The Minnesota Multi Housing Association (MHA)
is a state-wide nonprofit trade organization. With nearly 2,100 members representing more than 250,000 housing units throughout Minnesota, MHA is the voice of the state's multi housing industry.

Legislative Recap 2016

By Todd Liljenquist, Vice President of Government Relations

As the clock struck midnight on May 23rd, the status of the legislature’s primary initiatives for the 2016 Session remained unclear. The landscape has settled somewhat since the legislature adjourned but none of those priority issues have been enacted into law yet. Heading into session, it was largely agreed that a bonding bill, tax bill, and transportation funding bill were the legislative items of highest priority this year. Yet, none of the bills have become law. 

The House and Senate passed slightly different versions of the bonding bill, which also included substantial transportation funding, and Governor Dayton vetoed the tax bill due to a drafting error. A special session remains possible but, in an election year, each day that passes without movement toward an agreement makes it less likely that a special session will be convened at all. An update will be provided should the governor convene a special session.

Very little was enacted into law this session that directly impacts the rental housing industry. For a number of reasons, including logistical concerns about ongoing Capitol reconstruction disrupting legislative activities, the 2016 Session did not begin until March 8th which made for an extremely short 11-week session. For our organization, experiencing a less active legislative session was welcome as there have been a number of other issues consuming the time of our government relations team. 

HUD recently published guidelines on criminal background screening in rental housing which has caused significant concern and confusion in the industry. MHA is also awaiting a ruling in a Minnesota Supreme Court case, in which we filed an amicus brief, interpreting whether the "lockout statute" applies to an individual who has not yet been given possession or moved into the rental unit. Finally, a Minneapolis City Council member has proposed making it a violation of the Civil Rights ordinance for a property owner to refuse to participate in the Housing Choice Voucher program (HCV) (otherwise known as the Section 8 voucher).

One of the many elements of a successful government affairs program is having dedicated, supportive, and active member involvement in the process. We would like to thank Lisa Moe for providing steady leadership as chair of the Legislative Committee. We would also like to thank Legislative Committee members for their willingness to assist when asked and for their thoughtful consideration of legislative proposals. 

Detailed explanation of new laws that specifically affect rental housing, as well as a brief discussion of proposed legislation and the ongoing issues they represent follow.


New Laws

Landlord Risk Mitigation Fund

A one-time appropriation of $250,000 will fund a pilot program that will reimburse certain property owners for costs incurred while renting to higher-risk residents. The purpose of the pilot program is to provide a guarantee to incentivize property owners to rent to residents they would otherwise not likely rent to, including those who are homeless, living in a segregated setting such as an institution or shelter, or have a criminal record. The program will be administered through grants provided to housing authorities who will then disseminate funds to property owners or managers operating within the housing authority jurisdiction who apply for funding. Governor Dayton included the “landlord risk mitigation fund” in his $100 million equity funding proposal this session. Legislators also introduced standalone bills for the pilot program in both the House and Senate. 

The language for the funding of the pilot program provides: 

$250,000 is a onetime appropriation for grants to eligible applicants to create or expand risk mitigation programs to reduce landlord financial risks for renting to persons eligible under Minnesota Statutes, section 462A.204. Eligible programs may reimburse landlords for costs including but not limited to nonpayment of rent, or damage costs above those costs covered by security deposits. The agency may give higher priority to applicants that can demonstrate a matching amount of money by a local unit of government, business, or nonprofit organization. Grantees must establish a procedure to review and validate claims and reimbursements under this grant program.

(Laws of 2016, Chapter 189, Article 12, Section 2, Subdivision 3)


Real Estate Licensing Changes 

Two laws related to real estate licensing were enacted into law. Veterans returning from active duty or their spouses whose real estate license has lapsed or became ineffective shall be granted a waiver of the licensing experience requirement for purposes of taking the broker’s examination. Veteran licensees or spouse licensees may file for the waiver for up to two years rather than the prior six month limitation. Another change in law prohibits the Minnesota Department of Commerce (DOC) from recovering investigation costs from an entity when an investigation results in no finding of a violation. Under prior law, the DOC was only prohibited from recovering costs against a natural person when no violation was found as a result of the investigation.

(Laws of 2016, Chapters 90 and 156)

Receivership and LLC technical corrections
Technical and clarifying changes were made to the recently-amended statutory chapters dealing with receiverships and Limited Liability Companies (LLC). The revised LLC statute was enacted in 2014 while the previous changes to the receivership statute were enacted in 2012. Neither of the 2016 changes substantively change the laws related to the subject areas. 

(Laws of 2016, Chapter 135, Articles 3 and 4)


Property Taxes

State law does not require passage of a tax bill and, for the second year in a row, no tax bill was signed into law. Unlike last session, however, a final compromise tax bill passed both the House and Senate with broad bipartisan support. Tax relief was provided to many groups, including farmers, parents, college-indebted students, and businesses, but the tax bill was ultimately vetoed by Governor Dayton due to a one-word error. That one-word potentially put over $100 million of dedicated Vikings stadium revenue in jeopardy. Bill drafters mistakenly used “or” instead of “and” in a charitable gaming tax administration provision which would allow virtually every gambling facility to define itself as a bingo hall and qualify for a tax break. Under the language as drafted, funding for the state’s portion of the Vikings stadium could be compromised and the state would need to find other means of paying for its contribution.


Upon discovering the error, the governor insisted that it must be corrected in a special session while the House Republicans argued that the governor could still sign the bill and the issue could be resolved next session and, in the meantime, a legislative understanding of the tax provision could be memorialized by all parties. Ultimately, Governor Dayton “pocket-vetoed” the tax bill by failing to sign it within 14 days of final adjournment. Existing tax codes will continue in the same formulation which all but guarantees a larger state budget surplus for the beginning of the next biennium.

An increase to local government aid and county program aid were included in the vetoed tax bill but the largest property tax provision provided an exemption for the first $100,000 of commercial-industrial property value from the statewide general levy. The statewide general levy is paid by commercial and industrial properties in addition to their local property tax obligations. This proposed exemption would have no impact on the property taxes of property types which do not pay the tax, which includes apartments, but it would provide property tax relief to lower market-value properties which are primarily located in greater Minnesota. The proposed exemption would impact the overall state budget because that money would no longer be added to the general fund.

A provision involving the Certificate of Rent Paid (CRP) was once again proposed by the Minnesota Department of Revenue. The proposal requires rental property owners to submit a copy of the CRP to the department, in addition to giving a copy to the resident, in the content, format, and manner prescribed by the commissioner. Due to MHA’s advocacy efforts, the language requires that the department “first consult with representatives of owners or managing agents to develop an implementation and administration plan that attempts to minimize financial burdens and costs of compliance.” Although the proposal was once again not enacted into law, MHA will engage with the department on this issue if the department chooses to continue to pursue this proposal.

The Minnesota Department of Revenue included in its policy bill a proposal which requires rental property owners to submit a copy of the Certificate of Rent Paid (CRP) to the department, in addition to giving a copy to the resident, in the content, format, and manner prescribed by the commissioner. Although the proposal was not enacted into law due to the fact that there was no tax bill, MHA will engage with the department on this issue if it chooses to continue to pursue this proposal. 

 

Proposals NOT Enacted into Law

1.      Study on mandatory lead hazard testing. A study by the Minnesota Department of Healthy on benefits of imposing lead hazard testing requirements on all residential rental units in the state was proposed as a House floor amendment but failed to pass. The study largely replicated a bill introduced last session which did no pass but would require testing of all residential rental units built before 1978 every five years for presence of lead-based paint or lead hazards, and, under the 2015 proposal, test results need to be disclosed to current residents and prospective residents, and if lead-based paint or lead hazards are found, then interim controls or lead abateman measures need to be completed.

2.      MN Department of Agriculture pest control. The Minnesota Department of Agriculture proposed requiring all pesticide applicators following an application in a multi-unit dwelling, to post a notice of pesticide use. The department proposed posting of application reports during the 2015 Session and interested parties met with the department over the interim but could not reach an agreement on language. This session the provision was removed and the department was instructed to meet once again with interested parties over the legislative interim.

3.     Interim ordinance notice and hearing requirement. A bill mandating a 15-day notice and a public hearing prior to a municipality adopting a development moratorium passed to the House floor but failed to reach the Senate floor. Under current law, a majority vote of a city council can enact a development moratorium for up to one year without notice or a public hearing.

4.      Notice of proposed ordinances affecting business licenses. Required notice to potentially affected businesses at least 15 days prior to an initial hearing on an ordinance that may affect a business licensed by the county or city passed to the House floor but did not receive a hearing in the Senate. 

5.      Family and Medical Leave Act. A proposal which would provide employees up to 12 weeks of paid medical leave and 12 weeks of paid family leave per year, funded through a new payroll tax on all employers and employees passed the Senate but did not advance in the House.

6.      CIC construction defect claims. Efforts to change the law regarding construction defect claims for associations, including, among other things, imposing certain conditions on associations prior to commencing or intervening in litigation or arbitration involving construction defect claims, requiring a preventative maintenance plan and schedule for all common elements every year, and changing the ability of the court to award reasonable attorneys’ fees and costs of litigation to the prevailing party, did not receive a hearing in either body.

7.      Local wage and benefit law pre-emption. A bill that would explicitly prevent local governments from enacting wage and benefit laws that conflict with state laws passed the House during the 2015 Session but did not receive a hearing in the Senate in either session.

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