Tiny homes and barndominiums: Housing crunch forces New Ulm to consider alternative home types

The southern Minnesota city of New Ulm wants to grow, and people seem to want to move there. But there’s not enough affordable housing, forcing potential residents to move elsewhere. The potential solution to this affordable housing crunch is less restrictive zoning, and saying “yes” to more alternative styles of housing projects.

The city of New Ulm is struggling with an extremely tight housing market. City manager Chris Dalton said the vacancy rate for rental housing in New Ulm is under 1 percent. And he said there are relatively few homes coming on the market for sale in large part because there’s a lack of diverse housing options for older, empty nesters who want to downsize, so many of them opt to stay in their family homes longer.

“Our houses sell pretty quickly, but there’s just not enough,” Dalton said. “We get a lot of feedback from employers in town that when they get new employees, there’s not enough places for them to live, so they have to live outside of town.”

For the last five years, New Ulm has worked with developers and the city council to integrate new, non-traditional housing types like shed-houses (known as “shouses”), pole barn homes (called “barndominiums”) and even tiny, hotel-room sized houses to help relieve some of the housing crunch.

A tiny home development is under construction right now in New Ulm, with plans for 15 homes, each taking up about 400 square feet of space. The first two tiny homes will likely be available this fall. But Dalton said the shift in the city’s willingness to approve innovative housing didn’t happen overnight.

“It’s been kind of an internal culture with staff saying, ‘OK, let’s take a step back. Let’s not say ‘no’ right away. Let’s listen to what they have to say, see potentially where it would fit within the city,’” he said. ”It’s working with developers to address our housing need, working with staff internally to change that culture shift a little bit, and then preparing [the city] council for, ‘Hey, these are things that are potentially coming down the line.’”

One of these projects is a tiny home village being developed on a vacant lot by the local nonprofit New Ulm Business Resource and Innovation Center. Steve Brown, executive director of NUBRIC, said the plan is to eventually build 15 tiny houses, each with 400 square feet of space on the ground level with an upstairs loft bedroom, for a total of about 600 square feet of living space.

He’s hoping to have the first two model tiny homes ready this fall. And Brown said that from his perspective as a developer, the city has been easy to work with.

“I hope communities look at all the different ways to create affordable housing. It’s just so important,” Brown said. “There’s a huge need for employees and they have to have a place to live, and a comfortable place to live in a great community like New Ulm.”

Over the last decade or so, more communities have been taking an inward look at individual zoning and land use ordinances and making changes to better reflect what’s happening in the housing market and what best suits their community’s needs.

More cities are also addressing their own housing challenges, said Daniel Lightfoot, senior intergovernmental specialist for the League of Minnesota Cities. And he said it’s encouraging to see them involving stakeholders and residents.

“But it’s not necessarily the silver bullet to fix all of our housing challenges statewide,” Lightfoot said. “It looks different from community to community.”

Statewide, Minnesota needs about 100,000 new affordable homes to meet the overwhelming need, according to Anne Mavity, executive director of the Minnesota Housing Partnership, a St. Paul-based nonprofit that advocates for affordable housing and produces data-driven housing research.

She praised communities like New Ulm for reexamining their zoning and land use ordinances and changing them to address their housing needs, but she says the small, southern Minnesota city is still an outlier.

“The challenge is that [there] is an uneven response across communities and, in fact, most communities continue with these older zoning frameworks that are intended to be so much more restrictive,” Mavity said. “Our existing framework is inadequate to create the supply of housing that we need by the numbers.”

That uneven response is apparent in the seven-county Twin Cities metro area. Mavity said the Met Council provides housing goals for every city within the region, and in the last 10-year period, plans called for 36,000 new affordable homes being constructed. But only 16,000 units were actually completed.

Mavity said there are current efforts for state-level zoning reforms such as the Starter Homes Act. The legislation would mandate some zoning law changes statewide, legalizing more experimental and non-traditional home types while allowing for more multi-family housing developments. The bill would also streamline permitting and cut red tape to help fast-track construction of affordable housing.

“The kinds of creative solutions that communities like New Ulm are doing are things that we’re trying to look at from the state lens,” Mavity said. “How do we lay a menu down where cities can choose what’s right for their city? But they have to choose something. They have to be much more welcoming and streamlined to facilitate the creation of housing.”

But the bill failed to advance out of committee this year, as some legislators and local government officials raised concerns about the potential loss of local control over housing development. Affordable housing advocates and lawmakers are working to revise the legislation to address those concerns, and they plan to reintroduce it into the Minnesota state legislature again next year.

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