SF 3503

Introduction - 94th Legislature (2025 - 2026)

Posted on 05/11/2025 10:47 p.m.

A bill for an act
relating to housing; establishing a locally controlled housing fund; modifying
allowable uses of housing infrastructure bonds; requiring a report; authorizing the
sale and issuance of state bonds; appropriating money; amending Minnesota
Statutes 2024, section 462A.37, subdivision 2; proposing coding for new law in
Minnesota Statutes, chapter 462A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 462A.37, subdivision 2, is amended to read:

Subd. 2.

Authorization.

(a) The agency may issue up to $30,000,000 in aggregate
principal amount of housing infrastructure bonds in one or more series to which the payment
made under this section may be pledged. The housing infrastructure bonds authorized in
this subdivision may be issued to fund loans, or grants for the purposes of clauses (4) and
(7), on terms and conditions the agency deems appropriate, made for one or more of the
following purposes:

(1) to finance the costs of the construction, acquisition, and rehabilitation of supportive
housing where at least 50 percent of units are set aside for individuals and families who are
without a permanent residence;

(2) to finance the costs of the acquisition and rehabilitation of foreclosed or abandoned
housing to be used for affordable rental housing or for affordable home ownership and the
costs of new construction of rental housing on abandoned or foreclosed property where the
existing structures will be demolished or removed;

(3) to finance that portion of the costs of acquisition of property that is attributable to
the land to be leased by community land trusts to low- and moderate-income home buyers;

(4) to finance the acquisition, improvement, and infrastructure of manufactured home
parks under section 462A.2035, subdivision 1b;

(5) to finance the costs of acquisition, rehabilitation, adaptive reuse, or new construction
of senior housing;

(6) to finance the costs of acquisition, rehabilitation, and replacement of federally assisted
rental housing and for the refinancing of costs of the construction, acquisition, and
rehabilitation of federally assisted rental housing, including providing funds to refund, in
whole or in part, outstanding bonds previously issued by the agency or another government
unit to finance or refinance such costs;

(7) to finance the costs of acquisition, rehabilitation, adaptive reuse, or new construction
of single-family housing;

(8) to finance the costs of construction, acquisition, and rehabilitation of permanent
housing that is affordable to households with incomes at or below 50 percent of the area
median income for the applicable county or metropolitan area as published by the new text begin United
States new text end Department of Housing and Urban Development, as adjusted for household size; and

(9) to finance the costs of construction, acquisition, rehabilitation, conversion, and
development of cooperatively owned housing created under chapter 308A, 308B, or 308C
that is affordable to low- and moderate-income households.

(b) Among comparable proposals for permanent supportive housing, preference shall
be given to permanent supportive housing for veterans and other individuals or families
who:

(1) either have been without a permanent residence for at least 12 months or at least four
times in the last three years; or

(2) are at significant risk of lacking a permanent residence for 12 months or at least four
times in the last three years.

(c) Among comparable proposals for senior housing, the agency must give priority to
requests for projects that:

(1) demonstrate a commitment to maintaining the housing financed as affordable to
senior households;

(2) leverage other sources of funding to finance the project, including the use of
low-income housing tax credits;

(3) provide access to services to residents and demonstrate the ability to increase physical
supports and support services as residents age and experience increasing levels of disability;
and

(4) include households with incomes that do not exceed 30 percent of the median
household income for the metropolitan area.

(d) To the extent practicable, the agency shall balance the loans made between projects
in the metropolitan area and projects outside the metropolitan area. Of the loans made to
projects outside the metropolitan area, the agency shall, to the extent practicable, balance
the loans made between projects in counties or cities with a population of 20,000 or less,
as established by the most recent decennial census, and projects in counties or cities with
populations in excess of 20,000.

(e) Among comparable proposals for permanent housing, the agency must give preference
to projects that will provide housing that is affordable to households at or below 30 percent
of the area median income.

(f) If a loan recipient uses the loan for new construction as defined by the agency on a
building containing more than four units, the loan recipient must construct, convert, or
otherwise adapt the building to include:

(1) the greater of: (i) at least one unit; or (ii) at least five percent of units that are
accessible units, and each accessible unit includes at least one roll-in shower, water closet,
and kitchen work surface meeting the requirements of section 1002 of the current State
Building Code Accessibility Provisions for Dwelling Units in Minnesota; and

(2) the greater of: (i) at least one unit; or (ii) at least five percent of units that are
sensory-accessible units that include:

(A) soundproofing between shared walls for first and second floor units;

(B) no florescent lighting in units and common areas;

(C) low-fume paint;

(D) low-chemical carpet; and

(E) low-chemical carpet glue in units and common areas.

Nothing in this paragraph relieves a project funded by the agency from meeting other
applicable accessibility requirements.

new text begin (g) Bonds issued pursuant to this section for the acquisition and construction of housing
may be awarded through the locally controlled housing program.
new text end

Sec. 2.

new text begin [462A.44] LOCALLY CONTROLLED HOUSING PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment. new text end

new text begin A locally controlled housing program is established for
the agency to award funding to allow eligible recipients to develop or acquire housing to
be owned by the recipient.
new text end

new text begin Subd. 2. new text end

new text begin Creation of accounts. new text end

new text begin Two locally controlled housing program accounts are
created. One account is created in the housing development fund and one account is created
in the bond proceeds fund. Money in the accounts is appropriated to the commissioner to
award funding under this section. Money in the accounts is available until encumbered or
spent subject to section 16A.642. Money in the locally controlled housing program account
in the housing development fund consists of money appropriated to the account and
transferred from other sources and all earnings from money in the account, including
repayments on loans awarded under this section.
new text end

new text begin Subd. 3. new text end

new text begin Eligible recipient. new text end

new text begin (a) A city, as defined in section 462C.02, subdivision 6, or
a county is eligible to apply for and receive a grant from either account established in
subdivision 1.
new text end

new text begin (b) A federally recognized American Indian Tribe or a Tribally designated housing entity
is eligible to apply for and receive a grant from the locally controlled housing program
account in the housing development fund.
new text end

new text begin Subd. 4. new text end

new text begin Use of funds; program requirements. new text end

new text begin (a) An eligible recipient must use the
proceeds for the acquisition of the predesign, design, construction, furnishing, and equipment
of property for use as housing and must maintain ownership of housing funded under this
section for at least 50 years after receipt of the funding.
new text end

new text begin (b) In a multifamily property funded under this section, at least 30 percent of the units
must be occupied by households whose income, at the time of application or initial lease
agreement, does not exceed 50 percent of the area median income as published by the United
States Department of Housing and Urban Development, as adjusted for household size, and
at least 30 percent of the units must be occupied by households whose income, at the time
of application or initial lease agreement, does not exceed 100 percent of the area median
income as published by the United States Department of Housing and Urban Development,
as adjusted for household size. At the time of application or initial lease agreement, no
household moving into a multifamily property funded under this section may have an income
greater than 400 percent of the area median income as published by the United States
Department of Housing and Urban Development, as adjusted for household size.
new text end

new text begin (c) In single-family property funded under this section, the homes must be occupied by
households with incomes not exceeding 50 percent of the area median income as published
by the United States Department of Housing and Urban Development, as adjusted for
household size.
new text end

new text begin (d) An eligible recipient may act as a community land trust with respect to single-family
property funded through the locally controlled housing program account in the housing
development fund, provided that the recipient meets the requirements applying to a city
acting as a community land trust under sections 462A.30 and 462A.31.
new text end

new text begin (e) Lease agreements with tenants in housing funded under this section must include all
applicable tenant protections included in public housing lease agreements.
new text end

new text begin Subd. 5. new text end

new text begin Operation of locally controlled housing. new text end

new text begin Housing funded under this section
may be operated and managed by the eligible recipient or by a third party under a lease and
management contract complying with section 16A.695, subdivision 2. Except when the
proceeds from the housing are pledged for repayment of the awarded funds, a recipient may
use the proceeds only for the acquisition or the predesign, design, construction, furnishing,
and equipment of housing to be used as affordable housing in the recipient's jurisdiction.
new text end

new text begin Subd. 6. new text end

new text begin Administration. new text end

new text begin (a) To the extent practicable:
new text end

new text begin (1) the agency must make funding available so that an approximately equal number of
housing units are financed in the metropolitan area and in the nonmetropolitan area;
new text end

new text begin (2) the agency must fund projects that include accessible units, as defined in section
1002 of the current State Building Code Accessibility Provisions for Dwelling Units in
Minnesota; and
new text end

new text begin (3) the agency must provide technical assistance to eligible recipients seeking to apply
for funding under this section and to award recipients attempting to comply with the
requirements of this section.
new text end

new text begin (b) Applications for funding must include a housing needs assessment that identifies the
estimated range of affordability for each project.
new text end

new text begin (c) Money in the locally controlled housing program account in the bond proceeds fund
must be awarded as grants. Money in the locally controlled housing development fund must
be awarded as loans. The commissioner must operate the locally controlled housing program
account in the housing development fund as a revolving loan fund.
new text end

new text begin Subd. 7. new text end

new text begin Reports. new text end

new text begin Beginning January 15, 2026, and each year thereafter, the
commissioner must submit a report to the chairs and ranking minority members of the
legislative committees with jurisdiction over housing finance specifying the projects that
received funding under this section in the prior fiscal year.
new text end

Sec. 3. new text begin LOCALLY CONTROLLED HOUSING PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Appropriation. new text end

new text begin $....... is appropriated from the bond proceeds fund to
the commissioner of the Housing Finance Agency for the locally controlled housing program.
new text end

new text begin Subd. 2. new text end

new text begin Bond sale. new text end

new text begin To provide the money appropriated in this section from the bond
proceeds fund, the commissioner of management and budget shall sell and issue bonds of
the state in an amount up to $....... in the manner, upon the terms, and with the effect
prescribed by Minnesota Statutes, sections 16A.631 to 16A.675, and by the Minnesota
Constitution, article XI, sections 4 to 7.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4. new text begin APPROPRIATION; LOCALLY CONTROLLED HOUSING PROGRAM.
new text end

new text begin $....... in fiscal year 2026 is appropriated from the general fund to the commissioner of
the Housing Finance Agency for the locally controlled housing program.
new text end