As the cost of a new home increases, two cities take proactive approaches
With the cost of housing increasing at a rate much faster than wages, two cities in Minnesota are working to reduce what new-home buyers pay.
Why? Growth is good for Minnesota cities. New homes bring new residents which, in turn, create jobs and expand the tax base of cities.
According to a 2015 study from the National Association of Home Builders, for every 100 new homes built there is a one-year economic impact of $28.7 million in economic activity, $3.6 million in local government revenue and 395 jobs created.
In the following years, the sustained effect of these 100 homes is $1 million in added local government revenue, 69 jobs and $4.1 million in added economic activity.
North St.Paul is Booming
In the Twin Cities suburb of North St. Paul, the city is seeing its fi rst large-scale new home development since the 1950s.
Earlier this year, the city and M/I Homes partnered on the Gateway at McKnight, which lies on a former block manufacturing site. This new development will be made of 100 townhomes, priced in the upper $200,000s.
As a former industrial site, site cleanup was necessary before redevelopment. As part of its downtown revitalization efforts, the city of North St. Paul established a TIF district to help with cleanup and soil corrections.
“Strong leadership on the city council and a cooperative city staff allowed the project to move through the entitlement process in less than three months,” said John Rask, vice president of land for M/I Homes. “We develop in communities all across the Twin Cities and have never seen anything close to the level of cooperation that we received from North St. Paul. Too often cities act only in a regulatory capacity and miss an opportunity to achieve better results by working in collaboration with builders and the development community.”
According to permit numbers, the Fargo- Moorhead area has been growing at a fast pace the past several years. These same fi gures show that most development is happening on the North Dakota side of the Red River, with the number of new homes in Moorhead much lower.
Data of new home development in the area points to home prices as the reason why. In Fargo, the price per square foot for an entry- level home is between $103 and $114 per square foot. In Moorhead, it’s nearly double, at $198 per square foot.
Attracting buyers to the Minnesota side of the river has been an important goal for the city for the past few years.
In 2017, the city actively worked to end the twin home sprinkler mandate in Minnesota, which was helping to shirt nearly all twin home development in the area to North Dakota. When the bill was signed into law, then-Mayor Del Rae Williams held a press conference announcing Moorhead was open for development.
The city also runs a website called “Make Moorhead Home” to attract new residents to the city. The website features information about the community and links to information on builders and Realtors.
Moorhead is also looking inward to see what incentives the city can offer to lure new residents. To help offset the costs of building a new home, Moorhead offers a two-year tax rebate.
New-home buyers receive a rebate of all general taxes paid for the fi rst two tax years after their home is completed and the property is fully valued for tax purposes. In the fi rst fi ve years of the program, more than 800 residents have taken advantage of this program.
“It’s great to see cities begin to take a proactive approach to decrease the cost of new housing,” said David Siegel, executive director of Housing First Minnesota. “Each city has shown in its own way that local governments possess the power to decrease the cost of housing when they chose to.”