DFL proposes sales tax increase in metro to fund affordable housing programs, rental assistance
ST. PAUL, Minn. -- Twin Cities-metro residents would pay more when they shop under a plan at the state capitol designed to fix what advocates say is an affordable housing crisis that needs long-term investment.
The proposal at Minnesota Legislature implements a .25% sales tax hike in the region, which include Anoka, Carver, Dakota, Hennepin, Ramsey and Scott counties. A tax estimate expects it to generate nearly $200 million per year by 2027.
Most of that funding would provide aid to local governments to assist with housing development, but it would also funnel 25% of those revenues to a rent voucher program for those who need the most help, which supporters say would be transformational for low-income Minnesotans.
"Housing is a huge crisis in Minnesota and needs a big fix. This sales tax is one tool to use to move us forward," said Ben Helvick Anderson, vice president of policy and organizing and Beacon Interfaith Housing Collaborative. The group is a leader in the "Bring it Home, Minnesota" campaign that's pushed the legislature to expedite construction of new affordable housing and provide rent support for low-income people in the state.
"The federal rental assistance program has always been very much underfunded and never funded to fully meet the need," he added. "We in Minnesota are really tired of waiting for that and are ready to step up."
The state is short more than 100,000 thousand affordable rental homes, according to an analysis by the National Low Income Housing Coalition, and more than 167,000 households here are extremely low income. Most of the people are cost-burdened, which means they spend more than 30% of their monthly income on housing.
Rep. Mike Howard, DFL-Richfield, who authored the bill, said the tax increase would support the development of 1,000 affordable homes for purchase and 1,000 rental units on average per year and provide rental assistance. He added that more than half of renters in the metro area are considered cost burdened.
Opponents during the House Taxes Committee Tuesday expressed concerns about raising sales taxes at a time when the cost of goods is high and pushing an increase that voters didn't weigh in on.
"I encourage the committee to take a deep breath on all of the taxes we are raising on Minnesotans in this state when we have a huge surplus and the economy isn't looking great," said Rep. Kristin Robbins, R-Maple Grove. "We really have to be mindful of the tax burden on our constituents and how it affects their daily lives."
Patricia Nauman, executive director of Metro Cities, an association representing municipalities in the Twin Cities metro, said her group is opposed to the sales tax increase because it's a program that has "statewide value and significance," but would just affect taxpayers in the metro. She noted their support of other programs the housing package targets.
The amount of rent assistance to eligible Minnesotans would be determined by a formula: the difference between 30% of household income and the rent charged at a fair market price. There'd be an additional allowance for utilities if not included.
Supporters of the housing plan argue the real need for investment is much larger than $200 million annually, but Anderson with Beacon Interfaith Housing Collaborative is optimistic that the program will create a foundation to build on in future years.
"I'm excited that even in a tiny way we can start it through this sales tax because it can really make an impact on so many lives," he said.
The metro sales tax hike also isn't the only proposed tax increase the DFL-led state legislature is considering this session.
A transportation funding package discussed later in that same committee includes new retail delivery fees and additional increases, including another .75% sales tax increase in the seven-county metro.