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Author seeks to let donors use Minnesota housing tax credit to pay for supportive services
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Summary
Representative Ray Rauer told the House Taxes Committee HF2901 would expand the state housing tax credit (created 2021) to allow contributions to pay for on-site supportive services for deeply affordable housing; Beacon Interfaith Housing Collaborative testified support, saying service reserves are often the final funding gap.
Representative Ray Rauer brought House File 2901 to the Minnesota House Taxes Committee on April 9, asking lawmakers to add supportive services as an eligible use of the state housing tax credit.
The bill would allow private contributions, eligible for the existing housing tax credit, to be designated for ongoing on-site supportive services -- such as case management, job training, substance use referrals and mental health counseling -- alongside capital funds for construction and rehabilitation. Representative Ray Rauer said the change is aimed at enabling supportive housing for people exiting homelessness and those with high needs to remain viable over time.
Supporters told the committee the new authority would help close persistent service-funding gaps. "Supportive housing is housing that creates subsidized housing and wrap-around services for the most vulnerable Minnesotans," testified Ben Helvick Anderson, vice president of policy and organizing at Beacon Interfaith Housing Collaborative. Beacon, which the witness said operates 24 supportive-housing buildings housing more than 1,200 residents, described using private fundraising to create a "service reserve" that can be drawn down annually to cover the gap between available service contracts and the price of onsite services.
Committee members asked how adding services as an eligible use would affect the program's limited funding. The state's housing tax credit program, created in 2021 and described in testimony as having a $10,000,000 annual set-aside, currently awards credits on a first-come, first-served basis. Rauer and witnesses acknowledged the program is finite and that adding an eligible use could increase competition for credits, but they said the tool would allow developers to combine service-reserve fundraising with other public funding (for example housing infrastructure bonds and county/state contracts) to close deals and stabilize existing supportive properties.
Beacon described two projects to illustrate the difference service funding makes: Gladstone Crossing in Maplewood, which the organization said is currently using the tax-credit mechanism to raise capital, and a family supportive housing project in Shakopee that required a multi-year fundraising effort to establish a service reserve before construction could proceed. Testimony emphasized that, for some developments, demonstrating a funded service reserve is necessary to secure full financing or to stabilize an at-risk property.
The committee heard the bill informationally and did not take a formal vote on HF2901 during the April 9 hearing.
Looking ahead, proponents asked lawmakers to consider HF2901 as part of broader housing financing discussions; no committee action was taken at the hearing.
