Task force recommends ways to address critical shortage of affordable housing

A block of finished homes in the Brooks Ridge housing community.
A block of finished homes in the Brooks Ridge housing community, May 25, 2018, in Chaska, Minn.
Matthew Hintz for MPR News File

An affordable housing task force appointed last year by Gov. Mark Dayton is recommending broad changes in funding, technology and regulation to meet a statewide demand for affordable housing.

The 28-member task force made 30 recommendations and identified six goals to improve access to housing.

The report says economic growth depends on adequate affordable housing for workers, and that for the past decade Minnesota home construction hasn't kept up with demand.

The shortage of affordable housing now cuts across the state, from the Twin Cities metro to regional centers, to small towns with growing industries.

One key recommendation for meeting that demand is building 300,000 new homes by 2030.

"What that really means in practical terms is that we have to step up by about 10,000 more homes per year for the next five years. We're currently building about 20,000 homes a year and that simply is not enough to house a growing population," said Minnesota Housing Finance Agency Commissioner Mary Tingerthal.

The report called for a dedicated, permanent source of funding for affordable housing programs, but doesn't identify how much money is needed or where the funding should come from.

The task force also called for incentives to spur private investment, pointing to a North Dakota tax credit program called the Housing Incentive Fund.

Established in 2011, the fund provides a dollar-for-dollar tax credit to individuals or corporations who contribute. The North Dakota Housing Finance Agency said the fund has leveraged more than $434 million to build or rehabilitate 2,500 housing units.

Maintaining existing affordable housing is also a critical need across Minnesota, according to the task force report.

A recent Wilder Research study found more than 16,000 very low-income senior households across the state need home repairs or improvements in order to stay in their homes.

Another goal identified by the task force is to better link homes and services people need to maintain economic stability.

The task force identified the rising cost of home construction as a key barrier to creating enough affordable housing.

More than a half million Minnesotans already pay more than 30 percent of their income for housing. Task force member and Duluth Mayor Emily Larson said that means more subsidies are needed to make affordable apartment buildings financially feasible.

"We can't construct a building that really requires $1,500 a month for rent and expect them to only charge $800 a month rent. Somebody needs to make up that gap," Larson said.

The task force identified several ways to reduce the cost of building affordable housing: Minnesota needs to address a construction industry labor shortage, and Tingerthal said the state should aspire to be a national leader in housing innovation and technology.

"We heard some very compelling testimony that the construction trades have really lagged behind in adopting the use of new technologies and there are several promising areas in California and in the Scandinavian countries," she said.

Another factor that drives cost is regulation. The National Association of Home Builders says government regulation adds more than 20 percent to the cost of a new home.

The task force recommended a statewide panel be created to evaluate ways the regulatory burden might be eased, and Larson thinks that's something every community should be doing.

"How can we adjust our guidelines, our policies, our fees, our permitting so that when we are looking and asking for greater creativity on the part of developers or investors, that we're being flexible in trying to send a like message," Larson said.

Larson said while the state building code is important to ensure housing is safe, there might be ways to make cost-saving adjustments.

The cost of housing is rising much faster than wages, the report said, and cutting costs is critical.

"If we don't somehow find a way to limit the rate at which the cost of building housing is growing this could be a losing battle," Tingerthal said.

The construction industry trade group Housing First Minnesota said in a statement that the task force report addressed key issues making it difficult to build affordable housing in the state.

Six goals identified by the Governor's Task Force on Affordable Housing

Goal 1: Commit to homes as a priority

Create a broader and stronger public commitment to the urgent need for more homes that are more affordable to more Minnesotans.

Goal 2: Preserve the homes we have

Keep the homes we already have, especially those that are most affordable.

Goal 3: Build more homes

Build 300,000 new homes by 2030, across all types, prices and locations to stabilize prices and meet demand.

Goal 4: Increase home stability

Assist twice as many people at risk of losing their homes because of rent increases, evictions and heavy cost burdens.

Build stronger links between where we live and the services we may need to live stable lives.

Goal 6: Support and strengthen homeownership

Create pathways to sustainable homeownership, with a focus on removing barriers for households of color.