Hennepin County will have an extra $91 million in federal funds to spend on housing next year

23December 2021

Hennepin County is poised to spend in 2022 an unprecedented infusion of money on housing options for lower-income families and people living on the streets.

Normally, the county annually budgets $146 million for its housing development and homeless programs. But it has allocated an extra $91.4 million from its federal COVID-19 relief funds.

“This has the power to really make an impact on housing infrastructure and how we do our work,” Julia Welle Ayres, Hennepin County’s director of housing development and finance, said. “We’re really excited to think about how much impact that could make.”

The money is part of the multibillion-dollar American Rescue Plan (ARP) Act of 2021, which enables local entities to use a portion of that money for housing programs. It’s administered by the U.S. Department of Housing and Urban Development.

Throughout the new year, the county will roll out a series of requests for proposals for various elements of its funding plan. The first request was posted earlier this week and is due Jan. 24.

Earlier this month, Ramsey County and the city of St. Paul said they planned to make a combined ARP commitment of $74 million for “deeply affordable” housing. They aim to build up to 1,000 permanent rental units for people with 30% of the area’s median income.

Hennepin County’s one-time infusion of cash doesn’t include a more than $28 million commitment from Minneapolis, nor does it include funds that already have been approved by the county. Altogether, the money will be used by a range of nonprofits and housing providers to bolster existing programs and expand new ones.

That includes down-payment assistance for home buyers and purchases by the county of hotels and offices for conversion into single-room occupancy (SRO) facilities. SROs offer more independence than a shelter does, but cost far less than a traditional one-room apartment.

Some of the funds will be used to increase rental construction and improve the condition of naturally occurring affordable housing, or housing that’s already affordable to the lowest-income families.

“The dedication of resources toward more housing and more housing choices, like SROs, is exactly what we need to begin to scale supply to what the demand for affordable housing is in our communities,” said Anne Mavity, executive director of the Minnesota Housing Partnership. “Federal emergency relief funding provides an opportunity to invest in housing production and preservation — right now. It not only creates affordable homes, but also creates jobs, supports families and a strong economy.”

Ayres said the goal is to help 1,000 people exit homelessness and finance the creation of 2,000 additional units of income-restricted housing, or about twice as many the county does in a normal funding year.

And for the first time, Hennepin County will be able to spend more money on creating new homeownership opportunities.

Normally, Ayres said, the county is able to help fund about 50 homeownership opportunities. Now, the county has budgeted an additional $1.2 million in a first-ever homeowner assistance fund. “We’re excited to make a bigger dent in that space,” she said.

The county already has dedicated $25.6 million for what it calls “equitable homelessness recovery” through a variety of initiatives, including eliminating self-pay and making physical improvements at shelters that will help reduce the operation costs.

About $14 million will be spent on case management and helping homeless people find jobs and stable housing. Another $3.5 million will be spent on a new emergency shelter facility for Simpson Housing, which has deferred maintenance and is costly to operate.

Ayres said the ARP funds have to spent within two years. Though the county isn’t targeting a particular geographic area, there will be a focus on serving households that earn 50% or less of the area’s median income. It also will focus on providing funding to minority developers.

Perhaps the most innovative priority will be the expansion in the number of SROs. Hennepin County was one of the first in the country to move sick and vulnerable residents into hotels.

“We quickly realized this [the pandemic] was going to be more than a couple months,” she said. “And we realized that it was cheaper to own hotels rather than rent.

The county bought four buildings in 2020, including three hotels. It will use some of its ARP money to acquire additional properties and convert them into SROs. It also will look for partners to help model and operate SROs.

The county plans to shop around for smaller buildings that will accommodate 20 to 50 one-room rental units with shared kitchens.

“The gap we’re trying to fill is for people who are in shelters or are unhoused and don’t need services and just need really affordable housing,” she said. “We’ve found that once they’re out of shelter, they have the stability to figure what’s their next step.”

So far, the county converted one building in the Stevens Square neighborhood. The former Metro Inn Motel in south Minneapolis will be converted next year.

About $2 million of the money will be spent on helping developers who had affordable housing projects that were shovel-ready but got delayed or scaled back because of rising material costs.

“This is the time to do really innovative things with these funds,” Ayres said. “If we weren’t using this moment to do extraordinary things, then this pandemic would be even more tragic.”

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