Minnesota’s Economic News — W/E 9/29/23
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In an attempt to address the lack of affordable housing, the Minnesota House passed a bill on Monday that includes extra funding for numerous housing programs. The bill — HF 4376 — adds an additional $230 million to what is currently for housing programs for the fiscal year 2023.
The funds are allocated as follows:
$100 million in community stabilization through naturally occurring affordable housing;
$50 million for first generation homebuyers assistance, including a pilot down payment assistance program;
$20 million for the Minnesota Housing challenge program, which aims to provide affordable permanent rental housing;
$14 million for family homelessness prevention;
$10 million to the Housing Trust Fund for rental assistance;
$10 million for the Homework Starts with Home program;
$7 million to local housing trust funds;
$5.19 million for a manufactured home cooperative program;
$5 million in flexible financing for capital costs;
$5 million to strengthen the supportive housing model;
$2 million for a pilot program to increase lead testing in residential units;
$1 million for homeownership education and training;
$425,000 for stable housing mediation grants; and
$383,000 for enforcement of income discrimination.
According to Hausman — chair of the House Housing Finance and Policy Committee — this bill had four goals, namely “building more homes that Minnesotans can afford, wanting to reduce cost for renters and create more homeowners, to save the affordable homes already available and creating services that provide pathways to more stable housing.”
But it is quite ironic that a bill looking to build more homes or reduce costs for renters says nothing about removing the excessive red tape and fees that raise the cost of construction, delay projects, and discourage investment in the housing market.
High and rising housing prices are a result of supply being unable to meet demand. And previous American Experiment research has shown that what causes low supply and high prices in Minnesota are excessive rules and fees, which do not exist in most of our neighboring states. Throwing money at the problem won’t solve this issue and would likely push prices even higher — by increasing demand while keeping supply the same.
Any effort to address rising housing costs needs to address the root cause of the problem — inadequate supply. Increasing funding will merely push those high costs onto taxpayers, something which is unsustainable in the long term.
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