Report: Cost of housing in Twin Cities region on track to rival Denver, Seattle

Blue Line Flats, an affordable housing complex in south Minneapolis.
Blue Line Flats, an affordable housing complex in south Minneapolis.
Max Nesterak | MPR News 2018

A newly released report from the Family Housing Fund says the cost of housing in the seven-county Twin Cities region is higher than cities like Austin, Texas; Nashville, Tenn.; and St. Louis. The report also says the region is on a trajectory to becoming as expensive as Denver or Seattle.

The report, which analyzed data from the U.S. Census Bureau and other state and federal organizations, also concluded there is a significant shortage of housing in the Twin Cities to accommodate a growing workforce — which could hurt economic growth over time.

According to the organization's website, the McKnight Foundation and the cities of Minneapolis and St. Paul first created the Family Housing Fund in 1980 to promote the development of affordable housing in the two cities. Responding to a growing need for affordable housing in suburban communities, the fund formally expanded its mission in 1997 to serve Anoka, Carver, Dakota, Hennepin, Ramsey, Scott and Washington counties.

In March, the housing advocacy group Minnesota Housing Partnership released a report that said more than 110,000 of Minnesota's poorest households don't have affordable housing options. That's defined as housing that costs 30 percent of household income or less.

Family Housing Fund President Ellen Sahli said 1 in 5 workers in the Twin Cities region pays more than 30 percent of their income each month for a place to live.

"We are sounding the alarm," Sahli said. "Housing in the Twin Cities is less affordable than most realize, and if we don't take action soon, our housing future is not pretty."

According to the Family Housing Fund report, the housing shortfall could result in nearly 50,000 fewer jobs in the region in 20 years.

"Affordable apartments are disappearing from our landscape, we have a dramatic shortage of entry level homes to purchase and at the same time, we have a projected economic growth that will bring 368,000 new workers to our region over the next 20 years," Sahli said.

The report says the most significant shortage of housing hits low- and moderate-wage working people.

"Everyone needs a place to call home, and we know that stable and affordable housing is directly connected to positive health, education, and economic outcomes for the entire community," Sahli said.

The Twin Cities will need 176,710 new housing units by 2038. But from 2012 to 2017, the region produced an average of 10,874 units per year when the need was 14,368 units annually. That equals a gap of 3,495 housing units each year, the report found. Lisa Sturtevant, the author of the report and president of a housing consultant firm, said there is an excess of housing for those making $85,800 or more.

"This is something we've seen in communities throughout the country, and we know that when the local workforce can't find housing they can afford, the entire community suffers," Sturdevant said. Workers will be looking for more multifamily housing options, including town homes, apartments and condominiums than single-family homes.

"We hope this serves as a wake-up call to the region," Sahli said.

Low vacancy rates also contribute to the housing problem.

A 2018 analysis by the Metropolitan Council found low vacancy has become the norm in the Twin Cities, affecting housing costs. The analysis found the region's overall vacancy rate was 4 percent in 2018 — down from 5.8 percent in the 2010 Census.

A benchmark for a "healthy" vacancy rate is 5 percent. At that rate, housing costs rise with inflation. But rates below 5 percent are associated with higher housing costs.

Video: What constitutes affordable housing?

Have you had trouble finding affordable housing?

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