Purpose

This bill broadens what can be funded with statewide local housing aid and adjusts how and when funds can be spent on certain eligible uses. It expands programs to support emergency rental assistance, nonprofit housing providers, and a wider range of housing projects, including outside the metro area, while adding new design and accessibility requirements for some new construction.

Main provisions (what the bill would do)

• Qualifying projects: The bill lists several types of projects that qualify for aid, including:

  • Emergency rental assistance for households earning less than 80% of the area median income (AMI) as defined by HUD.
  • Financial support to nonprofit affordable housing providers to help create safe, dignified, affordable, and supportive housing.
  • Projects located outside the metropolitan counties.
  • Development of market-rate rental properties if the local government submits a resolution and documentation showing the area meets certain HUD-based area requirements.
  • Construction, acquisition, rehabilitation, demolition, or removal of existing structures; financing for construction or permanent financing; interest rate reductions; refinancing; and gap financing to create affordable housing for:
  • Homeownership: households with incomes up to 115% of the greater of state or area AMI.
  • Rental housing: households with incomes up to 80% of the greater of state or area AMI.
  • Financing the operations and management of financially distressed residential properties.
  • Funding supportive services or staff for supportive housing (supportive housing operations may be funded as a capitalized reserve or ongoing support).
  • Costs of operating emergency shelters, facility construction, and related services.

• Prioritization and affordability targets:

  • Projects should prioritize serving households with incomes not exceeding 80% AMI for homeownership and 50% AMI for rental housing.
  • Priority may be given to projects that reduce disparities in home ownership, reduce housing cost burden, reduce housing instability or homelessness, improve home habitability, create accessible housing, or increase energy- or water-efficiency.

• Financing concepts:

  • Gap financing defined as the difference between property costs (including acquisition, demolition, rehabilitation, and construction) and either the market value at sale or the amount a targeted household can afford for housing, using standard industry practices.

• Demolition and land use:

  • If funds are used to demolish or remove existing structures, the cleared land must be used to build housing for people who meet income limits.

• Accessibility and design requirements for larger projects:

  • For new construction of buildings with more than four units, the funding recipient must ensure:
  • Either at least one unit or 5% of units are accessible, with each accessible unit featuring a roll-in shower, a water closet, and a kitchen work surface that meet current state accessibility provisions.
  • Either at least one unit or 5% of units are sensory-accessible, including: soundproofing between shared walls for first and second floor units; no fluorescent lighting in units and common areas; low-fume paint; and low-chemical carpet and carpet glue.
  • The project must still meet other applicable accessibility requirements beyond these provisions.

Significant changes to existing law (how this bill alters current statutes)

• Expands the list of qualifying projects eligible for statewide local housing aid beyond prior uses.
• Extends eligibility to include outside the metropolitan area, increasing the geographic scope.
• Introduces market-rate rental property funding under conditions tied to area-specific requirements.
• Adds explicit funding for supportive services and operational costs related to supportive housing, not just construction.
• Adds detailed accessibility and sensory-accessibility requirements for larger new-construction projects.
• Sets explicit income caps for affordable housing funded by aid (homeownership up to 115% AMI; rental up to 80% AMI) and requires priority to target lower-income households to reduce disparities and burdens.

Potential impacts

• More housing projects could receive aid, including outside the metro area, potentially increasing affordable housing supply.
• Emphasis on accessibility and sensory-friendly design may improve livability for people with disabilities and other needs.
• Clear prioritization and affordability targets aim to reduce cost burdens and homelessness and to address inequities in homeownership opportunities.
• Local governments may need to prepare resolutions and documentation to support market-rate projects funded with aid.

Relevant Terms emergency rental assistance, area median income (AMI), HUD, outside the metropolitan counties, market-rate rental properties, qualifying projects, homeownership, rental housing, supportive housing, supportive services, capitalized reserve, financing (construction financing, permanent financing, interest rate reduction, refinancing, gap financing), disadvantaged housing, affordability, energy-efficiency, water-efficiency, accessibility, accessible units, sensory-accessible, roll-in shower, water closet, kitchen work surface, smoke-free/low-emission materials, land use after demolition, disparity reduction, housing cost burden, homelessness, unit requirements, 462A.39, 462A.37, 1002 (State Building Code Accessibility Provisions).