Richfield council backs 4(d) tax support to preserve three affordable apartment complexes

The Richfield City Council on Jan. 28 approved a resolution supporting the use of the 4(d) tax classification to help Hempel Real Estate acquire and preserve three naturally occurring affordable rental properties, preserving what staff described as 236 units and roughly 477 residents.

Supporters said the move will keep existing tenants housed and maintain 2- and 3-bedroom affordable units that are in short supply. "I therefore urge this council to approve a memorandum of understanding supporting request for financial assistance and 4 d tax status from Hempel Real Estate for the acquisition and preservation of 3 identified affordable rental communities," resident Scott Dahlquist told the council during open forum.

City staff and the Housing and Redevelopment Authority (HRA) said the three propertiesNew Orleans Court, Richland Court and Winton Housecontain a mix of one-, two- and three-bedroom units that rent at about 50% to 60% of area median income (AMI). The HRA approved a memorandum of understanding on Jan. 21 that lays out potential HRA assistance if the purchase proceeds. That package includes a 15-year forgivable loan of $1,570,000 from the Affordable Housing Trust Fund and a $200,000 remodeling loan, conditions limiting rents and income caps and commitments to accept rental assistance.

Council members repeatedly weighed the trade-offs. "There's trade offs particularly in the decision before us tonight that we are shifting the tax burden in a small way," Council Member Hayford O'Leary said, but added he supported preservation of the units because of the benefits to the broader community. Council Member Burke framed the decision more directly: "To me, it's imagining the people who would be displaced, having them in this room... would you pay $10 to keep these people here?" Burke said, and indicated he would vote in favor.

The city report said the 4(d) classification would lower the property tax rate applied to the buildings (staff cited a 0.25% rate for qualifying affordable apartments compared with 1.25% for non-affordable apartments in the example used), producing estimated annual owner savings of $352,050 using the pay-2022 values and tax rates cited in the staff materials. The city noted that the reduction in tax capacity would shift $278,432 of tax capacity across jurisdictions; to keep levy revenue constant, city staff estimated the owner of the median-valued home in Richfield would pay about $9.97 more per year under the example provided.

Council discussion noted two mitigating factors: the HRA's planned use of housing trust funds for the project and the planned decertification of two tax increment financing (TIF) districts in 2026, which staff said will add tax capacity that will partially offset the 4(d) reduction. Council Member Christensen and others urged follow-up policy work, including conversations with state legislators about long-term approaches to balancing preservation incentives and tax shifts.

The council voted to approve the use of the 4(d) tax classification for the Hempel purchase and preservation plan. Staff said Hempel is completing due diligence and will return to the HRA with a firm rehabilitation cost estimate; the HRA will consider a formal HRA agreement, likely at its February meeting.

Votes at a glance: the council moved and seconded the resolution and the motion passed; no roll-call tally was read into the record.

The council and community members who testified said the immediate result keeps larger affordable units and existing voucher-supported households in Richfield while staff and council members flagged longer-term policy questions about who bears a shifted tax burden and how the city might address that in future policy.