Homeowner loans, grants proposed in Burnsville | Burnsville

Eligibility, rates would reflect economic need   

Proposed new housing programs in Burnsville would offer qualifying homeowners cash grants for home repairs, loans for maintenance and improvement projects, and loans to senior citizens for maintenance and improvement projects.

Grants would range from $50 to $2,000 to help homeowners repair minor property code violations. Homeowners would be responsible for half the cost under the program, dubbed Code Cash.

The Home Enhancement Loan Program (HELP) would offer loans of up to $50,000 for interior or exterior improvements, maintenance or remodeling. Homeowners could take up to 15 years to repay the loans.

The Senior Deferred Loan Program would provide up to $15,000 for interior or exterior improvements, with repayment deferred until the home is sold or no longer owner-occupied as a primary residence.

The city-funded programs would meet the housing goal of Burnsville’s Economic Development and Redevelopment Strategic Plan, which the City Council approved in 2018. The city’s Economic Development Commission, which helped write the plan and recommended new housing programs, got a look at the proposals at its Nov. 10 meeting.

Council review is scheduled for Dec. 14, with a vote for adoption in late January or early February. Funds to begin the programs are included in the proposed 2022 budget.

“These programs are outstanding,” said Commissioner Jeff LaFavre. “We’ve been talking about things like this for awhile. Kudos to the administration for putting it together.”

The programs are intended to meet housing repair needs that exceed the city’s annual allocation of federal Community Development Block Grant funds administered by Dakota County, said Community Development Director Jenni Faulkner.

“There’s quite a long waiting list for that program, which tells us there’s a need in the community for these types of housing programs,” she said.

The HELP program would charge interest rates of 1% to 3% based on homeowners’ income compared with area median income. The senior loan program would include an income cap at or below AMI for eligibility. Loans would be interest-free.

Code Cash grants would be earmarked for homeowners with a property maintenance code violation who meet two of three conditions: socioeconomic disadvantage confirmed in a statement from the homeowner, an age of at least 65 or a disability, and a risk to life or safety based on the violation.

Eligible projects would range from updating smoke and carbon monoxide detectors to repairing or replacing roofs, doors and windows.

“We spend quite a bit of time on code enforcement, and we would rather spend that time helping people improve their homes or helping them fix the problem, rather than sending an inspector out two or three times, sending them to court, especially for small things that don’t cost much,” Faulkner said.

Requiring homeowners to pay half could incentivize them to avoid future violations, which can range from handrails in disrepair to dead trees and dilapidated accessory structures, Faulkner said.

“I know we had a situation a few years ago where someone’s roof was practically caved in,” she said. “They had poor credit, they were seniors, so they were on a fixed income, and all the equity that they had was in their home, but they couldn’t qualify for a loan anywhere.”

The HELP program would establish a revolving-loan fund for projects such as home additions and renovations, roof replacements, garage additions or expansions, foundation repair and insulation.

A number of north metro cities have such programs, City Planner Sarah Madden said, citing Coon Rapids.

“Their program is incredibly successful and has been funded by their City Council for more than 10 years, and they have been able to distribute on average almost $400,000 per year to homeowners in their community,” Madden said.

Burnsville’s proposed $50,000 loan cap “is on the higher end of what other programs offer,” she said. Multiple loans may be allowed if the balance doesn’t exceed the cap. Loans would be issued through a third-party servicer.

Under the proposal, the ratio of all loans secured to the property, including the new loan, could not exceed 100% of the property value. A homeowner’s debt-to-income ratio could not exceed 43%.

Loans would be “secured with mortgage in favor of the city,” said a city staff report.

“It will be a first-come, first-served program,” Madden said.

The proposal doesn’t have an income limit for eligibility “but would provide a higher interest rate for those with incomes 150% higher than area median income,” the report said.

The Senior Deferred Loan Program would be for homeowners who are at least 66 and have income at or below area median income. It would provide up to $15,000 for interior or exterior improvements, “but the city may ask for a third-party home visit to evaluate projects and determine any life/health/safety projects that may need prioritization through the loan program,” the report said. “Recreational improvements or funds to pay down existing loans or capital are not eligible.” A third party would administer the loans.

The council has already set aside $200,000 for housing programs, Faulkner said. The city could also tap some of nearly $1 million in unallocated tax-increment financing funds and $500,000 in other unrestricted funds, she said. The city’s share of federal COVID-19 relief through the federal American Rescue Plan is another potential source.

“We have $2 million that the council has not allocated of our $8 million allocation,” Faulkner said. “We cannot use that for a loan program, but we can use that for a grant program.”

Commissioners offered some ideas for tightening the programs to help keep them solvent.

“I think one of the things you’re probably hearing across the commission tonight is we really desire to make these programs sustainable so they can continue to replicate themselves down the road,” LaFavre said. “And if we just give the money away, that’s not going to be possible.”

Rental properties would not be eligible for the programs.

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