The need for affordable housing is growing. In 2000, 297,000 low-income households statewide could not afford their housing. It is projected that this number will grow to 330,000 low-income households by 2010. Moreover, housing programs have been under fire in recent years as significant budget cuts were made to help compensate for the state’s budget deficit. Appropriations for affordable housing reached an all-time high in 2000-2001 with $173 million for the biennium.  Appropriations have been scaled back to $70 million for the 2006-2007 biennium. In the face of these cuts, the Minnesota Senior Federation joined the Housing Solutions Alliance, whose purpose is to create dedicated funding for a range of housing opportunities in Minnesota including an increase in state funding dedicated to the production of senior housing. The Alliance comprises more than 100 organizations. The HSA proposal dedicates new revenue to proven flexible state programs and creates a local incentive-based fund accessible to small rural communities as well as larger communities.

The source for these dollars would be an increase in the deed surcharge tax.  The deed tax is a one-time transfer tax imposed on the value of the real property transferred. Under current law, .33 percent of the value of the property goes towards paying the deed tax. The new surcharge would increase that amount to by .17 percent (to .5 percent) to raise revenue for housing and homelessness programs. The current deed tax is projected to generate $134 million statewide in fiscal year 2006. The deed surcharge of .17 percent would raise approximately $69 million in one year. 

According to a report from the Pennsylvania Association of Realtors, 37 states have a deed tax. Sixteen of those have a higher deed tax than Minnesota’s (the highest being a 2 percent tax). This change would move Minnesota to a rank of 12th instead of 17th and still far below states with much higher deed taxes. Ten other states have used this as a source for dedicating revenue to housing and homelessness programs including Florida, Hawaii, Illinois, Maine, Maryland, Nebraska, New Jersey, Nevada, South Carolina and Vermont. Currently Iowa, Kentucky, New York State, Oregon and the city of Milwaukee are considering a similar approach.   

The dramatic increase in property values over the last several years has put affordable housing out of reach for low-income renters and homebuyers. While sellers will directly benefit from this windfall of higher property values, the deed surcharge will bring some equity to the system by directing this small portion of the property’s value to programs that will help low-income households afford their housing. The table below provides examples of the impact of potential deed surcharges on property sales of various values.

The Minnesota Senior Federation is already gearing up for the 2007 legislative session and promoting senior housing funding will be one of MnSF’s highest priorities. If you are not currently an active citizen lobbyist, go to www.mnseniors.org or call Max Neuhaus at MnSF to join, 651/783-5004 or 877/645-0261 ext. 5004.