Long-term investments in local, affordable housing

How the county is leveraging the new Local Affordable Housing Aid program to create more sustainable and deeply affordable rental housing.

For the past several years, Hennepin County capitalized on one-time pandemic era recovery dollars, turning it into long-term investments in affordable housing. Now, a new funding source—the Local Affordable Housing Aid program—will help to sustain those strategic investments into the future, helping thousands more residents find and keep stable housing.

The Minnesota Legislature approved a new Metro Sales and Use Tax to fund the Local Affordable Housing Aid program in 2023. The program will generate an estimated $30 million a year for Hennepin County to support affordable housing programs.

The additional funding could not come at a more critical time for Hennepin County residents. More than 64,000 low-income households in Hennepin County pay more than half their incomes toward housing costs, with the vast majority of those households earning below 30% of the area median income (AMI). That equals out to income of no more than $35,750 for a family of three. These communities have to forgo other basic needs, live in poorer quality housing, and are more likely to experience homelessness.

At the same time, many affordable housing owners are still recovering from to industry-wide rental revenue decreases and operating expense increases, which takes existing units off-line and curbs the rate of new production. A sustainable infusion of funding to both create more deeply affordable units and boost developers’ ability to sustain and produce new housing is critically needed.

Doubling down on proven strategies

Hennepin County was already a leader in affordable housing financing before the pandemic recovery funding helped to boost production to record levels. In 2022, we used those one-time funds to triple our housing production by using the strategies already in place, leading to 3,500 new affordable housing units, many dedicated to people experiencing homelessness.

With the addition of Local Affordable Housing Aid to current funding, Hennepin County is poised to maintain a steady level of high, sustainable growth—doubling our annual pre-pandemic production numbers.

At the core of Hennepin County’s housing strategy is our work across the housing spectrum, ensuring a range of options across income levels. So, in addition to an increase in affordable rental housing and homeownership production, the Local Affordable Housing Aid funding will, fund supportive housing services, emergency rental assistance, and emergency shelter.

Local Affordable Housing Aid funding:

 

Spotlight on: Repair + Grow

Early in the pandemic, we created a new kind of emergency rental assistance program that allowed landlords to apply on behalf of renters. This took much of the burden off of renters and acknowledged that it was the landlords who needed the assistance to keep up with operating costs.

Three years later, it was clear that affordable housing owners and operators were still struggling with their operating budgets. We called together a panel of operators to learn more, and through a series of conversations we started to have a clearer understanding of the real pain points.

We learned that since 2020, owners have faced increased operating expenses in at least two key drivers, such as high rates of insurance, security issues, and repairs. 57% of owners have experienced issues with unpaid rent, and 86% of owners have struggled with low reserves, which make responding to critical repair needs, such as roof replacement, elevator repair, or many other types of maintenance, extremely difficult.  

To respond, Housing and Economic Development crafted the Repair + Grow program to help affordable housing owners recover from the lasting financial impacts of the pandemic and – more importantly – grow their capacity to get back into developing.   

Through Repair + Grow, we were able to provide a targeted $17.8M investment in our affordable housing ecosystem. In the short-term, these funds are supporting 8,800 units, across which the average household income is only $22K/year; 12% of the 8,800 units are designated for people exiting homelessness.  This support will make sure these tenants are safe and secure in their homes. 

But we designed this investment for the long-term. Almost every proposal included measurable and actionable plans to increase occupancy rates and rent payments, and to use those funds to replenish depleted reserves.

Long term local impacts

Local Affordable Housing Aid will help us to continue growing our impact in the areas we care most about, including increased production, more deeply affordable and dedicated units, and more climate resilience and more access to homeownership.

Making homelessness rare, brief, and nonrecurring

The county’s Local Affordable Housing Aid implementation plan is one part of the county’s systematic housing strategy, focusing our efforts on supporting households below 50% of the area median income (AMI) and in turn reducing disparities in housing cost burden. Maintaining high rates of housing production complements our housing stability and person-to-person case management work, making it possible for more people to reach their goals from the stability of permanent housing.

We welcome feedback from the community to help guide our Local Affordable Housing Aid strategy. You can read more about the current strategy on our Local Affordable Housing Aid webpage and fill out a short survey to share ideas and input.