Minnesota housing commissioner reports high demand, limited supply for Housing Infrastructure Bonds

Commissioner Jennifer Ho of Minnesota Housing told the Capital Investment Committee on March 25 that housing infrastructure bonds remain a critical financing tool while demand continues to far outstrip available resources.

Ho, joined by legislative director Dan Kitzberger, told committee members the agency issues HIBs and maintains strong credit ratings and that HIBs leverage roughly one-to-one with federal programs such as the HOME Investment Partnership Program, the National Housing Trust Fund and Low-Income Housing Tax Credits. She said only about 5% of housing would be eligible for general obligation bonds because most affordable housing is privately owned, which makes HIBs a unique Minnesota tool to support privately developed affordable housing.

According to Ho, between 2012 and 2024 housing infrastructure investments affected nearly 10,000 units with more than $800 million of committed state resources and about $1.8 billion in total development costs when leveraged with other funds. She said HIBs support rehabilitation of federally assisted rental housing, permanent supportive housing, senior housing, single-family construction (including community land trusts) and infrastructure at manufactured home communities.

Ho described recent awards from 2023–24: 12 multifamily developments in 2023 and six in 2024 on the rental side; 39 single-family proposals funded in 2023 and eight in 2024; and four manufactured-home-community infrastructure awards in 2023 and one in 2024 (housing infrastructure portion only). She noted two permanent supportive housing projects selected in December were located in Red Lake and Mankato and that one preservation project was a roughly $8.6 million investment to preserve 56 units (Bickham Court / Perspectives in St. Louis Park).

Ho warned the committee that prospective award totals for 2025 could be substantially smaller than recent years: she estimated rental awards might fall to $30–45 million (compared with $330 million in 2023–24) and single-family awards could fall to $15–20 million, contingent on federal funding and how resources are combined in the consolidated RFP. She said the MHFA consolidated RFP process matches the highest scoring applicants to available funding and that geography (metro vs. Greater Minnesota) is considered in awards.

Committee members asked technical questions about debt service and relative interest rates between general obligation and housing infrastructure bonds. Committee fiscal staff said annual debt service for housing appropriation bonds is about $38 million now and would grow to roughly $41–42 million annually once currently authorized but unissued bonds are sold. Ho said interest rates differ by about a quarter percentage point between GO and housing infrastructure bonds.

Ho closed by describing project impacts: road repairs and city water connections at a Richfield manufactured-home community; a $4 million project to build 52 units in Hibbing; Minnetonka Mills Church redevelopment into 10 units placed in a community land trust; and a $5.2 million award in Duluth for 30 units of permanent supportive housing. She said Minnesota Housing will open consolidated RFPs in April and aim to move selected projects to contract and construction as quickly as the development pipeline will allow.