Various League-supported workforce housing provisions await further action by the Legislature.
(Published Apr 3, 2017)
League-supported provisions related to workforce housing tax increment financing (TIF), workforce housing tax credits, and the workforce housing grant program have been included in various forms in different omnibus bills. Providing more tools for cities dealing with the shortage of market-rate, rental workforce housing is one of the League’s 15 legislative priorities.
Differences between House and Senate omnibus bills will be worked out in conference committees, which will convene after each chamber has passed their respective omnibus bills off their respective floors. Note: The Legislature will be on Passover/Easter break April 10–14.
Workforce housing TIF
The League-supported TIF language from HF 1178 (Rep. Paul Anderson, R-Starbuck) is included in the House omnibus tax bill (HF 4, Rep. Greg Davids, R-Preston), which was passed off the house floor on March 30. (Read related Bulletin article.)
On the Senate side, workforce housing TIF language was not included in the Senate omnibus tax bill. SF 1168 (Rep. Mark Johnson, R-East Grand Forks) was heard by the Senate Taxes Committee on March 22. Some members had questions about whether the duration of the TIF district would be too short to produce ample increment. Shannon Stassen, Crookston city administrator, testified in support of the bill, along with staff from the League and the Minnesota Chamber of Commerce.
The language from the original bill would allow cities to use TIF for market-rate rental housing. The bill aims to provide cities some assistance in the appraisal gap that is often experienced when a developer of market-rate housing in Greater Minnesota is considering building apartments.
Cities eligible for the proposed workforce housing TIF authority must:
Workforce housing TIF would be an additional authorized use under the current economic development TIF authority, with the duration being eight years after the district is certified. The bill also allows the higher income limits under the Minnesota Housing Finance Agency (MHFA) challenge program to be used for housing TIF districts, if the project receives an MHFA grant from the program.
Workforce housing grant program
The House version of the omnibus jobs and energy affordability bill (HF 2209, Rep. Pat Garofalo, R-Farmington) moves the Workforce Housing Grant Program from the Department of Employment and Economic Development (DEED) to MHFA and provides one-time funding of $4 million for FY 2018. The bill awaits action in the House Ways and Means Committee before going to the full House for a vote on the floor.
The Senate omnibus jobs bill (SF 1937, Sen. Jeremy Miller, R-Winona) includes an additional $1 million in funding to the DEED grant program for FY 2018-2019. That bill was passed off the Senate floor on March 29.
On a related note, article 2, section 2, subdivision 2 of the Senate agriculture and housing omnibus bill (SF 780, Sen. Torrey Westrom, R-Elbow Lake) includes an additional $600,000 each year in FY 2018 and 2019 for workforce housing in Greater Minnesota. Eligible communities must have: low housing vacancy rates; cooperatively developed a plan that identifies current and future housing needs; evidence of anticipated job expansion; are located outside the metropolitan area; and have a significant portion of area employees who commute more than 30 miles between their residence and their employment.
Among comparable housing proposals, preference must be given to proposals that: include a meaningful contribution from area employers that reduces the need for deferred loan or grant funds from state resources; or provide housing opportunities for an expanded range of household incomes within a community or that provide housing opportunities for a wide range of incomes within the development.
Projects that were funded with this appropriation would not be subject to income limitations for occupants (as long as no other income-restricted source of funds, such as MHFA Challenge funds, were used).
The Legislature originally funded the statewide DEED workforce housing grant program in 2015. The program is currently funded at $2 million each year in ongoing funding and has been successful in providing assistance to cities in the past two years. The League has advocated for DEED to solicit input from local communities to ensure that the goals of the Workforce Housing Grant program are met and DEED should award funds to eligible projects as quickly and efficiently as possible.
Workforce housing investor tax credits
HF 1020 (Rep. Rod Hamilton, R-Mountain Lake) and SF 785 (Sen. Mike Goggin, R-Red Wing) would give investors of workforce housing a 40 percent state tax credit (up to $1 million) for contributions toward eligible rental workforce housing. A project must also have at least 50 percent non-state matching funds to be eligible.
The tax credit language is included in the Senate taxes omnibus bill. It was heard by the Senate Taxes Committee on March 22. The tax credit language was not included in the omnibus House tax bill.
We need your help
Cities should thank the authors of the omnibus bills that include provisions of workforce housing in their bills and encourage continued inclusion of additional tools for local communities to develop workforce housing.
For more background information about this topic, read a previous Bulletin article.
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