HF 5158

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This Document can be made available
in alternative formats upon request  State of Minnesota
  HOUSE OF REPRESENTATIVES
  NINETY-FOURTH SESSION
  H. F. No.   5158
05/17/2026     Authored by Witte
  The bill was read for the first time and referred to the Committee on Taxes
1.1A bill for an act
1.2relating to taxation; local affordable housing aid; expanding eligible uses of aid;
1.3modifying the deadline to spend aid on certain eligible uses; amending Minnesota
1.4Statutes 2024, section 477A.35, subdivisions 4, 6; Minnesota Statutes 2025
1.5Supplement, section 477A.35, subdivision 5.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7Section 1. Minnesota Statutes 2024, section 477A.35, subdivision 4, is amended to read:
1.8Subd. 4. Qualifying projects. (a) Qualifying projects include:
1.9(1) emergency rental assistance for households earning less than 80 percent of area
1.10median income as determined by the United States Department of Housing and Urban
1.11Development;
1.12(2) financial support to nonprofit affordable housing providers in their mission to provide
1.13safe, dignified, affordable and supportive housing;
1.14(3) projects designed for the purpose of construction, acquisition, rehabilitation,
1.15demolition or removal of existing structures, construction financing, permanent financing,
1.16interest rate reduction, refinancing, and gap financing of housing to provide affordable
1.17housing to households that have incomes which do not exceed, for homeownership projects,
1.18115 percent of the greater of state or area median income as determined by the United States
1.19Department of Housing and Urban Development, and for rental housing projects, 80 percent
1.20of the greater of state or area median income as determined by the United States Department
1.21of Housing and Urban Development, except that the housing developed or rehabilitated
1.22with funds aid under this section must be affordable to the local work force;
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2.1      (4) financing the operations and management of financially distressed residential
2.2  properties;
2.3      (5) funding of supportive services or staff of supportive services providers for supportive
2.4  housing as defined by section 462A.37, subdivision 1. Financial support to nonprofit housing
2.5  providers to finance supportive housing operations may be awarded as a capitalized reserve
2.6  or as an award of ongoing funding; and
2.7      (6) costs of operating emergency shelter facilities facility construction and operations,
2.8  including the costs of providing services service provision.
2.9      (b) Recipients must prioritize projects that provide affordable housing to households
2.10 that have incomes which do not exceed, for homeownership projects, 80 percent of the
2.11 greater of state or area median income as determined by the United States Department of
2.12 Housing and Urban Development, and for rental housing projects, 50 percent of the greater
2.13 of state or area median income as determined by the United States Department of Housing
2.14 and Urban Development. Priority may be given to projects that: reduce disparities in home
2.15 ownership; reduce housing cost burden, housing instability, or homelessness; improve the
2.16 habitability of homes; create accessible housing; or create more energy- or water-efficient
2.17 homes.
2.18     (c) Gap financing is either:
2.19     (1) the difference between the costs of the property, including acquisition, demolition,
2.20 rehabilitation, and construction, and the market value of the property upon sale; or
2.21     (2) the difference between the cost of the property and the amount the targeted household
2.22 can afford for housing, based on industry standards and practices.
2.23     (d) If aid under this section is used for demolition or removal of existing structures, the
2.24 cleared land must be used for the construction of housing to be owned or rented by persons
2.25 who meet the income limits of paragraph (a).
2.26     (e) If an aid recipient uses the aid on new construction of a building containing more
2.27 than four units, the loan recipient must construct, convert, or otherwise adapt the building
2.28 to include:
2.29     (1) the greater of: (i) at least one unit; or (ii) at least five percent of units that are
2.30 accessible units, and each accessible unit includes at least one roll-in shower, water closet,
2.31 and kitchen work surface meeting the requirements of section 1002 of the current State
2.32 Building Code Accessibility Provisions for Dwelling Units in Minnesota; and
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3.1(2) the greater of: (i) at least one unit; or (ii) at least five percent of units that are
3.2  sensory-accessible units that include:
3.3(A) soundproofing between shared walls for first and second floor units;
3.4(B) no florescent lighting in units and common areas;
3.5(C) low-fume paint;
3.6(D) low-chemical carpet; and
3.7(E) low-chemical carpet glue in units and common areas.
3.8  Nothing in this paragraph relieves a project funded by this section from meeting other
3.9  applicable accessibility requirements.
3.10EFFECTIVE DATE. This section is effective for aids payable in calendar year 2027
3.11 and thereafter.
3.12   Sec. 2. Minnesota Statutes 2025 Supplement, section 477A.35, subdivision 5, is amended
3.13 to read:
3.14Subd. 5. Use of proceeds. (a) Any funds aid distributed under this section must be spent
3.15 on a qualifying project. Funds are Aid is considered spent on a qualifying project if:
3.16(1) a tier I city or county demonstrates to the Minnesota Housing Finance Agency that
3.17 the city or county cannot expend funds aid on a qualifying project by the deadline deadlines
3.18 imposed by paragraph (b) under this subdivision due to factors outside the control of the
3.19 city or county; and
3.20(2) the funds are aid is transferred to a local housing trust fund.
3.21 Funds Aid transferred to a local housing trust fund under this paragraph must be spent on
3.22 a project or household that meets the affordability requirements of subdivision 4, paragraph
3.23 (a).
3.24(b) Funds Aid must be spent by December 31 in the third year following the year after
3.25 the aid was received. The requirements of this paragraph are satisfied if funds are:
3.26(1) committed to a qualifying project by December 31 in of the third year following the
3.27 year after the aid was received; and
3.28(2) expended by December 31 in of the fourth year following the year after the aid was
3.29 received.
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4.1      (c) Notwithstanding paragraph (b), a recipient that intends to spend aid on a qualifying
4.2  affordable housing construction project under subdivision 4, paragraph (a), clause (3), or a
4.3  qualifying emergency shelter facility construction project under subdivision 4, paragraph
4.4  (a), clause (6), as documented in the most recent annual report submitted to the Minnesota
4.5  Housing Finance Agency under subdivision 6, must commit the aid to the project by
4.6  December 31 of the ..... year following the year the recipient received the aid and must
4.7  expend the aid by December 31 of the ..... year following the year the recipient received the
4.8  aid.
4.9      (c) (d) An aid recipient may not use aid money to reimburse itself for prior expenditures.
4.10     (d) (e) Any program income generated from funds aid distributed under this section
4.11 must be used on a qualifying project.
4.12     EFFECTIVE DATE. This section is effective for aids payable in calendar year 2027
4.13 and thereafter.
4.14   Sec. 3. Minnesota Statutes 2024, section 477A.35, subdivision 6, is amended to read:
4.15     Subd. 6. Administration. (a) The commissioner of revenue must compute the amount
4.16 of aid payable to each tier I city and county under this section. By August 1 of each year,
4.17 the commissioner must certify the distribution factors of each tier I city and county to be
4.18 used in the following year. The commissioner must pay local affordable housing aid annually
4.19 at the times provided in section 477A.015, distributing the amounts available on the
4.20 immediately preceding June 1 under the accounts established in section 477A.37, subdivisions
4.21 2 and 3.
4.22     (b) Beginning in 2025, tier I cities and counties shall submit a report annually, no later
4.23 than December 1 of each year, to the Minnesota Housing Finance Agency. The report must
4.24 include documentation of the location of any unspent funds aid distributed under this section
4.25 and of qualifying projects completed or planned with funds aid under this section. If a tier
4.26 I city or county fails to submit a report, if a tier I city or county fails to spend funds within
4.27 the timeline aid by the deadlines imposed under subdivision 5, paragraph (b), if a tier I city
4.28 or county uses funds aid for a project that does not qualify under this section, or if a tier I
4.29 city or county fails to meet its requirements of subdivision 5a, the Minnesota Housing
4.30 Finance Agency shall notify the Department of Revenue and the cities and counties that
4.31 must repay funds aid under paragraph (c) by February 15 of the following year.
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5.1      (c) By May 15, after receiving notice from the Minnesota Housing Finance Agency, a
5.2  tier I city or county must pay to the Minnesota Housing Finance Agency funds money the
5.3  city or county received under this section if the city or county:
5.4      (1) fails to spend the funds within the time allowed aid by the deadlines imposed under
5.5  subdivision 5, paragraph (b);
5.6      (2) spends the funds aid on anything other than a qualifying project;
5.7      (3) fails to submit a report documenting use of the funds aid; or
5.8      (4) fails to meet the requirements of subdivision 5a.
5.9      (d) The commissioner of revenue must stop distributing funds aid to a tier I city or county
5.10 that requests in writing that the commissioner stop payment or that, in three consecutive
5.11 years, the Minnesota Housing Finance Agency has reported, pursuant to paragraph (b), to
5.12 have failed to use funds aid, misused funds aid, or failed to report on its use of funds aid.
5.13 A request to stop payment under this paragraph must be submitted to the commissioner in
5.14 the form and manner prescribed by the commissioner on or before May 1 of the aids payable
5.15 year the aid recipient wants the commissioner to stop payment of aid. The commissioner
5.16 shall not stop payment based on a request received after May 1 until the next aids payable
5.17 year.
5.18     (e) The commissioner may resume distributing funds aid to a tier I city or county to
5.19 which the commissioner has stopped payments in the year following the August 1 after the
5.20 Minnesota Housing Finance Agency certifies that the city or county has submitted
5.21 documentation of plans for a qualifying project. The commissioner may resume distributing
5.22 funds aid to a tier I city or county to which the commissioner has stopped payments at the
5.23 request of the city or county in the year following the August 1 after the Minnesota Housing
5.24 Finance Agency certifies that the city or county has submitted documentation of plans for
5.25 a qualifying project.
5.26     (f) By June 1, any funds money paid to the Minnesota Housing Finance Agency under
5.27 paragraph (c) must be deposited in the housing development fund. Funds Money deposited
5.28 under this paragraph are is appropriated to the commissioner of the Minnesota Housing
5.29 Finance Agency for use on the family homeless prevention and assistance program under
5.30 section 462A.204, the economic development and housing challenge program under section
5.31 462A.33, and the workforce and affordable homeownership development program under
5.32 section 462A.38.
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6.1     EFFECTIVE DATE. This section is effective for aids payable in calendar year 2027
6.2 and thereafter.
      Sec. 3.  6