In early November, the Minneapolis 4d Affordable Housing Incentive will receive a public hearing at the Business Housing and Zoning Committee about whether to update the program.
The 4d program helps preserve affordable housing in Minneapolis by offering property tax reductions in exchange for keeping rents on some units affordable.
The changes to the 4d program would primarily be that instead of requiring that 20% of the units at a property be affordable at 60% of the area median income, it would require they be affordable at 50% AMI.
The program’s potential change was born out of the increased number of applications the program received last year after the state of Minnesota decreased the tax rate on properties enrolled in the low-income rental classification.
Amy Geisler, a manager of residential finance for the city of Minneapolis, said the significant property tax reduction by the state brought a surge in applicants for the 4d program. City staff feel they can better align the program to the city’s needs for affordable housing.
The original purpose of the 4d program, Geisler said, was to preserve naturally occurring affordable housing and prevent the displacement of low-income tenants.
Dan Hylton, the research manager for HousingLink, a nonprofit that provides information and data around affordable housing to low-income families, said he understands why the city might make the change, saying the program is successful but doesn’t reach the renters who might need 50% or 30% AMI units.
However, Hylton said he could see why it might make owners and property managers “balk” because most market-rate units barring newer, high-end properties are already closer to 60% AMI.
“The restriction is really more of a protection against rents rising too fast, but it’s not really a super heavy lift from a property management/bottom line side,” Hylton said. “It’s dependent on the submarket, of course, but I think going from 60% to 50% AMI you are going from market rate to below below-market and that would obviously bring with it a set of financial challenges.”
Cecil Smith, the CEO of the Minnesota Multi Housing Association, said in an interview with Finance & Commerce that he has wanted to see more analysis on what the change from 60% to 50% AMI would mean for the average family renting a 4d unit. Until then, Smith said, his organization doesn’t have a formal position on the change.
“We just want to have a good policy outcome that works in the marketplace and for the good of both renters and property owners and managers who participate in the program,” Smith said. “Looking at the numbers steadily attracting participation, and obviously last year’s 4d tax change was a major change to the policy that was outside the city’s control. So how do you adjust that policy response to that? I think this was the initial effort to do that. I’m not convinced, and I think MHA is not convinced, that this is the right approach, but we don’t have a formal position.”
Smith requested more analysis and more time to consider the change while speaking to the Minneapolis Advisory Committee on Housing at its Oct. 10 meeting. The BHZ Committee was originally going to take up the policy change at its Oct. 22 meeting. It has been pushed back to Nov. 7 to provide staff more time to review public comments, said city spokesperson Jess Olstad.
Geisler said the 4d program changes are not retroactive, so properties with 4d units in place are not subject to the change.
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