Household Formation Is Up, Home Sizes Are Down

Recent data from the Census Bureau points to a transition from renting to owning which is pushing up household demand. The Bureau’s most recent measure of household formations, a key driver of housing demand, revealed that the count of total households increased to 122.4 million in the last quarter of 2018, from 120.1 million a year ago.

The gains are attributed to strong owner household formation, as the number of homeowner households has been climbing since the third quarter of 2015. The number of renter households has been falling.

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Housing's Day at the Capitol Draws Hundreds

Housing's Day at the Capitol Draws Hundreds

Hundreds of members of Housing First Minnesota and the Minnesota REALTORS® gathered from across the state for the third annual Housing Day at the Capitol on March 4.

This year’s event kicked off with a rally at the Capitol rotunda where attendees heard from Speaker of the House Melissa Hortman (DFL, Brooklyn Park), Senate Majority Leader Paul Gazelka (R, Nisswa) and House Minority Leader Kurt Daudt (R, Crown). All three praised the groups’ efforts to promote housing affordability and more inventory options across the housing ecosystem.

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Minnesota’s Green Path Program Takes Center Stage at the RESNET Conference

Minnesota’s Green Path Program Takes Center Stage at the RESNET Conference

Minnesota’s Green Path is the leading energy efficiency and green building program for the residential construction industry in Minnesota. The program has provided Home Performance Reports (HPRs) for more than 16,000 newly built homes highlighting the Home Energy Rating System (HERS) score and air exchange rate. When Green Path was created by BATC-Housing First Minnesota in 2011, only 4 percent of Parade of Homes entries were energy tested. In recent events, 70 percent of the homes have been energy tested by a certified rater, showcasing the growth of the program.

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Are You Sure You Don’t Need a Construction Stormwater Permit?

When stormwater drains off a construction site, it carries sediment and other pollutants that harm lakes, streams and wetlands, according to the Minnesota Pollution Control Agency. To control this erosion, the agency requires construction site owners and operators to obtain a National Pollutant Discharge Elimination System (NPDES)/State Disposal System (SDS) Construction Stormwater General Permit.

The requirement for the permit has been in place for well over a decade, but some in the industry remain unaware.

You need an NPDES/SDS permit if you are the owner or operator for any construction activity disturbing:

• One acre or more of soil

• Less than one acre of soil if that activity is part of a “larger common plan of development or sale” that is greater than one acre

• Less than one acre of soil, but the MPCA determines that the activity poses a risk to water resources

Of particular significance for custom builders, for those building on one lot within a larger subdivision over an acre, an NPDES/SDS permit is needed. Housing First Minnesota continues to receive phone calls from builders and developers regarding this requirement. Fines for failure to comply can be significant.

When in doubt, contact the Minnesota Stormwater Hotline at 651-757-2119 or 800-657-3804 for assistance. More information and appropriate forms can be found online at the MPCA website: https://www.pca.state.mn.us/water/construction-stormwater.

Minneapolis and Bloomington Adopt Affordable Housing Mandates

Minneapolis and Bloomington Adopt Affordable Housing Mandates

Inclusionary zoning is a requirement that real estate developers include below-market-rate units in new projects. While the concept may on the surface appear positive, substantial research on the effectiveness of inclusionary zoning indicates that it ultimately has negative consequences. Generally, these affordable units can only be achieved by increasing the monthly rents for other tenants. This makes overall housing and what is known as “naturally occurring affordable housing” less achievable, and it can at times makes such projects entirely unfeasible.

Despite broad concern over the policy, both the cities of Minneapolis and Bloomington are immersed in inclusionary zoning discussions with both cities adopting new ordinances.

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Kick-Starting Housing Innovation

Housing Innovation Project Seeks to Build a

New Home at Prices That Compete With Today’s Resale Homes

If we could modify codes and incorporate new building materials and techniques could we construct a home today that would be safe, durable and at a price that competes with existing homes?

That’s a question that a group of Twin Cities housing experts is now tackling. The Regulatory Affairs Subcommittee and Local Government Issues Working Group of Housing First Minnesota have taken on this challenge. These groups began work on the initiative last year.

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A New Look at Construction

Using a home design that one builder has been building for three decades, the group is examining all the changes in construction techniques, materials and codes over the past 30 years to see what efficiencies can be achieved. By examining changes in state regulatory policies and in technology, the group hopes to develop a safe, durable, attractive, saleable home at a more affordable price.

Starting from foundation excavation and working all the way through the construction process, this group has worked through each phase of the construction process and developed a proposed work plan. Builders and subcontractors are now being asked to “bid” on the project, giving the group its first look at how affordable this home could be.

Rethinking the Development Process

Physically building the home is only part of the equation. Delivering an affordable, attractive, entry-level home also requires rethinking every step in the development process to get to a lower lot price.

Members of the Local Government Issues Working Group are tackling the land development and permitting process for local government units. They are looking at items such as lot sizes, setbacks, in-development infrastructure, off-site improvements, water management, land rationing policies, and park and permit fees. To aid the group in its work, they have been reviewing best practices from cities across Minnesota.

For example, Waconia city officials worked with developers and builders to reduce the cost of homes as it sought to attract more townhome projects. “Waconia is a great example of a city taking a forward-thinking approach to affordability,” said David Siegel, executive director of Housing First Minnesota. In similar fashion, the city of North St. Paul and a developer collaborated on bringing a new affordable townhome project to the community.

Kick-Starting Innovation

Housing First Minnesota believes this is just the beginning of a wave of innovation that will sweep across housing construction in Minnesota. Both project teams hope to demonstrate to state and local governments what is possible – more affordable construction through partnerships. This may prove to be a template for workforce housing as well as providing an affordable product more broadly.

Support from government partners to make this first cost-busting home a reality is essential and can help establish Minnesota as a leader in home construction innovation.

Regulatory Update: Minnesota Agencies Address Dishwater Air Gap, Building and Energy Codes, Lead Paint and Construction Waste

Plumbing Code

The Minnesota Board of Plumbing’s Ad-Hoc Rulemaking Committee, which operates under the Minnesota Department of Labor and Industry (DLI), is in the final phase of reviewing the state’s plumbing code. The Committee has recommended making the dishwasher air gap optional, with an added option of allowing the discharge line to be run as high as possible under the cabinet.

In December 2018, Housing First Minnesota submitted a proposal to the DLI to remove the air gap requirement. At the Committee’s Jan. 14 meeting, Committee members agreed and recommended making the change.

While significant, the recommendation remains a proposal, and meetings of the Ad-Hoc Rulemaking Committee are slated to continue through April, with the first draft of the code available later this year.

Building Code and Energy Code

Proposed changes to Minnesota’s building code are expected to be made available later this year by DLI. Housing First Minnesota made several recommendations with regard to the building code, with a focus on the challenge of affordability. A decision on adopting a new energy code is also expected later this year, but hinges on an evaluation by the U.S. Department of Energy. Again, Housing First Minnesota was engaged in the process, urging steadiness as appropriate given the affordability crisis.

Minnesota’s new building code and energy code are expected to go into effect in March of 2020.

RRP/Lead Paint

After more than a year of work, the Minnesota Department of Health (MDH) is now in the final stages of taking custody of the RRP/Lead Paint Rule. This important regulation regarding homes constructed prior to 1978 presently is in the hands of the U.S. Environmental Protection Agency (EPA) out of Chicago. But within the past few months, EPA and MDH have agreed on a framework to make rule enforcement local.

Housing First Minnesota has been deeply engaged in the process, providing input and suggestions. The initial draft of the Minnesota RRP Rule was released in mid-2017. Shortly thereafter, representatives of Housing First Minnesota met with senior EPA officials to share concerns over the direction taken by MDH. A primary concern was the dramatic increase in remodeling costs the proposal would have generated, with no increase in protection.

MDH held a large stakeholder meeting in August 2017. Prior to that meeting, Housing First Minnesota presented two alternative drafts of the rules based on what other states have done. The last publicly available draft of the Minnesota RRP Rule was published in late December 2017. Housing First Minnesota has continued to share its insights and concerns with MDH throughout the process.

Construction and Demolition Refuse

The Minnesota Pollution Control Agency (MPCA) is considering new regulations for construction and demolition waste. Following an initial meeting in January the agency is now preparing a report on groundwater quality near construction and demolition landfills. The outcome of this report, scheduled for spring 2019, will guide any formal rulemaking by MPCA. The agency’s concern is the possibility that groundwater near construction demolition landfills is becoming contaminated.

In addition to any formal action taken through rulemaking and regulations, the MPCA is also looking to develop construction and demolition reuse and recycling programs. Construction site waste includes materials such as concrete, bricks, wood and lumber, roofing, drywall, landscape and other wastes.

It is not yet clear how the construction and demolition waste considerations or the reuse and recycling program will affect industry practitioners. But Nick Erickson, regulatory affairs manager at Housing First Minnesota, said the association will continue to be vigilant to ensure that whatever is proposed is done with the goal of affordability in mind. More information is available at https://www.pca.state.mn.us/waste/construction-and-demolition-waste.

Minneapolis to Require Energy Testing on All Home Sales

The city of Minneapolis voted to approve a requirement of energy testing on all home sales. The measure, known as the Truth in Sale of Housing (TISH) program, will require a home energy inspection by a licensed professional within three days after a home is listed for sale.

The tests will require insulation inspections in attics, heating systems and windows. Additionally, the TISH program authorizes holes to be drilled into walls of pre-1980 built homes to assess insulation quality. A provision to require blower tests in each home was removed from the final version of the ordinance.

The TISH energy testing requirements go into effect in 2020.

Beginning in 2021, landlords will be required to disclose energy costs on a square footage basis to prospective renters.

Consensus on the Affordability Crisis

Consensus on the Affordability Crisis

2019 is off to a steady start for the first few months of home construction activity. Given our adventures with the weather, steady may be acceptable for now, though we know we need to be building more homes. This isn’t just the homebuilder wanting to build more homes, a growing consensus of public and private institutions have come to this same conclusion: our housing market is broken and we need a surge in new, affordably priced homes.

The Housing Affordability Institute provided a remarkable look at one of the reasons our housing market is suffering, our homes are simply too expensive for many Minnesotans. In Priced Out: The True Cost of Minnesota’s Broken Housing Market, we get to see what impacts the cost of new homes and the challenges this presents for many Minnesota families.

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Legislature Weighs Housing Affordability

Legislature Weighs Housing Affordability

With growing pressure to address the burgeoning housing affordability crisis, the legislature is considering several initiatives, ranging from housing subsidies to the creation of a commission on housing affordability.

Leading the housing policy discussion, HF 1208 (Carlson, A., DFL-Bloomington)/SF 1294 (Draheim, R-Madison Lake) would create a legislative commission to review regulatory costs, housing innovations and homeownership access issues across the housing spectrum.

Modeled after existing legislative commissions covering complex policy issues like pensions and data privacy, the measure would seat eight legislators, two from each caucus, to review and make housing policy recommendations.

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Homeowners Priced Out

Homeowners Priced Out

New Report from the Housing Affordability Institute Reveals Why The Housing Market Fails Too Many Minnesota Families

A new report titled Priced Out: The True Cost of Minnesota’s Broken Housing Market provides a detailed look at the growing regulatory pressures on new homes, which is having a powerful effect on the entire housing ecosystem of our state. The research demonstrates that up to one-third of the price of a new Twin Cities home is due to local, regional and state housing policies.

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