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Metro sales tax might foot bill for statewide rental assistance program

DFL spending targets announced this week devote $1 billion of the state’s projected $17.5 billion budget surplus to housing.

Shoppers in the Twin Cities metropolitan area may see a small sales tax increase for even more.

For long-term, ongoing investments in housing and not just one-time funds, Rep. Michael Howard (DFL-Richfield) sponsors HF2763, which would impose a 0.25% metropolitan region sales tax on retail sales with proceeds used to fund housing programs.

Howard said the bill could annually create more than 1,000 units of affordable rental housing, build 1,000 affordable single-family homes and provide vouchers for up to 3,000 low-income families.

After the House Housing Finance and Policy Committee adopted a delete-all amendment, HF2763 was laid over Friday for possible omnibus bill inclusion.

“If our entire General Fund budget was a gallon jug of water, we spend less than a tablespoon on housing,” Howard said. If the announced budget target for housing is implemented, that percentage of spending would stay at 0.4%.

Sales tax proceeds would be distributed in three yet-to-be-established accounts within the housing development fund:

  • 60% to the metropolitan county aid account in the newly formed housing assistance fund;
  • 25% to a state rent assistance account; and
  • 15% to the metropolitan city aid account, also in the housing assistance fund.

The council would establish a state rental assistance program for “cost-burdened” Minnesotans paying more than 30% of their income on rent, many of whom are households of color. Other eligibility requirements would include a household income no more than 50% of the area median income.

To develop and preserve affordable housing, a local aid program could provide funding to cities with populations over 10,000 people, and metropolitan counties. A grant program would be established for cities not qualifying for aid.

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