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Twin Cities communities falling far behind on affordable housing

The Twin Cities area is falling behind in affordable housing units like Hoffman Place, a 60-unit apartment building in White Bear Lake.
Courtesy of Met Council
The Twin Cities area is falling behind in affordable housing units like Hoffman Place, a 60-unit apartment building in White Bear Lake.

Twin Cities communities are lagging far behind their goals for the production of affordable housing, according to a new report from the Metropolitan Council.

And with the nation in a prolonged economic slump, the prospects for significantly increasing the supply of affordable owner-occupied and rental housing remain bleak.

In 2010, just 1,541 new affordable housing units were added to the region's housing stock, according to the Council. While up slightly in each of the last two years, that’s down from the nearly 5,500 new housing units that were added in the peak year of 2001.

The 2010 production total included just 758 affordable owner-occupied units, the lowest output since the Council began collecting this data in 1996.

The number of affordable units produced by the region steadily decreased every year from 2003 to 2008.
Source: Metropolitan Council
The number of affordable units produced by the region steadily decreased every year from 2003 to 2008.

"When we look nationally, very few communities are building any type of housing," says Libby Starling, research manager for the Met Council. "On the supply side, builders are continuing to work through their excess inventories. They are also struggling to secure money to finance new construction as well as to find buyers. Affordable housing is a piece of that puzzle."

Libby Starling
Courtesy of Met Council
Libby Starling

The decline comes at an unfortunate time for families that have been victims of the Great Recession.

"The mortgage foreclosure crisis has devastated families and neighborhoods, and the number of homeless, especially families and children, continues to grow despite determined efforts to prevent and end homelessness," says the Family Housing Fund in its 2011-13 strategic plan.

As defined by the Met Council and the federal government, an owner-occupied home is considered "affordable" if  households with 80 percent of the region’s media income can pay the mortgage without spending more than 30 percent of their income. In 2010, this translated to a home priced at $233,100 or less.

For rental housing, units are considered affordable if they have monthly rents of less than $787 for one bedroom, $945 for two bedrooms and $1,092 for three bedrooms.

Big expense
However, for many Twin Cities families, shelter takes an excessive bite of their pay. In 2010, 35.5 percent of all households spent more than 30 percent of their income for housing, according to Wilder Research

As Starling indicated, the precipitous decline in affordable housing production mirrors the overall construction of housing since the recession and the meltdown in the housing industry.

In 2010, communities in the region issued just 5,761 residential building permits. That’s down from a peak of 21,350 in 2004 and the third lowest total in the 40 years the Met Council has collected this data.

While the decline in the production of affordable housing is a relatively recent trend, the failure of Twin Cities communities to meet their affordable housing goals dates back much farther.

Under the 1996 Living Communities Act, communities that wish to apply for Met Council grants to help clean up polluted lands, leverage economic development or help fund affordable housing must negotiate affordable housing goals with the Council.

Since 1996, communities have fallen short of their goals for owner-occupied units by nearly 45,000 units, or 53 percent. They have fallen short of their goals for rental housing by nearly 4,000 units, or 25 percent.

Looking to the future, the Council has identified the need for 51,000 new affordable housing units by 2020. However, if production continues at the pace of 1,500 new units a year, the region obviously would fall far short.

Cities need more help
Recognizing the lack of resources to help cities, Starling says, the Met Council allowed them to adopt affordable housing goals that would fall well short of meeting the 51,000-unit goal.

"Unfortunately, there are not a lot of tools available to help cities build affordable housing," Starling says.

Patricia Nauman
metrocitiesmn.org
Patricia Nauman

Patricia Nauman, executive director of Metro Cities, an organization representing 80 communities in the region, says her members are very aware of the need for affordable housing, but that they view it as a "shared responsibility."

"What we have said continually is that cities have a role, but that the state has a role also," Nauman says. "We have seen a continual diminishment of resources for affordable housing, and we would expect that these resource challenges will continue for some time."

One encouraging sign in the Met Council report – affordable housing no longer is being concentrated in Minneapolis and St. Paul.

Since 1996, 55 percent of the new affordable housing has been built in the developing suburbs, 25 percent in the developed suburbs, 15 percent in the central cities and 5 percent in rural areas.

The top five locations for new affordable housing units include the fast-growing suburbs of Shakopee, Maple Grove and Woodbury.

Jim Solem, a former commissioner of the Minnesota Housing Finance Agency and a former executive of the Met Council, says some suburban communities are still reluctant to accept affordable housing, but that attitudes in many of them have changed over the last two decades.

Many local officials say they recognize their community needs a range of housing choices to accommodate the young people who grew up there, the empty nesters who no longer need large single-family homes, and some of the workers employed in the community.

"In many communities, mayors and city councils have stepped up to do the right thing," Solem says.

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Comments (9)

What we need is some legislation that forces those greedy mortage banks to make loans available to low income folks. Then there will be enough potential buyers to interest builders to provide houses for them.

The affordability of existing housing is extremely relevant here. The median sales price is around $150,000 in the metro area, and the operative definition of affordable housing used here is <$233,100. What are the implications for our understanding of the regional supply of affordable housing?

The issues are education and creation of living wage jobs, not housing subsidies.

How about developing housing that is more affordable, like bringing back rooming houses with shared facilities? There are thousands of college kids living in dorms, it should work for low income singles also.

Building "affordable housing" in areas like White Bear Lake isn't all that helpful without affordable and efficient transportation. Housing distant from work and without such transportation increases the cost of living, especially for families that have to deal with child care as a result of constrained budgets and travel options. Places like WBL, with few options for public transportation and also having spread out shopping, requires people to own and insure a car, spend money on gas, and spend money on car maintenance. It's an expense that takes away from whatever "savings" made from living in "affordable housing." Quite frankly, communities that can't at least provide compact services, grocery stores, etc., and preferably affordable and efficient public transportation (being forced to work from 7 to 4 because of the bus schedule is a ridiculous restraint) around their "affordable housing" should be ineligible for any grants for affordable housing.

Rachel makes an excellent point. The Met Council should probably track how much housing is actually occupied by owners or renters who fall under the 80% of median income level. That would give a more accurate indication of whether or not we are increasing concentrations of poverty.

Rather than withhold affordable housing grants, I would tend to withhold other things that such cities really care about: road funding, sewer funding, etc. Use the carrot of LCA funding to encourage affordable housing, but if they haven't filled enough affordable housing units, bring out the sticks.

Concentrated poverty affects the whole region. Segregation affects the whole region. Affordable housing helps alleviate both.

I helped form an affordable housing commission in a Colorado community. It’s a tough nut to crack, and rather than be prescriptive, I’d need to know more about how local communities – the Twin Cities, but also the suburban cities and towns – deal with issues like zoning, which has a profound effect on housing affordability. Rachel’s comment (#5) is also right on target, though I’d guess what she's talking about is not limited to White Bear Lake.

It makes little sense to twist arms and otherwise go to great lengths to provide housing for municipal and retail workers, firefighters and teachers, police and other modestly-paid government employees, if they’re going to have to spend more on transportation than they do on housing. 30% of gross income for housing and utilities has been the rule of thumb for affordability at the housing end, but many families are spending that much and more on transportation. It’s pretty tough to provide much support to the local economy in other ways if housing and transportation alone are eating up 2/3 of your income.

My experience has been that median family income needs to be at least 30% of median home price to have much hope of making progress on this. I’d be surprised if median family income in the 7-county metro area was $69,000+, which is what would normally be required if the median home is $233,100. If nothing else, the disparity illustrates just how ingrained, and difficult to deal with, the housing bubble continues to be. Smaller housing units and greater density are two time-honored and effective ways to moderate the price of housing, but zoning regulations and local prejudices often preclude the approaches that would be simplest and work best.

Another option that doesn’t seem to be explored by most media outlets is the rehabbing and reuse of existing housing, which often meets both the above criteria – it’s usually smaller in size (thus more affordable in terms of maintenance and upkeep), and in existing cities, at least, typically built on smaller lots. My Minneapolis neighborhood is filled with houses of 850 to 1,400 square feet, virtually all of them on lots of 5,000 square feet, and they’re selling for far less than the $233,100 that qualifies as “affordable.”

I don’t know the numbers here, but a similar argument could be made in connection with rental housing, as well, whether single-family detached or multifamily. Local prejudices often play even more of a role in this context, and often show up in the form of whole neighborhoods zoned exclusively for single-family detached housing – and sometimes expensive, “exclusive” single-family housing – at city council request/direction, effectively precluding residence by those of more modest income. If all the apartment buildings in your town are in a single district or area, that’s probably what happened. People obsessed with the value of their housing often get downright paranoid about anything – anything – that they perceive to be a threat to that value. That’s what gets residents to city council meetings to utter dubious allegations to the effect that every renter is a criminal, etc.

I guess I’m confused why there is any conversation of building new affordable homes when the median price in most of the greater metropolitan communities fall below the bench mark number of $233,100.

http://www.mplsrealtor.com/downloads/market/RREAR/RREAR.pdf (pages 11 and 12)

There isn’t a need for new structures. There is a need for organizations or social investors to purchase homes and become landlords for the least advantaged.

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