House committee OKs $162 million housing investment with no General Fund impact

They didn’t exactly find money under the couch cushions, but the House Housing Finance and Policy Committee found creative ways to provide more money for housing.

Using unspent money set aside for claims against the state and interest earned from previous appropriations, the committee voted to support $100 million in Housing Infrastructure Bonds and boost funding for workforce housing and homelessness prevention.

Rep. Spencer Igo (R-Wabana Township) said the bill would make a $162.3 million investment in housing with zero impact to the General Fund. “My back-of-envelope math estimates this could mean 2,000 new houses across the State of Minnesota.”

Sponsored by Rep. Michael Howard (DFL-Richfield), HF1141, as amended twice, was approved on a voice vote and is headed to the House Ways and Means Committee.

“It’s a really good bill that will do a lot of good for Minnesotans,” Howard said.

The bill would authorize the sale of $100 million in Housing Infrastructure Bonds, which is the state’s most effective tool for building and preserving affordable housing, said Kelly Law, senior policy and field building advisor for the Minnesota Consortium of Community Developers.

Other appropriations would include:

• $40 million for the Family Homeless Prevention and Assistance Program;
• $20 million to the Greater Minnesota Workforce Housing Development Program;
• $150,000 to the Homebuyer Education, Counseling and Training Program; and
• $150,000 for a Minnesota Nice HomeShare pilot program. Run through the Arrowhead Area Agency on Aging, the program would match people 55 and older with extra room with someone needing an affordable place to live.

[MORE: View the spreadsheet]

Funding for these programs and debt service on the bonds would come from two sources.

First is $40 million by redirecting unused money set aside for the Tyler Settlement. This was set aside to address claims against counties and the state for excess takings from the sale of tax-forfeited properties.

Second is $20 million income from investments made by the Minnesota Housing Finance Agency. Committee members heard about this issue during an informational hearing about SF2434 on April 7.

The 2023–24 Legislature approved a major increase in housing funding, roughly $1 billion, creating several new programs for Minnesota Housing to administer. Because standing up those programs took time, the agency temporarily invested the unused funds. With both high interest rates and an unusually large balance, agency investments have generated nearly $100 million.

Reclaiming that investment income received bipartisan support in the housing committee. But Minnesota Housing Commissioner Jennifer Ho cautioned that pulling back those dollars could pose program integrity challenges, saying the agency doesn’t use General Fund money for operations and needs to ensure it has enough to operate its grant programs over the next seven years.

Amendments

Two committee members proposed and then withdrew amendments. Rep. Matt Norris (DFL-Blaine) proposed that $15 million of the proceeds from the sale of bonds be used for improvements to manufactured home parks. Igo offered an amendment to prevent cities with moratoriums on new housing from receiving state grants meant to encourage building affordable housing units. 

Testimony

Testifiers appreciate that the bill would provide additional money for housing, but hoped to see some of it directed to supportive housing programs which help some of the most vulnerable Minnesotans, including those with mental health challenges or substance abuse issues.

[MORE: Read written testimony]

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The following are bills that have been incorporated in part or in whole into the omnibus housing finance and policy bill:

• HF1343 (Zeleznikar)
• HF1879 (Kozlowski)
• HF2462 (Norris)
• HF4207 (Howard)
• HF4378 (Kozlowski)