A first of its kind: Select Committee on Homeownership convenes

In a historic moment for homeowners in Minnesota, state senators on Aug. 13 convened the Select Committee on Homeownership Affordability and Availability at the Minnesota Senate Office Building. A first-of-its-kind forum, the Select Committee was approved by the Minnesota Senate in the closing days of the 2019 legislative session.

The committee, chaired by Sen. Rich Draheim (R-Madison Lake) and comprised of members from both political parties, will make findings and recommendations to the Minnesota Senate on ways to increase homeownership opportunities across the state.

The first committee hearing featured testimony from Minnesota Housing Finance Agency (MHFA) Commissioner Jennifer Ho, along with several professionals from the housing industry. Commissioner Ho emphasized the lack of housing inventory, which is driving up housing costs throughout the state. Her message was echoed throughout the two-hour hearing.

“We are facing a two-part crisis: supply and affordability. Multiple generations are competing for homes at the same price point,” remarked Paul Eger, vice president of governmental affairs for the Minnesota REALTORS®.

David Arbit, director of research from the Minneapolis Area REALTORS®, said the housing market has exhibited ominous red flags over the past few years that are continuing to impact the market. “Something scary happened in 2017 when for the first time ever more of our homes were listed for over $300,000 than under $300,000,” he said.

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With an inventory challenge negatively impacting the housing market, experts have found consensus in calling for a surge of newly built single-family homes, condominiums, townhomes and apartments over the next 10 or more years.

David Siegel, executive director of Housing First Minnesota, addressed this issue at the hearing.

“While a sustained surge in homebuilding is the clear answer to our housing market’s challenges – we face an even larger one. We simply can’t build the necessary homes today because it costs far too much to construct workforce homes in Minnesota,” he said.

Throughout the hearing industry leaders reiterated concerns about regulatory costs impacting the ability to deliver affordably priced homes.

“Where water oversight is conducted by a single agency in comparable markets, it’s not unusual for a Minnesota project to have five or six agencies conducting oversight,” said John Rask, vice president of M/I Homes.

Industry leaders laid out a broad overview of the housing regulatory footprint, which includes federal, state, regional and local government regulations. They stated that the most challenging and impactful regulatory bodies for housing are local governments, highlighting their reliance on subdivision agreements, where the details and requirements for developing a neighborhood are negotiated in a contract between the property owner and a city. These agreements are oftentimes referred to as Planned Unit Developments (PUD).

“I can tell you that the PUD process in today’s world always makes homes more expensive and less affordable,” said Rask.

The Select Committee heard repeatedly about how elusive inventory is for first-time homebuyers and others. Tony Wiener, vice president of Cardinal Homes, offered a real- world example about the disconnect between what homeowners are looking to spend and the price points available to them.

“On a weekly basis, I hear from customers who are interested in learning more about building a new home, however, their budgets are nowhere close to what we can build for them,” said Wiener.

The Select Committee will be convening throughout the fall and is expected to recommend specific solutions to address homeownership and affordability.