Grant

Family Housing Fund ($750,000)

Program-Related Investment

Family Housing Fund ($900,000)

Program-Related Investment

Greater Minnesota Housing Fund ($600,000)

Background

Minnesota’s housing market varies considerably across the state. It is experiencing increased rental market pressure for affordable housing in urban areas and in the eastern and southern parts of the state due to in-migration of lower-income households and job growth. In Minneapolis-St.Paul, the current rental vacancy rate is 3.9 percent, with many vacant units in older rental properties. Western Minnesota is largely rural, with a declining population, but many of the affordable properties are older and in poor condition. Over the next ten years, 52,000 units of subsidized housing in Minnesota are at risk of being lost as subsidy contracts expire and/or properties deteriorate. Minnesota ranks third in the country in the number of subsidized rural rental properties, 78 percent of which are eligible for prepayment. Some key risks to existing affordable housing include increased incentives for owners to opt-out of Section 8 subsidy contracts, conversions of tax credit properties to market-rate rents, expiring rental assistance contracts, demolition of public housing units that are not replaced, and federally-assisted properties at risk of contract termination for poor physical conditions.

Project Description

The grant and program-related investments will support Minnesota’s Preservation Plus Initiative, which is designed to take the state and its partners to what they call a “new preservation frontier” by institutionalizing a more a proactive and preventative approach at Minnesota Housing, the Family Housing Fund, and Greater Minnesota Housing Fund – three leading providers of capital for preservation projects. Minnesota will fill gaps in its existing preservation infrastructure, expand successful strategies, and develop new preservation tools. The “Preservation Plus Initiative” has five major components. One element is to identify and resolve gaps in existing preservation processes and resources. The grant will support a working group that will identify and resolve gaps in Minnesota’s existing approach to preserving federally-assisted housing. The working group will analyze the following: prepayment of mortgages in the rural assisted housing inventory; conversion of low-income housing tax credit properties to market-rate rents; properties affected by expiring mortgages and subsidies provided by HUD; properties in financial or physical trouble; and opportunities to support the acquisition of portfolios of subsidized properties. The second component will improve early detection of at-risk properties using Minnesota’s successful property risk predictive model, the Watchlist. With this information, Minnesota Housing performs a risk analysis to identify properties that have high risk and need attention or an early intervention such as loan modification or emergency grant. The third component will be to increase the operational capacity of owners and developers of existing affordable rental housing through the provision of technical assistance and asset management tools. The fourth component will be to develop a preservation strategy for unsubsidized affordable housing. The grant will support a comprehensive feasibility study to explore threats to this stock in both metropolitan and rural areas, and to make recommendations to Minnesota Housing and other lenders about specific policies and strategies to preserve these affordable units. The final piece of the initiative will be a program-related investment to capitalize a new flexible revolving loan fund. The fund will provide short-term financing related to preservation needs such as emergency repairs, predevelopment planning, site control, bridge financing, or possibly acquisition of unsubsidized affordable properties. The Family Housing Fund and the Greater Minnesota Housing Fund will be custodians of this pool, but consistent with Minnesota’s collaborative approach, the Interagency Stabilization Group, Greater Minnesota Preservation Work Group, and the Stewardship Council will direct the use of the pool.

Contact

Angie Skildum
Research and Policy Director
Family Housing Fund
801 Nicollet Mall, Suite 1650, Minneapolis, MN 55402
612-375-9644, ext. 15