Despite a budget surplus of more than $19 billion, the Minnesota Senate on Tuesday approved a Housing budget agreement that includes a $745 million metro sales tax increase on Minnesotans – part of the nearly $10 billion in tax hikes proposed by legislative Democrats this year. The Housing conference committee reached the agreement behind closed doors, without input from Republicans on the conference committee. It passed the Senate on a party-line vote after Housing Committee Chair Lindsey Port (DFL- Burnsville) confirmed the bill included a tax increase. 

“If the lack of solutions in the Democrats’ housing agreement weren’t bad enough, they are soaking Minnesotans for another $745 million on top of it,” said Senator Eric Lucero, the lead Republican on the Housing Committee. “With a record $19 billion surplus – and $1 billion set aside for housing – there is zero need to increase taxes on people who are already struggling to get by, especially a regressive sales tax. It is nothing short of absolutely outrageous.”

In addition to the massive tax increase, the Democrat housing agreement spends $92 million to create a new rental assistance program in the vein of the troubled and controversial RentHelpMN program. RentHelpMN was recently the subject of a damning audit, which found the Minnesota Housing Finance Agency badly administered the program. 

Senate Republicans previously attempted to impose several guardrails and protections recommended by the Legislative Auditor on the new rental assistance program, to ensure it does not suffer from the same waste and mismanagement as RentHelpMN. Democrats rejected those efforts. 

“A program to simply pay people’s rent is terribly misguided,” Lucero said. “It will not fix anything; the only outcome will be that we have made people complacent, encouraged landlords to raise rent prices even further, and created a cycle of government dependency. This one is worse than a band-aid because it’s actually causing damage.” 

The Democrat Housing agreement spends more than $1 billion on a variety of feel-good housing programs but fails to address the root causes of the state’s current housing crisis. The bill, which spends more than eight times the previous housing budget, does little to tackle the shortage of 95,000 available housing units and does nothing to reduce the onerous regulations that are driving up prices. 

The median price of a new construction home in Minnesota is far higher than any neighboring states, despite similar weather and cost of building materials. Minnesota is $95,000 more expensive than Illinois and North Dakota; $120,000 more expensive than Wisconsin; $153,000 more expensive than Iowa; and $173,000 more expensive than South Dakota. (Zondra, March 2023.) 

“This housing budget agreement is a gigantic, missed opportunity,” Lucero added. “Instead of addressing the real problems that cause housing to be so expensive here, Democrats have nothing better to offer than band-aid solutions that will exacerbate our problems in the long run and enormous tax hikes on Minnesotans.”