HF 5025

Introduction - 94th Legislature (2025 - 2026)

Posted on 04/20/2026 11:57 a.m.

A bill for an act
relating to taxation; local government aids; allowing counties to spend housing
aid payments on expenses of administering qualifying aid expenditures; amending
Minnesota Statutes 2024, sections 477A.35, subdivision 4; 477A.36, subdivision
4.

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

Section 1.

Minnesota Statutes 2024, section 477A.35, subdivision 4, is amended to read:

Subd. 4.

Qualifying projects.

(a) Qualifying projects include:

(1) emergency rental assistance for households earning less than 80 percent of area
median income as determined by the United States Department of Housing and Urban
Development;

(2) financial support to nonprofit affordable housing providers in their mission to provide
safe, dignified, affordable and supportive housing;

(3) projects designed for the purpose of construction, acquisition, rehabilitation,
demolition or removal of existing structures, construction financing, permanent financing,
interest rate reduction, refinancing, and gap financing of housing to provide affordable
housing to households that have incomes which do not exceed, for homeownership projects,
115 percent of the greater of state or area median income as determined by the United States
Department of Housing and Urban Development, and for rental housing projects, 80 percent
of the greater of state or area median income as determined by the United States Department
of Housing and Urban Development, except that the housing developed or rehabilitated
with funds under this section must be affordable to the local work force;

(4) financing the operations and management of financially distressed residential
properties;

(5) funding of supportive services or staff of supportive services providers for supportive
housing as defined by section 462A.37, subdivision 1. Financial support to nonprofit housing
providers to finance supportive housing operations may be awarded as a capitalized reserve
or as an award of ongoing funding; deleted text begin and
deleted text end

(6) costs of operating emergency shelter facilities, including the costs of providing
services deleted text begin . deleted text end new text begin ; and
new text end

new text begin (7) costs incurred by counties in administering qualifying projects under this subdivision,
except that administrative costs may not exceed ....... percent of aid received under this
section. Costs incurred in transferring aid payments to a local housing trust fund as provided
in subdivision 5, paragraph (a), are not eligible under this clause, but costs incurred in
expending funds transferred to a local housing trust fund are a qualifying project under this
section, subject to the percentage limit in the preceding sentence.
new text end

(b) Recipients must prioritize projects that provide affordable housing to households
that have incomes which do not exceed, for homeownership projects, 80 percent of the
greater of state or area median income as determined by the United States Department of
Housing and Urban Development, and for rental housing projects, 50 percent of the greater
of state or area median income as determined by the United States Department of Housing
and Urban Development. Priority may be given to projects that: reduce disparities in home
ownership; reduce housing cost burden, housing instability, or homelessness; improve the
habitability of homes; create accessible housing; or create more energy- or water-efficient
homes.

(c) Gap financing is either:

(1) the difference between the costs of the property, including acquisition, demolition,
rehabilitation, and construction, and the market value of the property upon sale; or

(2) the difference between the cost of the property and the amount the targeted household
can afford for housing, based on industry standards and practices.

(d) If aid under this section is used for demolition or removal of existing structures, the
cleared land must be used for the construction of housing to be owned or rented by persons
who meet the income limits of paragraph (a).

(e) If an aid recipient uses the aid on new construction of 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 this section from meeting other
applicable accessibility requirements.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2027 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2024, section 477A.36, subdivision 4, is amended to read:

Subd. 4.

Qualifying projects.

(a) Qualifying projects shall include:

(1) emergency rental assistance for households earning less than 80 percent of area
median income as determined by the United States Department of Housing and Urban
Development;

(2) financial support to nonprofit affordable housing providers in their mission to provide
safe, dignified, affordable and supportive housing;

(3) outside the metropolitan counties as defined in section 473.121, subdivision 4,
development of market rate residential rental properties, as defined in section 462A.39,
subdivision 2, paragraph (d), if the relevant unit of government submits with the report
required under subdivision 6 a resolution and supporting documentation showing that the
area meets the requirements of section 462A.39, subdivision 4, paragraph (a);

(4) projects designed for the purpose of construction, acquisition, rehabilitation,
demolition or removal of existing structures, construction financing, permanent financing,
interest rate reduction, refinancing, and gap financing of housing to provide affordable
housing to households that have incomes which do not exceed, for homeownership projects,
115 percent of the greater of state or area median income as determined by the United States
Department of Housing and Urban Development and, for rental housing projects, 80 percent
of the greater of state or area median income as determined by the United States Department
of Housing and Urban Development, except that the housing developed or rehabilitated
with funds under this section must be affordable to the local work force;

(5) financing the operations and management of financially distressed residential
properties;

(6) funding of supportive services or staff of supportive services providers for supportive
housing as defined in section 462A.37, subdivision 1. Financial support to nonprofit housing
providers to finance supportive housing operations may be awarded as a capitalized reserve
or as an award of ongoing funding; deleted text begin and
deleted text end

(7) costs of operating emergency shelter facilities, including the costs of providing
services deleted text begin . deleted text end new text begin ; and
new text end

new text begin (8) costs incurred by counties in administering qualifying projects under this subdivision,
except that administrative costs may not exceed ....... percent of aid received under this
section. Costs incurred in transferring aid payments to a local housing trust fund as provided
in subdivision 5, paragraph (a), are not eligible under this clause, but costs incurred in
expending funds transferred to a local housing trust fund are a qualifying project under this
section, subject to the percentage limit in the preceding sentence.
new text end

(b) Recipients must prioritize projects that provide affordable housing to households
that have incomes that do not exceed, for homeownership projects, 80 percent of the greater
of state or area median income as determined by the United States Department of Housing
and Urban Development, and for rental housing projects, 50 percent of the greater of state
or area median income as determined by the United States Department of Housing and
Urban Development. Priority may be given to projects that: reduce disparities in home
ownership; reduce housing cost burden, housing instability, or homelessness; improve the
habitability of homes; create accessible housing; or create more energy- or water-efficient
homes.

(c) Gap financing is either:

(1) the difference between the costs of the property, including acquisition, demolition,
rehabilitation, and construction, and the market value of the property upon sale; or

(2) the difference between the cost of the property and the amount the targeted household
can afford for housing, based on industry standards and practices.

(d) If aid under this section is used for demolition or removal of existing structures, the
cleared land must be used for the construction of housing to be owned or rented by persons
who meet the income limits of paragraph (a).

(e) If an aid recipient uses the aid on new construction of 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 this section from meeting other
applicable accessibility requirements.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for aids payable in 2027 and thereafter.
new text end