HF 5158
Introduction - 94th Legislature (2025 - 2026)
Posted on 05/17/2026 12:37 p.m.
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A bill for an act
relating to taxation; local affordable housing aid; expanding eligible uses of aid;
modifying the deadline to spend aid on certain eligible uses; amending Minnesota
Statutes 2024, section 477A.35, subdivisions 4, 6; Minnesota Statutes 2025
Supplement, section 477A.35, subdivision 5.
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 deleted text begin fundsdeleted text end new text begin aidnew text end 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; and
(6) deleted text begin costs of operatingdeleted text end emergency shelter deleted text begin facilitiesdeleted text end new text begin facility construction and operationsnew text end ,
including deleted text begin the costs of providing servicesdeleted text end new text begin service provisionnew 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 calendar year 2027
and thereafter.
new text end
Sec. 2.
Minnesota Statutes 2025 Supplement, section 477A.35, subdivision 5, is amended
to read:
Subd. 5.
Use of proceeds.
(a) Any deleted text begin fundsdeleted text end new text begin aidnew text end distributed under this section must be spent
on a qualifying project. deleted text begin Funds aredeleted text end new text begin Aid isnew text end considered spent on a qualifying project if:
(1) a tier I city or county demonstrates to the Minnesota Housing Finance Agency that
the city or county cannot expend deleted text begin fundsdeleted text end new text begin aidnew text end on a qualifying project by the deleted text begin deadlinedeleted text end new text begin deadlinesnew text end
imposed deleted text begin by paragraph (b)deleted text end new text begin under this subdivisionnew text end due to factors outside the control of the
city or county; and
(2) the deleted text begin funds aredeleted text end new text begin aid isnew text end transferred to a local housing trust fund.
deleted text begin Fundsdeleted text end new text begin Aidnew text end transferred to a local housing trust fund under this paragraph must be spent on
a project or household that meets the affordability requirements of subdivision 4, paragraph
(a).
(b) deleted text begin Fundsdeleted text end new text begin Aidnew text end must be deleted text begin spent by December 31 in the third year following the year after
the aid was received. The requirements of this paragraph are satisfied if funds are:
deleted text end
deleted text begin (1)deleted text end committed to a qualifying project by December 31 deleted text begin indeleted text end new text begin ofnew text end the third year following the
year deleted text begin afterdeleted text end the aid was receiveddeleted text begin ;deleted text end and
deleted text begin (2)deleted text end expended by December 31 deleted text begin indeleted text end new text begin ofnew text end the fourth year following the year deleted text begin afterdeleted text end the aid was
received.
new text begin
(c) Notwithstanding paragraph (b), a recipient that intends to spend aid on a qualifying
affordable housing construction project under subdivision 4, paragraph (a), clause (3), or a
qualifying emergency shelter facility construction project under subdivision 4, paragraph
(a), clause (6), as documented in the most recent annual report submitted to the Minnesota
Housing Finance Agency under subdivision 6, must commit the aid to the project by
December 31 of the ..... year following the year the recipient received the aid and must
expend the aid by December 31 of the ..... year following the year the recipient received the
aid.
new text end
deleted text begin (c)deleted text end new text begin (d)new text end An aid recipient may not use aid money to reimburse itself for prior expenditures.
deleted text begin (d)deleted text end new text begin (e)new text end Any program income generated from deleted text begin fundsdeleted text end new text begin aidnew text end distributed under this section
must be used on a qualifying project.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for aids payable in calendar year 2027
and thereafter.
new text end
Sec. 3.
Minnesota Statutes 2024, section 477A.35, subdivision 6, is amended to read:
Subd. 6.
Administration.
(a) The commissioner of revenue must compute the amount
of aid payable to each tier I city and county under this section. By August 1 of each year,
the commissioner must certify the distribution factors of each tier I city and county to be
used in the following year. The commissioner must pay local affordable housing aid annually
at the times provided in section 477A.015, distributing the amounts available on the
immediately preceding June 1 under the accounts established in section 477A.37, subdivisions
2 and 3.
(b) Beginning in 2025, tier I cities and counties shall submit a report annually, no later
than December 1 of each year, to the Minnesota Housing Finance Agency. The report must
include documentation of the location of any unspent deleted text begin fundsdeleted text end new text begin aidnew text end distributed under this section
and of qualifying projects completed or planned with deleted text begin fundsdeleted text end new text begin aidnew text end under this section. If a tier
I city or county fails to submit a report, deleted text begin if a tier I city or countydeleted text end fails to spend deleted text begin funds within
the timelinedeleted text end new text begin aid by the deadlinesnew text end imposed under subdivision 5, deleted text begin paragraph (b), if a tier I city
or countydeleted text end uses deleted text begin fundsdeleted text end new text begin aidnew text end for a project that does not qualify under this section, or deleted text begin if a tier I
city or countydeleted text end fails to meet its requirements of subdivision 5a, the Minnesota Housing
Finance Agency shall notify the Department of Revenue and the cities and counties that
must repay deleted text begin fundsdeleted text end new text begin aidnew text end under paragraph (c) by February 15 of the following year.
(c) By May 15, after receiving notice from the Minnesota Housing Finance Agency, a
tier I city or county must pay to the Minnesota Housing Finance Agency deleted text begin fundsdeleted text end new text begin moneynew text end the
city or county received under this section if the city or county:
(1) fails to spend the deleted text begin funds within the time alloweddeleted text end new text begin aid by the deadlines imposednew text end under
subdivision 5deleted text begin , paragraph (b)deleted text end ;
(2) spends the deleted text begin fundsdeleted text end new text begin aidnew text end on anything other than a qualifying project;
(3) fails to submit a report documenting use of the deleted text begin fundsdeleted text end new text begin aidnew text end ; or
(4) fails to meet the requirements of subdivision 5a.
(d) The commissioner of revenue must stop distributing deleted text begin fundsdeleted text end new text begin aidnew text end to a tier I city or county
that requests in writing that the commissioner stop payment or that, in three consecutive
years, the Minnesota Housing Finance Agency has reported, pursuant to paragraph (b), to
have failed to use deleted text begin fundsdeleted text end new text begin aidnew text end , misused deleted text begin fundsdeleted text end new text begin aidnew text end , or failed to report on its use of deleted text begin fundsdeleted text end new text begin aidnew text end .
A request to stop payment under this paragraph must be submitted to the commissioner in
the form and manner prescribed by the commissioner on or before May 1 of the aids payable
year the aid recipient wants the commissioner to stop payment of aid. The commissioner
shall not stop payment based on a request received after May 1 until the next aids payable
year.
(e) The commissioner may resume distributing deleted text begin fundsdeleted text end new text begin aidnew text end to a tier I city or county to
which the commissioner has stopped payments in the year following the August 1 after the
Minnesota Housing Finance Agency certifies that the city or county has submitted
documentation of plans for a qualifying project. The commissioner may resume distributing
deleted text begin fundsdeleted text end new text begin aidnew text end to a tier I city or county to which the commissioner has stopped payments at the
request of the city or county in the year following the August 1 after the Minnesota Housing
Finance Agency certifies that the city or county has submitted documentation of plans for
a qualifying project.
(f) By June 1, any deleted text begin fundsdeleted text end new text begin moneynew text end paid to the Minnesota Housing Finance Agency under
paragraph (c) must be deposited in the housing development fund. deleted text begin Fundsdeleted text end new text begin Moneynew text end deposited
under this paragraph deleted text begin aredeleted text end new text begin isnew text end appropriated to the commissioner of the Minnesota Housing
Finance Agency for use on the family homeless prevention and assistance program under
section 462A.204, the economic development and housing challenge program under section
462A.33, and the workforce and affordable homeownership development program under
section 462A.38.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for aids payable in calendar year 2027
and thereafter.
new text end