4d Affordable Housing Incentive Program

Rental property owners can get property tax reductions if they keep 20% or more of their rental units affordable.

The Minneapolis 4d program:

  • Preserves affordable homes in Minneapolis
  • Helps rental property owners get property tax reductions if they agree to keep 20% or more of their rental units affordable
  • Helps owners make existing buildings greener through cost sharing for energy efficiency improvements and solar installations

Resources

Affordable housing criteria

Rent is affordable to households making less than 60% of Area Median Income (AMI). Maximum rents for 2021-2022 are as follows:

  • Studio/Efficiency $1,102
  • 1 Bedroom $1,181
  • 2 Bedrooms $1,417
  • 3 Bedrooms $1,636
  • 4 Bedrooms $1,825
  • 5 Bedrooms $2,014

As units turn over, affordable units are rented to households making less than 60% of AMI. In 2021-2022, this means that units must be rented to households making less than the following amounts:

  • $44,100 for one person
  • $50,400 for two people
  • $56,700 for three people
  • $62,940 for four people
  • $67,980 for five people

Benefits for property owners

  • 10-year eligibility for 4d property tax rate, also known as the Low Income Rental Classification (LIRC) which provides an approximate 40% tax rate reduction on qualifying units in most cases. For more information, see Minnesota Statute 273.128, subdivision 3.
  • Grant of $100 per affordable unit, capped at $1,000 per property
  • Payment of first year LIRC fees to the State of Minnesota
  • Green Cost Share funding up to $50,000 per building & 90% of project costs, with eligibility determined by a free energy assessment; and Solar Energy incentives up to $50,000 per project

Program eligibility guidelines

Owners of market-rate rental properties must meet the following criteria:

  • At least 20% of the rental units in a building are affordable to households whose family income is at or below 60% of Area Median Income.Existing tenants in units that have program compliant rents do not need to be income qualified.
  • Going forward, income qualification for tenants is determined upon initial occupancy. Thereafter, increased incomes of tenants in affordable units will not violate the program requirements.
  • Tier 1 or 2 rental license with no rental housing license revocations or outstanding housing orders.
  • Buildings can include units with owner occupants, but only rental units are eligible for 4d tax status.
  • Building does not already qualify for LIRC tax status in Minnesota
  • Market rate new construction projects with at least 20% affordable units can receive up to a $100,000 incentive if pursuing ENERGY STAR, Zero Energy Ready, or Passive House Institute US (PHIUS) certification.
    Single room occupancy (SRO) housing, rooming houses, group homes, and single family homes can participate in the program, starting in fall 2020

Property owner commitment

Record a 10-year affordability declaration on your property stating:

  • At least 20% of units at a property (e.g. 2 units at a 10-unit property) will remain affordable to households making 60% of Area Median Income (AMI). You may enroll up to 100% of the units in the building.
  • As units turn over, new tenants must have household incomes at or below 60% of AMI. The property owner must verify new tenant incomes and report them to the City on an annual basis. Building owners do not need to verify incomes of existing tenants.
  • Rent increases for tenants in affordable units are limited to 6% or less annually, unless the unit is turning over to a new tenant
  • Property owner or manager commits to accepting tenant based assistance (e.g. Section 8 vouchers) and agrees to affirmatively market vacancies by advertising units on HousingLink.org.
  • If a building is sold, declarations run with the property.

Modifications to 4d program commitments

Property owners:

  • Can reduce the number of units in the 4d program if they originally opted for a higher than required level of participation (20% of units in a building).
  • Must contact the City to begin the modification process. If a declaration has been in place for less than five years, the owner must pay a $2,000/unit fee for any opt-downs.

Application process and timeline 

October

  • City will activate the online application portal. All applicants must complete an application checklist , , and Rent Roll Template .
  • Applicants with multiple buildings should submit multiple applications.
  • Applicants should submit their applications as soon as possible for fastest review and processing by City staff.
  • Early applications will be reviewed on a first come, first serve basis. 

January

Final submission deadline. Submit application.

February

City staff will send enrollment paperwork to applicants for review and signature. Standard forms of agreement can be reviewed at any time, and include the 4d Participation Agreement  and Declaration of Restrictive Covenants ,  and , and . Applicants should review the  to ensure all forms are submitted and enrollment items are completed by the deadline. Early applicants may receive materials early for expedited enrollment.

Meet with City staff to review program requirements and compliance procedures and complete enrollment and notarize documents.

February 25, 2021 at 5:00 p.m. – Deadline for selected applicants to submit a signed 4d Participation Agreement, notarized Declaration of Restrictive Covenants, W9 and City ACH transfer form, and LIRC application.

Prior to March 31

City submits LIRC applications to Minnesota Housing on behalf of all selected applicants.

May - June

Applicants receive Minneapolis 4d incentive grants ($100 - $1,000 per property) via US mail.

New Construction: market rate developers should send an email during the pre-construction design phase to be considered for green construction incentives up to $100,000 per project.

Yearly compliance requirements and deadlines

January 31 – Annual Compliance form  is due to the City of Minneapolis by January 31st. This form must be completed and submitted for review yearly. Staff will review the form in accordance with the , with instances of non-compliance including:Tenants with incomes over 60% AMI, unless grandfathered in

  • Rent increases of more than 6% in a year without unit turnover
  • Rent over 60% AMI
  • Units used for short term rentals, subleasing without income verification
  • Other violations of program covenants, such as a failure to address housing code violations

Non-compliant units will face loss of LIRC (4d) tax status until they come back into compliance. If a building has a 2nd year of non-compliance, the owner must pay a fine of $500 per unit to the City.

March 31 – The LIRC re-application form must be submitted separately by participants to Minnesota Housing before March 31st. Minnesota Housing will send this form to you each year by mail, and the form must be submitted yearly in order to maintain ongoing 4d tax status.

All new households that move in after you enroll in the 4d program must be certified as income qualified for your 4d units. Household income must be verified via an applicant’s prior year IRS 1040 form.

All adult applicants must complete the 4d Government Data Practices Act form .

Applicants who do not file a federal tax return must also sign Attachment 1 to the 4d GDPA form and provide alternative third party documentation of income. Examples of acceptable alternative documentation include paystubs and Social Security benefit letters. Calculate household income by annualizing gross income received multiplied by the number of pay periods or disbursements per year.

Program participants familiar with Low Income Housing Tax Credit rules for verifying and calculating household income may instead elect to use those procedures for certifying an applicant’s eligibility.

Verified income and monthly rent charged for your 4d units must be recorded in the . The City of Minneapolis will review this document for completion. 

 should reflect all activity for the taxable year. For the first year of participation, this time period will be the date of your declaration through 12/31.

Other important dates

Green Cost Share annual application deadlines – funds are first come, first serve

  • 4d Energy Efficiency – March 1, May 1, July 1
  • 4d Solar Projects – December 1, February 1, April 1

August (annually) – Minnesota Housing certifies LIRC (4d) classifications. For example, if an applicant applies for 4d status during the October 2019 to January 2020 application cycle, Minnesota Housing would certify 4d status for that property by August 2020.

November (annually) – 4d program participants receive a notice of proposed levies and taxes. For example, if an applicant applies for 4d status during the October 2019 to January 2020 application cycle, they would receive a notice reflecting lower taxes in November 2020.

Annually, one year after applying for the Minneapolis 4d program – Program participants will receive tax bills, which will have a pro-rated reduction of ~40% per unit. For example, if an applicant applied for 4d status during the October 2019 to January 2020 application cycle, their 2021 tax bill would be the first bill to reflect the lower 4d tax rate. This lag time exists because an applicant cannot receive 4d status until Minnesota Housing certifies LIRC status, which happens in August each year.

Stay informed

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Selling property

The City works several with non-profit partner organizations that can buy properties and help apartments stay affordable by utilizing City financing. For more information, contact us.

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4d Affordable Housing Incentive Program

Contact us

 

Community Planning & Economic Development

Planning and Zoning

 
 

 

 

Phone

612-673-3000

 
 

Address

Public Service Building
505 Fourth Ave. S., Room 320
Minneapolis, MN 55415

4d Affordable Housing Incentive Program

Community Planning & Economic Development (CPED)

Phone

612-673-5055

Address

Public Service Building
505 Fourth Ave. S., Room 320
Minneapolis, MN 55415