REST Easy with Mahoney July 2024

By Nathan Plack

The following are a few state and federal legislative updates with potential impact to real estate developers and management companies.  

MINNESOTA UPDATES

Prevailing wage requirements for LIHTC developments

Minnesota is now the first state in the nation to add prevailing wage requirements to LIHTC-funded affordable housing projects. The requirement is effective for applications for funding submitted after August 1, 2024. Contractors and subcontractor noncompliance with prevailing wage requirements would require your project sponsor/developer to create a “wage theft prevention plan”, subject to agency approval, to be required for all future funding applications. Once a wage theft prevention plan is in force, further violations, e.g. wage underpayments of $50,000 or more, could result in project sponsors being disqualified for funding for 3 years. Further details can be read in the language of the bill included HERE.

Tenant protections

• Tenants’ right to organize. Tenants will have the right to establish associations, particularly tenants from disparate properties sharing the same landlord. Landlords cannot prohibit associations from meeting and/or passing out flyers, and if found to be noncompliance, may be fined. This law is effective January 1, 2025.
• Tenants use of individual taxpayer ID number (ITIN) option. Landlords will be required to provide the option for prospective tenants to provide an ITIN in lieu of a social security number. Lease applications cannot be denied solely because applicants choose to provide an ITIN. This law is effective January 1, 2025.
• Landlord requirement to accommodate future tenants if new construction occupancy is delayed. Landlords will be required to remedy tenants if newly constructed units with signed leases are not ready by the move-in date. Options to remedy include: 1) offering other housing to the future tenant, 2) payment from the landlord, or 3) termination of lease and refund of all amounts paid. This law is effective January 1, 2025.
• These newly enacted tenant protections plus a few others are summarized in a free webinar provided by HOME Line which aired on June 12, available

Proposed Legislation, in Committee

Electric vehicle charging and parking requirement for all new projects?

Bill HF3439 was introduced in the Minnesota House in February 2024. Under the proposed statue, the Minnesota building code would require a minimum number of electric vehicle ready spaces, electric vehicle capable spaces, and electric vehicle charging stations either within or adjacent to new commercial and multifamily structures and all new residential buildings that provide on-site parking facilities. You can keep up to date by following the Minnesota House of Representatives session notes.

FEDERAL UPDATES

2025 TCJA Provisions Sunset, What’s Next?

The US House of Representatives Ways and Means Committee has formed the “Tax Teams”, groups of representatives tasked with drafting 2025 legislation to address the sunset of many impactful tax breaks included in the Tax Cuts and Jobs Act (TCJA). There are 10 Tax Teams, including one focused on Community Development. Potential impact areas include Historic Tax Credits and Opportunity Zones. Stakeholders are encouraged to submit comments via a newly created comment portal, read more about it HERE.

LIHTCs and Private-Activity Bonds – Proposed 50-year Affordability Period

Legislation has been introduced in the US House of Representatives to create an optional 50-year affordability period for low-income housing tax credit (LIHTC) developments. If a project sponsor elects an affordability period of 50 years, in exchange they would have access to private activity bonds after 15 years without reducing the volume cap of bonds at the time of recapitalization. The goal is to provide greater access to capital and incentivize keeping housing affordable. Open recapitalization at the 15-year mark, sponsors would have the choice to re-up the 50-year period (with year 15 access to cap-free PAB’s) or agree to a traditional 30-year affordability period without access to further credits under this election. Read more about the Keep Housing Affordable Act, as introduced, HERE.