Local Affordable Housing Aid (LAHA) Policy Discussion and Direction

In 2023, a law was enacted that established metropolitan area sales tax with revenue only to be used for affordable housing purposes.  This program is called Local Affordable Housing Aid (LAHA).  The law included a provision that cities over 10,000 in population receive their share directly, based upon a formula of each city's portion of cost-burdened households.  The direct allocation allows cities local control over what housing-related assistance it feels its residents need.  Generally speaking, the money can be used for things such as building new affordable housing (entire buildings or a percentage of the units); preservation/renovation of existing affordable housing, and emergency rental assistance.  There is a companion program that is statewide (SAHA) that Ramsey is not eligible for.

The amount of money varies from year-to-year.  In 2024, Ramsey received $118,897.15 and in 2025, $317,780.38 (current balance total = $435,677.53).  The 2026 and future allocations will likely be similar to the 2025 amount (2024, the first year, was a partial year).  Funds must be used by their fourth year, meaning that the 2024 allocation must be committed by the end of 2027 and spent by the end of 2028.  Some exceptions can be made for projects in the works.  

Projects can be for both rental and ownership housing and the determining factor of who is eligible is based on Area Median Income (AMI).  It should be noted that AMI is based off of household size.  For 2025, the AMI for a family of four in Ramsey is $132,400.  The ownership projects need to benefit people with household incomes of less than 115% AMI, with preference given to household incomes less than 80% AMI.  Rental projects (construction or emergency renal assistance) are limited only to those incomes below 80% AMI.  The money can be used in the form of a loan or a grant.  There can be a cost-share component.  Any money that is repaid from a loan or a claw-back provision will need to be re-used for affordable housing. 

Staff met to discuss what we are seeing in the field based on code enforcement complaints, business interactions, and other anecdotal information as to what might be beneficial to the community.  Staff also met with Anoka County Housing staff to discuss various program options.  The following are some ideas that staff feels will be beneficial while not majorly impacting staff time.  

Single-Family Home Exterior Improvements
Large-cost projects like new windows, new siding, new roofs, (potentially) repaving driveways, utility connections, and large tree removal can be cost-prohibitive for families at and below 115% AMI.  These types of improvements to a home can have positive effects on the surrounding neighborhood.  These items can usually be planned for several months, and the city can offer an application window scheduled around when staff has more time.  Cost range estimate: $10,000 to $50,000 per house.

Single-Family or Town home Interior Improvements
Having a furnace, water heater, or air conditioner replaced can be an urgent and costly issue.  Cost range estimate: $1,500 to $10,000 per home.  

Construction Grant for Multi-Family Development
Assist a developer in constructing multi-family rental units with a portion dedicated to meeting affordability standards.  Cost range: using up to all the funds the City has received and is holding.


Issues to Consider
In putting together a program or policy on how to spend the money, staff is taking into account the following issues when making recommendations to the Council:

Income Verification: Staff will be responsible for verifying the recipient's income and household size for any of the home-improvement programs.  This commonly-accepted way of doing this is to examine the recipient's most recent tax returns.  Some jurisdictions rely on a "self reporting" form, but that would become extremely time-intensive should allegations of fraud be made.  In a multi-family situation, the developer/management company will be responsible for reporting to City staff and likely will be using additional money from other sources that will require reporting anyway.  

Administering Payment: Staff will be responsible for paying the recipients of the funds and then assuring that the money is spent for its intended purpose.  Our program could be set up in a way that the contractors are paid directly—both down and final payments.  

Admin Fees: Right now, cities cannot use any of the money to cover staff time in administering these programs.  There may be some legislation introduced this year to allow cities to tack on an administrative charge for the grants or loans.  

Repayment of Loans: Staff does not have the capacity to process monthly loan payments.  Should a loan program be desired, cities can contract with third party agencies to administer one, but those costs cannot be funded through LAHA money.  Often, these agencies tack on a fee for their services that is paid by the homeowner or an arrangement through the city's general fund.  The city could structure a program as a zero-percent/zero-payment/forgivable after X-years program (essentially a lien on the home) so that the money is not used to "flip" a house or build resale value instantly before selling.  Should it sell before the specified time, the money is paid back at the time of closing in full or by a reduced amount.  

Multi-Family Grants: The Council would need to be committed to assisting a developer constructing multifamily housing with a measurable affordability component in Ramsey.  

Not Using the Funds: The funds are meant for helping our residents or potential future residents.  Should the money not be used, it will go back to Minnesota Housing and used in other communities.  

Since some money needs to be committed, or spent by the end of next year, staff would like direction to prepare a policy for adoption this spring and then start to work with residents and/or developers on using the money.  

LAHA Sales tax revenue

Please provide direction on the types of projects the Council would like to see the money used for.  Should the Council want to explore a partnership with a third-party agency to administer housing improvement loan programs, provide that direction as a partnership may take a few months to put together.    

Provide direction to staff.