The Minnesota State House of Representatives and Senate passed a $1B housing budget bill that seeks to address the affordable housing access and down payment challenges. Home sale prices in Minnesota have continued to increase despite the decline in the number of closed sales. In March, the average home price in the state increased by 0.9% to reach $371,623, and sales dropped 20.2%. A similar trend was seen in the seven-county Twin Cities area, where the median sales price increased by 0.7% to $357,500, and the average days on the market surged 38.7% to 43. According to an analysis by the National Low Income Housing Coalition, the state has a deficit of over 100,000 affordable rental homes. Over 165,000 households, around 28% of renter households, have extremely low income. The annual household income required to afford a two-bedroom rental home is $46,616, but the maximum income for an extremely low-income household is $30,190. 66% of extremely low-income households are severely cost-burdened, spending over 50% of their income on housing costs and utilities. 81% are cost-burdened, spending 30% on housing costs and utilities. A majority (70%) of very low-income families are cost-burdened.
Around half of the allocated $1B will go towards creating housing supply in the state. A one-time cash offer of $200M will go towards the housing infrastructure program, and $90M will be spent on rehabilitating old, low-rent apartment complexes. The state is expected to spend $46M for statewide rent assistance, $150M for the first-time home buyer down payment assistance, and $45M for a homelessness prevention program. Experts believe around 5,000 households would qualify for the bill's down payment assistance. Rep. Mike Howard criticized the bill, comparing the state's budget and the allocation to a gallon and a tablespoon of water, respectively. This is the first time the state will be spending $1B on housing. The administration plans to fund the bill through a 0.25% sales tax increase in the Twin Cities metro area, effective from Oct. 1. Minnesotans would pay an extra $0.25 on a $100 purchase. The tax increase is estimated to generate $353M in the next two years and $200M per year by 2027. Items like groceries and clothing have been excluded from the sales tax. The tax hike will come into effect in the seven-county region, which includes the following counties — Anoka, Carver, Dakota, Hennepin, Ramsey, and Scott. This is the first-ever tax dedicated to affordable housing. Other provisions in the bill include:
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