SF 4392
Introduction - 94th Legislature (2025 - 2026)
Posted on 03/13/2026 09:19 a.m.
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A bill for an act
relating to taxation; statewide local housing aid; expanding eligible uses of aid;
modifying the deadline to spend aid on certain eligible uses; amending Minnesota
Statutes 2024, section 477A.36, subdivisions 4, 6; Minnesota Statutes 2025
Supplement, section 477A.36, subdivision 5.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
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; and
(7) 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 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 calendar year 2027
and thereafter.
new text end
Sec. 2.
Minnesota Statutes 2025 Supplement, section 477A.36, subdivision 5, is amended
to read:
Subd. 5.
Use of proceeds.
(a) Any funds distributed under this section must be spent on
a qualifying project. If a tier I city or county demonstrates to the Minnesota Housing Finance
Agency that the tier I city or county cannot expend funds on a qualifying project by the
deleted text begin deadlinedeleted text end new text begin deadlinesnew text end imposed by deleted text begin paragraph (b)deleted text end new text begin this subdivisionnew text end due to factors outside the
control of the tier I city or county, funds shall be considered spent on a qualifying project
if the funds are transferred to a local housing trust fund. Funds transferred to a local housing
trust fund 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), aid that a recipient will spend on a qualifying
affordable housing construction project under subdivision 4, paragraph (a), clause (4), or a
qualifying emergency shelter facility construction project under subdivision 4, paragraph
(a), clause (7), as documented in the most recent annual report submitted to the Minnesota
Housing Finance Agency under subdivision 6, must be committed to the project by December
31 of the ..... year following the year the aid was received and expended by December 31
of the ..... year following the year the aid was received.
new text end
deleted text begin (c)deleted text end new text begin (d) new text end An aid recipient may not use aid funds 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 funds 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.36, subdivision 6, is amended to read:
Subd. 6.
Administration.
(a) The commissioner of revenue must compute the amount
of aid payable to each aid recipient under this section. Beginning with aids payable in
calendar year 2024, before computing the amount of aid for counties and after receiving
the report required by subdivision 3, paragraph (e), the commissioner shall compute the
amount necessary to increase the amount in the account or accounts established under that
paragraph to $1,250,000. The amount calculated under the preceding sentence shall be
deducted from the amount available to counties for the purposes of certifying the amount
of aid to be paid to counties in the following year. By August 1 of each year, the
commissioner must certify the amount to be paid to each tier I city and county in the
following year. The commissioner must pay statewide local housing aid to tier I cities and
counties annually at the times provided in section 477A.015. Before paying the first
installment of aid annually, the commissioner of revenue shall transfer to the Minnesota
Housing Finance Agency from the funds available for counties, for deposit in the account
or accounts established under subdivision 3, paragraph (e), the amount computed in the
prior year to be necessary to increase the amount in the account or accounts established
under that paragraph to $1,250,000.
(b) Beginning in 2025, aid recipients shall submit a report annually, no later than
December 1 of each year, to the Minnesota Housing Finance Agency. The report shall
include documentation of the location of any unspent funds distributed under this section
and of qualifying projects completed or planned with funds under this section. If an aid
recipient fails to submit a report, fails to spend funds deleted text begin within the timelinedeleted text end new text begin by the deadlinesnew text end
imposed under subdivision 5, deleted text begin paragraph (b),deleted text end uses funds for a project that does not qualify
under this section, or if an aid recipient fails to meet the requirements of subdivision 5a,
the Minnesota Housing Finance Agency shall notify the Department of Revenue and the
aid recipient must repay funds under paragraph (c) by February 15 of the following year.
(c) By May 15, after receiving notice from the Minnesota Housing Finance Agency, an
aid recipient must pay to the Minnesota Housing Finance Agency funds the aid recipient
received under this section if the aid recipient:
(1) fails to spend the funds deleted text begin within the time alloweddeleted text end new text begin by the deadlines imposednew text end under
subdivision 5deleted text begin , paragraph (b)deleted text end ;
(2) spends the funds on anything other than a qualifying project;
(3) fails to submit a report documenting use of the funds; or
(4) fails to meet the requirements of subdivision 5a.
(d) The commissioner of revenue must stop distributing funds to an aid recipient that
requests in writing that the commissioner stop payment or that the Minnesota Housing
Finance Agency reports to have, in three consecutive years, failed to use funds, misused
funds, or failed to report on its use of funds. 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 year prior to the aids payable year in which 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 aids payable based on certification
in the following calendar year.
(e) The commissioner may resume distributing funds to an aid recipient 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 funds to an aid
recipient to which the commissioner has stopped payments at the request of the recipient
in the year following the August 1 after the Minnesota Housing Finance Agency certifies
that the recipient has submitted documentation of plans for a qualifying project.
(f) By June 1, any funds paid to the Minnesota Housing Finance Agency under paragraph
(c) must be deposited in the housing development fund. Funds deposited under this paragraph
are 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.
(g) An eligible Tribal Nation may choose to receive an aid distribution under this section
by submitting an application under this subdivision. An eligible Tribal Nation which has
not received a distribution in a prior aids payable year may elect to begin participation in
the program by submitting an application in the manner and form prescribed by the
commissioner of revenue by January 15 of the aids payable year. In order to receive a
distribution, an eligible Tribal Nation must certify to the commissioner of revenue the most
recent estimate of the total number of enrolled members of the eligible Tribal Nation. The
information must be annually certified by March 1 in the form prescribed by the
commissioner of revenue. The commissioner of revenue must annually calculate and certify
the amount of aid payable to each eligible Tribal Nation on or before August 1 of the aids
payable year. The commissioner of revenue must pay statewide local housing aid to eligible
Tribal Nations annually by December 27 of the year the aid is certified.
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