2023 State Legislative Session one of the best ever for stable housing and homeownership.
You may have heard by now that the 2023 Minnesota State Legislative Session was one of the best in history with regard to the amount in funding directed toward stable and affordable housing assistance across the housing ecosystem – from exiting homelessness to achieving and sustaining successful homeownership. This is great news and is much needed as we face continuing increases in rent, limited home sales inventory, rising mortgage interest rates and other challenges to individual housing stability and affordability.
The Center is especially proud of the role we played in securing funds for the homeownership side of the equation. In 2021, we partnered with Minnesota Realtors® to conduct a study quantifying the need for down payment assistance in our state. The results indicated that more than 100,000 renter households currently unable to afford to buy a home could do so with down payment assistance of $10,500 or less. Further, with regard to the racial ownership gap, transitioning just 11,600 Black renter households to homeownership would increase the Black homeownership rate in Minnesota by ten percent – a significant gap reduction.
In 2022, we brought forward a legislative proposal for a First-Generation Homebuyers Down Payment Assistance Fund, in partnership with Minnesota Realtors and Twin Cities Habitat for Humanity. While the proposal was well received, it died (along with most of the 2022 session’s work) when that session ended in partisan gridlock. Reintroduced in 2023, the proposal passed into law in May with $100 million to be managed and disbursed through Community Development Financial Institutions (CDFIs) and another $50 million to be managed and disbursed through Minnesota Housing.
The focus on first-time first-generation homebuyers was very deliberate, as this population is the least likely to be able to access generational wealth to facilitate a down payment. (For the purposes of this fund, first-time first-generation includes those whose parent or prior legal guardian either never owned a home, or owned a home but lost it due to foreclosure.) Further, because of Minnesota’s large racial homeownership gap, there are proportionally more potential first-generation homebuyers of color than potential first-generation white homebuyers. So while the program will be accessible by any potential first-generation homebuyer, regardless of race, the program should help to reduce the overall racial homeownership gap simply due to our state’s statistical realities.
While the specifics on accessing this new fund remain to be determined and finalized, the development framework is designed to greatly simply the process for buyers, Realtors® and lenders alike. Funds will not be restricted to specific areas, cities or regions. They also will be “reserved” at the beginning of the purchase process, ensuring availability at the conclusion of the sometimes lengthy transaction timeline. Access to the program will be available via any lender, as opposed to being restricted to a specific entity. (The CDFIs will manage and disburse funds behind the scenes with regard to the consumer’s perspective.) Up to ten percent of the home’s purchase price will be available (capped at $32,000), and the funds will be structured as a loan which is forgivable over five years of owning the home as the buyer’s primary residence. The program is expected to become available to consumers in 2024.
Stay tuned for more information on this important new program as details are nailed down and consumer outreach ramps up. We’ll also be working with the Realtor and lender community to ensure everyone is ready to take advantage of this ground-breaking initiative!