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Housing affordability crisis: Policymakers must be deliberate in fixing it

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David Siegel
Minnesota’s growing housing affordability crisis has been getting a lot of needed attention as of late. Past initiatives, including former Gov. Mark Dayton’s 2018 Task Force on Housing and the Minnesota Homeownership Initiative from the Minnesota REALTORS and Housing First Minnesota has helped to raise awareness of the state’s affordability challenges.

A new report from the Housing Affordability Institute has built upon these efforts and taken the discussion a step further. With the release of a comprehensive study into the cost drivers behind new construction entitled “Priced Out: The True Cost of Minnesota’s Broken Housing Market,” the conversation can begin with a common language and an informed public.

The report highlights specific challenges in the new home marketplace and their impacts on our state’s housing ecosystem. What’s clear from the report is that the key value of home affordability has been shockingly absent from housing policy discussions in the Twin Cities and across the state. The impacts are powerful. The findings are sobering:

    • Homeowners will pay $47,000 more for the identical home in Lake Elmo versus Hudson, Wisconsin, only a 15-minute drive apart.
    • Homeowners will pay $82,000 more for a home in the Twin Cities versus the same home (actually 100 sq. feet larger) in a growing Southwest Chicago-area suburb.
    • Up to one-third of a newly built home’s price comes from various housing policies.

How did we get here?

For decades, well-intentioned policymakers at the local, regional and state level have enacted housing policy without adequately considering their impact on affordability. The compounding effect of these efforts in the Twin Cities has led to the fourth-highest disparity between new and existing home prices of any metropolitan area in the country (a staggering $142,000 between average resale and average newly built).

While the cause of the affordability crisis was unintentional, policymakers at the local, regional and state level must be deliberate in fixing it. We must value affordability along with safety and durability when crafting housing policies.

What can be done?

Bold action is needed across the state. The Legislature needs to elevate and broaden the affordability discussion. By forming a standing Legislative Commission on Housing Affordability, the Legislature can work with local governments, its own agencies, builders and developers and other stakeholders to ensure that homes in our region are affordable.

The housing industry is committed to doing its part, and we look forward to policymakers at all levels joining together to fix our affordability challenge.

David Siegel is the executive director of Housing First Minnesota and the president of the Housing Affordability Institute.

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Comments (6)

  1. Submitted by Steve Rose on 02/18/2019 - 09:12 am.

    What can be done?

    “The Legislature needs to elevate and broaden the affordability discussion.” Really, that is a solution? I don’t think that is it.

    If someone can really get a $47K discount on the price of a house and by driving 15 minutes, they will. However, a state boundary is crossed in that 15 minutes; it is a drive from a 1.17% effective real estate tax state (MN) to a 1.95% state (WI). Assuming a $200K house, the annual MN tax bill would be $2340 and in WI $3900. Over the 30 years of a mortgage, the $47K discount is washed out ($1560 difference X 30 = $47K).

    • Submitted by Tom Anderson on 02/18/2019 - 11:34 pm.

      Any chance we know the property taxes for the two areas?

      And, after a task force, a standing commission could also help, I guess.

  2. Submitted by chuck holtman on 02/18/2019 - 02:34 pm.

    I’m reading this article, and the words seem never to be saying what they mean. Bullet points are presented as “powerful” arguments about affordability, but I can’t ascertain their implications. Then it strikes me – I bet Housing First Minnesota is a homebuilders’ group, and it wants to reduce regulation of homebuilding. A quick internet check and, voila!

    Mr. Siegel: Readers of MinnPost tend to be interested in and thoughtful about public policy. You should skip the euphemism, state where your organization believes regulation costs more than it achieves, and tell us how the savings from deregulation would redound to homebuyers of limited means, rather than to the profit margin of your organization’s members. We can stand the straight talk.

    • Submitted by B. Dalager on 02/19/2019 - 02:11 pm.

      What a slimy thing to do! Housing First is a model used to find affordable permanent housing for folks who are homeless, and then provides wraparound supportive services. A homebuilder organization co-opting that name is disgusting.

  3. Submitted by Paul Udstrand on 02/19/2019 - 09:25 am.

    Unfortunately the “report” cited in this article is filled with garbage data and tables. It’s clear that the authors have selected cities and regions that magnify the costs they want to highlight, and numbers are jumble of garbage. they repeatedly claim that “regulatory” costs are the primary factor making MN houses more expensive but even cursory glance at their tables reveals that land price is the biggest factor.

    Regarding the land price they break it down in pie charts that separate out various costs, but they don’t discuss the actual land value. So when you complain for instance that the “improvements” your required to make in Hudson comprise 45% of the land cost compared to 48.5% in Lake Elmo, without a dollar figure per square foot or acre or whatever, that doesn’t really tell you anything.

    Furthermore, the authors never really provide a clear explanation what they’re classifying as a regulatory expense. For instance in their Land Cost pie chart they claim that the regulatory land costs in Corcoran MN are twice as high as Hudson WI, but you have no idea what they’re talking about, none of the percentages add up to the numbers they provide, and there’s no more than a 7.4% difference in any single category. The methods by which they transform 7.4% in to a 33% are never clearly explained.

    Every time they want to make their point they pick a different city to highlight instead of selecting basic cohort for comparison. When they want to talk about permits and fees suddenly Hugo MN shows up in the mix. When they want to talk about Parks suddenly Prior Lake shows up in the mix. The southwest Chicago area comes and goes as a comparison quite conveniently as well, and by the way comparing an entire region in Chicago to specific cities in MN is obviously a statistical mistake. And for some unknown and unexplained reason the authors only pick exo-burbs like Victoria and Lake Elmo to examine, Hopkins or Edina don’t make the cut. I suppose they can say they were using Hudson WI as a comparison, but why then why Hudson? Are there no cities in WI similar to Hopkins? Choosing Hudson may well skew the comparison.

    The Report provides a bunch of tables and numbers but they don’t really tell you anything so it’s mostly garbage pretending to be detail. The source of all this data is either authors themselves, or builders, so there’s no way of analyzing how reliable the data is.

    They claim to have talked to a bunch of builders but they don’t say how many, or where, or describe any kind of sampling methodology.

    Not to be too nit-picky but the report’s pretense of empirical credibility is disingenuous. One of their authors, who has identified as a Ph.D is also listed as a peer reviewer. You cannot peer review your own work, and that authors Ph.D is in Public Administration, he has a B.A. in Economics. This in NOT a peer reviewed study, and I doubt it could survive any serious peer review given the plethora of methodological problems and errors.

  4. Submitted by Matthew Steele on 02/19/2019 - 10:59 am.

    Maybe real estate agents could slash their fees as a way to increase affordability if they’re so concerned about it. That’s something they have the power to do today, and it could easily take 2-4% off the cost of purchased housing. That could be $10,000 on the median home price in the Twin Cities.

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