In her opening remarks at the Agency’s October Board Meeting, Commissioner Mary Tingerthal stated that the board would soon be making the annual project funding awards. Once this was done she and Lieutenant Governor Tina Smith would be in Rochester for an announcement of the awards. Tingerthal commented that finally the media was giving this commitment of funding the attention it deserves.

Tingerthal also reported that the Agency received three recognition awards at this year’s National Council of State Housing Agencies event. The national association recognized Minnesota Housing for its Housing and Jobs Initiative, the Community Fix-up Fund, and the registry used to connect homeless veterans to housing and other services.

Commissioner Tingerthal informed the board that Jim Solem, one of her predecessors, was being inducted into the University of St. Thomas’s Real Estate Hall of Fame. Tingerthal said that she couldn’t think of anyone who has contributed more to affordable housing finance in this state than Jim Solem.

In one action not connected with the Super RFP awards the board endorsed the staff recommendation to redistribute enhanced homeownership capacity initiative funds to three other participating agencies. Staff told the board that White Earth Investment Initiative, one of the recipients of the program which is intended to increase minority home ownership, declined to accept its awarded funds due to a lack of staff capacity to administer the program. Board member George Garnett asked why none of the program funds was going to Duluth, a community with a significant minority population. Staff said that no applications had been received from Duluth agencies but that they will be hosting another program outreach in January and might be able to attract Duluth agencies.

Discussion of RFP Awards

In introducing the super RFP recommendations (all of which were subsequently adopted by the board) staff stated that 1420 units would be funded, with a total $88.3 million in Agency funds awarded. Should all funded projects proceed as proposed, development costs would total $236 million.

In providing context for the awards staff said that at least one project would be funded in each region of the state, and this year 65% of the awarded funds would go to Greater Minnesota. Over a five year period the agency has funded development or redevelopment of 12,000 housing units, with 60% of awarded funds going to Twin Cities projects and 40% to those in Greater Minnesota. While staff was pleased that more fundable Greater Minnesota projects had been submitted they noted that some areas within Greater Minnesota were still underrepresented in the awards. Particularly so was the Central region, they said, where 13% of the state’s residents live but only receiving 4% of the agency’s funds. Commissioner Tingerthal said that over the next couple of years the agency will focus its technical assistance on this region.

With its homeownership awards, 16 Twin Cities and 12 Greater Minnesota projects will receive funding. Agency resources being distributed include $500,000 from Housing Infrastructure Bonds; these are being used to support community land trust projects. For the first time in assessing home ownership project proposals the Agency considered walkability and industry cost data supplied by R.S. Means. All funded projects were within an acceptable cost range based on this data, staff said. Median targeted affordability for agency homeownership funds is 52% of area median. Staff saw trends in more proposals linked to workforce needs and larger multi-bedroom new homes. Coming out of the Great Recession new ownership construction had nearly ceased, but now staff were seeing confidence to recommence construction.

Board member Garnett again expressed concern about the Duluth area. In what he described as a relatively closed system where most development was controlled by the housing authority and a couple of nonprofits, Garnett wanted to know whether homeownership opportunities were going to minority families. In response, staff said that the Agency really encouraged the nonprofit One Roof to expand beyond its land trust development model and serve the community with a variety of development types. Staff added that in its review they found that One Roof did serve minority households above the percentages in which minority households reside in Duluth.

From the 78 multifamily proposals submitted staff recommended 23 for funding, representing 1,100 housing units. Of the projects awarded, 10 are located in the Twin Cities, 13 in Greater Minnesota. Staff said that the emphasis on process improvement supported their clearer funding priorities – preservation, family housing, workforce housing and supportive housing — and this clarity benefited developers.

The board ask­­ed staff to respond to an email submitted by a resident of Moorhead who was opposing a 43 unit supportive housing project proposed by a local faith based nonprofit. Tingerthal said that this had been a contentious project a year ago, but the developer reworked the proposal to address most of the concerns that had been voiced. The current proposal rated very high; and while residual concerns still exist the level of community opposition drastically reduced.

Staff highlighted a number of rental projects including one for homeless youth in Edina, a community where only 8 affordable units had been developed in 14 years they noted. Commissioner Tingerthal added that the city supported the youth project, in spite of initial community opposition, due in part to the organized efforts of area congregations. Edina also was requiring market-rate rental developers to include affordable units or contribute to a fund. Tingerthal then described pro-affordable housing efforts of other local governments, with many of these spurred by the formation of the Urban Land Institute sponsored Regional Council of Mayors.

At the start of the September MN Housing Board Meeting, Commissioner Tingerthal announced she has been appointed to the Federal Reserve Board of Governors’ Consumer Advisory Council. She represents one of 15 people nationally recruited to provide advice to the Fed on the impact of its policies on various types of consumers. Tingerthal also announced that Paula Beck, the general counsel, was leaving the Agency to work for Sherman Associates; Tingerthal asked the board for attorney recommendations to fill that post.

Final 2016 Affordable Housing Plan

The board passed the final 2016 Affordable Housing Plan. Changes from the earlier draft included an additional $100,000 from Agency resources to the enhanced homeownership capacity initiative. The Agency also added a policy item in the section that addresses critical local housing needs and would support the Metropolitan Council in its implementation of the Council’s recently adopted Housing Policy Plan. In passing the Agency plan, board chair John DeCramer stated that he liked what the staff was doing to solicit input on the plan and said that all of the comments would be considered as the Agency progresses throughout the program year.

Board Adopts Conversion Program of Housing Tax Credit Rental Units

The board adopted a program guide for the conversion of housing tax credit rental units to tenant homeownership at the end of the initial federal compliance period. The guide provides details on allowed purchase price, property condition and other measures helpful for long term success in homeownership. Board member George Garnett asked why the Agency was doing this when affordable rental housing was so scarce. Commissioner Tingerthal replied that tax credit rules require this option; further, this approach was only likely to be used on Indian reservations where many of the tax credit units are single family homes. For example, the Red Lake Tribe had developed single family tax credit units with a homeownership goal as their objective. A couple of other tribes might be interested in this conversion to ownership also. Tingerthal added that very few places in the country have put procedures in place for the tenant purchase of tax credit units.

Approval of 1.5 million in HECAT Funds

After considerable discussion concerning whether housing counseling was effective in helping people of color become homeowners, the board approved staff recommendation of $1.5 million in homeownership (HECAT) counseling funds. Member Garnett attempted to stop the funding award and wanted staff to bring back a spending plan in which proposals submitted by organizations of color were fully funded. Garnett said that the homeownership disparity by race would not decline unless the Agency made radical changes in how they approach housing counseling. Garnett added that in a variety of endeavors experience shows that culturally competent agencies rooted in communities were most effective in reaching successful outcomes for community residents. Board members asked staff for data on the success of HECAT awardees in assisting households of color reach homeownership. Tingerthal cautioned the board by saying that one goal of counseling is to help a potential homebuyer make an informed decision regarding home purchase. Sometimes success, she said, is a family concluding that home ownership would not be in their best interest.

Regarding distribution of federal housing tax credits among local government jurisdictions, the board gave final approval to a staff recommendation that reduced credits for some suballocators, particularly the cities of Minneapolis and St. Paul. The reallocation originated by utilizing the existing formula for distribution of credits among issuing jurisdictions but now updated with current census data. Garnett, who argued for a revision of the formula in prior meetings, restated his point that it was a mistake to take financial resources away from communities that needed and wanted the funding and give them to communities that did not.

Cost Containment Report

John Patterson, Director of Research, Planning and Evaluation, provided an overview of the Agency’s just completed report on cost containment. Patterson said that in its efforts to hold down development costs the Agency was balancing a lot of factors. He said that some policies of the Agency, the green building standards for example, actually increased costs, at least in the short run. Board member Gloria Bostrom stated her opposition to use of Agency funds to pay for non-housing costs, like remediation of soil contamination. Bostrom urged that these costs should be paid by other agencies; she added this is one reason affordable housing development looks so expensive. Furthermore, Patterson said that the Agency’s efforts are bearing some fruit. About 8 years ago the cost of housing financed by the Agency was twenty percent higher than comparable market-rate development; that percentage has now dropped to seven. Over the coming months Patterson said that the Agency will be reviewing its own processes and development standards from the perspective of adding costs and will return to the board this coming spring with a report on these cost drivers.

Selected paraphrased statements from the Minnesota Housing 2015 Cost Containment Report

• While soft costs account for a smaller share of Total Development Costs (TDC)(ranging from 14 to 25 percent), they should be a key focus of cost containment strategies… While soft costs are a necessary component of a housing development, eliminating inefficiencies in these costs will not affect the quality of the housing.
• Low-Income Housing Tax Credits (LIHTC) appear to add five to nine percentage points to the share of TDC attributable to soft costs… For developments without tax credits, soft costs account for 14 percent to 17 percent of TDC. That percentage jumps to 21 percent to 25 percent for developments with tax credits.
• Starting with the competition for the 2014 tax credits, the credit applications for projects having lower than median TDC per unit costs are eligible to receive four competitive scoring points. Four points is meaningful and should influence the decisions of developers. For example, with the October 2014 selections, 12 of the 52 tax credit applications scored within four points of the selection threshold.
• As part of the document revision process in preparation for the upcoming consolidated RFP, the Agency will place an emphasis on cost containment, with a focus on life-cycle costs such as maintenance, repair and utility costs.
• Starting in 2016 the Agency also will use a systematic approach for assessing costs of single-family development. The benchmark will be the 80^th percentile in costs, by location, of Agency funded projects. For example a Twin Cities TDC per home above $313,625 would be flagged for additional scrutiny.

Once again Katherine Kersten shares a vision for regional growth in which all roads lead to less regulation and lower taxes. Kersten’s alarmist piece includes numerous misleading or misplaced condemnations of the Metropolitan Council, affordable housing, and the planning profession. I’ll focus on two of her examples given as reasons to feel very bad about public life in the Twin Cities.

First, Kersten charges that the unelected Metropolitan Council is dictating that each metropolitan city “accommodate a precise, arbitrarily determined number” of housing units for low-income people. What Kersten is referring to is the state’s Metropolitan Land Planning Act. Through this act individual communities are required to complete 10-year comprehensive plans that, in part, include a housing program that will “provide sufficient existing and new housing to meet the local unit’s share of the metropolitan area need for low and moderate income housing.” The Council’s role, assigned to it by the legislature, is to help the communities with this task and review and comment on the extent to which community comprehensive plans meet the obligation. Kersten should not be going after the Council but direct her charges at the state legislature; she would have to drop the unelected part of her charge however.

Second, Kersten states that affordable housing has gotten way too costly and she cites the Pillsbury A-Mill development, in Minneapolis, as her prime exhibit. Readers should know that this development is very expensive but that is because of the cost of historic restoration. This property was only redeveloped because government promotes preservation through the provision of historic tax credits. The Minnesota legislature’s 2010 passage of state credits to match those of the federal government provided enough return for a developer to take the risk of moving forward with the very risky A-Mill investment. Housing subsidies contributed a lesser portion of the overall project budget; and this enabled the building to house moderate income families as opposed to just sitting there as a historic artifact. Instead of looking at this as an example of too high costs of affordable housing, Kersten should be directing her ire at elected government bodies for spending so much on historic preservation.

In fact, the metropolitan area has done very little to invest in housing affordability while the need for housing assistance increases, particularly in suburban communities. Yes, education and stable family structure are critical, as Kersten writes is the real solution; but education, family stability and housing affordability are deeply connected. It’s not either-or with respect to these important concerns. That’s why during the last state legislative bonding session superintendents of five school districts signed a statement which included: “Housing is one of the best investments the Legislature could make if it wants to help education. Our students’ future quite literally depends on this foundation, and our community’s future depends upon these students.”