House and Senate Tax Committees Hear League Workforce Housing Bill

The workforce housing bill would create a new tax increment financing tool for cities facing a lack of housing for workers.
(Published Mar 17, 2014)

The House Property and Local Tax Division heard testimony on March 13 on the League’s workforce housing bill, HF 2739 (Rep. Dan Fabian, R-Roseau). The Senate companion bill, SF 2396 (Sen. LeRoy Stumpf, DFL-Plummer), was heard the following morning in the Senate Taxes Committee.

A broad coalition of groups spoke in support of the bill, including Todd Peterson, community development coordinator for the City of Roseau, and Chris Eng, Duluth’s business and community development director, both of whom played key roles in shaping the legislation. In addition, representatives from Minnesota Housing Partnership (MHP) and Polaris, a Roseau company interested in expanding, spoke in support of the additional local tool for workforce housing.

The League’s bill would create a new type of tax increment financing (TIF) district for the construction of market-rate housing to accommodate job growth. Members of both committees acknowledged the importance of addressing the workforce housing issue, but expressed concerns with expanding the traditional role of TIF. While TIF alone cannot solve all of the complex issues related to housing and workforce development in Greater Minnesota, it would provide individual communities a better chance to develop desperately needed mid-priced housing. The League’s bill strikes a balance between the need for more development tools against the concerns that TIF could be used by communities without a true need.

Both bills remain in their respective committees and can be considered for inclusion in the omnibus tax bills. The League will continue to work with the many groups who have advocated for this legislation to help cities facing severe housing shortages.

How would it work?
TIF works by collecting the additional property taxes created by development within a defined TIF district and using the additional tax revenue (“increment”) to finance part of the development costs. TIF is a local development tool that does not require state funding. There are various types of TIF districts, each with different goals and restrictions on their use.

The basic workforce housing TIF district would be a type of economic development TIF district, not a housing TIF district. Housing units that are financed with housing TIF districts contain income qualifications that can prevent families with higher paying jobs from qualifying to rent or own those units. Workforce housing seeks to support the growth of higher paying jobs in a community.

The other important distinction between the districts is that an economic development TIF district only collects the increment generated by the project for nine years, whereas, a housing district collects the increment for 25 years. A workforce housing district would give cities more flexibility than a traditional housing district, but would create less increment to finance a project.

Qualifying cities would have:

  • Relatively low unemployment.
  • A small available labor pool unable to accommodate significant job growth.*
  • A low vacancy rate.
  • An existing employer that indicates that the lack of adequate housing prevents it from hiring new employees.

*Cities with colleges and universities are treated differently because large student populations can skew labor pool data.

“Chronic” workforce housing shortage
The bill creates a second type of workforce housing TIF district for communities with chronic workforce housing problems. In addition to meeting the base criteria above, these cities must have a minimum population of 1,500, be located outside of the seven-county metropolitan area, and have had five or fewer market-rate housing unit starts per 1,000 residents in each of the last 10 years. Communities meeting this definition could establish a TIF district with a 25-year duration.

Can this help your city?
If your community could possibly benefit from this legislation, please contact League staff (see information at right).

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