Request for Committee Action

2024-00533 - Minneapolis Homes: Financing Round 4 Property Sales

2023-00650 - Minneapolis Homes: Financing Round 3 Property Sales

2022-00462 – Minneapolis Homes: Financing land sales

2021-00607 – Minneapolis Homes: Financing land sales and financing awards

2020-01190 - Sustainability Policy for one to three-unit new construction residential development projects through the Minneapolis Homes: Financing program

2020-00680 - Revising Minneapolis Homes homeownership products to align with Minneapolis 2040 comprehensive plan

On July 31, 2020, the City Council approved program modifications to the Minneapolis Homes suite of programs, resulting in Minneapolis Homes: Financing. The Minneapolis Homes: Financing program seeks to create affordable homeownership opportunities through development financing, offered through an open and competitive notice of funding availability (NOFA) process. Historically, the City had separate housing programs that resulted in similar program activities. The creation of Minneapolis Homes: Financing opened eligible activities to include new construction, rehabilitation, and acquisition, opened eligibility to include both City-owned and privately-owned land, and incorporated the Missing Middle Housing Pilot program into the base program to allow 1-20 unit projects. A new program pathway was also created to finance stabilization of existing owner-occupied units and stabilization for renters to purchase their rental building or a home on the open market through a perpetually affordable housing model. These changes were born from a robust community engagement process with Minneapolis Homes staff and the City's consultant, Grounded Solutions Network (GSN), that included 24 focused discussions with developers, long-term affordable housing providers, and representatives of Black, Hmong, Hispanic/Latinx, Immigrant, and American Indian communities as well as widely advertised public meetings in July 2019 and February 2020 that engaged over 1,000 community members and stakeholders. In response to the feedback received, staff recommended, and City Council approved the following policy changes to the Minneapolis Homes products:

• Improving access by BIPOCI and community-led developers by consolidating programs to simplify the application process, permitting the full subsidy need for housing units, and providing pathways for owner-occupied buyers to directly apply for City land and financing opportunities
• Serving lower income households by restricting income levels for all homebuyer programs to 80% AMI.

On December 4, 2020, the Council increased the standard for 1-3 unit buildings financed through Minneapolis Homes: Financing to the Department of Energy Zero Energy Ready Home program from Enterprise Green Communities with the Minnesota Overlay and approved a pilot incentive for ultra-efficient buildings.

On March 18, 2025, CPED staff released a Notice of Funding Availability (NOFA) competitive application process due on April 4, 2025. Sixteen applicants submitted 115 proposals, for a total of 158 units, with a total funding request of $24,769,068.

CPED staff followed up with applicants whose applications required additional clarification and then facilitated an intensive review process of substantially complete applications with a panel of CPED staff. The panel evaluated each application using the NOFA's selection criteria, which fell into four primary categories: cost-effectiveness, ability to meet affordable housing needs, developer experience or partnership with an experienced developer, and demonstrated performance and capacity to commence construction before winter of this year. Funding awards and land sale recommendations are based on this review.

Financing Guidelines

Developers were eligible to apply for City financing for project gap assistance and affordability gap assistance. Project gap assistance is the difference between the total development cost of the property and the appraised value upon completion. Affordability gap assistance is the difference between the appraised value upon completion and the affordable sales price. Affordability gap is calculated by City staff as 29% of a household's income for a mortgage payment based on assumptions from the Metropolitan Council and U. S. Department of Housing and Urban Development (HUD). Project gap and affordability gap are capped at a combined maximum subsidy amount that varies by the size of unit and income bracket of the household it is restricted to serve. The full amount of project gap is structured as a no-interest loan to facilitate construction. Upon sale of a property to a qualified homebuyer, demonstrated project gap is forgiven and demonstrated affordability gap is structured as either:

1. Recapture Downpayment Assistance: eligible when affordability gap is 15% or less of a home's value and located on City property in North Minneapolis or privately owned property city-wide, secured as a mortgage and note with the homebuyer that is deferred and payable from net proceeds within 30 years or upon property sale; or
2. Perpetually Affordable Housing: eligible citywide for all activity types when affordability gap is 20% or more of a home's value, secured with a declaration of restrictive covenants or land lease rider that applies an equity sharing formula to maintain affordability for a minimum 30-year term, renewable upon each property sale. Perpetually Affordable Housing projects additionally have a maximum affordable price, based on the middle of the income tier of the affordable unit.

All homes financed are required to be sold for homeownership to households at or below 80% AMI. Applicants that applied for projects at lower AMI tiers will be required to sell at the income limit they applied to serve.

Proposed Development

Out of the 115 project applications received, City staff recommends 22 projects (21 City-owned and one privately-owned properties), which will result in a total of 25 affordable ownership units. The total funding required for the recommended proposals is $5,916,343.

Additional Funding Award

Staff recommends Minneapolis Homes: Financing up to $500,000 in additional project gap financing for the 14th Avenue Townhomes project located at 2833-2839 14th Ave S. The development received $2,324,550 in Minneapolis Homes: Financing and Sustainability Incentive funds in 2021. The development will provide 10 units of perpetually affordable housing affordable to households earning 60% of area median income using a passive house design to reduce energy costs. The additional award will make this a fully-funded project.

Land Disposition Policy

The sale of these properties is consistent with the City’s Disposition Policy. The total sales price of the properties is $294,104 resulting in total net loss of $74,218.20 after eligible costs of $323,322.20 (acquisition, transactional and site assemblage costs). To finance the project gap requested for the perpetually affordable projects, City staff recommend a land write down of $40,196. The sale of these properties will result in future generation of property taxes and elimination of ongoing property management costs. Notification was provided to the applicable neighborhood organizations for comments.

Some of the properties being sold pursuant to the NOFA were purchased under the Neighborhood Stabilization Program. In accordance with HUD guidance, “Change in use” requirements apply to all properties acquired or improved in the NSP Program. Under the “Change in use” rules, all land sale proceeds, equal to the fair market value will be returned to the NSP Program to cover ongoing program costs.