Sections 81-1235 to 81-1243 shall be known and may be cited as the Middle Income Workforce Housing Investment Act.

(1) Current economic conditions and limited availability of modern housing units impact the ability of Nebraska's older urban neighborhoods and majority-minority communities to maintain residential stability. Low rates of homeownership and a lack of high-quality, non-income-restricted rental housing negatively affects the ability of residents of such neighborhoods and communities to achieve housing stability and invest in their neighborhoods and communities. A lack of workforce housing affects the ability of neighborhoods and communities to maintain and develop viable, stable, and thriving economies. A shortage of quality housing in such areas also impacts the ability of local private, nonprofit, and public employers to grow and prosper.

(2) Impediments exist to the construction, rehabilitation, and financing of urban workforce housing. Comparable home sale and appraisal prices do not justify the cost of new construction homes. There is a lack of space that would be large enough for development to achieve cost efficiencies. Due to generations of disinvestment, these neighborhoods and communities frequently receive a stigma that negatively impacts the residential real estate market.

(3) In order to develop attractive housing options that lead to the recruitment and retention of a world-class workforce in Nebraska's older urban communities, it is the intent of the Legislature to use new and existing resources to support creation of workforce housing investment funds. Such funds will be used to encourage development of workforce housing in Nebraska's urban and underserved neighborhoods and communities.

For purposes of the Middle Income Workforce Housing Investment Act:

(1) Department means the Department of Economic Development;

(2) Director means the Director of Economic Development;

(3) Eligible activities of a workforce housing investment fund means:

(a) New construction of owner-occupied or rent-to-own housing in a neighborhood and community with a demonstrated need for housing that is affordable and attractive to first-time homebuyers, middle-income families, and the emerging workforce;

(b) Substantial repair or rehabilitation of dilapidated housing stock; or

(c) Upper-story housing development for occupation by a homeowner or rent-to-own tenant;

(4) HOME funds means funds awarded as formula grants under the HOME Investment Partnerships Program administered by the United States Department of Housing and Urban Development;

(5) Homeownership incentive reserve account means an interest-bearing, deposit-insured account maintained by the owner of a housing unit for future use by the unit's tenant to purchase a home;

(6) Matching funds means dollars contributed by individuals, businesses, foundations, local and regional political subdivisions, or other nonprofit organizations to a workforce housing investment fund administered by a nonprofit development organization;

(7) Nonprofit development organization means a regional or statewide nonprofit development organization approved by the director;

(8) Owner means one or more persons, jointly or severally, in whom is vested all or part of the legal title to, or beneficial ownership of, the subject housing unit;

(9) Project reserve account means an interest-bearing, deposit-insured account maintained by the owner of a housing unit for unexpected expenses, routine maintenance, and other operational costs associated with managing rental properties;

(10) Qualified activities include purchase guarantees, loan guarantees, loan participations, and other credit enhancements related to eligible activities of the workforce housing investment fund;

(11) Qualified investment means a cash investment in a workforce housing investment fund administered by a nonprofit development organization;

(12) Rent-to-own housing means housing units that:

(a) Are located within a development of single-family housing, duplexes, townhouses, or multifamily housing in which there are no more than ten units on a parcel of land; and

(b) Meet the following requirements until the housing unit is owner occupied:

(i) The housing unit is occupied by a tenant as the tenant's primary residence;

(ii) The tenant does not own a home or other residential real estate;

(iii) The lease for the housing unit provides that:

(A) Not less than fifty dollars of the tenant's monthly rent shall be set aside in a homeownership incentive reserve account prior to any cash flow distributions to the owner. Such homeownership incentive reserve account shall be maintained by the owner in an interest-bearing account as long as the tenant resides in the unit. When the lease ends, the owner shall liquidate the homeownership incentive reserve account and distribute the money to the tenant for downpayment and closing costs on the purchase of a home that will be the tenant's new primary residence. If the tenant does not purchase a home at the end of the lease, the money in the homeownership incentive reserve account shall be transferred to a project reserve account; and

(B) The tenant may end the lease without penalty if the tenant provides the owner with thirty days' written notice and purchases a home that will be the tenant's new primary residence; and

(iv) The housing unit is the subject of a legally binding agreement granting the tenant the option to purchase the unit from the owner at fair market value not less than one year after the lease begins. Such agreement shall give the tenant the ability to apply homeownership incentive reserve account funds to downpayment and closing costs;

(13) Urban community means any area that is:

(a)(i) In a county with a population greater than one hundred thousand inhabitants as determined by the most recent federal decennial census; and

(ii) Within or adjacent to a qualified census tract as described in 26 U.S.C. 42(d)(5)(B), as such section existed on January 1, 2022;

(b) Within a city of the primary class or within a county in which a city of the primary class is located; or

(c) In a county with a population greater than one hundred thousand inhabitants, as determined by the most recent federal decennial census, that does not contain a city of the metropolitan class or a city of the primary class;

(14) Workforce housing means:

(a) Owner-occupied or rent-to-own housing units that have an after-construction appraised value of at least one hundred twenty-five thousand dollars but not more than three hundred thirty thousand dollars. For purposes of this subdivision, housing unit after-construction appraised value shall be updated annually by the department based upon the most recent increase or decrease in the Producer Price Index for all commodities, published by the United States Department of Labor, Bureau of Labor Statistics;

(b) Owner-occupied or rent-to-own housing that meets the following requirements:

(i) The cost to substantially rehabilitate such housing exceeds fifty percent of its before-construction assessed value; and

(ii) The after-construction appraised value of the building alone is at least one hundred twenty-five thousand dollars but not more than two hundred seventy-five thousand dollars. For purposes of this subdivision, housing unit after-construction appraised value shall be updated annually by the department based upon the most recent increase or decrease in the Producer Price Index for all commodities, published by the United States Department of Labor, Bureau of Labor Statistics;

(c) Upper-story housing for occupation by a homeowner or rent-to-own tenant; and

(d) Housing units that do not receive federal or state low-income housing tax credits, community development block grants, HOME funds, or funds from the Affordable Housing Trust Fund. Notwithstanding the foregoing, the department shall not restrict the construction of housing units on land parcels prepared using funds from the sources described in this subdivision and shall not restrict the sale of housing units to homebuyers that receive homebuyer assistance funds from the sources described in this subdivision; and

(15) Workforce housing investment fund means a fund that has been created by a nonprofit development organization and certified by the director to encourage development of workforce housing in urban communities.

(1) The director shall establish a workforce housing investment grant program to foster and support the development of workforce housing in urban communities.

(2) A nonprofit development organization may apply to the director for approval of a workforce housing grant for a workforce housing investment fund. The application shall be in a form and manner prescribed by the director. Through fiscal year 2026-27, grants shall be awarded by the director on a competitive basis until grant funds are no longer available. Grant maximums shall not exceed ten million dollars to any one nonprofit development organization over a two-year period, with the cumulative amount for any single grantee to be determined by the department at the discretion of the director. An applicant shall provide matching funds for workforce housing grant funds awarded. For grant funds awarded prior to July 19, 2024, an applicant shall provide matching funds of at least fifty percent of the amount of such grant funds awarded. For grant funds awarded on or after July 19, 2024, an applicant shall provide matching funds of at least twenty-five percent of the amount of such grant funds awarded. Unallocated funds held by the department shall be rolled to the next program year.

(3) Grants shall be awarded based upon:

(a) A demonstrated need for additional housing. Need can be demonstrated with a recent housing study or a letter from the planning department of the city in which the fund is intending to operate stating that the proposal is in line with the city's most recent consolidated plan submitted under 24 C.F.R. part 91, subpart D, as such subpart existed on January 1, 2020;

(b) A neighborhood or community that has a higher-than-state-average unemployment rate;

(c) A neighborhood or community that exhibits a demonstrated commitment to growing its housing stock;

(d) Reducing barriers to the development and purchase of owner-occupied housing with flexible forms of assistance, including grants, forgivable loans, homeownership incentive reserve accounts, purchase option agreements, and other forms of long-term, patient financing;

(e) Projects that can reasonably be ready for occupancy in a period of twenty-four months; and

(f) A demonstrated ability to grow and manage a workforce housing investment fund.

(4) A workforce housing investment fund shall:

(a) Be required to receive annual certification from the department;

(b) Invest or intend to invest in eligible activities for a workforce housing investment fund;

(c) Use any fees, interest, loan repayments, or other funds received by the nonprofit development organization as a result of the administration of the grant to support qualified activities; and

(d) Have an active board of directors with expertise in development, construction, and finance that meets at least quarterly to approve all qualified investments made by the nonprofit development organization. A nonprofit development organization shall have a formal plan and proven expertise to invest unused workforce housing investment fund balances and shall conduct an annual audit of all financial records by an independent certified public accountant.

(5) A nonprofit development organization that has previously received a grant or grants under the Middle Income Workforce Housing Investment Act shall not be eligible for an additional grant under this section unless the organization has expended at least fifty percent of the funds from such previous grant or grants.

(1) The Middle Income Workforce Housing Investment Fund is created. Funding for the grant program described in section 81-1238 shall come from the Middle Income Workforce Housing Investment Fund. The Middle Income Workforce Housing Investment Fund may include revenue transferred at the direction of the Legislature, grants, private contributions, and other sources. Any money in the Middle Income Workforce Housing Investment Fund available for investment shall be invested by the state investment officer pursuant to the Nebraska Capital Expansion Act and the Nebraska State Funds Investment Act.

(2) The department shall establish a subaccount within the Middle Income Workforce Housing Investment Fund that shall be used to fund affordable housing and related land parcel preparation activities under the Economic Recovery Act as described in subdivisions (4)(d) and (e) of section 81-12,241.

(3) The department shall administer the Middle Income Workforce Housing Investment Fund and may seek additional private or nonstate funds to use in the grant program under the Middle Income Workforce Housing Investment Act, including, but not limited to, contributions from the Nebraska Investment Finance Authority and other interested parties.

(4) Interest earned by the department on grant funds shall be applied to the grant program.

(5) If a nonprofit development organization, or a recipient of subaccount funds described in subsection (2) of this section, fails to engage in a qualified activity within twenty-four months after receiving initial grant funding, the nonprofit development organization or recipient of subaccount funds shall return the grant proceeds to the department for credit to the General Fund.

(6) Beginning July 1, 2029, any funds held by the department in the Middle Income Workforce Housing Investment Fund shall be transferred to the General Fund.

(1) Each nonprofit development organization shall submit an annual report to the director to be included as a part of the department's annual status report required under section 81-1201.11. The report shall certify that the workforce housing investment fund meets the requirements of the Middle Income Workforce Housing Investment Act and shall include a breakdown of program activities.

(2) The annual report shall include, but not be limited to:

(a) The name and geographical location of the nonprofit development organization;

(b) The number, amount, and type of workforce housing investment funds invested in qualified activities;

(c) The number, geographical location, type, and amount of investments made;

(d) A summary of matching funds and where such matching funds were generated;

(e) The results of the annual audit required under subdivision (4)(d) of section 81-1238; and

(f) The number of tenants assisted into homeownership, if applicable.

(3) If a nonprofit development organization ceases administration of a workforce housing investment fund, it shall file a final report with the director in a form and manner required by the director. Before July 1, 2029, any unallocated workforce housing investment fund grant funds shall be returned for credit to the Middle Income Workforce Housing Investment Fund. On and after July 1, 2029, any unallocated workforce housing investment fund grant funds shall be returned to the department for transfer to the General Fund.

(4) If a workforce housing investment fund fails to file a complete annual report by February 15, the director may, in his or her discretion, impose a civil penalty of not more than five thousand dollars for such violation. All money collected by the department pursuant to this subsection shall be remitted to the State Treasurer for distribution in accordance with Article VII, section 5, of the Constitution of Nebraska.

(5) This section does not apply to the subaccount of the Middle Income Workforce Housing Investment Fund described in subsection (2) of section 81-1239.

(1) The department shall use its best efforts to assure that any grant funds awarded to a nonprofit development organization are targeted to the geographic communities or regions with the most pressing housing, economic, and employment needs.

(2) The department shall use its best efforts to assure that the allocation of grant funds provides equitable access to the benefits provided by the Middle Income Workforce Housing Investment Act to all eligible neighborhoods and communities.

(3) The director may contract with a statewide public or private nonprofit organization which shall serve as agent for the department to help carry out the purposes and requirements of the Middle Income Workforce Housing Investment Act. The department or its agent may only use for expenses that portion of the funds available for the workforce housing investment grant program through the Middle Income Workforce Housing Investment Fund necessary to cover the actual costs of administering the program.

(1) As part of the department's annual status report required under section 81-1201.11, the department shall submit a report to the Legislature and the Governor that includes, but is not necessarily limited to:

(a) The number and geographical location of workforce housing investment funds;

(b) The number, amount, and type of workforce housing investment funds invested in qualified activities; and

(c) The number, geographical location, type, and amount of investments made by each nonprofit development organization.

(2) The report to the Legislature shall be submitted electronically.

(3) Information received, developed, created, or otherwise maintained by the department in administering and enforcing the Middle Income Workforce Housing Investment Act, other than information required to be included in the report to be submitted by the department to the Governor and Legislature pursuant to this section, may be deemed confidential by the department and not considered a public record subject to disclosure pursuant to sections 84-712 to 84-712.09.

The department may adopt and promulgate rules and regulations to administer and enforce the Middle Income Workforce Housing Investment Act, including rules, regulations, and reporting requirements relating to proposals pursuant to subdivisions (4)(d) and (e) of section 81-12,241.