HRA Meeting Date: February 1, 2024
To: Members of the Housing and Redevelopment Authority
From: Melissa Hanson, Housing Coordinator
Title
Consider Resolution Dedicating Source of Public Revenue for the Local Housing Trust Fund.
Body
Action Requested:
The HRA to approve attached Resolution Dedicating Source of Public Revenue for the Local Housing Trust Fund.
Summary Report:
The Northfield HRA’s mission is to be a partner in providing a sufficient supply of affordable, adequate, safe and sanitary dwellings in Northfield. The primary guiding document supporting that mission is the city’s adopted Comprehensive Plan.
Our goal is to create a community with housing opportunities available along the entire housing spectrum: from renters to homeownership, first-time homeowners, to senior living, workforce housing and empty-nesters. We strive to create affordable housing opportunities and strengthen our neighborhoods utilizing:
• Sustainability
• Innovation
• Partnerships
• Community Input
The adopted Comprehensive Plan (2008) states the following goal regarding housing:
“Provide housing opportunities for all people who live and work in Northfield. A variety of housing options, including rental housing, should be available as first-time homebuyers have families, become empty nesters, become elderly and eventually need assisted living services. Green technology, environmental considerations and strong neighborhood qualities should be combined to provide a safe, secure and pleasing living environment.” (p. 11.2)
The HRA has multiple options for implementing and funding these goals and opportunities. One opportunity is through the unrestricted funds associated with the HRA levy, which is based on the property tax capacity in the City. The HRA may use those dollars to pay for housing-related development and redevelopment and/or economic development-related activities. HRA levy funds are more flexible than those levied by the City’s Economic Development Authority (EDA) which are restricted to economic development activities.
The HRA also is able to access funding from: Minnesota Housing; through Dakota County’s Community Development Block Grant (CDBG) allocation from the Federal Department of Housing and Urban Development (HUD); through direct application to HUD and Minnesota Housing for special project and program grant funds; and in partnership with Rice County, who manages the “Housing Choice Voucher” program (commonly referred to as “Section 8,” which is a reference to the section of the enabling federal law) for the entire county.
The State of Minnesota passed enabling legislation (Minn. Stat. §462C.16) that grants cities the authority to establish a local housing trust fund by ordinance, or to participate in a joint powers agreement to establish a regional housing trust fund for housing. Funds may only be used to:
• Make grants, loans, and loan guarantees for the development, rehabilitation, or financing of housing.
• Match other funds from federal, state, or private resources for housing projects.
• Provide down payment assistance, rental assistance, and homebuyer counseling services.
LHTFs offer cities a flexible tool to respond to local housing needs. A city may finance its LHTF with any money available to local government, unless expressly prohibited by state law. Up to 10 percent of LHTF dollars may be used for costs associated with fund administration.
The City Council established a municipal Local Housing Trust Fund (LHTF) through ordinance in 2022 identifying the HRA as the administrative authority. The HRA convened a subcommittee to discuss and propose funding mechanisms for the LHTF. The discussion included looking at the different funding opportunities available to the City and HRA for housing development, including new funds allocated in the two most recent housing omnibus bills adopted by the state legistlature.
Through the 2021 and 2023 Minnesota Housing Omnibus bills, the state of Minnesota has set aside a total of $5.8 million for matching grants to LHTFs to be administered by Minnesota Housing Finance Agency (MHFA). According to MHFA, a grantee is eligible to receive a grant amount equal to 100 percent of the new public revenue committed to the LHTF from any source other than the state or federal government that is more than $150,000, but not more than $300,000.
Therefore, funds from the recently allocated Statewide Affordable Housing Aid (SAHA) is sourced from state government and is not eligible to be used as matching funds for the matching grant from MHFA. Federal CDBG dollars are similarly ineligible to be used for the match. HRA levy dollars and proceeds from the sale of property are considered new public revenue and eligible for the matching grant from MHFA.
The subcommittee met twice with the Housing Coordinator. Staff then met with the Community Development Director, City Administrator, and Finance Director.
From already existing HRA funding sources, the subcommittee considered dedicating 40% of the HRA municipal levy (approximately $150,000), the City’s SAHA ($150,000), The City’s CDBG allotment ($76,000), and sale proceeds of three HRA-owned rental properties (combined 2023 EMV $681,000) to the Local Housing Trust Fund. The subcommittee was interested in annually dedicating 40% of the HRA municipal levy and the City’s SAHA to the LHTF. The subcommittee recommends that at the time of sale of any rental properties, the HRA direct proceeds to the LHTF through Resolution.
Based on the documented demand for housing supply throughout the city, county, state and nationwide; the current 2008 Comprehensive Plan stated goal; information gathered through an HCI/Northfield Promise Council of Champions-sponsored effort in partnership with the nationally recognized housing technical assistance non-profit Enterprise Community Partners-convened Housing Solutions teams and information gathered during the in-process community engagement work associated with the 2045-horizon Comprehensive Plan, staff recommends changes to the subcommittee’s proposal.
These changes are suggested with an eye toward fiscal responsibility which includes ensuring the HRA retains the ability to be as flexible and responsive to the many and varied housing needs in the City of Northfield, which mirror those affecting the County, State and nation as well as the stated desire in the existing comprehensive plan to increase the tax base - primarily through tax-base diversification and to be adequately staffed and funded. Because the HRA levy dollars are the most flexible pool of funds available to the HRA, staff believes it is unwise to dedicate 40% of the levy to the LHTF which will restrict the use of those funds for housing-only initiaitves, given there are multiple additional mechanisms historically used by and accessible to HRA initiatives that ARE restricted, including those restricted to the administration and implementation of programs that assist those who fit the HUD definition of extremely low- low-, and moderate- income such as SAHA, CDBG, low income housing tax credits, and other, similar funds or funding mechanisms.
Attachment 1 is the subcommittee-proposed resolution annually dedicating the City’s SAHA to the LHTF, as well as future CDBG allocations. In addition, the proceeds from the sale of existing HRA-owned rental properties to the LHTF, which meets MHFA’s requirement of dedicating at minimum $150,000 of new public revenue to the LHTF.
Attachment 2 is a red-lined-by-staff version of the subcommittee-recommended resolution that staff are confident will further preserve the HRA’s ability to be flexible and responsive both to its own mission as well as the direction set by the existing City of Northfield Comprehensive Plan and more-likely-than-not to support the in-process 2045-horizon comprehensive plan.
The subcommittee members were Commissioner Crow, Commissioner Nystrom, Commissioner Zuccolotto, and former Commissioners Dee and Gerdes.
Alternative Options:
The HRA is able to consider either of the attached resolutions as written, or make additional amendments.
Financial Impacts:
City’s SAHA for fiscal years 2023 and 2024 is approximately $150,000 and was received by the City December 2023.
Tentative Timelines:
• 2017 - Minnesota became the 14th state to pass legislation to formally recognize local housing trust funds for housing development (Minn. Stat. 462C.16: Housing Trust Funds for Local Housing Development). Attachment 2.
• 2021 - Minnesota passed the Omnibus Housing Finance bill that included $1 million for state matching grants, to be administered though Minnesota Housing Finance Agency (MHFA) for Local Housing Trust Funds (LHTF) up to $150,000.
• 2022 - The City of Northfield approved Ordinance No. 1034 establishing a Local Housing Trust Fund. Attachment 3.
• 2023 - Minnesota passed the historic $1.065 billion Housing Omnibus bill, the largest single investment in housing in state history. This bill included and additional $4.8 million for state matching grants, to be administered through MHFA for LHTFs. Attachment 4.
• 2024 - The City of Northfield’s LHTF is funded.
• 2024 - Programs TBD
• 2024 - Apply to MHFA for matching funds when application is available.