Tax Change Undercuts Affordable Housing

State could lose 80,000 units of low-cost housing

This is a popular notion at the legislature now, and housing activists hold out little hope that lawmakers will reinstate the tax break for affordable housing. Doyle believes the issue has gotten so little attention for a couple of reasons--because tax laws are confusing, and because this change "doesn't affect homeowners," who are lawmakers' bedrock constituency.

The Minnesota Housing Partnership's Callanan likewise doubts that the 4D tax break will ever be returned to the tax code. "We're going into an election," says Callanan, "and one of the greatest victories for these legislators was the overhaul of the property tax system. They don't want to monkey with that."

There may be another way to mitigate the problem: Change the way affordable housing is assessed for tax purposes. Bob Odman, of the state Housing Finance Agency, says he's trying to convince county tax assessors to put lesser values on "rent-restricted properties." It's an uphill battle by its nature, since counties are under budget constraints themselves and want to raise as much revenue as possible. But Odman is optimistic that a solution may be reached as early as the 2005 tax year.

Alan Arthur of the Central Community Housing Trust: Trouble is on the way
Nathan Grumdahl
Alan Arthur of the Central Community Housing Trust: Trouble is on the way

Even if a new assessment formula is worked out, and every county can be convinced to accept it, Odman admits that "some of those rents will still have to increase. But those units won't necessarily be lost to the housing supply. They just won't be as affordable. It may cost a little more and we're trying to analyze just what that impact is going to be."

All of this comes at a time when those who rely on affordable housing are being hit by "significant cuts to social services and housing programs," in the words of Alan Arthur. Not to mention the abysmal job market. Nancy Doyle points to a Minnesota study that projects a shortfall of 33,000 affordable rental units across the state by 2010--and that's if we don't lose any of the rental stock we already have.

The number of people who stayed at homeless shelters nearly tripled between 1990 and 2001, according to the Minnesota Demographic Center. Governor Tim Pawlenty claims to want to end homelessness in Minnesota. Losing tens of thousands of units of affordable housing hardly seems a good start.

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