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Request for Committee Action

A briefing memo explaining the purpose, background, and impact of the requested action.
Minneapolis Homes: Financing application concept to support the acquisition and sale of investor-owned rental properties for affordable homeownership (RCA-2023-01049)

ORIGINATING DEPARTMENT
Community Planning & Economic Development
To Committee(s)
# Committee Name Meeting Date
1 Business, Inspections, Housing & Zoning Committee Oct 24, 2023
Lead Staff:
Roxanne Young Kimball
Presented By:
Roxanne Young Kimball
Action Item(s)
# File Type Subcategory Item Description
1 Action Development Project

Approving $2 million of Housing Replacement District funds through the Minneapolis Homes: Financing Program to facilitate the acquisition, site preparation, and sale of affordable homeownership of investor-owned rental properties acquired by the Land Bank Twin Cities or other mission-driven entities.

2 Action Contract/Agreement

Authorizing the Director of Community Planning & Economic Development to approve Minneapolis Homes: Financing contracts to developers in accordance with approved program terms.

Previous Actions

2020-00680 - Revising Minneapolis Homes homeownership products to align with the Minneapolis 2040 comprehensive plan

2019-00597 – Housing Replacement District IV Tax Increment Financing Plan

December 8, 2009 – Housing Replacement District III Tax Increment Financing Plan

August 22, 2003 – Housing Replacement District II Tax Increment Financing Plan

August 9, 1996 – Housing Replacement District Tax Increment Financing Plan

Ward / Neighborhood / Address
# Ward Neighborhood Address
1. All Wards
Background Analysis

Investor ownership of single-family homes has dramatically increased both nationally and in the Twin Cities metropolitan area, primarily due to the impacts of the Great Recession. Investors were positioned to purchase foreclosed homes for low prices and rent them. While the trend of investor ownership has increased options for renters, it has reduced opportunities for affordable homeownership and contributed to the growing racial disparity gap in homeownership rates between white households and households of color.

The intention of this application concept is to commit $2 million of Housing Replacement District (HRD) funds to the Minneapolis Homes: Financing program for use on investor-owned rental properties that have been acquired by the Land Bank Twin Cities (“LBTC”). A HRD is a tax increment financing (TIF) district authorized by special legislation under the Laws of Minnesota, Chapter 264, Article 5, Sections 44 through 47. HRDs have as their sole purpose the acquisition and preparation of parcels for sale for the development of market rate housing, defined as housing with a market value that does not exceed 150% of the average market value of single-family housing in the City. HRD funds are eligible to pay for up to 75% of eligible acquisition and site preparation costs as defined in the respective Council approved HRD plans. 

Typically, HRD funds are available through the unified Minneapolis Homes: Financing and Property Sale request for proposals process, which is expected to release and approve funding awards by the 2nd quarter of 2024. Currently there are over 100 investor-owned rental properties available on the open market, a majority of which are concentrated in North Minneapolis. LBTC is interested in acquiring some of the investor-owned rental properties, but it is not feasible for LBTC to wait until the 2nd quarter of 2024 to transfer the properties to developers. To respond to the emerging need, staff recommend establishing the previously described $2,000,000 pool of financing available through a rolling application process that is specifically committed to providing development gap to properties acquired by LBTC or other mission driven entities. LBTC-acquired properties will be marketed to developers, and the CPED Director will have the authority to utilize the pool of financing by approving development gap funding and associated contracts through the Minneapolis Homes Financing program for developers that demonstrate capacity consistent with the Minneapolis Homes Financing program requirements. Acquisition, rehabilitation and resale as market rate housing is consistent with the recapture pathway of Minneapolis Homes: Financing and no perpetual affordable housing requirements will be applied, in accordance with HRD rules.

The alternate model for approval of contracts is intended to provide an agile, responsive pathway to stabilize housing units through homeownership. It is expected up to 20 units will be supported through this programmatic effort and sold to households with incomes below 80% of area median income, consistent with the Minneapolis Homes: Financing program objectives.