Housing & Economic Development Committee
While the provision of housing is predominantly a private sector, market-driven activity, all levels of government – federal, state and local – have a role to play in facilitating the production and preservation of affordable housing in Minnesota.
Metro Cities’ housing policies recognize and support the intergovernmental nature of this issue – including participation from federal, state, regional and local governments. Policies A through C outline the role of cities. Cities are responsible for much of the ground-level housing policy in Minnesota – including land-use planning, building code enforcement, and often times the packaging of financial incentives. However, the State and Metropolitan Council must also play a major role by empowering local units of government and providing a variety of funding programs and tools. Policy D addresses the state’s responsibility to provide financial resources and establish a general direction for housing policy. Finally, Policy E speaks to the urgent need for the federal government to increase its financial support for the production and preservation of affordable housing.
In the state of Minnesota, the provision of housing is predominantly a private sector, market-driven activity. However, all cities facilitate the development of housing via responsibilities in the areas of land-use planning, zoning ordinances and subdivision regulations. Many cities choose to play an additional role by providing financial incentives and regulatory relief, participating in state and regional housing programs and supporting either local or countywide Housing and Redevelopment Authorities. Cities are also responsible for ensuring the health and safety of local residents and the structural soundness and livability of the local housing stock via building permits and inspections.
Metro Cities strongly opposes any effort to reduce, alter or interfere with cities’ authority to carry out these functions in a locally determined manner.
III-B City Role in Affordable and Life Cycle Housing
Metro Cities’ supports affordable and life cycle housing and recognizes its importance to the economic and social well being of individual communities and the region. Cities can facilitate the production and preservation of affordable and lifecycle housing by:
Metro Cities supports the location of affordable housing in residential and mixed-use neighborhoods throughout a city. However, Metro Cities does not support passage of a mandatory inclusionary housing law that would require a certain percentage of units in all new housing developments to be affordable to households at a particular income level because these units can’t be produced without a deep developer subsidy or cross-subsidization from the other houses in the development.
While Metro Cities believes there are cost savings to be achieved through regulatory reform, density bonuses, and fee waivers, Metro Cities does not believe a mandatory inclusionary housing approach can achieve the desired levels of affordability solely through these steps. The Metropolitan Council, in creating its affordable housing targets, must recognize both the opportunities and financial limitations of cities. The Council should partner with cities to facilitate the creation of affordable housing through direct financial assistance and/or advocating for additional resources through the Minnesota Housing Finance Agency.
III- D Metropolitan Council Housing Targets
In advance of the 2008 Comprehensive Plan deadline and in response to projected growth in the Metro Area, the Metropolitan Council created a methodology to determine how many affordable housing units would be needed and where those units should go. From that process, each metro area city was assigned an affordable housing “target”. Further, Met Council Comprehensive Plan guidance instructs cities to guide sufficient land to accommodate the “targets”.
Metro Cities supports the creation of affordable and lifecycle housing in the metro area. However, providing affordable and lifecycle housing is a shared responsibility between the private sector and government at all levels, including the federal government, state government and Metropolitan Council. Land economics, construction costs and infrastructure needs create barriers to the creation of affordable housing that cities cannot overcome without assistance.
Therefore, Metro Cities supports a Metropolitan Council affordable housing policy that recognizes the following tenets:
III- E State Role in Affordable Housing
Primarily through the programs of the Minnesota Housing Finance Agency (MHFA), the state establishes general direction and prioritization of housing issues. The state financially supports a variety of housing types including homeless shelters, transitional housing, supportive housing, senior housing, and family housing. The state must continue to be an active partner in addressing lifecycle and affordable housing issues.
Particularly, the state should:
III-F Federal Role in Affordable Housing
Metro Cities encourages the federal government to maintain and increase current levels of funding for affordable housing. Federal investment in affordable housing will increase the supply of affordable and life cycle housing as well as increase the inter-jurisdictional collaboration between the two levels of government. Federal funding plays a critical role in aiding states and local governments in their efforts to maintain and increase affordable housing throughout the state. Metro Cities strongly encourages the following:
Sub-prime mortgages and predatory lending practices have resulted in thousands of mortgage foreclosures throughout the state. Foreclosures are devastating to homeowners and tenants and can be equally devastating to neighborhoods when the presence of vacant housing results in reduced property values and increased crime. The additional public safety and code enforcement costs of managing vacant properties are a financial strain on cities.
Metro Cities supported the 2007 Legislature’s efforts to eliminate predatory lending practices and the 2008 Legislature’s efforts to reduce foreclosures among current recipients of sub-prime mortgages, including technical changes to the foreclosure process, increased financial support for mortgage foreclosure prevention activities, and financial assistance to individuals. As solutions to address vacant housing are developed, including assistance to cities for property management, neighborhood recovery and public safety costs associated with foreclosures, Metro Cities urges the Legislature to partner with cities and the private sector to adopt and implement those solutions.
III-H City Role in Economic Development
The State of Minnesota should continue to recognize cities as the primary unit of government responsible for the implementation of economic development and redevelopment policies and land use controls. However, the state should begin to shift its focus from addressing economic needs based on population or location to a broader statewide perspective, which is based on economic development strategies, economic development priorities and economic impact. The state should also recognize the additional cost cities bear when undertaking redevelopment vs. development projects.
The economic viability of the Metro Area is enhanced by a broad array of economic development tools that create infrastructure, recycle previously developed property, provide incentives for business development and support technological advances. It should be the goal of the state Legislature to champion development throughout the state by providing enough sustainable funding to assure that the state remains competitive in a global marketplace. Metro Cities supports the following:
Redevelopment allows local communities to adjust to changing market conditions, better utilize existing public infrastructure, and maintain a viable local tax base. However, due to the higher up-front costs of redevelopment, as compared to Greenfield development, desirable redevelopment projects often require public assistance. The State of Minnesota has a responsibility to provide cities with practical and flexible resources that will address the challenges and take advantage of redevelopment opportunities. Metro Cities supports:
Tax Increment Financing (TIF) has been and continues to be the primary tool available to local communities for assisting economic development, redevelopment and housing. Over time, several statutory changes have made this critical tool increasingly difficult to use, while recent property tax reform has resulted in a decreased state financial stake in city TIF decisions. At the same time that TIF has become more restrictive and difficult to use, federal and state development and redevelopment resources have been steadily shrinking. The 2006 eminent domain changes will make redevelopment significantly more expensive in some cases, and impossible in others. The cumulative impact of TIF restrictions, shrinking federal and state redevelopment resources, and changes to eminent domain laws will restrict a city’s ability to address problem properties and will accelerate the decline of developed cities in the Metropolitan Area. Without proper tools and resources to address decline, cities will be unable to stop it. At a minimum, the state should authorize increased flexibility in local TIF decisions.
Metro Cities urges the Legislature to:
In addition, for sites that do not meet the restrictive blight and contamination definitions of the 2006 changes to eminent domain law, the Legislature should explore creating incentives to encourage owners whose properties meet the blight definitions under M.S., Chapter 469, to voluntarily sell their land for redevelopment purposes. Incentives could include income tax credits, capital gains deferrals or other incentives targeted at property owners.
Finally, Metro Cities encourages the State Auditor to continue to work toward a more efficient and streamlined reporting process.
Eminent domain law changes made by the 2006 Legislature resulted in a significant philosophical and legal shift in Minnesota. Whereas prior to 2006, Minnesota law provided extensive deference to local governments, statutory changes enacted in 2006 provide significantly greater deference to property owners. Eminent domain actions for traditional public uses such as streets, parks or sewers will cost more. And except for the most extreme cases of blight or contamination, eminent domain for redevelopment purposes will be nearly impossible at any cost.
The proper operation and long term economic vitality of our cities is dependent on the ability of a city, its citizens and its businesses to continually reinvest and reinvent. Reinvestment and reinvention strategies can occasionally conflict with the priorities of individual residents or business owners. Eminent domain is a critical tool in the reinvestment and reinvention process and without it; our cities will be allowed to deteriorate to unprecedented levels before the public will be able to react. Metro Cities strongly encourages the Governor and Legislature to revisit the 2006 eminent domain changes to allow local governments to address blight and contamination problems before those conditions become financially impossible to address. Specifically, the Legislature should:
III-M This Old House/ This Old Shop
Metro Cities supports the reenactment of the “This Old House” law, which allowed owners of older homestead property to defer an increase in their tax capacity resulting from repairs or improvements to the home. In particular, “This Old House”, or a similar program, should be reauthorized as an incentive for re-occupying and homesteading foreclosed or vacant homes.
Metro Cities also supports passage of similar legislation for owners of older commercial/industrial property that make improvements that increase the property’s market value by at least 12%.
Without a thorough study, the Legislature should not make any substantive changes to the Business Subsidy Act during the next legislative session, but should look to technical changes that would stream line both state and local processes and procedures.
Where many traditional economic development tools have focused on managing the costs and availability of traditional infrastructure—roads, rail, utilities, etc.—the new economy is increasingly dependent on reliable, redundant, cost effective, high bandwidth telecommunications capabilities. While the United States was once a leader among “wired” economies, its position has slipped dramatically as other countries have facilitated investments in fiber-optic deployment (fiber to the premises), commitments to true high speed internet capacity (100 mb to 1 gb) and improved networks (Internet 2). Recognizing that there is a policy debate regarding the role of government versus private telecommunications companies in implementing the next generation of internet capability, bringing about such capabilities is increasingly important to insure that U.S. companies in general and Minnesota companies in particular can compete effectively in the global economy.
Metro Cities endorses a comprehensive strategy to stimulate the implementation of true high speed, world class, high bandwidth internet capabilities that are reliable, redundant, cost effective and available to all properties.
III-P City Role in Environmental Protection and Sustainable Development
Historically, cities have played a major role in environmental protection, particularly in water quality. Through the construction and operation of wastewater treatment and storm water management systems, cities are a leader in protecting the surface water of the state. In recent years, increased emphasis has been placed on protecting ground water and removing impairments from storm water. In addition, there is increased emphasis on city participation in controlling our carbon footprint and in promoting green development.
Metro Cities supports public and private environmental protection efforts to reduce greenhouse gas emissions and to further protect surface and ground water. Metro Cities also supports “green” design and construction techniques to the extent that those techniques have been thoroughly tested and are truly environmentally beneficial, economically sustainable, and represent sound building practices. Metro Cities supports additional, feasible environmental protection with adequate funding and incentives to comply.
Metro Cities supports continued development of the metropolitan area in a manner that is responsive to the market, but is cognizant of the need to protect the water resources of the state and metro area. Metro Cities supports the goals of the Clean Water Act and efforts at both the federal and state level to implement it. However, insufficient resources for impaired water assessments, total maximum daily load (TMDL) analysis, and capital projects threaten both our environment and the metro area’s ability to respond to market demands for development and redevelopment. Consequently, Metro Cities supports continued funding for clean water, including dedicated funding for: