Plan would subsidize home ownership, not build new units
The Neighborhood Revitalization Program Policy Board voted 7- 3 Feb. 24 to transfer half of its $4 million Affordable Housing fund to a mortgage assistance program to encourage home ownership.
The Minneapolis City Council had set up the program to build new affordable housing.
Policy Board members Mayor R.T. Rybak and Council President Paul Ostrow voted against the measure, claiming it runs counter to the housing initiative's original intent. Ostrow said that mortgage subsidies "are not why the City Council set aside these dollars."
Hennepin County commissioners Mark Stenglein and Peter McLaughlin voted for the proposal. Stenglein said the money would go directly to low-income people, not developers.
At root is a philosophical dispute: does Minneapolis need more affordable housing, or does it need to make existing housing easier to afford?
To date, $600,000 of the $4 million fund has been spent.
Build housing or build incomes?
NRP is funded with taxes diverted from city, county and school budgets. The program currently spends $11 million per year, though that is threatened by state and city budget crises. The NRP Policy Board includes representatives from the City Council, Hennepin County Board, state legislature, Minneapolis Public Schools, Park and Library boards, charities, labor unions and neighborhoods.
The fund transfer was controversial in part because it was not on the Policy Board's meeting agenda. Also, barely half of the board -- 10 of 18 members -- voted. Some claim that more members would have attended had they known a significant policy change was at stake.
Gretchen Nicholls, executive director of the Center For Neighborhoods, a Minneapolis nonprofit, claims the measure did not adhere to any of the criteria established for the affordable-housing reserve fund.
"Seven people, none of them city officials, authorized the transfer of $2 million of city funds to a proposal that was seen for the first time that evening," she said. "No thought was given to whether it aligned with city goals or how it compared to other private sector financing mechanisms. From where I sat, it … is an indication that NRP is accountable to no one."
McLaughlin claims that it is merely a preliminary vote whose details will be worked out at the next NRP Policy Board meeting, scheduled for Monday, March 24.
He termed the mortgage-support program "a strategy that's worth exploring. What we are trying to do is to foster ownership of homes by lower-income people. It creates additional stability because when you own your home, you are less likely to move and thus become more engaged in the community in which you live."
Stenglein acknowledged that the new program departs from Rybak's and Ostrow's policy.
"The Mayor and the City Council president made some pretty direct promises to the voters about increasing units of affordable [housing] in the city," said Stenglein. "In fairness to Paul Ostrow, he's right, this will not increase the number of affordable housing units in Minneapolis.
"However, I voted in favor of the proposal because the money is going to go to low income-people," he said. "The Mayor and the Council President want to invest in housing. I want to invest in people and let them buy the houses themselves."
Best use of funds?
Stenglein says research shows using public dollars to create affordable housing averages two and a half years and requires over $25,000 of public subsidy per unit. Stenglein and McLaughlin think that is an inefficient use of public money.
The proposal would increase home ownership in neighborhoods where most residents rent. It doesn't give out mortgages, it only guarantees them. The preliminary plan would guarantee the first 20 percent of the mortgage issued by a lending institution. That would help low-income families qualify for a mortgage.
If the property's value rises above the 20 percent, or the property's equity equals the loan amount, the bank would return the loan to the fund, to be lent to another family. As each family moves into a home it owns, that would free up another rental unit, program supporters say.
Nicholls contends that mortgage assistance money could come from anywhere in the NRP budget and should not have come from the fund earmarked for the creation of new housing. Allocation of NRP dollars has to be approved by the city council.
Ostrow appeared before the City Council's Community Development Committee on March 4, asking the six-person committee to block the proposal. Councilmembers Lisa Goodman (7th Ward), Scott Benson (11th Ward), Don Samuels (3rd Ward), and Gary Schiff (9th Ward) sided with Ostrow, while Councilmembers Robert Lilligren (8th Ward) and Dean Zimmermann (6th Ward) sided with the policy board.
After the vote, Bob Miller, NRP chairman, said, "It isn't dead yet. The will of the Community Development Committee is that they don't think that this measure should be pursued. Of course that will be taken into consideration when the policy board meets again. But the policy board will consider this, regardless of what the committee has expressed."