Budget includes $184 million for Minnesota Housing, $50 million in housing infrastructure bonds

A new law provides $184 million from the General Fund to a variety of loan and grant programs operated by the Minnesota Housing Finance Agency. It also authorizes the sale of $50 million in housing infrastructure bonds.

Sponsored by Rep. Spencer Igo (R-Wabana Township) and Sen. Lindsey Port (DFL-Burnsville) the omnibus housing law mostly takes effect July 1, 2025.

HF2309/SF2298*/CH32

The law provides $46 million for the state’s rental assistance program, which offers help to lower income, and rent-burden Minnesotans.

It also appropriates $23.29 million for the Housing Trust Fund Account, which offers loans or grants to develop, acquire, preserve and rehabilitate low-income rental or co-op housing along with providing support programs for families with school-aged children.

Among other appropriations are:

• $28.89 million for a family homelessness prevention and assistance program. Base funding is set at $10.72 million staring in fiscal year 2028;

• $27.85 million for the Challenge Grant Program;

• $10.68 million for rental assistance for individuals with a mental illness;

• $8.46 million affordable rental investment fund which supports federally assisted rental property;

• $7.49 million to rehabilitate rental housing;

• $5.54 million for rehabilitation of owner-occupied housing;

• $5.5 million for the Homework Starts with Home program to provide assistance to families who are highly mobile, homeless or at risk of becoming homeless;

• $4 million for a Greater Minnesota workforce housing development program;

• $2.5 million for the workforce homeownership program, with the base set at $250,000 in fiscal year 2028 and beyond;

• $3.77 million ($2 million over base) for a fund aiming to address significant racial gaps in home ownership; and

• $2 million for manufactured home park infrastructure grants.

One-time funding includes $2 million for Greater Minnesota housing infrastructure grants and $2 million for community-based, first-generation homebuyer downpayment assistance grants.

The law also provides less than $1 million per year for homeownership education and training programs, capacity building grants, and Build Wealth Minnesota, which offers resources in financial literacy, budgeting and debt counseling. (Art. 1, Sec. 2)

Policy

The law encourages communities to reduce some zoning regulations by offering a boost to competitive grant scores. The Housing Finance Agency shall award points, capped at 5% of total points available, to applicants in communities that do at least one of the following:

• allow multifamily housing in at least 50% of the area in commercial zones;

• allow smaller units such as duplexes, accessory dwelling units, or townhomes in 50% of areas zoned for single-family housing;

• don’t require more than one parking space per unit;

• don’t require lot sizes bigger than 1/8-acre for new single-family home construction;

• don’t have aesthetic mandates on new home construction such as a specific exterior finish, decks, porches, shutters or a minimum garage size;

• have density bonus for affordable housing; or

• have adopted inclusionary zoning to increase the supply of affordable homes.

This scoring boost took effect May 24, 2025, and expires after five years. The boost only applies in the next scoring system developed by the agency. (Art. 3, Sec. 13)

The law also requires the Minnesota Housing Finance Agency to work with stakeholders and develop a framework by Feb. 15, 2026, to preserve regulated affordable housing. Per the law, "The goal of this framework is to preserve and sustain affordable housing development organizations, the affordable rental buildings they own, and the housing for the people who live in the buildings today and in the future."

Additionally, the Community-Based First-Generation Homebuyers program administered by the Midwest Minnesota Community Development Corporation will not be a pilot project, but a program. The law makes eligibility apply to a homebuyer, not household. Grants can be up to 10% of the median home sales price, beginning in 2027. (Art. 1, Secs. 9, 11)

Other policy provisions include those that will:

• require the agency to inform manufactured home park owners about a tax credit for selling to cooperatives;

• require Minnesota Housing to post rights and responsibilities of landlords and tenants on its website;

• clarify that income needs to be recertified annually for rental assistance, not eligibility;

• allow rental assistance to be distributed by formula;

• make contract alternative schools and contract tribal schools eligible for Housing Challenge Grants;

• allow housing infrastructure bonds to be used for adaptive reuse, such as converting former school buildings into apartments;

• require Local Housing Trust Fund Grants to be used within five years instead of eight;

• change the high-rise sprinkler grant and loan program so more buildings are eligible;

• require Minnesota Housing to report its asset management portfolio, including operating expenses compared to revenue and a summary of tenant receivables, including late rent, fees and damages; and

• require a report on accessible housing. (Art. 3, Secs. 1-8, 10, 12, 15-16)

Other changes include: landlords must ensure living quarters, including kitchens and bathrooms, are capable of maintaining a temperature of at least 68 degrees Fahrenheit in the winter and may not disclose information about a tenant who is a victim of violence even if the renter needs to break their lease; anti-wage theft laws apply to all agencies allocating low-income housing tax credits; and, in a provision effective May 24, 2025, counties cannot charge to remove illegal restrictive covenants from title documents. (Art. 4, Secs. 1, 4-5, 9).

SF2298* / HF2445 / CH32