Priced Out: The True Cost of Minnesota’s Broken Housing Market
After a decade of recovery following the Great Recession, new, entry-level and moderately priced single-family homes have all but disappeared from our region, leaving the Twin Cities with a housing market that is fundamentally broken and ill-equipped to meet the demands of many Minnesotans.
The report by the Housing Affordability Institute, Priced Out: The True Cost of Minnesota’s Broken Housing Market, unveils a sobering conclusion: By nearly every measure, new homes in the Twin Cities cost more to build than new homes in any other Midwestern market.
With too few new homes available at an affordable price, more and more Minnesota families are being priced out of the housing market. This is placing pressure on the rental market, limiting move-up options and leaving the region’s housing ecosystem broken.
“Although the new homes being built today may look similar to new homes built over the past 30 years, the final price far exceeds what buyers paid years ago, even after adjusting for inflation,” said David Siegel executive director of BATC-Housing First Minnesota. “This disappearance of affordable new homes is not due to a change in buyer or builder preferences, but to homebuilders simply being unable to build at a price that many buyers in the region can afford.”
The Housing Affordability Institute, a nonprofit housing policy organization formed last year by Housing First Minnesota, has just completed a comprehensive review and analysis of data provided by homebuilders, land developers, cities and the State of Minnesota that looked at development and building costs in the Twin Cities. The key findings of Priced Out reveal that up to 33 percent of a new home’s price in the Twin Cities derives from regulations and policies from the local, regional and state level.
“Priced Out: The True Cost of Minnesota’s Broken Housing Market does not suggest rules and ordinances are not appropriate. Rather it shows how costly building regulations, and the choices they represent are,” said reviewing economist Elliot Eisenberg. “The results are clear and the belief that regulations don’t matter, or that builders and developers absorb regulatory costs is shown to be false.”
In addition to an in-depth review of why fewer buyers can afford new homes in the Twin Cities, Priced Out includes a pathway for policymakers to ensure the dream of homeownership exists for future generations.
“We think this report is the start to reimagining how we bring stakeholders together to start talking about important regulatory decisions,” said Siegel. “We need to elevate affordability, which has not been a priority in the regulatory process, in order to help young families find the home they can afford in the community they desire.”