Committee Summary: House Local Government Division Committee, Feb. 23

Reporting by Lolla Nur, Freelance Community Journalist and UpTake Fellow

The House Local Government Division Committee met on Feb. 23 at 8:30am to discuss HF3256 Legalizing Affordable Housing Act (Rep Steve Elkins DFL). The purpose was to go over information about how Minnesota’s 2021 increased housing demand, labor and supplies costs, coupled with a historic supplies shortage, have all impacted the market.

Most of the meeting was of informational presenters on economics, housing sales, housing market statistics and demographics. 

According to testifiers, Minnesota has had a historic shortage in housing construction over the last decade due to a mix of strict zoning regulations and various market factors that have not been able to capture what many testifiers called the “missing middle” of the housing market. This “missing middle” is more affordable 2-4 unit buildings such as duplexes, triplexes and small-to-medium sized multifamily buildings. 

These are more “affordable for groups that have been left out and more accessible for groups who don’t have access to intergenerational wealth to buy detached single family homes,”  according to Zillow researcher and testifier, Luke Bell. 

The presenters (and summary of their comments) included: 

Danielle Leach, Zonda. She presented Zonda’s own proprietary data on the Twin Cities housing market. She mentioned all housing inventory is tight in the Twin Cities, right now at 0.6 months of supply; usually it’s at 4 months of available supply, she said. 

  • There’s little available product in the market priced under $350,000
  • Entry level buyers are being priced out of the market. 
  • Land is expensive, while the cost of supplies (lumber) and labor are also increasing.
  • Builders are selling housing inventory faster than they can get it started or closed due to supply and labor shortages. This is a response to the demand.

Luke Bell, Government Relations and Public Affairs at Zillow. He said Zillow is interested in reducing barriers to housing, and spoke on the race and class equity challenges created by the housing crisis. He expects  home values to climb, increasing by 16% nationally by the end of 2022 compared to 2021.

  • Black homeownership in the Twin Cities is 26%. White home ownership is 76%. This is the lowest Black homeownership in the US, and largest white-black housing gap. 
  • Reforming residential zoning rules would allow for more construction and density to increase housing supply and affordability. 
  • He suggested relaxing zoning rules to allow more efficient construction will be the most effective way to increase housing supply. 
  • 57% of respondents in St Paul support building more houses (more density) in their communities according to Zillow research.
  • Neighborhoods made of single family detached homes are whiter and more racially segregated.
  • If Minnesota doesn’t build enough housing, we won’t be able to keep up with demand and Minnesota’s population growth.

Libby Starling, Community Development and Engagement division of the Federal Reserve Bank of Minneapolis. She spoke to housing affordability challenges, especially low BIPOC homeownership in the Twin Cities.

  • Peak Black homeownership in Minnesota was in 1950 (during segregation), it was 46%. Nearly half of Black MN communities owned a home in 1950. In 2019 it’s about 23% (and white is 77%.).
  • 4.6% of all Twin Cities housing was vacant in 2020. This makes the Twin Cities the lowest housing availability – worst housing shortage in the nation (worse than LA, Seattle, Denver etc).
  • We’re behind by 80,000 missing units that were not built over the last 15 years to keep up with the current demand.
  • This is a result of a decade-long trend of new housing starts not keeping up with demand. 
  • The biggest need is multifamily homes (5+ units) and single family detached homes.

David Arbit, Minneapolis Area Realtors. He said lot sales plummeted during the Great Recession, skyrocketed in 2012-13, and then stayed steady 2014-19. Lot prices have increased again, especially between 2020-21. 

He also mentioned the market is a spectrum: “We need both housing under $300K and housing at a million dollars. One end of that spectrum is thriving, the other end isn’t.”

Other testifiers included: 

  • Scott McLellan, MN Department of Labor and Industry
  • Amber Backhaus, MN Auto Dealers Association.
  • Ethan Roberts, Jewish Community Relations Council of MN and the Dakotas
  • David Werschay, Werschay Homes. 
  • Paul Heuer, Pulte Homes. 
  • Peter Coyle, a lawyer lobbyist representing Housing First MN. 
  • Paul Eger, Minnesota Association of Realtors. 

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