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HF 5058

Penalties under affordable housing aids for cities that impose moratoria on new residential developments imposed.

2025-2026 Regular Session Introduced by Mike Howard and 1 co-sponsor

Cities that impose moratoria on new residential development would have their state housing aid withheld starting the year after adoption, resuming after termination.

Author added Rehrauer
#governmentaloperations-local #taxation
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Bill Summary · HF 5058

Summary of HF 5058 (2025-2026) – Penalties under affordable housing aids for cities that impose moratoria on new residential developments

Objective

HF 5058 proposes penalties related to affordable housing aids for Minnesota cities that impose moratoria on new residential development. The bill would withhold or delay certain state aid payments to any city that enacts a moratorium on new residential construction, with payments resuming only after the moratorium ends or the moratorium is repealed/expired. It also requires annual reporting to certify whether a moratorium is in effect.

Key provisions

  • Section 1 (amends Minn. Stat. 477A.35)

    • New Subd. 5b: Penalties for moratoria on residential construction.
    • Policy: The Commissioner of Revenue must not pay aid under this section to a city that imposes a moratorium on new residential developments.
    • Timing of withholdings/payments:
    • The Commissioner must stop issuing payments to the city in the year after the city adopts a moratorium.
    • Payments resume in either:
      • The year after the moratorium expires, or
      • The year after a resolution or ordinance to end the moratorium takes effect.
    • Interim period with no aid:
    • During the period the city does not receive aid, the Commissioner must pay the amount that the city would have received under this section to the county or counties containing the city.
    • Certification/Reporting:
    • In the annual report required under subdivision 6, a Tier I city must certify whether it has in effect a moratorium on new residential developments.
    • Effective date: Beginning with aid payable in 2027.

  • Section 2 (amends Minn. Stat. 477A.36)

    • Adds Subd. 5b with identical language and effect as Section 1, applied to the separate aid category under 477A.36.
    • Effective date: Beginning with aids payable in 2027.

Affected entities

  • Cities in Minnesota that have (or implement) moratoria on new residential development.
  • The Minnesota Department of Revenue (level of interaction: withholding and resuming state aid, and managing interim payments to counties during moratorium periods).
  • Counties containing affected cities (in periods when the city is not receiving aid, the act directs payment of the foregone amount to the relevant county).

Substantive impact

  • Financial penalty mechanism: Cities that impose moratoria on new housing will experience withholding of state local government aid payments starting the year after adoption of the moratorium.
  • Payments resume: Aid resumes in the year after the moratorium ends or after an ordinance/resolution to end the moratorium takes effect.
  • Interim remedy: While the city is without aid, the state must transfer the amount foregone to the county or counties where the city is located.
  • Accountability: Tier I cities must certify annually whether a moratorium is in effect.
  • Policy aim: Presumably to deter moratoria that could constrain affordable housing supply and to maintain anticipated funding flows to counties when cities pause housing development.

Procedural and timeline details

  • Effective date for the penalty: Aid payable in 2027.
  • Administration: The Minnesota Department of Revenue implements the withholding, resumes payments after termination of moratorium, and handles interim county payments.
  • Reporting: Annual certification by Tier I cities on moratorium status as part of the required annual report.

Considerations

  • The bill targets moratoria on “new residential developments,” which could include both market-rate and affordable housing projects if defined broadly in local ordinances.
  • The mechanism shifts financial support away from the affected city and toward county governments during moratorium periods.
  • The policy relies on counties’ continued eligibility and ability to absorb redirected funds during interim periods.

If you’d like, I can provide a comparison with current law, potential fiscal impact estimates, or a plain-language brief for non-expert readers.

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

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