and went to very competitive colleges. Both became teachers. And maybe, just maybe, they positively effected the people they met from the north side. I think you need to broaden your outlook a little.

    • Submitted by Pat Terry on 05/21/2020 - 01:47 pm.

      This makes no sense. The 2040 plan was really about reducing arbitrary regulations and making it easier to build.

    • Submitted by George Kimball on 05/24/2020 - 10:50 am.

      “BTW, I’m a democrat.”

      Sorry, if one’s words and actions are Republican, that makes one a Republican. Enjoy Florida!

  7. Submitted by Julie Stroeve on 05/20/2020 - 05:04 pm.

    the low-income forumulas aren’t low income, and any solution needs to begin with resetting formulas to reflect actual incomes and affordability of “low income” housing.

    • Submitted by lindalee soderstrom on 05/27/2020 - 12:00 am.

      agree. Low, very low and extremely low income residents are being left out of the formula entirely but we do have deeply poor residents in our state; so should not be so neglectful of our poor. I suggest that 60-120% AMI (area median income) or incomes for mom/dad and two kids of around 60 to 120 thousand a year can manage A-okoay. These will take care of themselves, builders, buyers, rennovators and renters because they have adequate resources. Those less privileged do require we have a social contract as providers in the search of a common good, together, we all do better.

  8. Submitted by Joel Stegner on 05/26/2020 - 02:07 pm.

    Simple reason – Republicans do not serve the poor.

    Why do Republicans always expect their cut of the action when the state tries to help those in true need? Read about Trump and if is clear how many tax and regulations are set up so developers pay low or no taxes and take no responsibility to build affordable housing. Instead they load on amenities to maximize costs and profits. Look at the regulations that limit the availability of multi-unit housing for the working poor or tiny houses for young singles and couples that want them.

    The subsidies for builders who build luxury housing and second and third residences for the rich are enormous. And of course, Republican politicians are content to build communities with high levels of housing instability and homelessness, as it weakens the bargaining power of working people. Their game is about serving the top 20% as others are “less deserving” in our sick society.

  9. Submitted by lindalee soderstrom on 05/27/2020 - 12:11 am.

    If we treat Homes for All as INFRASTRUCTURE instead of a bargaining chip in a game of legislative tiddly winks, more workforce housing by way of preservation of existing apartment homes and first time buyer homes would be developed and maintained. To the Good of All. We can house our own workforce in Minnesota and thrive; or if we dont’t – we won’t. It is a choice. The only solution to homelessness is HOMES. The only way to assure right now that building and preservation get funded is to Go Big for BONDING. Let’s go Big so everyone can Come Home. We have virtually eliminated homelessness for our MN veteran populations; through many of the project types discussed here. Lets go the rest of the way and give every child, all the elders, and working folks a place to lay their heads. MN likes to solve its own problems. Lets do it.

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