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HF 5158

Local affordable housing aid; eligible uses of aid expanded, and deadline to spend aid on certain eligible uses modified.

2025-2026 Regular Session Introduced by Jeff Witte

Expands and tightens local affordable housing aid uses, prioritizes housing for lower incomes, sets accessibility standards, and strengthens oversight on timing, reporting, and rep

Introduction and first reading, referred to Taxes
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Bill Summary · HF 5158

Summary of HF 5158 (2025-2026) — Local affordable housing aid; eligible uses of aid expanded, and deadline to spend aid on certain eligible uses modified

HF 5158, introduced in the 94th Legislature of Minnesota, concerns local affordable housing aid financed through state allocations. The bill expands eligible uses of aid, updates requirements for project types and accessibility, and adjusts deadlines and reporting/administrative provisions for how aid is spent and monitored. It takes effect for aids payable in calendar year 2027 and later.

Main purpose and intent

  • Broaden and clarify how local affordable housing aid (administered by Minnesota Housing Finance Agency) may be used to support affordable housing initiatives.
  • Encourage construction and rehabilitation of affordable housing, including supportive housing, emergency shelters, and related services.
  • Improve accessibility and energy/water efficiency in new qualifying projects.
  • Tighten accountability around spending, reporting, and the timing of aid expenditures to ensure funds are used for qualifying projects.

Key provisions and changes

Qualifying projects (Section 1, Subd. 4)

  • Expanded eligible uses include:

    • Emergency rental assistance for households at or below 80% of area median income (AMI).
    • Financial support to nonprofit affordable housing providers for safe, dignified, affordable, and supportive housing.
    • Financing for construction, acquisition, rehabilitation, demolition/removal of structures, construction/financing tools (including gap financing and etc.) to provide affordable housing, with income limits:
    • Homeownership projects: up to 115% of the greater of state or metro AMI.
    • Rental housing projects: up to 80% of the greater of state or metro AMI.
    • Financing operations and management of financially distressed residential properties.
    • Funding of supportive services or staff for supportive housing (can be capitalized reserves or ongoing funding).
    • For new emergency shelter facilities or operations, project funding is now included (clarified as “new construction and operations” for shelters), replacing prior language.

  • Prioritization (Subd. 4, b):

    • Preference to projects serving households at or below:
    • Homeownership: 80% of greater of state/AMI.
    • Rental housing: 50% of greater of state/AMI.
    • Priority considerations include reducing disparities in home ownership, reducing housing cost burden, homelessness/housing instability, improving habitability, accessibility, and energy or water efficiency.

  • Gap financing (Subd. 4, c):

    • Defined as either the difference between project costs and market value at sale, or the difference between project costs and what the targeted household can afford.

  • Demolition/removal requirement (Subd. 4, d):

    • Cleared land from demolition/removal must be used to construct housing for households within income limits.

  • Accessibility requirements (Subd. 4, e):

    • For new constructions with more than four units:
    • At least one unit (or 5% of units) must be accessible, including features such as roll-in showers and accessible kitchens.
    • At least one unit (or 5% of units) must be sensory-accessible, including soundproofing, no fluorescent lighting, low-odor/low-chemical materials, etc.
    • These accessibility requirements supplement, not replace, existing code requirements.

  • Effective date (Section 1):

    • Provisions effective for aids payable in calendar year 2027 and thereafter.

Use of proceeds and timing (Section 2, Subd. 5)

  • Use of aid must be directed to qualifying projects.
  • A tier I city or county can demonstrate inability to expend aid on a qualifying project by deadlines to allow a transfer to a local housing trust fund.
  • Timing of expenditure:
    • Prior text required funds to be spent by the third/fourth year after aid receipt; current version clarifies timing windows and allows certain commitments and expenditures by the new deadlines.
  • New provisions emphasize that aid for eligible construction projects or emergency shelter facilities carries specific commitment and expenditure deadlines (to be set within the statute’s framework).
  • Reimbursement prohibition: aid cannot be used to reimburse prior expenditures.

  • Program income generated from aid must be used on a qualifying project.

  • Effective date (Section 2):

    • Provisions effective for aids payable in calendar year 2027 and thereafter.

Administration and reporting (Section 3, Subd. 6)

  • Calculation and distribution:
    • Commissioner of Revenue computes and certifies aid amounts to tier I cities and counties; payments occur annually per established timelines (June 1 distribution with August 1 certification).
  • Annual reporting (beginning 2025):
    • Tier I cities/counties must submit an annual report to Minnesota Housing Finance Agency by December 1, detailing unspent aid and qualifying projects completed or planned.
    • Failures to report or spend on qualifying projects can trigger repayment obligations to the Minnesota Housing Finance Agency, with enforcement timelines and conditions.

  • Potential suspension or resumption of aid:

    • The Commissioner may suspend aid if a city/county requests it or if the Minnesota Housing Finance Agency reports repeated misuse or non-use.
    • If suspended, aid can resume once documentation of plans for qualifying projects is submitted and verified.

  • Allocation of recovered funds:

    • Funds repaid or redirected may be deposited into the housing development fund and used for related programs (family homeless prevention, economic development/housing challenge, workforce and affordable homeownership development).

  • Effective date (Section 3):

    • Provisions effective for aids payable in calendar year 2027 and thereafter.

Who would be affected

  • Tier I cities and counties that receive local affordable housing aid.
  • Minnesota Housing Finance Agency (MHFA), which administers and monitors aid distributions, reporting, and compliance.
  • Nonprofit affordable housing providers and developers undertaking qualifying projects.
  • Households with incomes up to specified AMI thresholds who benefit from emergency rental assistance, affordable housing, and supportive housing.
  • Local housing trust funds that may receive transfers of aid when funds cannot be spent by deadlines.

Procedural and timeline aspects

  • Effective date for all substantive changes: aids payable in calendar year 2027 and thereafter.
  • Annual certification and distribution cycle:
    • August 1: certification of distribution factors.
    • June 1: disbursement of funds through MHFA accounts.
  • Annual reporting by December 1 for tier I cities/counties (beginning in 2025; continues with updated requirements).
  • Potential repayment by February 15 of the following year if noncompliance or misallocation is identified.
  • Funds repaid or redirected by June 1 are deposited into the housing development fund for related programs.

If you’d like, I can provide a side-by-side comparison with current law (477A.35) to highlight all substantive changes line-by-line.

Compiled from official sources — confirm details with the bill’s official record.

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