Letter From the President

Letter From the President

What an end to the summer! In a period of just a few weeks in August, a landmark Minnesota Supreme Court decision was issued and Governor Dayton’s Task Force on Housing issued its final report. These were big steps forward — both of which will positively impact growing the housing conversation.

In Harstad v. Woodbury, the practice of requiring unauthorized and unrelated conditions development contracts and calling them ‘voluntary agreements’ was struck down by the high court. The court’s clear ruling on this practice is a major victory for homeowners. Development does, must, and will continue to pay its own way by building out infrastructure to support development projects. But the all-too-common practice of requiring additional fees and requirements on top of these has now been ruled illegal. Look for full coverage of the Harstad case throughout this issue.

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Governor’s Task Force Report: More New Housing Needed

The Governor’s Task Force on Housing Affordability released its report titled “More Places to Call Home: Investing in Minnesota’s Future” on Aug. 21. Leading the recommendations included in the report is a call to build 300,000 new homes by 2030, create a regulatory review panel and address the industry- wide labor crisis.

“The Governor’s Task Force on Housing took an important first step in identifying the shortage of new housing production, our need to evaluate regulations, and the construction labor shortage which threatens our ability to solve our housing affordability crisis,” said David Siegel, executive director of Housing First Minnesota. “We are especially pleased with the emphasis to support and strengthen homeownership. “Throughout the Task Force process, Housing First Minnesota advocated for solving our housing supply challenges by increasing affordability across the housing market.

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“We are pleased to see the Task Force embrace the core of this approach, which begins with evaluating regulations and land policies to directly address affordability. “The hard work of addressing the cost drivers impacting housing affordability now enters a new phase. As the leading voice for homebuilding and remodeling, Housing First Minnesota is pleased to see other stakeholders ready to join us in addressing this critical challenge facing all Minnesotans.”

Housing First Minnesota staff attended meetings of the task force and homeownership work group during the first half of the year and sent a letter to the task force in June, saying that addressing Minnesota’s low housing inventory is critical to solving the housing affordability crisis.

Project Build Minnesota Marketing Efforts Extend Reach

Project Build Minnesota Marketing Efforts Extend Reach

The Project Build Minnesota website is yielding impressive results despite only having been actively in the marketplace for four months. As of this writing, the website has on average 45 user visits per day (which will bring 16,000 visits per year). Visitors spend approximately two minutes on the website, and two-thirds of the visitors are from the Twin Cities metropolitan area.

The most visited page on the website is “the trades” with 4,017 views in May and June. The Project Build Minnesota social campaign is also revving up, with regular posts being boosted on Facebook. There are 300 likes as of early August and the number is rising steadily. Through our Facebook posts, we’ve reached 49,155 people and had 1,336 post engagements.

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New Construction Stormwater Permit Now in Effect

New Construction Stormwater Permit Now in Effect

The Minnesota Pollution Control Agency (MPCA) released the fnal 2018 Construction Stormwater Permit on July 25. The 2018 Permit, which went into effect on Aug. 1, includes changes requested by Housing First Minnesota.

In May, Housing First Minnesota sent a letter to the MPCA seeking changes to five items, including several provisions that would have expanded enforcement actions under the new Permit, with MPCA making each of the requested changes.

One difference between the earlier draft and the final permit, however, concerns industry experts. In April 2017, Housing First Minnesota requested the repair timeframe be increased, a change that was included in the draft version of the permit released in April 2018. Instead of increasing the repair time frame to “BMPs prior to the next anticipated rain event or within three (3) calendar days whichever comes first” as planned, the MPCA reverted to the existing language of “by the end of the next business day after discovery” in the final 2018 Permit.

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Housing First Minnesota Leads in Providing Industry Input on Building Code Report

Housing First Minnesota Leads in Providing Industry Input on Building Code Report

Following the June 26 meeting of the Construction Codes Advisory Council (CCAC), the Department of Labor & Industry (DLI) released a report that included comments and concerns voiced by the CCAC members regarding the initial technical review of model code changes earlier this year. The report also included comments submitted by organizations following the release of the Technical Advisory Group (TAG) Reports in mid-May.

Of the 10 organizations either submitting comments or co-signing letters, Housing First Minnesota’s comments stood out for several reasons. In a memo submitted by Housing First Minnesota’s regulatory affairs manager, the organization outlined its longtime goal of housing affordability being given equal consideration to safety and durability. Housing First Minnesota was also the only group to submit comments on multiple TAG reports and to call for not adopting the 2018 International Energy Conservation Code (IECC) for residential construction due to concerns about affordability.

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DLI Reduces Contractor License Fees

DLI Reduces Contractor License Fees

Due to the health of the state’s Contractor Recovery Fund, effective July 1 the Minnesota Department of Labor & Industry (DLI) eliminated the $80 assessment that licensed residential building contractors pay as part of their two-year license.

The Contractor Recovery Fund compensates homeowners and lessees of residential property, up to $75,000, who have experienced direct out-of-pocket losses because of a Minnesota licensed contractor’s fraudulent, deceptive or dishonest practices.

The fund’s balance has stabilized over recent years as the state’s housing market has recovered and fund payouts have decreased accordingly.

With fewer funds withdrawn, DLI Commissioner Ken Pederson used his authority to eliminate this assessment. This is in addition to the DLI reducing most license fees by 40 percent over the past four years.

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DLI Announces 2019 Minimum Wages

The Minnesota Department of Labor and Industry announced that the minimum wage rate will increase to $9.86 per hour for large employers and $8.04 for others effective Jan. 1, 2019. The state’s minimum wage is adjusted for inflation each year.

As of Jan. 1, 2019, the rates will be:

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The City of Minneapolis has higher minimum wage rates, at $11.25 per hour for large businesses (more than 100 employees) and $10.25 for small businesses. The next increase for Minneapolis will be July 1, 2019, when rates increase to $12.25 for large businesses and $11.00 for small businesses.

Radon Licensing Rules Challenged

The Minnesota Association of Radon Professionals and Standard Water Control Company, a radon mitigation firm, have filed suit against the Minnesota Department of Health over proposed radon licensing rules, created under the Minnesota Radon Licensing Act of 2015.

The proposed rules would require individuals performing radon-related services to be licensed by the State of Minnesota, through the Department of Health.

The proposed radon licensing rules would also require licensed radon testers to pay a $150 per year fee, licensed mitigation professionals would pay a $250 per year fee, companies analyzing test kit results pay up to $500 per year in fees and a $75 per home fee for mitigation system installation in existing homes. In addition, radon testers and mitigation system installers would submit quarterly reports of all homes where services were performed.

The proposed rules are set to take effect on Jan. 1, 2019. An administrative law hearing was held on July 17. Final comments on the proposed rules were due in August.

Sen. Matt Little Discusses Housing Affordability

Sen. Matt Little Discusses Housing Affordability

Sen. Matt Little (DFL) represents Minnesota Senate District 58 in the southern portion of the Twin Cities including portions of Lakeville, Farmington and numerous townships.

Q: Your district has seen immense residential growth in recent years. What’s been the impact of this growth?

Sen. Little: New residential growth has brought in thousands of new families. I was recently at a National Night Out party where there must have been 50 kids running around. These families are revitalizing the schools and providing energy to neighborhoods. Not only that, new businesses are opening up everywhere to serve these new neighbors. All the growth has provided a wealth of excitement and I can’t wait to see what’s next.

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Is the Housing Market Shifting?

Is the Housing Market Shifting?

Since the June and July housing numbers have been published there seems to be much more uncertainty about the current state of the housing market. People are beginning to ask questions about the market. Is the decrease in sales volume a warning sign? Are we in a bubble? Will there be another housing market correction? One or two months’ data by themselves doesn’t signal a major change in the direction of the housing market. We will need to look at several more months’ data to understand more about where the market is headed.

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The Developing Trade War and the Impact on Interest Rates

By ELLIOT EISENBERG

GraphsandLaughs, LLC, Elliot@graphsandlaughs.net

The U.S. economy is growing rapidly, and 2018 is shaping up to be the best year for economic growth since 2006. As a result, the Federal Reserve is a lock to raise rates by a quarter-point in September, and there is a 70 percent chance that they will do so again in December to cool down growth and prevent inflation from taking hold. But plenty can change before that. The biggest immediate threat comes from the rapidly escalating trade war we are in.

The most likely outcome of rising trade tariffs is a premature pause in the current interest rate rising cycle. A trade war will cause business demand for physical plant, equipment, and employees to contract due to heightened economic uncertainty. Trade wars will also cause consumer demand to lessen due to rising unemployment, higher prices, and falling consumer confidence, exacerbated by a decline in equity values. While such a slowdown would not be expected to be that large, it would still slow GDP growth and interest rate increases.

If, however, the hit to GDP is bigger than anticipated, because the quantity of imported goods facing steep tariffs rises substantially, rates could be reduced to ward off a possible recession. That would only occur if other factors came into play, as the current $50 billion in products facing tariffs along with any retaliatory actions by other nations is not nearly large enough to meaningfully reduce GDP, let alone drive us into recession.

The bigger fear is that a trade war has the opposite effect on monetary policy and forces the Fed to raise interest rates. If this occurs, it would be very destructive to both Main Street and Wall Street. For this to happen, the economy would need to experience a series of strong negative supply shocks. It might happen like this: global trade conflicts quickly escalate, significantly driving up the cost of many imported goods as well as domestically-produced substitutes.

While the chances of seeing rates rise to ward off a rise in inflation expectations is highly unlikely, it is a worst case-scenario for both the economy and financial markets. This is because it offers a combination of faster inflation, weaker growth, and tighter monetary policy. My baseline is that the impacts of rising tariffs and protectionism are too limited to meaningfully alter the course of monetary policy. But, in the fog of (a trade) war, things inevitably go awry just think of Harley-Davidson’s unexpected decision to shift to offshore manufacturing and adversaries respond in ways not anticipated; be prepared.

Move-In Day for Minnesota Assistance Council for Veterans

The Housing First Minnesota Foundation and build partner Lennar are set to hand over the keys of the second home to be donated to the Minnesota Assistance Council for Veterans (MACV). Lennar started construction of the home back in April and wrapped up in August. A key ceremony is scheduled for mid-September.

The five-bedroom home will be used by MACV to house homeless female veterans, a population of the community that MACV says is in growing need. The Maplewood lot for this home was donated by the Minneapolis Area Association of REALTORS® Foundation.

“The work MACV does for our veteran community is so important and we’re happy we are able to use the talents and generosity of our industry to be able to help them fulfill an important need.”- Donnie Brown, HOUSING FIRST MINNESOTA FOUNDATION MANAGER

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“We’re very excited to be donating a second home to MACV,” said Donnie Brown, Housing First Minnesota Foundation manager. “The work MACV does for our veteran community is so important and we’re happy we are able to use the talents and generosity of our industry to be able to help them fulfill an important need.”

Lennar helped the Housing First Minnesota Foundation complete a similar home for MACV last year that was built to house homeless veterans along with their families.

The Artisan Home Tour Gives Back in a Big Way

The Artisan Home Tour, a high-end home tour presented by Housing First Minnesota, not only hit an important attendance record in its fifth year, it also hit an important donation milestone to the Housing First Minnesota Foundation. The Artisan Home Tour has now donated nearly $100,000 dollars to the Foundation over the past five years.

Since its inception the tour has made yearly donations to the Foundation. These contributions help the Foundation build and remodel homes for veterans and homeless families in need.

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