Program election (9% vs. 4% vs. hybrid) — Minnesota

One QAP, eight Allocating Agencies

Minnesota Housing is the primary HTC Allocating Agency for the state under Minnesota Statutes sections 462A.221 to 462A.225, but section 462A.222 lets qualifying cities and counties become their own Allocating Agency — a "Suballocator" — for a reserved share of the 9% credit. Eligibility was fixed by the original 1987 statute to cities of at least 50,000 population with a housing and redevelopment authority (HRA), cities located in three or more counties with an HRA, and counties of at least 100,000 population with an HRA, and a city or county had to submit a written request within 45 days after June 2, 1987 to be designated. The Amended 2026-2028 QAP (Chapter 2.F) confirms the current roster: Minneapolis, St. Paul, Dakota County, and Washington County in the Metropolitan Area, plus Duluth, Rochester, and St. Cloud in Greater Minnesota. Minneapolis and St. Paul may each route their allocations through the jointly operated Minneapolis/Saint Paul Housing Finance Board.

Not all seven actually run an independent competition today. Duluth, St. Cloud, and Rochester have each signed a Joint Powers Agreement (JPA) with Minnesota Housing under which Minnesota Housing itself performs the HTC allocation and compliance monitoring on their behalf — their reserved credit share is administered through Minnesota Housing's own process, not a separate local scoring round. Minneapolis, St. Paul, Dakota County, and Washington County have not signed a JPA, so those four run genuinely separate Round 1 competitions with their own applications, deadlines, and (potentially) their own selection criteria. This session did not independently confirm whether those four non-JPA Suballocators' own selection criteria mirror Minnesota Housing's Self-Scoring Worksheet or diverge from it — that should be confirmed against each Suballocator's own published materials before assuming Minnesota Housing's scoring guide applies inside their jurisdictions.

The Metropolitan Council is worth a direct correction, because the industry shorthand around a "regional suballocator system" can overstate its role. "Metropolitan Area" in the QAP is simply a cross-reference to Minnesota Statutes section 473.121, subdivision 2 — the seven-county area over which the Metropolitan Council has planning jurisdiction (Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington counties, with a handful of specific cities carved out). The Council itself allocates no credits to any project. Its one statutory role, under section 462A.222, subdivision 4, was time-bound: by October 1, 1990, develop and submit to Minnesota Housing a plan for how credits would be distributed within the metro area, a plan Minnesota Housing "may amend" after consulting the Council, local governments, and housing and redevelopment authorities. The Council is a planning consultant on the metro distribution formula — not an Allocating Agency, and not a body that runs a competition or issues an allocation to any developer.

Round 1 forces a real choice of agency; Round 2 erases it

During Round 1, a for-profit applicant with a site inside a Suballocator's jurisdiction must apply directly to that Suballocator for an HTC allocation — Minnesota Housing will not accept the application "unless the Suballocator has entered into a Joint Powers Agreement with Minnesota Housing or has returned all their HTCs to Minnesota Housing." The one carve-out is the nonprofit set-aside: a nonprofit applicant with a project inside a Suballocator's jurisdiction may apply simultaneously to the Suballocator and to Minnesota Housing's own nonprofit set-aside. Minnesota Housing also caps how much of each geographic pool Round 1 can spend on preservation versus new construction — a 2/3 preservation allocation ceiling per pool, waivable at Minnesota Housing's discretion if qualifying new-construction proposals aren't competitive.

The two geographic pools — Metropolitan Area and Greater Minnesota — aren't split by a fixed percentage written into the QAP. Minnesota Statutes section 462A.222, subdivision 1a sets the formula: the metro pool is allotted a share equal to "the metropolitan counties' percentage of the total number of state recipients of the Minnesota family investment program, general assistance, Minnesota supplemental aid, and Supplemental Security Income in the state, as reported annually by the Department of Human Services," with Greater Minnesota getting the remainder. The Amended 2026-2028 QAP states Minnesota Housing will update that split "based upon updated demographic data in early 2025, 2026 and 2027" and post the applicable figure on its website — not in the QAP text itself. A commonly repeated 39% Greater Minnesota / 61% Metro split traces to secondary industry summaries with inconsistent as-of dates (some cite January 2020, others January 2022); this session could not confirm the percentage actually in effect for the current cycle, and a live deal should pull the figure Minnesota Housing has posted rather than reuse either cited number.

Round 2 flattens all of that. It combines every remaining or returned credit — including anything a Suballocator didn't commit — into one unified statewide pool, allocated by Minnesota Housing "without regard to geographic distribution and with no set-asides." Projects located inside a Suballocator's jurisdiction may apply directly to Minnesota Housing in Round 2, and previously-funded projects with an annual HTC shortfall of at least 5% but no more than 33.33% get priority over other Round 2 and waiting-list applicants. In effect, the choice of Allocating Agency that matters so much in Round 1 stops mattering once Round 2 opens.

The bond/4% path already matches OBBBA — no added Minnesota ceiling found

Bond-financed 4% deals run on a year-round pipeline rather than either Round. Chapter 7 of the QAP requires a 42(m) preliminary-determination application at least 60 days before the tax-exempt bonds are issued (late filings are subject to a fee), and Minnesota Housing's QAP governs "all projects for which Minnesota Housing is the issuer of the bonds and all other projects for which the issuer is not located within the area covered by a Suballocator QAP" — language that implies a Suballocator could in principle run its own separate bond QAP for bond-financed deals inside its jurisdiction. This session did not independently confirm whether any of the four non-JPA Suballocators actually maintain a separate bond QAP; treat that as an open question to raise directly with the relevant city or county rather than assuming Minnesota Housing's Chapter 7 always controls.

On the federal test itself, the Amended 2026-2028 QAP already states both halves of the post-One Big Beautiful Bill Act rule directly: "The required minimum percentage is 25%, if (a) a project is placed in service after December 31, 2025, and (b) at least 5% of the aggregate basis of the building and land is financed with bonds issued after December 31, 2025," and "For all other projects, the required minimum percentage is 50%." The QAP calls this "subject to future changes in federal law," and this session found no Minnesota-specific administrative ceiling tighter than that federal floor — a contrast with Colorado, which capped its own bond-financed aggregate basis at 30% administratively, a full year ahead of its own stated glide path. Because that kind of tightening can happen in agency guidance without amending the QAP text itself, confirm Minnesota Housing's current practice before underwriting a live 2026-vintage bond deal to either percentage.

The state credit is real — but it's a donation market, not a project election

Minnesota does have an enacted, currently active state housing tax credit — the State Housing Tax Credit (SHTC), created by 1Sp2021 c14 art1 (2021) and codified at Minnesota Statutes section 290.0683 (the credit itself) and section 462A.40 (the contribution account and its uses). It is structurally nothing like Colorado's or Georgia's state credit. A Minnesota taxpayer contributes between $1,000 and $2,000,000 to the Minnesota housing tax credit contribution account, and "the credit equals 85 percent of the amount the taxpayer contributed to the account during the taxable year." The statute caps the whole program at the state level: "the aggregate amount of tax credits allowed to all eligible contributors is limited to $9,900,000 annually." Unused credit carries forward up to ten years, and the program sunsets — it "expires after December 31, 2028," though Minnesota Housing retains authority to issue certificates for contributions received before January 1, 2029, with related wind-down authority running through January 1, 2030.

The contributed dollars don't ride along with a specific development's federal credit allocation. Minnesota Housing uses the account to make loans and grants to cities, federally recognized tribes and tribal housing corporations, nonprofits, housing authorities, private developers, and property owners, for new construction, acquisition, rehabilitation, demolition or removal, gap financing, construction or permanent financing, interest-rate reduction, or refinancing. Recipients must serve households that meet the income limits in Minnesota Statutes section 462A.33, subdivision 5 — an income-restriction condition written directly into section 462A.40. Industry reporting states that both the 2024 and 2025 SHTC program years were fully subscribed at the full $9.9 million; this session did not independently verify a subscription report from Minnesota Housing itself confirming that figure, so treat it as a widely reported but not agency-document-confirmed data point. Separately, some secondary reporting describes a 2024/2025 legislative change letting Greater Minnesota market-rate workforce housing receive SHTC contributions without an income restriction — this session read the current text of section 462A.40 directly and found only the income-limit condition quoted above, with no workforce-housing carve-out in that section. Whether such a carve-out exists elsewhere in statute or only in Minnesota Housing's annual program materials was not confirmed; verify directly with Minnesota Housing before assuming an unrestricted workforce-housing SHTC pathway is available.

The practical takeaway for program election: the SHTC is an upstream capital source a development may separately compete for, not a box checked on the HTC application the way Colorado's standard/accelerated state credit rides inside Round One or Round Two. It does not appear anywhere in the Section 42 minimum set-aside or program-election mechanics of the Amended 2026-2028 QAP.

No codified 9%/4% hybrid found

Unlike states that publish an explicit "twinning" mechanism combining 9% and 4%/bond financing on a single site, this session found no such provision anywhere in the Amended 2026-2028 QAP text. That is a non-finding, not a denial — the QAP simply doesn't describe one. A sponsor considering that kind of structure in Minnesota should raise it directly with Minnesota Housing rather than assume, from this or any other state's practice, that it is either available or barred.