On Monday, July 22, the Hastings Economic Development and Redevelopment Authority (HEDRA) and City Council Planning Committee met with the Dakota County Community Development Agency (CDA) to discuss the potential collaboration for Local Affordable Housing Aid (LAHA) dollars.
The money comes from a new sales tax created in the 2023 Housing Finance and Policy omnibus bill that is meant to support the efforts of cities across the seven-county metro area “develop and preserve affordable housing within their jurisdictions to keep families from losing housing and to help those experiencing homelessness find housing,” according to the Minnesota Department of Revenue website.
The legislation is purposefully broad and doesn’t require cities to spend the funds for three years which allows cities to pick and choose projects with care.
“It’s a new funding source so they are giving cities some time to figure out how to use it,” said Lisa Alfson, Director of Community and Economic Development at the Dakota County CDA.
Qualifying projects for these funds include emergency rental assistance, financial support to nonprofit affordable housing providers, housing development and rehabilitation as well as many others, all based on income requirements.
2024 is the first year cities will receive funds from this new tax, with Hastings receiving $114,387.44 across two installments, one on June 20 and the second on Dec. 26.
The meeting between the CDA, HEDRA and the city council was to review options for collaborating with various existing and new programs with these funds. The CDA has various affordable housing projects throughout the county, any of which Hastings can use LAHA funds to join.
“There’s always need for affordable housing but there’s never money, and now there’s money,” said Alfson.
The first program is Home Improvement Loans, which provide zero interest deferred loans that allow homeowners to “maintain the safety and integrity of existing homes, to remove architectural barriers in homes to allow independent living for handicapped, and to reduce lead-based paint hazards,” according to the CDA. High priority projects for Home Improvement Loans include lead-based paint removal, Radon mitigation, HVAC repairs, windows, roofs, plumbing and electricity.
Loans would range from $15,000-$35,000 and are due only when the homeowner no longer occupies the property, or sells or refinances. Currently the Home Improvement Loan program is mainly funded by federal funds via the department of Housing and Urban Development. With new state dollars potentially coming into this project, “this would just be putting more money into it to expand it,” said Alfson.
Home Improvement Loans are available based on household income as compared to area median income (AMI). Area median 2024 household income for Minneapolis, St. Paul and Bloomington is $99,400 for a household of two and $124,200 for households of four. The program’s eligibility is based on percentages of household’s income versus AMI. In order for applicants to quality for Home Improvement Loans a household income must be at 80% or less AMI along with other financial requirements like sufficient credit score and home equity.
The second program is a Radon mitigation grant. This new grant would allow testing, and installation of Radon systems in homes. Radon is the leading cause of lung cancer in the United States outside of smoking. Inhaling the colorless, odorless gas damages the lining of the lungs and can eventually cause lung cancer.
Radon is much more common in Minnesota than across the country with average Radon levels in Minnesota Houses more than three times higher than the national average with 2 in 5 Minnesota houses tested having radon levels that are a major health risk according to the Minnesota Department of Health.
Houses built after 2000 require a passive Radon system, but even those can not do enough to remove Radon from houses. A large percentage of houses in Hastings were built before 2000, lacking even passive systems which make them excellent candidates for Radon testing.
The third program is preservation and new construction gap financing. This existing CDA program would help affordable housing developments bridge the difference between their raised capital and the cost of projects. Examples of this program the CDA have already worked on include the Scott-Carver-Dakota (CAP) Agency preservation project, an 8-unit apartment complex in South St. Paul for very low-income individuals and a Habitat for Humanity’s unit on Walnut Street in Hastings.
Part of the discussion of Hastings putting LAHA funds into CDA programs was if those funds would solely go to residents. According to Alfson, were Hastings to join any or all of these programs, LAHA would hold these funds and they would be used exclusively for Hastings residents when they came through CDA programs.
This system of segregating funds so that they only go towards residents of the community is not new for the CDA. Even with federal funds, like those used for Home Improvement Loans, the CDA has different accounts for each community.
“Our finance people love us for all the different accounts we need,” quipped Alfson.
In addition, the CDA would not benefit financially from Hastings pooling its money into these programs.
Other options for Hastings with these funds include reimbursement programs for housing upgrades, emergency rental assistance and mortgage assistance, but little has been decided about alternative options to what the CDA proposes. According to Hastings Community Development Director John Hinzman “We are still learning from the state what to do with these funds.”
The decision rests in part with HEDRA. “The goal is to talk with HEDRA and determine what to do with them,” said Hinzman with that decision occurring in the next few months.
Were the city to agree to decide to work with the CDA on any of the above listed programs, the city would have to execute a joint powers agreement with the CDA and agree on a start date which would have to be sometime this fall.
The CDA has presented similar presentations such as the one that will be given to HEDRA and the City Council Planning Committee on July 22 to 9-11 cities in Dakota County with none currently signed onto the projects.