Middle-income housing program expansion clears first round

The construction of rent-to-own housing units in urban areas would qualify for state assistance under a measure advanced from general file April 23.

Under LB288, introduced by the Urban Affairs Committee, the construction of rent-to-own housing and the development of upper-story housing for occupation by a rent-to-own tenant would be eligible for grants under the Middle Income Workforce Housing Investment Act.

Omaha Sen. Terrell McKinney, the committee’s chairperson, said the change would align with recent updates to the Rural Workforce Housing Investment Act allowing grants to be used to build both owner-occupied and rental housing.

A committee amendment, adopted 41-0, replaced the bill with a modified version of the original proposal along with provisions of three other measures considered by the committee this session.

McKinney said the package is intended to increase housing affordability and accessibility across the state.

The amendment would define rent-to-own housing units as those that are located within a development of single-family housing, duplexes, townhouses or multifamily housing in which there are no more than 10 units on a parcel of land. A rent-to-own unit would have to be a tenant’s primary residence, and the tenant could not own a home or other residential real estate.

A rent-to-own housing lease would have to provide that at least $50 of the tenant’s monthly rent be set aside in a homeownership incentive reserve account maintained by the property owner.

When the lease ends, the owner would distribute money in the account to the tenant to use for a down payment and closing costs on the purchase of a home. If the tenant does not purchase a home at the end of the lease, the money in the account would be transferred to a separate account the owner could use for unexpected expenses, routine maintenance and other costs.

The tenant would have the option to purchase the unit at fair market value one year after the lease begins. Tenants could end a rent-to-own lease without penalty if they provide the owner with 30 days’ notice and purchase a home that will be their primary residence.

The amendment also would update the definition of workforce housing to provide that owner-occupied or rent-to-own housing units have an after-construction appraised value of $125,000 to $330,000. Currently, owner-occupied units may not cost more than $330,000 to construct.

Also included in the amendment are the provisions of LB450, sponsored by Sen. John Fredrickson of Omaha. They would update the Property Assessed Clean Energy Act, under which municipalities may agree to provide financing for the installation of certain energy efficiency improvements in exchange for a property owner’s agreement to pay an annual assessment.

Under Fredrickson’s measure, grid resiliency improvements — including backup power generators, solar panels with battery storage and smart grid technology — also would qualify for the agreements.

The amended provisions of LB626, introduced by Norfolk Sen. Robert Dover, would update the Community Development Law.

Under Dover’s proposal, municipalities could approve redevelopment projects that use tax-increment financing in areas where less than 20% of the housing is affordable housing — which the amendment defines as workforce housing, low-income housing or housing intended for households earning less than 150% of the applicable county’s median income.

A municipality’s governing body could approve such a project if it includes the construction of residential housing and at least 30% of the residential housing in the area would be affordable housing upon completion of the project.

Current law allows the use of TIF for workforce housing only in rural communities or within extremely blighted areas of urban municipalities. Dover’s measure would remove the restriction.

Also included are provisions of LB292, introduced by the committee. They state legislative intent to appropriate $250,000 from the Middle Income Workforce Housing Investment Fund to the state Department of Economic Development, which would be required to provide a grant to a qualified applicant to conduct a study on prefabricated housing.

McKinney introduced an amendment, adopted 40-0, to remove those provisions from the committee proposal.

Dover introduced an amendment, adopted 40-0, to include amended provisions of his LB622, which would change how the department disburses grants under the Nebraska Affordable Housing Act.

Beginning July 1, 2026, the department would disburse grant funds equal to 80% of the housing development costs to the grant recipient upon approval and 20% upon the project’s completion.

Grant recipients would be required to submit a schedule of uses of grant funds, including an itemization of costs, to the department on a quarterly basis. Recipients could be disqualified from receiving grants for up to two years if they do not meet the requirement.

The amendment also would require that applicants identify land for a proposed project before applying for a grant.

Finally, Dover’s amendment would require the department to recapture a percentage of the funds allocated to a grant recipient equal to the percentage of the housing development the recipient agreed to build but failed to complete. The proposal also would require grant recipients to recapture downpayment assistance provided to buyers when they sell their homes.

Dover said recapturing the funds could increase affordable housing construction by 20%.

After adoption of the amendments, senators voted 42-0 to advance LB288 to select file.