Minnesota lawmakers approve $1 billion for housing

Houses for sale in a residential area.
Minnesota lawmakers have sent a bill to the governor that spends $1 billion of the state’s $17.5 billion budget surplus on housing programs and imposes a 0.25 percent metro area income tax increase to fund affordable housing.
Paul Middlestaedt for MPR News

Minnesota lawmakers have sent a bill to the governor that spends $1 billion of the state’s $17.5 billion budget surplus on housing programs and imposes a 0.25 percent metro area sales tax increase to fund affordable housing.

The Senate voted 34-32 Tuesday on an agreement worked out by a conference committee. On Monday the House voted 70-61 for the bill that would allow the state to create a new rental voucher system, a first-generation homebuyers assistance program and boost workforce housing around the state.

When the bill originally passed in the Senate it was without the tax increase. The conference committee adopted the House position and put the tax in the final version.

Gov. Tim Walz has said he supports the bill and will sign it into law when it reaches his desk. Taken together, the proposal is the largest spend for housing that the Legislature has made.

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Housing advocates said the measure is needed to reduce homelessness and improve access to affordable housing around the state. Republican lawmakers and homebuilding organizations meanwhile, said the bill didn’t do enough to address some of the restrictions that lead to higher prices in building new homes in Minnesota.

“Here at the Legislature, we spent more new money to house animals at the Minnesota Zoo than we put into the Minnesota housing budget. But this is a new day,” the bill’s author Rep. Michael Howard, DFL-Richfield, Minn., said during floor debate on Monday.

“This bill represents our most ambitious, historic effort to address our housing crisis investments that begin with making huge strides all across our housing continuum from preventing homelessness to creating new pathways to homeownership,” Howard continued.

Here are some of the provisions included in the proposal:

  • It would allocate $46 million for a rental assistance program aimed at helping people that federal Section 8 vouchers miss, Howard said. The proposal could impact up to 5,000 families a year. 

  • It would spend $200 million for a new housing infrastructure program.

  • A total of $150 million would be designated to help first-generation homebuyers. Under the provision, the funds could send up to 10 percent of a home’s purchase price (with a cap of $32,000) to new homebuyers.

  • $30 million would be earmarked for workforce housing projects in Greater Minnesota.

  • More than $65 million would be spent on homelessness prevention efforts.

  • And $90 million would be directed to community stabilization.

  • The plan would also increase the sales tax in the metro area by a quarter percent to fund affordable housing in the region moving forward.

House Republicans opposed the bill and said it didn’t focus enough on creating new housing.

“We're missing the mark here. We're not building enough homes, we're not fixing some of the regulatory issues,” Rep. Jim Nash, R-Waconia, Minn., said. “We're putting too much money into, effectively, renting people apartments, when I worry about what happens if we see a downturn in the economy. And what happens then?”

Republican lawmakers also raised concerns about increasing taxes when the state has a historic budget surplus at its disposal.

“My county of Anoka did not ask for a tax increase county-wide. We don't need another new tax. We've got a $17.5 billion surplus,” Rep. Peggy Scott, R-Anoka, said.

The bill’s supporters said the state needed the extra revenue on an ongoing basis to continue funding affordable housing programs into the future.

“This sales tax will go directly to cities and counties to address the unique affordable housing challenges in their community,” Howard said. “It's why more than two dozen local elected officials from across the state or from across the metro area have put out a strong letter of support.”