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Legislature Adjourns with Incremental Housing Progress
YOUR ASSOCIATION FIGHTS OFF ADDITIONAL IMPACT FEES
After a full 18 months of being gaveled in for either regular session or a special session, July marked the first month that the legislature was not in session since the pandemic began.
Legislators used nearly every minute before a government shutdown would have commenced, but a full budget was finally passed and signed into law by Gov. Walz on June 30, including an omnibus housing bill.
Unfortunately, nearly all major housing industry priorities that were included in the Senate’s version of the housing bill, including the removal of exclusionary zoning practices, failed to make it through final negotiations.
“Despite our state’s already acute and worsening housing inventory and affordability crises, the legislature and Gov. Walz failed to enact any meaningful reform to address the regulatory roadblocks which are pushing homeownership out of reach for far too many Minnesotans,” stated David Siegel, the association’s executive director.
“Our housing crisis will only be solved when the legislature fully addresses these roadblocks and exclusionary zoning practices that have taken Minnesota to record-high home prices and the largest homeownership equity gap in the country between white and black Minnesotans.”
“All throughout session we saw two vastly different strategies in approaching Minnesota’s housing issues,” said Mark Foster, director of legislative and political affairs at the association. “The Senate advanced bills focused on expanding the overall supply of housing and advancing homeownership opportunities for more Minnesotans. Meanwhile the House spent their time advancing additional park and street impact fees that would cost homeowners thousands of dollars more and refused to hear any bills addressing Minnesota’s exclusionary zoning practices.”
Senator Rich Draheim (R - Madison Lake) is the chair of the Senate Housing Committee. He introduced and advanced many pieces of legislation aimed at expanding the supply of affordable starter homes statewide.
Here is a rundown of where the major housing items ended.
HOUSING INDUSTRY INITIATIVES & PRIORITIES
ADDRESSING EXCLUSIONARY ZONING THROUGH PLANNED UNIT DEVELOPMENTS
HF1840 (Elkins)/SF915 (Draheim)
In an important first step, a bill aimed at addressing Minnesota’s exclusionary zoning practices was sent to the Senate floor after hearings in both the Housing Committee and Local Government Committee. This legislation confronts one of the top affordability barriers head-on, the overuse and manipulation of Planned Unit Development (PUD) contracts as a means to approve housing projects. The goal of the legislation is to lift barriers that drive larger lot requirements and exterior design mandates in new home approvals.
Siegel testified in favor of the bill.
“This bill is a first step to addressing the issue that experts have almost unanimously agreed is the key to fixing our growing housing and homeownership problems: lifting local barriers and zoning carveouts which are currently restricting the construction of affordably priced homes,” stated Siegel.
“We have heard from government groups that these are simply ‘the market.’ That is wrong. The market does not restrict land availability and drive land costs—local governments and the Met Council do. The market does not demand large lots, large homes, with large garages for starter homes—local governments do. And, the market does not demand stone exteriors on starter homes—local governments in PUDs do.”
Local government groups presented numerous testifiers in opposition to measure, arguing that the SF915 would take away “local control” from cities and towns.
Where it finished: The bill was included in the Senate version of the housing omnibus bill, but did not receive a hearing in the House and was not in the final bill. Expect further discussion around this in the interim and again in the 2022 regular session.
DAVID SIEGEL, EXECUTIVE DIRECTOR HOUSING FIRST MINNESOTA
FIVE-YEAR PAYBACK FOR ENERGY CODE PROVISIONS
SF910 (Draheim)
Minnesota builds some of the most energyefficient homes in the country. By some measures we are number one in energy efficiency. With that in mind, several legislators aim to protect energy efficiency, while also raising affordability as a top issue. This legislation mandates that the costs of any new provisions added to future updates to Minnesota’s energy code must have a payback of no more than five years following completion of a new home project. This bill drew opposition from more than a dozen special interest groups, but advanced following the committee discussion.
Where it finished: The bill advanced through one committee in the Senate, but was not heard in the House. Expect further discussion in the 2022 session.
SINGLE-FAMILY HOMES EXEMPTED FROM WINDOW FALL PREVENTION
HF1496 (Fischer)/SF802 (Koran)
Several years ago, during a building code update process, single-family homes were mandated to include window fall protection devices in certain settings. This bill moved to strike that provision in many locations throughout one and two-family dwellings and townhomes, solving an egress issue and saving homeowners hundreds of dollars in the process.
Where it finished: Signed into law, this provision will save hundreds of dollars per home. This updated language states that: window fall protection devices are not required in one and two-family dwellings if: the lowest part of an operating window is 24 inches above the finished floor – OR – the lowest part of the opening of an operable window is located 72 inches above the exterior grade below. This became active starting August 1, 2021.
MODERNIZING BUILDING PERMIT FEES
HF1085 (Stephenson)/SF801 (Koran)
Substantial valuation variations and large permit fee surpluses in many growing cities have revealed structural problems with valuation-based permitting. There is simply no rationale for the wide disparities in accepted valuation at the time of permit issuance. Home size and features, not arbitrary valuation, is the number one factor in calculating inspection time and costs. HF1085/SF801 would end the valuation method of establishing permit costs, and instead move to a square footage-based system. This move would ensure that building permits and the homeowners who ultimately pay these costs, are charged fees that are fair, reasonable, and proportionate to the actual costs to perform these inspections and plan reviews.
Where it finished: This bill was heard in both chambers, but it did not advance to the omnibus stage.
HOUSING INDUSTRY ITEMS OF CONCERN AND OPPOSITION
INCREASING PARK DEDICATION AUTHORITY
Initiated by the city of Rochester, this bill would have created new park dedication authority for cities of the first class who are approving development projects. The House bill was heard and passed in both the Local Government Division and State Government Finance and Elections Committee and now sits on the House floor. Peter Coyle, Housing First Minnesota counsel, testified in opposition to the bill, citing concerns of a nexus, a deadline to utilize the dollars, and the potential for double dipping. The Minnesota Realtors® and the Minnesota Multi-Housing Association have partnered with Housing First Minnesota to express the industry’s concerns with the bill.
Where it finished: The bill advanced to the House floor, but it was never heard in the Senate. It ultimately was not included in a final omnibus bill.
STREET IMPACT FEES
HF527 (Masin)/SF277 (Pratt)
The street impact fee debate returned in the 2021 session, continuing many years of discussion surrounding the need and appropriateness of off-site transportation fees in new developments. Prior to the Harstad v. Woodbury Supreme Court decision, many cities were requiring these fees despite having no legislative authority to do so. After the Harstad decision deemed these fees illegal, local government groups have asked the legislature to legalize the fee collection, which would create a new tax on housing developments for future, undefined transportation improvements. As currently written, the proposed language provides new authority for city councils to impose an additional tax on growing businesses, nonprofits, and housing developments. The proposal creates endrun around requirements imposed upon cities under the special assessment laws designed to protect property taxpayers, including the demonstration of benefit and public hearings.
The House bill was heard and passed in both the Local Government Division and State Government Finance and Elections Committee after very contentious hearings. Housing First Minnesota led a coalition of nearly a dozen other business and nonprofit organizations that are opposed to this legislation.
Where it finished: After two very contentious hearings in the House, the bill did not make it to the omnibus stage.
CITIES AUTHORIZED TO ESTABLISH STREET IMPROVEMENT DISTRICT
HF1565 (Elkins)/SF1998 (Johnson Stewart)
A close relative of the street impact fee issue, the proposal for street improvement districts would expand authority by allowing cities to draw street improvement districts where a fee or transportation utility could be required. This would impact both existing and new development. Housing First Minnesota joined dozens of opposing organizations when this bill was heard in the House Local Government Division.
Where it finished: The bill advanced in the House, but was not heard in the Senate, and ultimately did not become law.
CARPET STEWARDSHIP PROGRAM
HF1426 (Jordan)/SF1171 (Weber)
Aimed at better managing flooring waste, this bill would create a new program to recycle carpet and has the potential to increase the costs of carpet by 4-6 cents per square foot. As written, it would authorize the Minnesota Pollution Control Agency commissioner to unilaterally increase the increase the fees even more in coming years. Housing First Minnesota joined with several others in opposition to the bill.
Where it finished: The bill was discussed in the House, but not the Senate. The program was not created this year. This idea has been around for many years, so expect more discussion.
MANDATING ALL NEW GARAGES TO BE ELECTRIC CAR READY
BE053 (Bierman)
This concept would mandate all new garages and any remodeled garages of at least 50% need to be electric car ready. This language has the potential to raise the costs of housing by hundreds of dollars for an item that very few consumers are currently demanding. The bill was heard in the House Climate Change Committee.
Where it finished: The bill was heard as a discussion matter only, with no official action. Expect proponents of the concept to try to advance it in the 2022 session.
IN THE INTERIM: MAJOR ZONING REFORM ON THE DOCKET FOR NEXT LEGISLATIVE SESSION
Following the release of August’s Star Tribune piece on exclusionary housing practices in the Twin Cities, Rep. Jim Nash (R-Waconia) called for the gathering of the Housing Affordability Commission, and Rep. Steve Elkins (DFL-Bloomington) introduced the most comprehensive Housing Affordability bill in decades.
In calling for the bipartisan, bicameral Housing Affordability Commission to meet, Nash stated, “Homeownership should be an attainable dream for all Minnesotans, and we need to take a comprehensive look at the multiple inputs that drive costs to skyrocket: zoning, land use, required elements for decorative aspects of homes by a city, inspection fees, impact fees, and many others.
“I’ve said all along that the solution is like solving a quadratic equation in algebra class: so many integers that need to be worked on separately in order to pull together the entire answer for the problem. Everyone deserves a ‘North Star‘ to head toward, and that comes with the safety and security of homeownership.”
Elkins introduced a first-of-its-kind Housing Affordability Act as a “grand bargain” of sorts. The extensive bill calls for many positive changes in planning and zoning at the local level, limits on aesthetic mandates, caps on dedication fees, makes changes to building permit structures and reporting, adjusts the disclosure of energy code paybacks, but also authorizes impact fees and street improvement districts.
In introducing the bill, Elkins said the goal is to develop thousands of additional units of entry-level workforce housing across the state every year to meet the needs of newly forming young families. “On one hand, financially stressed cities need a means to finance the basic infrastructure required to support new housing development,” said Elkins.
“On the other hand, housing developers need relief from regulatory restrictions that are preventing them from building an adequate supply of new homes and apartments that are affordable to young families.
“This bill addresses both sides of that equation. It would allow cities to use cost-based development impact fees to pay for roads and infrastructure-new development should pay its own way, but no more than that.
“At the same time, the bill would sweep away zoning restrictions used to promote the construction of expensive homes on large lots and would remove institutional barriers to the construction of new entry-level homes, apartments and condominiums. This is a complex problem which requires a comprehensive solution.”
If there is a special session late this fall, Elkins is expected to introduce the bill. He will also ask to present the legislation to the Legislative Commission on Housing Affordability.
For years, your Housing First Minnesota advocacy team has been working with legislators from both parties and all four caucuses to address the ever-rising costs of land and municipal fees. Look for deep discussions at the Capitol in the interim and a renewed push to address housing issues in the 2022 legislative session.
