Committee Summary: House Local Government Division Committee, February 23
By: Lolla Nur, UpTake Fellow
The House Local Government Division Committee met on February 23 at 8:30 a.m. to discuss HF3256 Legalizing Affordable Housing Act (Rep Steve Elkins DFL). The purpose was to review information on how increased demand for housing, Minnesota labor and supply costs in 2021, coupled with a historic shortage of supplies, have all had an impact on the market.
Most of the meeting consisted of newscasters on the economy, home sales, housing market statistics and demographics.
According to witnesses, Minnesota has experienced a historic shortage of housing construction over the past decade due to a mix of strict zoning regulations and various market factors that have failed to capture what many witnesses called the “missing link” of the housing market. This “missing middle” is more affordable 2 to 4 unit buildings such as duplexes, triplexes and small to medium sized multi-family buildings.
These are more “affordable for groups that have been left behind and more accessible for groups that don’t have access to intergenerational wealth to buy individual single-family homes,” according to Zillow researcher and witness Luke Bell. .
The presenters (and summary of their comments) included:
Danielle Leach, Zone. She presented Zonda’s own proprietary data on the Twin Cities housing market. She mentioned that all housing inventory is tight in the Twin Cities, currently at 0.6 months of supply; it’s usually 4 months supply available, she says.
- There are few products available in the market that are priced below $350,000
- Entry-level buyers are shut out of the market.
- Land is expensive, while the cost of supplies (timber) and labor are also rising.
- Builders are selling their housing inventory faster than they can start or close them due to supply and labor shortages. It is a response to demand.
Luke Bell, Government Relations and Public Affairs at Zillow. He said Zillow wanted to reduce barriers to housing and spoke about the racial and class equity challenges created by the housing crisis. He expects home values to climb, rising 16% nationally by the end of 2022 compared to 2021.
- Black ownership in the Twin Cities is 26%. Ownership of white houses is 76%. This is the lowest black homeownership rate in the United States and the largest black-white housing gap.
- Reforming residential zoning rules would allow for more construction and density to increase housing supply and affordability.
- He suggested that relaxing zoning rules to allow for more efficient construction would be the most effective way to increase housing supply.
- 57% of respondents in St Paul support building more homes (more density) in their communities according to Zillow research.
- Neighborhoods made up of single-family detached houses are whiter and more racially segregated.
- If Minnesota doesn’t build enough housing, we won’t be able to meet Minnesota’s demand and population growth.
Libby Starling, Community Development and Engagement Division of the Federal Reserve Bank of Minneapolis. She spoke about housing affordability issues, particularly the low BIPOC homeownership rate in the Twin Cities.
- The peak of black homeownership in Minnesota was in 1950 (during segregation), it was 46%. Nearly half of black communities in MN owned a home in 1950. In 2019, that’s about 23% (and whites 77%).
- 4.6% of all Twin Cities housing was vacant in 2020. This makes the Twin Cities the lowest housing availability – the worst housing shortage in the nation (worse than LA, Seattle, Denver, etc.).
- We are backlogged by 80,000 missing units that have not been built in the past 15 years to meet current demand.
- This is the result of a decade of new housing starts that are not keeping up with demand.
- The greatest need is for multi-family homes (5 units and more) and single-family detached homes.
David Arbit, Minneapolis-area real estate agents. He said lot sales plummeted during the Great Recession, soared in 2012-13, then remained flat in 2014-19. Lot prices have increased again, especially between 2020 and 2021.
He also mentioned that the market is a spectrum: “We need both sub-$300,000 homes and million-dollar homes. One end of this spectrum is thriving, the other is not.
Other cookies include:
- Scott McLellan, Minnesota Department of Labor and Industry
- Amber Backhaus, Minnesota Automobile Dealers Association.
- Ethan Roberts, Jewish Community Relations Council of MN and the Dakotas
- David Werschay, Werschay Houses.
- Paul Heuer, Pulte Houses.
- Peter Coyle, a lobbying attorney representing Housing First MN.
- Paul Eger, Minnesota Association of Realtors.