June 24, 2026

Dear NAIOP Minnesota Members,

The 2026 legislative session concluded on time and, despite one of the closest partisan divides in Minnesota history, lawmakers managed to pass a supplemental budget, a bonding bill, and several policy initiatives affecting commercial real estate, housing, taxation, and economic development.

With a 67-67 tie in the House and a 34-33 DFL majority in the Senate, the session was marked by compromise, fiscal restraint, and a focus on targeted policy changes rather than sweeping new mandates. While many proposals impacting commercial real estate were introduced, several of the industry's highest-priority concerns were either addressed favorably or prevented from advancing.

The Legislature approved a $660 million supplemental budget focused on targeted investments, technology modernization, public safety, healthcare, and fraud prevention. Lawmakers also created an Inspector General's Office to combat fraud, expanded staffing for fraud investigations, approved additional security funding for the Capitol and courthouses, and enacted social media protections for children.

Key Legislative Wins for Commercial Real Estate

Federal Tax Conformity Extended

One of the most significant victories was the extension of Pass-Through Entity (PTE) federal tax conformity through 2027. This provision continues to provide substantial federal tax savings for many Minnesota business owners and real estate investors at no cost to the state.

Additional tax provisions included a 14.88% increase in the property tax refund program for eligible homeowners and a one-year reduction in vehicle tab fees to 2022 levels. While these measures primarily impact residential taxpayers, they reflect the Legislature's efforts to provide targeted tax relief while maintaining fiscal restraint.

Tenant-Landlord Improvements

• Cleanup of submetering regulations
• Creation of an expedited eviction process
• Clarification that eviction notices may not be served directly to minors
• Manufactured housing infrastructure grants
• CIC/HOA reform measures
• Additional protections for domestic violence victims in contract-for-deed situations

Major Infrastructure Investments

• Water and sewer projects
• Transportation improvements
• Housing investments
• Asset preservation projects
• Veterans facilities
• Higher education facilities
• Parks, trails, and community assets

What Didn't Pass

• "Just cause" eviction requirements
• Tenant first-right-of-refusal mandates
• Sales taxes on professional services
• Taxes on advertising and social media services
• Wealth tax and net investment tax proposals
• Restrictions on corporate ownership of single-family homes
• Rent control proposals for manufactured housing
• Expanded building performance mandates and energy standards
• Various local tax increase proposals
• Property tax appeal reform proposals
• Restrictions on certain non-disclosure agreements involving local governments
• Independent contractor safe-harbor revisions affecting construction businesses
• Minnesota Starter Homes Act proposals
• Built-to-rent ownership restrictions

Government Relations Compliance

The Legislature expanded Minnesota's lobbying and governmental influence reporting requirements. Changes broadened the definition of lobbying activities involving both state government and local political subdivisions, and added new reporting considerations for expert witnesses and local advocacy activities. Businesses and industry participants who regularly interact with elected officials or local governments should review these changes with legal counsel to ensure compliance.

State Budget Outlook

Minnesota currently maintains a projected $3.7 billion surplus for the 2026-27 biennium; however, state economists continue to project a structural imbalance approaching $3.4 billion in the following biennium. This fiscal reality is likely to drive many of the tax and spending debates during the 2027 budget session.

Looking Ahead to 2027

• State budget sustainability
• Tax policy
• Environmental regulations
• Healthcare costs
• Housing and workforce challenges
• Infrastructure investments
• Tax Increment Financing (TIF) Conversion District proposals
• Efforts to reduce the state general levy on commercial and industrial property
• Continued focus on Minnesota's structural budget imbalance

Elections Matter

The 2026 election will have significant implications for commercial real estate. Voters will elect a Governor, U.S. Senator, the entire Minnesota House of Representatives, and numerous local officials. The outcome will help determine whether Minnesota enters the 2027 budget session with divided government or one-party control, which will directly influence tax policy, environmental regulation, housing policy, infrastructure investment, and commercial real estate issues.

The Primary Election is Tuesday, August 11, 2026. Request a mail-in ballot at mnvotes.gov.

Support the NAIOP Minnesota PAC

The relationships we build with policymakers and candidates matter. Please consider supporting the NAIOP Minnesota Political Action Committee to help ensure commercial real estate continues to have a strong voice at the Capitol.

Donate to the PAC »

Support the Penny Per Square Foot Program

As many of you begin preparing your 2027 budgets, please include your Penny Per Square Foot contribution in next year's planning and, if you have not already done so, fulfill your 2026 commitment. Your investment allows NAIOP Minnesota to monitor legislation, educate policymakers, build industry coalitions, and protect commercial real estate from proposals that increase costs and hinder investment.

Your impact makes a difference for commercial real estate.

Email NAIOP MN about getting involved in PPSF »