This August, the Minnesota Housing Finance Agency (MHFA) released a draft of its 2015 Affordable Housing Plan, which outlines MHFA’s spending goals, projections, and strategies for the upcoming year.  MHFA is one of the largest and most important agencies working to finance affordable housing for low and moderate-income Minnesotans—its $947 million budget is projected to assist approximately 67,000 households.  These kinds of reports are often quietly publicized, but  carry a lot of  significance. MHFA funding will immediately and tangibly affect Minnesotans’ lives even more than the most sweeping federal policy.  A deeper dig into this 100 page report reveals exactly how MHFA will work to meet the needs of Minnesota’s growing renter population, and often raises more questions than it answers.

The projected funding for homeownership and rental housing is split almost evenly.  But while homeownership efforts account for 52% percent of the budget, programs such as financed mortgage loans and homebuyer counseling will only reach only 25% of the state’s MHFA-aided home-owning households. In contrast, rental programs account for 47% of the funds but will reach 75% of the state’s renter households.  Equal funding produces drastically different results.

Why is MHFA choosing to invest so much money into homeownership initiatives for such little payoff? An annual rental subsidy costs 4% of a typical Home Mortgage loan – wouldn’t it make more sense to spend money where it can stretch further and reach more families?  MHFA cites historically low interest rates and home prices as reasons for expanding their Home Mortgage Program so “households who are ready to become successful homeowners have the opportunity.” (p19).  One of MHFA’s broad goals for 2015 is to “Offer a Range of Housing Choices”, specifically “Choices for More Renters to Become Homeowners” (p11).  While it’s true that Rental Production funding increased by $101 million (compared to a $24 million increase to Homebuyer and Home Refinance funding), the MHFA plan and projected programs are still homeowner-heavy.

Underscoring these facts and figures is the assumption that homeowning is superior to renting.  Not only is homeowning emphasized through federal policy (read more here), it is considered to be a foremost indicator of a stable and successful adult life.  Who isn’t at least a little nostalgic for the all-American house with a white picket fence?  Our culture ,as well as the MHFA plan, reinforces homeowning dreams.  It’s not wrong to aspire to buying a house. But for some low-income families, those expensive dreams will never become realities. Compounding this issue are the terrible health and safety conditions in a growing number of low-income rental units.  It’s no wonder no one wants to live in them.

MHFA’s budget plan isn’t evil, but it would have been encouraging to see a greater emphasis placed on renters, or at least an explanation of why spending so much money and focus on homeownership is necessary.  Increasing Rental Production funding even more would allow MHFA to build and maintain affordable rental units at a much greater bang for their buck, while simultaneously reducing Minnesota’s homeless population, currently estimated at 13,000.  Living in a rental unit can be just as safe, fulfilling, and affordable as living in a mortgaged home, as long as agencies like MHFA work to make it that way.

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Housing policy currently favors high-income homeowners, but recent initiatives have begun to recognize the needs of the growing renter population. One of the biggest problems facing the affordable housing community is the lack of available funding. In the next two blog posts, we’ll discuss promising ideas regarding increasing funding (federal policy) and distributing those funds (local policy.) The Common Sense Housing Investment Act, introduced by Minnesota’s Representative Keith Ellison in 2013, aims to create money for affordable housing through mortgage tax reforms.

By rearranging who receives tax benefits, and how many benefits they receive, this Act would create $196 billion for affordable housing. Most funds would go towards the currently unfunded National Housing Trust Fund (NHTF). The NHTF is special because it is a permanent program. The aid it would supply to Section 8 and other housing voucher programs, public housing projects, homelessness shelters, and more would not be subject to annual cuts. According to the Minnesota Housing Partnership, Minnesota would receive $77,500,000 for every $5 billion that goes to to the NHTF.

The Common Sense Housing Investment Act would fund the NHTF by using money through these two changes:

1. Lowers the amount of a mortgage for which a homeowner can receive a tax benefit from $1 million to $500,000.

What it means: People who have mortgages on homes worth more than $500,000 (about 4% of all homeowners) would only receive benefits for the first $500,00 of their mortgage, and no more.  Instead of going back to the wealthy homeowner, that money would go to the National Housing Trust Fund.

2. Converts the mortgage-interest-deduction procedure to a flat 15% tax credit for all homeowners. All homeowners would be able to get back 15% of mortgage interest paid in a year from federal income tax.

What it means: Currently, homeowners can receive mortgage-interest-deductions only if they itemize their taxes. However, homeowners with more moderate incomes often do not make enough money to get this deduction. A flat 15% tax credit for all mortgages opens up tax breaks to more people, especially those with smaller incomes. Estimates predict these changes would benefit nearly 20 million homeowners. (Note: This proposed tax credit would be nonrefundable. This means that it could bring a person’s tax bill to $0, but could not bring about a refund.)

These changes have two interesting effects—they allow more people to receive tax breaks, but also increase total tax revenue for the federal government. And although these tax changes benefit a broader range of homeowners, and they will also ultimately benefit low-income renters. The Common Sense Housing Investment Bill is supported by the United for Homes campaign, a coalition of more than 1,200 organizations that advocate for low-income housing. Unfortunately, it did not receive enough support to be signed into law. But in the US’s slow-moving, laborious policy environment, the introduction of this bill is an important first step into achieving actual housing policy reform. The bottom line is that to build and maintain more affordable housing, there needs to be more money. Bills that give money to the National Housing Trust Fund while achieving bipartisan support will be essential to solving the housing crisis.

Local governments play a large part in determining where money for affordable housing goes. Next time, we’ll break down the Minnesota Housing Finance Agency’s 2015 Affordable Housing Plan.


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The Rise of the Renter: Part 2

August 6, 2014

In Minnesota, and throughout the United States, the renter population continues to rise. .  For an increasing number of families, “home” is found in a rental or low-income-housing unit instead of a traditional, mortgage-financed house.  But housing policy in the United States continues to disproportionately favor homeownership.  Renters make up more than a third of [...]

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The Rise of the Renter: Part 1

July 27, 2014

This week kicks off a three part blog series examining the rise of the renter–not only throughout Minnesota, but across the nation.  Why are so many people seeking rental housing, and why does it matter?  What has (or hasn’t!) the government done to aid renters?  And lastly, how do we move forward?  What is the [...]

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The Livability of Minnesota’s New Minimum Wage

July 20, 2014

  On April 15th 2014, Minnesota Governor Mark Dayton signed a bill that officially increases the state’s minimum wage.  Although the wage increase is a government mandate, workers will not see their paychecks grow overnight.  Rather than automatically spiking, the wage increase will be slowly phased in.  Gradual increases over two years will result in a [...]

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$100 Million for Affordable Housing: Where It Comes From, Where It Goes

July 6, 2014

Welcome back to Homeline’s Public Policy blog!  Check back often as we begin to cover important Minnesota housing bills that were passed during the 2014 legislative session.  We’ll start by breaking down the “Homes for All” bonding bill, which sets aside  $100 million for affordable housing projects. Where does this money come from?  The term [...]

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Whose business is housing?

September 25, 2013

Created by OnlineMBA  recently shared this video contrasting how businesses and governments operate and interact with people they serve. Please take a moment to view the video—and return to read how this discussion relates to housing, and in particular, the dynamics of tenant/landlord interactions. If you look at MHP’s most recent 2 x 4 [...]

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HOME Line’s 2013 Tenants’ Bill of Rights and Tenants’ Survey

July 30, 2013

Based on calls from our statewide tenants’ hotline and our organizing efforts, HOME Line has selected nine proposed changes to Minnesota’s landlord/tenant law to push for in the 2014 legislative session.  We believe that these nine bills, each giving greater and clearer rights to Minnesota tenants, will help make our state a more fair and [...]

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Renters: Is a contract for deed a lease?

July 11, 2013

“There’s a real problem out there with landlords scamming people,” said Rep. Joe Mullery, DFL-Minneapolis. “They’re putting people into rentals and then turning those agreements into contract-for-deed sales without even telling them about it. … I think some of those landlords will keep doing it because they think they won’t get caught.” Jeffrey Meitrodt’s July [...]

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Renter’s Credit Increased!

June 17, 2013

As of recently, the legislature passed a $15.5 million increase in Minnesota’s renters’ credit, the tax rebate used to off-set the property taxes households pay through their rent. During the past several years, the legislature showed interest in cutting this important tax credit to help balance the state budget. Due to the on-going advocacy of [...]

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