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    Subdivision 1. Created. The economic development and housing challenge program is
created to be administered by the agency.
(a) The program shall provide grants or loans 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 support economic
development and redevelopment activities or job creation or job preservation within a community
or region by meeting locally identified housing needs.
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.
(b) Preference for grants and loans shall be given to comparable proposals that include
regulatory changes or waivers that result in identifiable cost avoidance or cost reductions, such
as increased density, flexibility in site development standards, or zoning code requirements.
Preference must also be given among comparable proposals to proposals for projects that are
accessible to transportation systems, jobs, schools, and other services.
(c) If a grant or loan 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 this section or for other housing-related purposes that primarily benefit the
persons residing in the adjacent housing. In making selections for grants or loans for projects that
demolish affordable housing units, the agency must review the potential displacement of residents
and consider the extent to which displacement of residents is minimized.
    Subd. 2. Eligible recipients. Challenge grants or loans may be made to a city, a federally
recognized American Indian tribe or subdivision located in Minnesota, a tribal housing
corporation, a private developer, a nonprofit organization, or the owner of the housing, including
individuals. For the purpose of this section, "city" has the meaning given it in section 462A.03,
subdivision 21
. To the extent practicable, grants and loans shall be made so that an approximately
equal number of housing units are financed in the metropolitan area and in the nonmetropolitan
    Subd. 3. Contribution requirement. Fifty percent of the funds appropriated for this section
must be used for challenge grants or loans for housing proposals with financial or in-kind
contributions from nonstate resources that reduce the need for deferred loan or grant funds from
state resources. Challenge grants or loans must be used for economically viable homeownership
or rental housing proposals that address the housing needs of the local work force.
    Among comparable proposals, preference must be given to proposals that include
contributions from nonstate resources for the greatest portion of the total development cost.
Comparable proposals with contributions from local units of government or private philanthropic,
religious, or charitable organizations must be given preference in awarding grants or loans.
    For the purpose of this subdivision, a contribution may consist partially or wholly of the
premium paid for federal housing tax credits.
    Subd. 4.[Repealed, 1Sp2001 c 4 art 5 s 10]
    Subd. 5. Income limits. Households served through challenge grants or loans must not have
incomes at the time of initial occupancy that 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 challenge fund grants
or loans must be affordable to the local work force.
Preference among comparable proposals shall be given those that provide housing
opportunities for an expanded range of household incomes within a community or that provide
housing opportunities for a wide range of incomes within the development.
    Subd. 6.[Repealed, 1Sp2001 c 4 art 5 s 10]
    Subd. 7.[Repealed, 1Sp2001 c 4 art 5 s 10]
    Subd. 8. Limitation on return. The limitations on return of eligible mortgagors contained in
section 462A.03, subdivision 13, do not apply to loans or grants for rental housing if the loans
or grants made by the agency, from all sources, are less than 50 percent of the total costs, as
determined by the agency.
History: 1999 c 223 art 2 s 56; 1Sp2001 c 4 art 4 s 34; art 5 s 5-9; 1Sp2005 c 1 art 4 s
104; 2007 c 135 art 8 s 7

Official Publication of the State of Minnesota
Revisor of Statutes