There is a well-known adage about buying a new car that says you lose $1,000 the second you drive off the lot. In many Greater Minnesota communities, that same theory applies to housing. If you are able to build a house, you lose money before you even unlock the front door — except instead of $1,000 you’re out upwards of $30,000.
In other words, the housing market in Greater Minnesota is broken.
A big obstacle to recruitment
Despite the pandemic, many manufacturers and businesses in Greater Minnesota are facing a worker shortage. Digi-Key in Thief River Falls has dozens of openings for jobs that offer good wages and benefits. The company plans to expand, adding approximately 1,000 jobs over the next decade, but the lack of market-rate housing remains a big obstacle to recruitment. A 2012 study recommended building 900 new units in Thief River Falls by 2022, but less than half that has been constructed so far.
[image_caption]Mayor Brian Holmer[/image_caption]
According to a 2018 study by the Center for Rural Policy and Development (CRPD), there are several reasons the housing market has stalled in Greater Minnesota. While median incomes, home sale prices and rents have been growing in many rural parts of Minnesota, so too have home construction costs. According to the CRPD report, housing professionals reported a 60% to 90% increase in building costs since 2000, a much faster rate than income growth.
Financing is difficult to obtain
High costs make it incredibly difficult to obtain financing. Unless you have enough money to pay in cash — and what young worker does? — it is hard to get a new starter home built. Whether renovating an older home or building a new one, development costs in Greater Minnesota typically exceed the appraised value of the finished project.
[image_caption]Shane Zutz[/image_caption]
State’s help is needed
Many cities are taking steps to encourage housing construction by waiving fees or offering other incentives, but we need the state to partner with local communities to fix Greater Minnesota’s broken housing market. As legislators consider housing bills this session, we urge them to support these proposals that specifically address needs in Greater Minnesota:
- Create and fund a new “Greater Minnesota Fix-Up Fund” to provide grants to assist cities in rehabilitating dilapidated housing.
- Pass a bonding bill that includes funding to establish the Greater Minnesota Housing Infrastructure Grant Program to help communities offset the cost of providing essential infrastructure like water and sewer connections to new housing developments.
- Put additional money into the existing Greater Minnesota Workforce Housing Development Fund and institute policy changes to make the fund more useable for Greater Minnesota communities.
Lawmakers should also remember that different regions have different needs. A program that works for Brooklyn Center or Apple Valley may not work for Thief River Falls or Austin. Whenever possible, they should pursue targeted approaches that address specific regional or community housing concerns.
For Greater Minnesota, the housing shortage is about more than mortgages and construction materials. It is about economic development, finding ways to ensure our communities and local businesses can grow and thrive. Right now, the lack of workforce housing is holding us back.
Brian Holmer is mayor of Thief River Falls and Shane Zutz is vice president of human resources for Digi-Key.
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Hmm, if a company needs workers that badly perhaps THEY should fund this, instead of asking hardworking metro taxpayers to subsidize their profit-taking. (Outstate isn’t gonna fund itself of course).
The business noted has an owner who is the wealthiest person in the state, a little fact not noted or addressed by the city of TRF or the article.
You can’t see it of course, but this is my shocked face…
In other words, Mayor Holmer is proposing that Minneapolis taxpayers like me subsidize housing for folks in Thief River Falls. That sounds fine to me; I’m always ready to pull out my checkbook for the greater good. But he ought to check with his Republican legislators up there – if I recall, they have some very strong, principled views that costs in one part of the state aren’t the business of folks in another part. So I can’t imagine his proposal has much of a chance.
Hmmm… I grew up with a different version of the adage in the column’s first paragraph – the version I learned was that you lose 30% to 40% of a new car’s value as soon as you leave the dealer’s lot. In the context of Matt Haas’s comment, I wonder how Greater Minnesota’s civic and business leaders feel about bumping the state’s minimum wage to $15/hour? That might make metro-area subsidization of Greater Minnesota a little less burdensome for urban dwellers.
Anecdotes aside, it’s a recurring and ongoing problem to balance housing supply and cost with employment and wages. The fact that it’s a recurring problem suggests – to me, at least – that the version of capitalism we all were taught has a fundamental flaw that few of its devotées are willing to admit. That flaw is that the benefits of the system – and I don’t deny that there are substantial benefits – come at a substantial cost to the society. Among the most significant of those costs is that the benefits are not equitably distributed (Notice I did not say “equally.” I said “equitably.” There’s a difference.), and that particular flaw has been on bold display for at least the past generation, whether we’re talking about the state’s urban areas or rural ones. In an ethical framework, there’s no reason why Jeff Bezos (picking an easy target) should be able to buy a small country of his own if he so desires, while his Texas employees (or Minnesota ones, for that matter) face bankruptcy over their energy bills. In a “haves” and “have-nots” context, those that have, get. Those that don’t, don’t.
I always amused that outstate folks are able to make requests like these with a straight face. I’ve always known small town folks (as I was one) to hold rather comical views regarding their superiority to city dwellers, but the hubris of late is staggering.
From this afternoon’s edition of “The Glean:” “…The report released Thursday from the Minneapolis Regional Chamber found that in 2017 the city paid out $1.97 billion in taxes while receiving just $543 million in state aid — a ratio of 3.5 to 1.”
The member of the Minnesota House who represents Thief River Falls, John Burkel, has proudly signed on as a co-sponsor of legislation to deny state disaster relief to rebuild Minneapolis.
Mayor Holmer, Mr. Zutz, I’m sure you’ll understand when I am less than interested in supporting this legislation.
Oh, thank you for that, RB. Mayor Holmer is… um… exercising a selection of facts, and maybe a choice little tidbit of hypocrisy…
The gentlemen from Pennington County might want to have a word with their representative about optics.
The article does point out a serious problem throughout the state. Our local situation is similar. The city has a backlog of infrastructure repairs and upgrades needed to deal with the reality of the more severe weather events that Climate Change is fostering. We also have a dearth of affordable housing which is made worse by a trend to convert houses to vacation rental property, and an influx of people who retire here, or can now work remotely from home.
The city is also exploring changes to zoning regulations to help lower housing costs. We do have the advantage of areas outside the city where land is somewhat cheaper and county rules aren’t as stringent. It is unfortunate that the legislature and many people have bought into the separate Minnesotas story. In summer we are flooded with people from the metro area who enjoy the beauty of the area. They also comment when roads and other services aren’t well maintained. Two Minnesotas are not a great idea for either Minnesota.
We’ll be happy to believe in “One Minnesota” just as soon as you give up rural greivance and recognize your dependence on the metro.
Yes, lack of affordable housing is a serious problem around the state. I bet the metro would love to have some of the money that’s been flowing from their pockets to outstate to deal with that problem in the metro. However, it’s not being dealt with here and outstate is already getting a lot more than their fair share of the tax dollars. I don’t think the solution is to ask the metro to open their veins wider. Besides, you point out that metro dwellers come bug you in the summer and complain about roads and such. So, essentially, you’re complaining that not only are metro dwellers not giving you enough money to deal with your roads (outstate gets a HUGE amount for roads relative to the metro), but they have the gall to do so while spending their tourist dollars on you, too?
What’s interesting is that a lot of people move to more rural areas and smaller towns, then drive many miles to work (often in larger towns or the metro), because it’s supposedly cheaper to live in those areas. Yes–but maybe too cheap? Maybe it’s time to start paying what it’s worth. After all, many outstaters hold a conservative view on taxes, but they certainly don’t mind if they get the benefits of them so long as someone else is paying them. In fact, they ask for more.
I appreciate your response. I guess that I need to clarify what I was trying to say. First, both our state senator or our two state house representatives have been supporting aid to Mpls. for the trial. It is sometimes hard to take when the “us and them” brush paints all in so called “Greater Minnesota” as “them”. Our part of the state: Lake, Cook and eastern St. Louis county have consistently voted Democrat. We are very clear that Lake and Cook counties which are not heavily populated need state aid to help keep our infrastructure and schools functional. And as you point out, our area does derive a significant benefit from people coming here to visit. My point in mentioning complaints about roads, etc. from visitors was to that the benefits received from state aid (Metro taxes?) also benefits those who visit here. Most people that live here realize that it is a symbiotic relationship with occasional “oh forever mores”. I hope the light bulb comes on for the person representing Thief River Falls in the legislature, but I don’t hold out much hope.
Second: on your comment about taxes. Our property taxes have been increasing in a regular fashion. But our city and county are between a rock and a hard place with covering the needs, and exceeding people’s ability to pay their taxes. We are the fourth largest county in Minnesota and have a population of around 11,000. We don’t have the information from the 2020 census, but the 2010 census did not paint a very good picture as far as income and age demographics. We have an aging population and many families with very low income. I volunteered at, and managed the local food shelf for several years and saw the impacts of this. As you point out, there are the same problems in the metro area. Somehow, we need to work on these problems together in an equitable way.
I can appreciate your point. However, it’s important to note that urbanites that choose to visit rural areas to vacation, retire, or work remotely, are doing just that: choosing. There is nothing essential about that, and city folk griping about the quality of country roads is an indulgence no one can afford–but if anyone has the right to it, as pointless as it is, it’s those bringing the tourism dollars in.
Indeed, our priorities must be straightened out. We DO need to work together on the right priorities. But the outstate political bullying has got to stop first–though, as you’ve rightly pointed out, some of the politicians are not going to see reason. They don’t have to–they keep getting elected, presumably because a significant proportion of their constituents enjoy owning the city folk. If most people recognize the symbiosis, they need to bring that view to the ballot box immediately. At some point, I suspect that the imbalance of taxes out/taxes in will land itself in a court room, or the city folk will get smart and agree to lowering state taxes and invest in more local taxes, and the adjustment will be painful to outstate folks.
The only answer right now to dealing with outstate problems with state tax dollars is to either starve the metro of tax dollars (which outstate politicians are actively doing and have been successful at for the last decade) or increase state taxes, which no one apparently wants. The better solution is to determine what the exact problem is and then get creative. The bootstrap mentality that many rural and small town folks espouse (I know it, I grew up in small town SD) feels awfully hypocritical when tax money is requested to deal with unsustainable expectations. As others have pointed out, if small towns want big business (or retirees or telecommuters), they need to make them INVEST in the community FIRST, not come begging for handouts later. It’s not anyone else’s problem.
What are the construction cost drivers and how does this address them? Throwing more money at the problem seems like it could just further inflate costs by increasing demand for scarce materials/labor/etc. If the costs are related to running new water and sewer infrastructure we should strongly encourage subdividing existing lots before making that choice. Small cities already have a difficult time maintaining their existing water infrastructure without adding more annual maintenance cost. If you check realtor.com the lots for sale in Thief River Falls are all over one acre. It is difficult to afford water and sewer hookups (especially on an ongoing basis) with large lots. That problem can be solved by dividing that cost among more people with smaller lots.
I’m also confused about the “lack of market rate housing” comment coupled with the “houses lose $30,000 of their value after they are built”. Would that mean existing local housing is too cheap? What place has a hard time attracting workers because housing costs too little?
Housing at below market in this area means pay to 95% of staff at below market due to a captive employer situation. What investments in housing has business made?
Or “picking winners,” when a Kenyan Islamo-fascist usurper does it.
Now come on, you can’t ask the state for money and then complain about subsidizing the metro area. Do what other cities do–fund it yourself via taxes and working with landlords. The cost of owning a home is rising all over, including the metro area and its tough to do on one income even for a single person making say 80-90,000.
“Report says Twin Cities metro pays out far more in taxes than it receives in aid” (Minnpost article)
Sorry guys, I’m struggling with your “R” representatives, dissing the metro, kind of calling us welfare Kings and queens, and then you folks coming along and wanting more from the state treasurer teat after we find out we are already providing near 50% extra to the so called “fiscally conservative” “R” areas of the state. Looks more like you folks are already on the “entitlement” wagon and want more “entitlement”, can’t you pull yourselves up by your boot straps like us metro folks?
I do hope Mayor Holmer and Mr. Zutz read the comments posted on their need for affordable housing for TRF. What I would like to know if lot size, building codes, covenants, contribute to the higher cost of construction in their community. Lower wages paid by local employers must be a factor too. If Mayor Holmer or Mr. Zutz want to reach out to me on how I survived on workforce wages living in Minneapolis they can google me and find my contact information. I doubt I will get a call.
As many commenters here have observed the irony of outstate leaders who claim dishonestly that outstate dollars shouldn’t flow to the twin cities is striking. More basically though the problem is simple- material costs are rising and supply/demand means prices are low. It’s the same dynamic that has steered development in the cities to locations where they can construct higher end more profitable projects.
This piece has broken the irony meter. How to you write this with a straight face in light of the debate on funding security for the Floyd murder trials? SMH.
I had to scroll back up to see if MinnPost started cross-posting articles from The Onion.
I know I’m late to pile on to the already astute observations that 1. the housing crisis isn’t an outstate-only problem, and 2. outstate is already getting an outsized share of aid at the expense of metro residents and businesses. IF, and that’s a big if, the fine mayor of Thief River Falls is asking for the legislature to take some of the money outstate already gets and relabel it something else, then fine. But asking for MORE money, especially when your state representatives are keen on punishing Minneapolis, who has been paying that money and not getting much of it back, is pretty gutsy. And not in a good way. I suggest that TRF and other middle sized communities take the local government aid and the other state and federal freebies and set some aside for affordable housing. Warning: your “real” residents (home owners) will get all NIMBY on you.
The was a time when employers located where the had access to the labor they needed. Or if it were something site specific, like a mine, they made sure to provide the necessary housing.
Now, employers want access to cheap labor in less populated areas, then complain about a lack of labor. I wish I could have my cake & eat it, too, but Mom was right.
What the article does not highlight is many highly skilled and much higher paying jobs are now located in Bloomington by the organization noted in the article. You are correct, maybe a higher pay scale in TRF would aid the market dynamics.
Expanding in Thief River Falls was a huge financial blunder (even with all the tax breaks they received). A private multi billion dollar company should have realized this years ago. Enough with the crony faux-capitalism.
Which leads to the other piece of irony that attaches to these gentlemen’s kvetch: there is insufficient housing in TRF because the market didn’t deem it necessary.
An interesting article and ask from TRF and also of interest is a well funded and very profitable business organization aiding in the discussion. I believe this organization just made a large addition to their facility aided by government monies. I’m interested in what is truly the issue, the problem could be the under market pay scale, which this business could assist by paying themselves first before paying taxes on profits. The truth is many in this region have no interest with a local housing investment and many leave the area every weekend to enjoy the greater region.
I would just add a couple observations.
As others have pointed out, our housing “market” is broken nearly everywhere in the United States, “greater” MN is no particular example of that. Well, actually, some neoliberal economist might agree that the market is broken while others will tell us it’s doing exactly what it’s supposed to. After all, why would anyone expect affordable housing to just manifest itself in Thief River Falls simply because someone built business there? Did the Mayor and others keep their town population and number of housing units some kind secret? I drive all over “greater” MN as a photographer and it’s not uncommon to see small towns advertising themselves as the new best place to open a big business… who do they think they’re kidding? You have a population of 700 and you think someone’s going to bring 1,500 jobs to your town?
I don’t think any of us wish ill upon Mayor Holmer or his town, but we have to make some basic observations. First, he’s asking for a subsidy derived from Metro taxpayers at a time when Republicans from “greater” MN have spent decades cultivating a divisive, adversarial, and sociopathic form of politics. This mentality has reached a fever pitch not only among Republican’s in the House and Senate, but also among many rural residents. Metro Resident’s of “lesser” MN are getting tired of it, and a request for MORE rural subsidy at this point is non-starter. Those of us living in lesser MN don’t appreciate rural attempts to micro-manage our budgets, lifestyles, or “values” via their State legislatures and have predictably been driven into a less generous mentality than we previously held.
The problem with adversarial and competitive mentalities that think cooperation is is for losers or suckers is; you don’t always win, and when we can see that the only outcome you will abide is winning or losing… we will defeat you. We are unwilling adversaries, but you make us adversaries.
Second, I’m sure the Mayor, City Council, and other “stakeholders” courted this business with promises of low costs, local tax breaks, ample (and affordable) labor, etc. etc. so if they made promises they couldn’t keep that’s not some other taxpayers problem now. Again, I’m sure the population and housing prices and availability in TRF weren’t a mystery or secret of any kind before this business was built, where did they think the workers would come from?
Third, it’s important to realize that this is actually request for a private subsidy, not a public subsidy. This is corporate welfare, i.e. housing for private sector employees. If someone decides to create jobs where there aren’t enough people to fill them, and no housing for people to live in, that’s not actually a taxpayer problem. This isn’t a request to subsidize schools, or infrastructure, or public safety, it’s appeal to build housing for people who don’t even live there yet and haven’t been hired by a private company. If the guys bringing the jobs don’t do their research ahead of time, that’s on them. Absent the rural/urban divide Republicans have cultivated, I wouldn’t support this kind of subsidy anyways. I was apposed to all of our stadium and arena subsidies, and those were all built without any State money.
I note that Mr. Arnold has tried to explain rural/out state economics, but I’m not sure who he thinks he’s explaining this to? Those of us in lesser MN recognized the crises of depopulating rural American and Minnesota decades ago, created Local Government Aid programs, and built them into our State budgets. Obviously in the year 2021 we don’t need anyone to explain the nature of shrinking rural tax bases and populations to us. Now if Mr. Arnold is trying to explain this to rural or small town mayors like Mr. Holmer, I have to say: “Good luck” and hope someone has some luck breaking this irrational and incoherent Republican Two-State mentality. If you can get Republicans to stop weaponizing EVERYTHING and EVERY issue, we can at least make sure that everyone in Minnesota has their basic services, infrastructure, education, and health care provided.
Finally I would just note that the depopulation of rural America has been underway for a long time and a lot of reasons. Any small town that’s organizing it’s economic models around “growth” instead of sustainability is simply betting on the wrong horse. You may get the occasional fool to show up and build something, but without cooperative Statewide relationships, state of the art energy, transportation, and internet infrastructure, not to mention a well trained population of workers to fill employment rolls, you’re building soon to be abandoned plants and factories. Cheap land and low taxes won’t fill these places with workers.
I was writing about the reality of the support that rural communities receive thanks to contributions from taxes paid in the metro area. I wasn’t informing you about this, but trying to convey that many in rural Minnesota recognize that reality, and are not fans of the Republican “Us and Them” campaign. We are fortunate in our area that Republicans are not the majority, but they do make a lot of noise. What is sad about the whole thing, is that with redistricting (as others have pointed out) they will have even less influence on how resources are distributed and priorities set. Talk about shooting yourself in the foot.
One other point, the comments about being smart about attracting businesses to a community really highlights a valid concern – an area desperate for more jobs giving away too much – forgiving property taxes for 10 years, free land, roads, water, sewer, looking the other way about environmental damage, etc..
We see it now on pipeline (Line 3) and copper nickle mining.
We do need to grow up and work together, and figure out how to solve our local problems without waiting for a handout.
Thanks for the clarification Mr. Arnold.
I think we might agree that a broken rural housing market isn’t actually the problem that’s holding rural communities “back”. The real problem is simply economics and depopulation. The idea of “growing” small towns with affordable housing is kind of an oxymoron. The “goal” of turning small towns into big towns defies the small town aesthetic on a fundamental level. People who still live in small towns, or move to them from big towns, do so because the want to live in a small town, so “growing” the town is illogical and economically impractical no matter which political Party tries to do it. This idea that something is “holding” rural communities “back” assumes that growth models work in rural America, that’s an irrational assumption to begin with given the contours of reality.
Yes, desperation breeds misfortune. Trading your future for your present is only logical if your present is literally non-existent without such a deal. And, quite frankly, with the pipeline and mining deals, not only will no one actually literally die without them, many will almost certainly live without clean water and air with them, and directly or indirectly, die as a result. It’s one thing to trade your own future for your present, but trading the futures of others is unethical.
Amen
I re-read this piece, and it didn’t get any better the second time.
Its not Greater Minnesota’s housing market that is broken. Its Greater Minnesota that is broken. Housing shouldn’t depreciate after it is built. Housing in the metro area continues to appreciate in value year after year. If you can’t build anything that is worth more than it costs to build, you probably shouldn’t build it at all.
If we are going to spend more money on housing, spend it here in the naturally growing metro, where that investment will pay off. Don’t flush it down the toilet trying to prop up dying remote small towns.
And again, I would be more sympathetic if these places weren’t electing people who ignore the fact that they are already being heavily subsidized by the metro, and campaign on resentment of the cities. Stop running against Ilhan Omar and deal with the actual issues in your districts, like this one.
Folks need to get some facts before they make assumptions about what’s going on in another part of their state. I’m not from the TRF area but have done work there. Digi-Key was not attracted to the area by local tax incentives, etc. It is a home-grown business, still in single ownership which means owner pays a ton in taxes, wages for line workers are in the $18-20 range plus health insurance cost is almost fully subsidized by the business, business runs shuttle at minimal cost for workers (who live as far away as Grand Forks).
As to housing here, there and everywhere. The divergence between household income and housing costs started 40 or so years ago. Building affordable housing in metro areas is tough and it’s even tougher in rural communities. New homes cannot be built for less than $175-225,000. Building a new home at that price in a small, rural town where most housing is valued well under $100,000 means: (1) banks won’t finance without a heft down payment (2) when the house is put for resale there isn’t a ready supply of buyers willing or capable of paying at the built+appreciation cost. A few towns have managed to counter this situation — Luverne comes to mind–but most don’t have the resources or moxy to pull off that type of success.
I’m currently working for a small northern community where 90% of the people with jobs commute 30-40 miles away. Housing in the town is old with an average value of under $75,000. People with low-wage jobs can afford to live there but at the price of that lengthy commute. Further, their ability to reinvest in their property is limited by income. A few new homes may be built at a new city-sponsored subdivision but all buyers seem to be retirees from the Twin Cities. That’ll help the town but only exemplifies the dual nature of so many rural economies (reference the Arrowhead comments above)–retirees and relatively affluent second home buyers from outside the rural area can afford higher valued new housing but the locals, whose incomes are based on the less affluent local economy, cannot. The new housing that gets built is for the retirees/second home folks because they can afford it and the builders can survive making those homes.
As noted by many, the answer to our state’s housing situation needs to be a systemic, statewide initiative that helps people acquire affordable housing in both urban and rural areas.