Disregarding the 1 percent sales tax hike already enacted by the 2023 legislature, a new bill, SF 2621, and its House companion, HF 3279, will ask voters to amend the state constitution and further raise the rate by “three-eighths of one percent” between 2027 and 2052. As the ballot phrasing explains, the proceeds will fund initiatives
to remove barriers to homeownership, to make rental housing safe and affordable, and to protect vulnerable households and communities from displacement and homelessness, and home
Specifically, the state will create:
- A home ownership opportunity fund: to buy or develop homes
- A Community and household stability fund: assistance programs for the homeless
- A Rental opportunity fund: rental assistance plus development or rehabilitation of rental housing
New funds, according to the bill,
must supplement traditional sources of funding…. and may not be used as a substitute.
That is, regardless of revenue shortfalls or changing needs, the state constitution would guarantee new housing funding for at least two decades. This would mean limited legislative control over future budgets — especially since earmarked funds are locked away in special accounts that are rarely part of the broader budget discussion — leaving less room to maneuver if state finances take a turn for the worse.
But setting aside the downsides to constitutionally dedicated spending, a few additional facts should give legislators a pause before they vote to pass this bill:
- The 2023 tax hike collected $677 million from Minnesotans in 2024, of which nearly $170 million was for housing initiatives.
- Research evidence strongly suggests that stringent regulations and excessive fees are the main culprits behind housing unaffordability in Minnesota.
- Minnesotans already shoulder a massive and expanding government;
- They pay some of the highest taxes in the country.
- Minnesota’s structural deficit has persisted since 2024. The fiscal outlook will only worsen once the COVID-19-driven surplus runs out.
As American Experiment’s written testimony to the Health and Human Services Committee specifically warns,
Amid mounting affordability concerns, SF 2621 will not only fail to address Minnesota’s housing challenges but will also increase costs for taxpayers.
