Request for Committee Action

2025-00566 - Updates for the Year 2026-2027 Housing Tax Credit Qualified Allocation Plan (QAP) and Procedural Manual

2025-00370 - Snelling Yards Family Housing: Tax Increment Financing (TIF) Plan

2023-00963 - Structure demolition and extension of redevelopment contract for 3605 Snelling Avenue 

2022-01123 - 2022 Affordable Housing Trust Fund Award Recommendations 

2021-00709 - Land Sale: Snelling Yards, 3601 East 44th Street 

2021-00624 - Exclusive Development Rights Extension for Snelling Yards Development Joint Venture 

Snelling Yards Family Housing is a new construction project proposed by Lupe Development Partners (Lupe) for the Snelling Yards Site, located in the Hiawatha neighborhood of Ward 12. This City-owned site has historically been used by Public Works as a storage site.  The Family Housing project represents the second phase of this redevelopment site; Phase I, The Hillock, is an affordable senior housing project that is already complete.

The proposed Family Housing project will include 95 units of affordable rental housing in a four-story building. The rental units are affordable at 80%, 50% and 30% Area Median Income (AMI) in a mix of one, two, and three bedrooms. This project will provide a large number of two- and three-bedroom units, which is a priority in the Affordable Housing Trust Fund (AHTF) program. Twelve units are subject to a Housing Assistance Program (HAP) contract and will be supported by Project Based Section 8 vouchers from the Minneapolis Public Housing Authority, and there are an additional 13 units set aside for homeless veterans with Veterans Affairs Supportive Housing (VASH) rental subsidies. Residents of these 13 units will also be provided with full-service case management through the Veteran’s Administration (VA).

The VA is the identified service provider, and services will be provided on-site. The VA supports veterans experiencing homelessness or who are at risk of homelessness or mental illness, by promoting physical and mental health, assisting in securing and maintaining housing, and working with veterans to achieve increased community integration.

In addition to the rental units, the project will include approximately 7,700 square feet of programming and amenity space. Project amenities include a community room, business and mail center, leasing and property management offices, exercise room, indoor bicycle storage, and laundry facilities.

The total development costs for the project are estimated at approximately $34 million.

PROJECT FINANCING

The project has received two prior AHTF awards totaling $2,070,000, which represents about 6% of the total development costs and will leverage more than $30 million in additional sources. To date, secured funds also include $900,000 in Hennepin County AHIF, environmental pass-through grants, deferred developer fee and energy rebates. The developer fee of $3,315,500 complies with AHTF program requirements. Operating and lease-up reserves are being capitalized up front, which is typical for affordable housing projects.

Since the project was originally envisioned, the unit mix has been refined and the project now qualifies for, and staff are recommending approval of, an additional award of up to $485,000 in AHTF funds. In addition, staff are recommending an extension of the two existing AHTF awards, which have expired. The AHTF Program specifies that awarded AHTF funds will only be allocated for a period of 18 months from the time of City Council award. At the end of 18 months, the funding allocation will be extended administratively for an additional nine-month period if the developer can provide evidence of 1) at least one-third of the total development funds have been secured; 2) the balance of the development funding is likely to be secured; and 3) a closing will occur within the next 12 months. This project meets those conditions and staff are recommending an extension until December 31, 2025 to allow for closing and construction commencement.

The developer has submitted an application to the City requesting Tax Increment Financing Assistance (TIF) in an amount not to exceed $849,000. Based on staff’s review and analysis of the TIF application, the project complies with the City’s Tax Increment Financing Policy and meets the statutory requirements for the establishment of a Housing TIF District. By action taken on May 1, 2025, the City Council approved the Snelling Yards II TIF Plan establishing a new housing TIF district. Approval of the TIF Pay-As-You-Go Note was delayed until this action to allow additional time to negotiate the finer points of the financial structure of the deal.

The increased property value resulting from the construction of this project will not be included in the City's general tax base until the TIF district is decertified, which is anticipated to occur in 26 years. The City will retain 10 percent of the tax increment generated each year for the payment of TIF administrative costs.

LAND SALE

The City issued a Request for Proposals in 2016 for the Snelling Yards site, and selected Lupe as the developer. The original Redevelopment Contract for this Phase 2 site included a purchase price of $1 million to the City. Due to escalating development costs including interest rates and labor costs, this project has a financing gap. To make the project financially feasible and close the gap, the developer requested, and staff is recommending to the City Council that the City finance the $1 million land purchase price via a forgivable promissory note and mortgage with the following terms:

1. 1. 0% interest
   2. 30-year term, following completion of the project
   3. Balloon payment of principal at the end of the term
   4. No mandatory payments of principal until balloon payment
   5. Loan forgivable at the end of the term, if the following conditions have been completed:
      1. Construction of an affordable housing project within three years of making the loan;
      2. Operation of the constructed project as affordable housing for the entirety of the term;
      3. Upon request by the City, but no more than annually, reports to the city evidencing the use of the property as affordable housing; and
      4. The assumption of the affordability requirements by any transferee.

Staff is recommending amendments to the existing redevelopment contract to provide for such seller financing.

HOUSING REVENUE BONDS

The City of Minneapolis has received a bond application from Snelling Yards Apartments, LP for the financing of the Snelling Yards Family Housing project. The developer is requesting, and staff is recommending approval of up to $17,000,000 in Tax Exempt Multifamily Housing Revenue Entitlement Bonds (HRB) to help finance the construction costs of the project. The bonds will generate approximately $10 million in Housing Tax Credit equity as a source of funds to the project.

The current status of the City’s HRB Entitlement is shown in the table below:

Bond Purchase/Underwriter: Allianz Life Insurance Company

Tax Credit Equity Investor: R4 Capital

Bond Counsel: Kutak Rock

Council Member: Aurin Chowdhury, Ward 12

PREVAILING WAGE FLEXIBILITY

The State of Minnesota passed legislation in 2025 after the City authorized its 2026-2027 Housing Tax Credit Qualified Allocation Plan and Procedural Manual that temporarily allows allocating agencies to modify the wage rate applicable to wood frame carpenter work on tax credit projects that are subject to state prevailing wages. The City wishes to allow tax credit projects in Minneapolis the ability to avail themselves of such flexibility. To facilitate the construction of affordable housing, pursuant to Laws of Minnesota 2025, Chapter 32, Article 4, Section 14, for projects located in Minneapolis receiving allocations or awards of low-income housing tax credits from the Minneapolis/Saint Paul Joint Housing Finance Board subject to state prevailing wage requirements pursuant to Minnesota Statutes, section 116J.871, subd. 2, where any financial assistance, as defined in Minnesota Statutes, section 116J.871, subdivision 1, paragraph (c), consists solely of allocations or awards of low-income housing tax credits as provided in Minnesota Statutes, section 462A.222, and where the project does not receive any other state financing or funding, such projects can use the applicable carpenter rate for residential construction under the federal Davis-Bacon and Related Acts for wood frame carpenter work as defined in Laws of Minnesota 2025, Chapter 32, Article 4, Section 14 until December 31, 2027, but only for structures of up to four stories.

Approval of these requests will position the project to close on financing and start construction in September 2025.