In a Minneapolis budget season largely defined by its challenges – layoffs, sharp property tax increases, cuts to long-running programs and fights over funding – Mayor Jacob Frey has looked to the issue of affordable housing as a bright spot.
His budget address touted moves as specific as allowing fourplexes in more parts of the city to the broader goal of building affordable housing in all kinds of neighborhoods – long a staple of his talking points.
A major part of reaching those goals has been the city’s Affordable Housing Trust Fund, providing millions in gap financing for the development and maintenance of multifamily rental properties where at least 20% of the units rent at 50% or less of the area median income.
But even as Frey points to the city’s ongoing investment in the fund as a win, it will likely take a hit: the total funding in the proposed 2027 budget is $15.5 million, the lowest since 2022 and the third straight year the total fund has decreased. Affordable housing advocates worry that even in a tight budget season, it’s the wrong time to let up.
Created in 2003 under Mayor R.T. Rybak, the AHTF began with a goal of $10 million a year, an amount that was regularly unmet when Frey took office in 2018. His first budget as mayor in 2019 increased the fund to $20 million, up from $6.5 million.
“It’s one of our longest-running programs, and it’s just a really crucial source,” said Amy Geisler, the housing development manager for the city’s Community Planning & Economic Development department.
There are similar funds at other levels of government – the Metropolitan Council, Hennepin County, Minnesota Housing – that form a network enabling affordable housing projects to proceed. The city’s fund often proves crucial to getting developments over the finish line.
“These projects just would not work if the city didn’t have that program in place to help leverage those other funds,” Geisler said.
It’s why the Minnesota Consortium of Community Developers has made it a local policy priority to increase investments in funds like the AHTF, calling them “a consistent, flexible resource” that brings both investment and jobs to the city.
The Beacon Interfaith Housing Collaborative has also made pushes to increase the funding and has partnered with the city on projects that use it, like The NorthView, which will redevelop 31 units of supportive housing..
“The City of Minneapolis provided essential ‘first-in’ money (this helps us attract other funders) for the project, which was a direct result of the advocacy work Beacon led to target the Affordable Housing Trust Fund,” the organization said in their announcement of the project.
When AHTF funding jumped from $14.75 million to $16.8 million between 2022 and 2023, Beacon called it “a significant start to reversing the multi-year trend of decreasing the trust fund each year since 2019” – a situation the city finds itself in once again.
Impending cuts to the 2027 budget for U.S. Housing and Urban Development threaten funds for affordable housing further. President Trump’s proposed budget would cut HUD funding by 13%, or nearly $11 billion.
Typically, Minneapolis awards AHTF dollars late in the year. Last year, nine projects were chosen, including a renovation of the Flour Exchange Building to provide 110 units of housing and the construction of Zaria Apartments on the site of the former Wells Fargo downtown branch.
Still, Geisler said, the total applications the city receives usually represent double or even triple the amount of available funds.
“The need is so great, and it is larger than the resources that the city even has available, and that has helped support the commitment to that program over the years,” she said.
Anne Mavity, the executive director of the Minnesota Housing Partnership, said the need is great statewide. Her organization estimates the state is 100,000 homes short of what’s needed to see every resident housed.
“The challenge is that at the state level, the Minnesota Housing Finance Agency receives about five applications for every one that they can actually fund because of the limited budget resources,” Mavity said.
Like Minneapolis, many municipalities have chosen to take action at the local level, Mavity said.
“Well over 70 communities across Minnesota have already formally adopted local housing trust funds that generate local revenue that can then be invested in local housing solutions,” she said, “and that’s really important.”
Even Minneapolis’ robust resources, she said, are still not enough to drive the amount of housing that’s needed, and private sector assistance remains a necessity.
“I think it’s not a time to take our foot off the gas,” she said. “It’s a time to really invest deeply.”
Mavity also pointed out that the affordable housing industry is maturing – developments made decades ago are now entering a stage where money needs to be spent to preserve them.
It’s an issue that’s become clear recently at Heritage Park, a Minneapolis apartment complex racked by water damage, rodent infestations and more. It was so bad that the Minneapolis City Council used $2.5 million in AHTF funds in July to help residents move out.
It’s a valid use of the fund, Geisler said – though certainly a unique one.
“Normally, rehabilitation projects like that happen [as part of] an annual process,” she said. “Just given the unique status of Heritage Park, we had to act more quickly.”
Policies need to be created to determine how best to keep that balance between developing new housing and maintaining older housing, Mavity said. Otherwise, “we will be stuck with the challenge of trying to invest and preserve the existing housing we have at the cost of actually creating the housing that we need to grow and thrive.”
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