St. Paul Mayor Carter, city council poised to approve $2.6 million home-buying ‘Inheritance Fund’

Frederick Melo, Pioneer Press
·7 min read
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At the urging of St. Paul Mayor Melvin Carter, the St. Paul City Council is poised to add up to $2 million next month to expand a 3-year-old fund to promote home-buying, on top of efforts to boost home rehabilitation among the city’s low- to moderate-income residents.

The newly reorganized “Inheritance Fund” eases eligibility restrictions, drops purchase-price limits and adds cash for first-generation homebuyers, and even more money for displaced residents from the city’s historic Rondo neighborhood, as well as their descendants.

It boosts funding even further for Rondo families who purchase homes within the geographic boundaries that once constituted the historically Black neighborhood. Under recently revised guidelines, the down-payment assistance awards can total from $40,000 to $110,000, and do not have to be paid back if the homeowner remains in the property at least 15 years.

The city council, acting as the city’s Housing and Redevelopment Authority, approved the policy changes on Jan. 11 and is likely to back the program expansion with up to $2 million from the city’s Housing Trust Fund on Feb. 22. In an interview, council member Chris Tolbert, who chairs the HRA, said the exact amount of funding has yet to be determined.

By some estimates, construction of Interstate 94 in the 1950s and ’60s is believed to have cost Rondo families some $90 million to $157 million in wealth creation in today’s dollars.

“Over 600 to 700 folks lost their homes to build the freeway, and many of those folks were the grandparents or great-grandparents of people still in St. Paul,” said Carter, in a recent interview.

“Some of those folks may be in California somewhere. Some of those folks may have left St. Paul, left Minnesota,” the mayor added. “It’s very difficult to put a number on what the total universe of folks who could be eligible would be. The goal would be to create a resource that could be generationally transferable.”

$1.5 million awarded to date

Since its creation in 2020, St. Paul’s down-payment assistance program has issued a total of $1.5 million in grants to 41 homebuyers citywide, with an existing wait list in the dozens. The goal isn’t just to house residents, but also to help low-income families begin generating wealth they can pass on to the next generation.

“For a fraction of what it costs to build or even rehab one affordable unit, these programs support the wealth creation that reduces the chance for the descendants of these recipients needing housing assistance in the future,” said Tara Beard, the city’s housing director, addressing the city council on Jan. 11.

“It allows us to address not only housing stability, but economic mobility, and therefore both current and future needs,” Beard said. “Creating and supporting homeownership opportunities is the primary way the city can address the racial disparities in homeownership that continue to plague the region.”

In Rondo, the added goal is to return some lost wealth to the families of those impacted by displacement. Over the years, former Rondo residents have come forward to say that when their families were forced to give up homes and businesses at the time of interstate construction, they received pennies on the dollar from the state for the value of their properties.

If approved by the city’s Housing and Redevelopment Authority on Feb. 22, the new budget for the down-payment assistance program would be $2.6 million for 2023 and 2024.

The city funded the down-payment program with $1.5 million from the HRA’s housing trust fund in 2020, and Minnesota Housing’s Impact Fund added $1 million in 2022. The down-payment fund had $630,000 remaining at the outset of the year.

‘Return to Rondo’

Under the recent guideline changes, descendants of Rondo families will be verified by the Rondo Community Land Trust, which has been in the process of tracing descendants for its own “Return to Rondo” program.

Rather than steer low-income homebuyers to particular neighborhoods, the revised guidelines now allow homebuying in any corner of the city.

“I think people should be able to live in any part of the city, no matter what their income,” said council member Rebecca Noecker during the Jan. 11 HRA hearing. “That’s what this program is for. That move toward integration is really important.”

Among the guideline changes:

• The citywide down-payment assistance program will be opened up to households earning no more than 80% of area median income, or AMI, which is about $89,000 for a family of four. The previous income limit was 60% AMI, or about $70,000 for a family of four. For the descendants of Rondo, the income limit will be 100% AMI, or $118,000.

• A $50,000 limit on combined college savings and retirement account balances has been eliminated.

• The previous program limited homebuying to particular high-poverty census tracts showing risks of gentrification and displacement. The revised program opens up homebuying to any neighborhood in the city, with the goal of supporting mobility and “housing choice” among low-income residents.

• The previous loan term was 30 years, with the expectation of full repayment by the end. The new loan term is 15 years, fully “forgivable,” meaning it does not have to be repaid at all if the homeowner stays in the property for 15 years. The loan is amortized so 1/15th of the principal, or debt, is erased from the loan each year.

• Purchase-price limits on homes have been eliminated.

• The maximum awards for the citywide homebuying program start around $40,000, with up to $10,000 added for first-time homebuyers whose parents never owned housing or lost housing to foreclosure. Another $50,000 would be added for descendants of Rondo, and yet another $10,000 added for Rondo descendants who buy homes within Old Rondo. The maximum payout is $110,000.

Beard noted that roughly half of the 41 down-payment assistance program recipients to date have been white, 40% have been Black and 12% are Asian.

Home rehab program expands eligibility, financial payouts

The city council, again acting as the HRA on Jan. 11, approved additional changes to the home rehabilitation program, which assists low-income homeowners with necessary home improvements. Since 2010, the program has awarded almost $10 million in assistance to 572 recipients, with funding taken from the city’s Community Development Block Grant, which is distributed through the city’s Capital Improvement Budget.

The actual home rehab program is much older, established some 30 years ago. It has sufficient funding to run through the budget year, said Crystal King, a spokesperson for St. Paul Planning and Economic Development, in an email.

Like the down-payment assistance program, the rehab awards will be structured as “forgivable” loans of $40,000 to $80,000, with additional dollars available for Rondo descendants.

Income limits, loan terms and other changes have been increased in step with the down-payment assistance program. In addition, the redemption values of life insurance policies are no longer included when calculating family assets for the purpose of eligibility.

Prior to this month, recipients were limited to $25,000 for home rehab help, with another $25,000 available for emergency repairs, for a total of $50,000. Those awards have been increased to up to $40,000 in each category, for a total of up to $80,000, or up to $120,000 for Rondo descendants.

The mayor said he expected the Inheritance Fund will be replenished with city council support in the years to come.

“The goal is to empty this fund as soon as possible because that means we’re facilitating homeownership, we’re facilitating wealth creation in our community,” Carter said. “We’ll certainly be looking to the city council and the HRA to refund the program. Our guess is this allocation will probably last us a couple years.”

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