Local Housing Incentive Account Deferred Loan Program
PROGRAM OVERVIEW
The City of Chanhassen offers deferred loan funding to support the preservation and creation of affordable rental housing. This program is designed for owners and developers of naturally occurring affordable housing and unsubsidized rental properties who are committed to maintaining rents at levels affordable to households earning 60 percent of Area Median Income or below.
The goal is to help preserve existing affordable housing, expand workforce housing options, and support high-quality housing that aligns with community goals.
Program funds must be used in accordance with Minnesota Statutes section 473.25(a) and should advance at least one of the following objectives:
Preserve existing affordable housing
Provide workforce housing choices
Demonstrate strong public and private partnerships
Leverage additional funding sources
Show project readiness
Reflect strong community support
Use land efficiently
Be located near public transit
Align with the mission of funding partners
FUNDING SOURCE
In 2006, the City of Chanhassen received 300,000 dollars from the Metropolitan Council’s Local Housing Incentives Account through the Livable Communities Fund. Loan repayments are returned to this program and made available for future affordable housing projects.
ELIGIBLE USES OF FUNDS
Deferred loan funds may be used for:
Gap financing, including land acquisition
Property acquisition
Demolition
Site preparation
Rehabilitation of water, sewer, or roads
New construction or structural improvements
Interior and exterior finishing|
Roofing
Electrical, plumbing, heating, and ventilation systems
INELIGIBLE USES
Funds may not be used for:
Administrative overhead
Bonds or insurance
Legal fees
Permits
Travel
Grant writing or bid preparation costs
LOAN TERMS AND CONDITIONS
Loan Amount
The amount of funding provided per unit will be determined through negotiations with the developer and will depend on the project’s financial needs. Units receiving City funding must be occupied by households earning no more than 60 percent of the Area Median Income (AMI). Income limits are updated annually.
2026 Area Median Income Guidelines
Minneapolis Saint Paul Bloomington, MN, and WI, U.S. Department of Housing and Urban Development Metropolitan Area Fair Market Rent (HUD Metro FMR) Areas
60 Percent AMI Limits
1-person household: 55,620 dollars
2-person household: 63,600 dollars
3-person household: 71,520 dollars
4-person household: 79,440 dollars
5-person household: 85,800 dollars
Affordability Requirement
Units funded through this program must remain affordable to households earning 60 percent AMI or below for the duration of the loan term or resale restriction period, whichever is longer.
Income Verification
Property owners must verify the income of new residents at the time of move in for affordable units. Existing residents are not required to reverify income.
Reporting
Property owners must maintain verification records and submit required documentation to the city.
The city will complete an annual progress report to the Metropolitan Council for the duration of the loan.
Interest and Structure
Loans are provided at zero percent interest and are structured as deferred loans.
Borrower Contribution
The borrower must contribute at least 50 percent of the total project cost.
Loan Term and Resale Restriction
Repayment terms are negotiated between the city and the borrower but may not exceed fifteen years.
A resale limitation of up to fifteen years will be recorded against the property. This ensures that public investment is protected and that affordability benefits are preserved.
If the property is sold before the resale restriction expires, the loan funds will be recaptured by the city and reinvested in another eligible affordable housing project.
Why Participate
Zero percent interest financing
Flexible deferred repayment structure
Support for property improvements and reinvestment
Contribution toward long term community housing stability
