News & Updates

Subsidizing Abuse: How Public Financing Fuels Exploitation in Affordable Housing Construction

by | Nov 14, 2023 | News

Minnesota faces a significant shortage of affordable housing. Middle and low income Minnesotans are finding it increasingly difficult to rent or buy a home. The supply of low-cost rental housing in Minnesota has actually fallen by a quarter over the last decade, while the cost of buying a home has more than doubled between 2012 to 2022. 

In recent years, state and local governments have taken steps to fund new affordable housing while promoting development of market-rate housing to help ease a shortage that is pushing up prices for all Minnesotans. Yet without stronger oversight over the use of Low Income Housing Tax Credits and Tax Increment Financing programs, there is a danger that new housing projects will be built on the backs of vulnerable workers who earn too little to live in the homes they build.  

This report details the extent of taxpayer support for low-road construction practices that exploit immigrants and other at-risk workers. The report explores how public financing flows to a handful of private for-profit housing developers that employ contractors that have been charged  with or face allegations of exploitation according to interviews with workers and industry experts. 

Key Findings:

  • Minnesota faces a severe housing crisis caused by a shortage of affordable homes, and the problem is getting worse. The supply of low-cost rental housing in Minnesota has decreased by a quarter over the last decade, from 408,599 affordable units in 2011 to 308,733 units in 2021.
  • State and local governments are making unprecedented investments in new housing development. In 2023, lawmakers earmarked a record $1 billion for housing affordability. 
  • Unfortunately, use of contractors that have a record of cheating workers or face allegations of exploitation is far too common on affordable housing projects.
  • While some sources of affordable housing development funding include robust labor standards, two leading sources of funding, the Low-Income Housing Tax Credit (LIHTC) program and local use of tax increment financing (TIF), often lack robust labor standards.
  • Our research found evidence that, since 2016, workers on 25 projects that received approximately $31 million in LIHTC funding were potentially at risk of exploitation by problem contractors. 
  • Our research further uncovered that, since 2018, workers on 14 projects that received approximately $53 million in TIF subsidies were potentially at risk of exploitation by problem contractors.  
  • In total, we have documented the use of contractors tied to proven or alleged exploitation of workers on affordable housing projects that have received over $84 million in taxpayer subsidies.
  • Three of the largest for-profit recipients of LIHTC and TIF funding – Dominium, MWF and Roers – repeatedly use contractors that have records of labor law violations or face serious allegations of worker exploitation. 
  • Affordable housing projects sponsored by Dominium, MWF and Roers were awarded over $47 million in taxpayer-funded subsidies across the Twin Cities metropolitan area between 2016 to 2021 to build 30 projects. This includes housing tax credits issued by Dakota County, Washington County and Minnesota Housing Finance Authority; TIF funding from the cities of Richfield and St. Louis Park; and gap funding from Dakota County.

Wage theft and exploitation remain persistent problems in the construction industry. This report highlights widespread use of contractors that have a record of wage theft or other abuses on publicly-financed affordable housing projects, and suggests concrete actions that state and local governments can take to prevent further abuse. We can prevent exploitation by increasing transparency, adopting responsible contractor standards, holding project owners accountable for abuses that occur on their watch, and investing in enforcement and worker education.

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