HF 4819

1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 03/21/2024 03:37pm

A bill for an act
relating to housing; expanding eligible uses of housing infrastructure bonds;
providing for recapitalization; amending a prior appropriation for the housing
infrastructure program; establishing a task force and requiring a report; amending
Minnesota Statutes 2022, sections 462A.03, by adding subdivisions; 462A.05,
subdivision 3b; 462A.21, subdivision 8b; 462A.37, by adding a subdivision;
Minnesota Statutes 2023 Supplement, section 462A.37, subdivisions 1, 2; Laws
2023, chapter 37, article 1, section 2, subdivision 17.

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

Section 1.

Minnesota Statutes 2022, section 462A.03, is amended by adding a subdivision
to read:

new text begin Subd. 2a. new text end

new text begin Distressed building. new text end

new text begin "Distressed building" means an existing rental housing
building:
new text end

new text begin (1) in which the units are restricted to households at or below 60 percent of the area
median income; and
new text end

new text begin (2) that:
new text end

new text begin (i) is in foreclosure proceedings;
new text end

new text begin (ii) has two or more years of negative net operating income;
new text end

new text begin (iii) has two or more years with a debt service coverage ratio less than one; or
new text end

new text begin (iv) has necessary costs of repair, replacement, or maintenance that exceed the project
reserves available for those purposes.
new text end

Sec. 2.

Minnesota Statutes 2022, section 462A.03, is amended by adding a subdivision to
read:

new text begin Subd. 6a. new text end

new text begin Recapitalization. new text end

new text begin "Recapitalization" means financing for the physical and
financial needs of a distressed building, including restructuring and forgiveness of amortizing
and deferred debt, principal and interest paydown, interest rate write-down, deferral of debt
payments, mortgage payment forbearance, deferred maintenance, security services, property
insurance, reasonably necessary capital improvements, funding of reserves for supportive
services, and property operations. Recapitalization may include reimbursement to a nonprofit
sponsor or owner for expenditures that would have otherwise qualified for recapitalization.
new text end

Sec. 3.

Minnesota Statutes 2022, section 462A.05, subdivision 3b, is amended to read:

Subd. 3b.

Refinancing mortgages.

The agency may make loans new text begin for recapitalization or
new text end to refinance the existing indebtedness, of owners of rental property, secured by federally
assisted housing for the purpose of obtaining agreement of the owner to participate in the
federally assisted rental housing program and to extend any existing low-income affordability
restrictions on the housing for the maximum term permitted. For purposes of this subdivision,
"federally assisted rental housing" includes housing that is:

(1) subject to a project-based housing or rental assistance payment contract funded by
the federal government;

(2) financed by the Rural Housing Service of the United States Department of Agriculture
under section 515 of the Housing Act of 1949, as amended; or

(3) financed under section 236; section 221(d)(3) below market interest rate program;
section 202; or section 811 of the Housing and Urban Development Act of 1968, as amended.

Sec. 4.

Minnesota Statutes 2022, section 462A.21, subdivision 8b, is amended to read:

Subd. 8b.

Family rental housing.

It may establish a family rental housing assistance
program to provide loans or direct rental subsidies for housing for families with incomes
of up to 80 percent of state median income, or to provide grants for the operating cost of
public housing. Priority must be given to those developments with resident families with
the lowest income. The development may be financed by the agency or other public or
private lenders. Direct rental subsidies must be administered by the agency for the benefit
of eligible families. Financial assistance provided under this subdivision to recipients of aid
to families with dependent children must be in the form of vendor payments whenever
possible. Loans, grants, and direct rental subsidies under this subdivision may be made only
with specific appropriations by the legislature. The limitations on eligible mortgagors
contained in section 462A.03, subdivision 13, do not apply to loans for the new text begin recapitalization
or new text end rehabilitation of existing housing under this subdivision.

Sec. 5.

Minnesota Statutes 2023 Supplement, section 462A.37, subdivision 1, is amended
to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given.

(b) "Abandoned property" has the meaning given in section 117.025, subdivision 5.

(c) "Community land trust" means an entity that meets the requirements of section
462A.31, subdivisions 1 and 2.

(d) "Debt service" means the amount payable in any fiscal year of principal, premium,
if any, and interest on housing infrastructure bonds and the fees, charges, and expenses
related to the bonds.

(e) "Foreclosed property" means residential property where foreclosure proceedings
have been initiated or have been completed and title transferred or where title is transferred
in lieu of foreclosure.

(f) "Housing infrastructure bonds" means new text begin money appropriated to the agency for the
purposes of this section, the proceeds of any bonds defined in this paragraph, and new text end bonds
issued by the agency under this chapter that:

(1) are qualified 501(c)(3) bonds, within the meaning of section 145(a) of the Internal
Revenue Code;

(2) finance qualified residential rental projects within the meaning of section 142(d) of
the Internal Revenue Code; deleted text begin or
deleted text end

(3) are tax-exempt bonds that are not private activity bonds, within the meaning of
section 141(a) of the Internal Revenue Code, for the purpose of financing or refinancing
affordable housing authorized under this chapter deleted text begin . deleted text end new text begin ; or
new text end

new text begin (4) are taxable bonds for the purpose of financing or refinancing affordable housing
authorized under this chapter.
new text end

(g) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended.

(h) "Senior" means a person 55 years of age or older.

(i) "Senior household" means a household with one or more senior members and with
an annual combined income not greater than 50 percent of:

(1) the metropolitan area median income for persons in the metropolitan area; or

(2) the statewide median income for persons outside the metropolitan area.

(j) "Senior housing" means housing intended and operated for occupancy by senior
households with at least 80 percent of the units occupied by senior households, and for
which there is publication of, and adherence to, policies and procedures that demonstrate
an intent by the owner or manager to provide housing for seniors. Senior housing may be
developed in conjunction with and as a distinct portion of mixed-income senior housing
developments that use a variety of public or private financing sources.

(k) "Supportive housing" means housing that is not time-limited and provides or
coordinates with linkages to services necessary for residents to maintain housing stability
and maximize opportunities for education and employment.

Sec. 6.

Minnesota Statutes 2023 Supplement, 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 deleted text begin , deleted text end or grants deleted text begin for the purposes of clauses (4) and deleted text end
deleted text begin (7), deleted text end 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, new text begin recapitalization, new text end and rehabilitation
of supportive housing new text begin where at least 50 percent of units are set aside new text end 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 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 new text begin , recapitalization new text end , adaptive reuse, or
new construction of senior housing;

(6) to finance the costs of acquisition, rehabilitation, new text begin recapitalization, new text end 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; deleted text begin and
deleted text end

(8) to finance the costs of construction, acquisition, new text begin recapitalization, new text end 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 Department of Housing and Urban Development, as adjusted for household size deleted text begin . deleted text end new text begin ; and
new text end

new text begin (9) to finance the recapitalization of a distressed building.
new text end

(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 or substantial rehabilitation 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, as defined by section 1002 of the current State Building Code Accessibility
Provisions for Dwelling Units in Minnesota, and include at least one roll-in shower; 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) Among comparable proposals requesting funding for recapitalization, the agency
must prioritize projects in properties that are:
new text end

new text begin (1) at risk of foreclosure; or
new text end

new text begin (2) under workout agreements with lenders.
new text end

new text begin When determining whether a building is at risk of foreclosure, sale, or closure, the agency
shall consider the factors qualifying a building as distressed, as defined under section
462A.03, subdivision 2a.
new text end

new text begin (h) Supportive housing providers may use a portion of funding awarded pursuant to this
section to support oversight and operations of supportive housing facilities.
new text end

new text begin (i) The agency must engage with community stakeholders, advocates, and developers
annually when considering project priorities.
new text end

new text begin (j) From July 1, 2024, through June 30, 2033, whenever the agency awards more than
$20,000,000 under this section, 50 percent of the amount must be awarded for
recapitalization.
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. 7.

Minnesota Statutes 2022, section 462A.37, is amended by adding a subdivision to
read:

new text begin Subd. 3a. new text end

new text begin Procedures for considering requests for recapitalization financing. new text end

new text begin (a) In
considering and processing requests for recapitalization financing under this section, the
agency must:
new text end

new text begin (1) process applications on a rolling basis;
new text end

new text begin (2) implement commercially reasonable standards consistent with the standards of other
providers of financing for affordable housing;
new text end

new text begin (3) prioritize timeliness and efficiency of closing;
new text end

new text begin (4) begin accepting applications no later than July 2, 2024;
new text end

new text begin (5) approve or reject an application within 60 days of receiving the application and all
supporting documents; and
new text end

new text begin (6) close and disburse recapitalization funds promptly and within 120 days of receiving
an approved application except when compliance with the 120-day deadline would be illegal
under the laws of this state or of the United States.
new text end

new text begin (b) The agency will provide a report on the status of implementation of this section by
January 30 of each year to the chairs and ranking minority members of the legislative
committees with jurisdiction over housing finance and policy. Each report will detail the
number of properties receiving funding for recapitalization in the prior year, the amount of
funding awarded for recapitalization in the prior year, the average time from the agency's
receipt of an application under this subdivision to closing, and a report of the number of
applications for recapitalization funding then in-process.
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. 8.

Laws 2023, chapter 37, article 1, section 2, subdivision 17, is amended to read:

Subd. 17. Housing Infrastructure

100,000,000

100,000,000

This appropriation is for the housing
infrastructure program for the eligible
purposes under Minnesota Statutes, section
462A.37, subdivision 2. This is a onetime
appropriation. new text begin Of this amount, at least
$50,000,000 must be used for recapitalization,
as defined by Minnesota Statutes, section
462A.37, subdivision 1.
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. 9. new text begin TASK FORCE ON LONG-TERM SUSTAINABILITY OF AFFORDABLE
HOUSING.
new text end

new text begin (a) A task force is established to:
new text end

new text begin (1) evaluate the process of awarding and closing awards of low-income housing tax
credits and housing infrastructure bonds; and
new text end

new text begin (2) recommend to the commissioner of the Minnesota Housing Finance Agency process
improvements to promote long-term sustainability of affordable housing projects.
new text end

new text begin (b) The Minnesota Housing Finance Agency shall convene the first meeting of the task
force no later than August 31, 2024, and shall provide accessible physical or virtual meeting
space as necessary for the task force to conduct its work. The task force must create final
recommendations for the commissioner of the Minnesota Housing Finance Agency no later
than April 30, 2025.
new text end

new text begin (c) The task force shall consist of 11 members representing a cross section of the
affordable housing industry and relevant agency staff. The chair of the house of
representatives committee with jurisdiction over housing finance shall appoint four members.
The chair of the senate committee with jurisdiction over housing finance shall appoint four
members. The commissioner of the Minnesota Housing Finance Agency shall appoint three
members. Members must be appointed no later than July 1, 2024.
new text end

new text begin (d) The task force expires upon submission of the final recommendations required under
paragraph (b).
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