Low wages, a severe shortage of affordable rental units and other factors leave many residents in the
U.S. unable to afford quality housing. More than 70% of extremely low-income renters are severely
housing cost-burdened, spending more than half of their limited incomes on housing costs, which forces
them to cut-back on other basic necessities like adequate food, health care and transportation and also
puts them at risk of housing instability.
This affordable housing crisis can also be felt right here in our backyard. According to the 2019 Out of
Reach survey by the National Low Income Housing Coalition (NLIHC), the state of Minnesota ranks 22nd
for the most expensive two-bedroom housing in the nation. The most expensive states include Hawaii
and California, with the most affordable states listed as Arkansas and West Virginia. Even the least
expensive states require residents to make more than $14 per hour in order to afford a two-bedroom
A broad range of programs to provide affordable homes for workers, low-income renters, homeless
individuals and seniors have been implemented across the state of Minnesota, but renters would need
to make a minimum hourly wage of $19.74, or work 80 hours per week, at the current state minimum
wage of $9.86 to afford a two-bedroom unit. This leaves many renters working two or more jobs to
afford housing across the state.
The need for more affordable housing nationwide is apparent, but how its being delivered varies from
community to community. Here are a few ways lenders can continue improving access to affordable
New loan types
Government officials and developers across the U.S. have been searching for the answer to affordable
living, and one new loan product creates a unique solution. Freddie Mac’s Non-Low Income Housing Tax
Credit (LIHTC) Forward loan is “an unfunded, forward commitment for affordable housing developed by
nonprofits and subsidized, rent-restricted affordable housing developed by for-profit developers for new
multifamily construction or substantial rehabilitation.”
This loan program allows developers to secure favorable terms for affordable and workforce housing
projects. Workforce housing allows people who work in a neighborhood to live nearby when they’d
typically be either priced out by luxury apartment units or wouldn’t qualify for traditional Section 8
units. Workforce housing developments reduce barriers to being successful at work and increase
employee retention. On the flip side, affordable housing is reserved for individuals or families earning
30–60% of AMI. The median income for all cities across the country is defined each year by U.S.
Department of Housing and Urban Development.
One Saint Paul-based firm, for example, recently broke ground on a new workforce housing complex in
Rochester called Technology Park Apartments. The 164-unit project was one of the first new
developments to be funded with this loan product in the state of Minnesota. The product is creating
quite a buzz among the broader housing sector, as it reduces the amount of unknown variables for
developers and gives them the tools needed to reduce the shortage of affordable housing.
Local financial support
Cities across our state are using tax increment financing (TIF) and tax abatement programs to help
neighborhoods overcome market challenges and make affordable housing transactions more attractive
and feasible for developers. Although these programs require deeper set-asides from developers, the
benefit of having very low to no taxes, or being reimbursed for taxes paid through TIF programs, brings
more developers to the table.
For renters, these programs are beneficial because there are more units available at a lower-than-
market rate. For example, through the 4d Affordable Housing Incentive Program, the city of Minneapolis
will require developers to provide at least 20% of the units at 60% of the area median income (AMI) in
order to qualify. This allows the city to support projects they believe will spur additional development in
the area. Specific requirements vary by community and program, but as more success is seen with these
programs, additional developers will be willing to take the risk.
Private and philanthropic partnerships
According to the Greater Minnesota Housing Fund (GMHF), naturally occurring affordable housing
(NOAH) is often in disrepair and, when purchased and upgraded by developers, per-unit pricing no
longer falls within the affordable range. To combat this issue, GMHF launched the NOAH Impact Fund to
finance the acquisition and preservation of naturally affordable rental housing to preserve the
affordability of such units for the long term. The program was one of 10 across the country to be
awarded the Secretary’s Award for Public-Philanthropic Partnerships from the U.S. Department of
Housing and Urban Development (HUD) and the Council on Foundations.
GMHF was recognized for its creativity in bringing together unusual private and philanthropic partners
to create unique affordable housing programs across the state. For example, Park Place of Bemidji in
Beltrami County brought together various partners including the state of Minnesota, GMHF, the City of
Bemidji, and Sanford Health to provide 60 units of affordable housing for residents dealing with
homelessness and addiction. Through this unique partnership, Sanford Health provides on-site nursing
services for residents allowing them to get the care they need while reducing the overall cost to the
court, public safety and health care systems.
Partnerships such as these help to bring more players to the field and get more unique groups more
interested in creating and sustaining affordable housing. From on-site health care services to financial
literacy programs provided by community banks, a higher level of involvement from outside parties will
result in more affordable housing opportunities nationwide.
The future of affordable housing is bright. By working together to preserve existing avenues and creating
new opportunities for these developments, the affordable housing crisis in our state can be alleviated.