Thread by @uptakemn

About to begin live tweeting House Local Government Division Committee.

Today's agenda is #HF3256 (Elkins) Legalizing Affordable Housing Act; local land use and building permit provision modified.

Chair Rep. Sandra Masin DFL has called meeting to order. Now taking roll call.

Quorum present. Minutes approved.

Rep Steve Elkins introducing HF 3256 Legalizing Affordable Housing Act. Will have presenters on economics, demographics and housing today.

Today's presenters are not testifying for or against the bill or discussing specific provisions of the bill, just presenting information.

First presenter: Danielle Leach from Zonda, which has its own proprietary data on the Twin Cities housing market. They collect sales data and do their own observation on the ground.

All types of housing is tight in the TC in terms of inventory, at 0.6 months of supply. We would usually expect 4 months in a balanced market so to have less than one month supply is tight.

Strong demand with limited inventory = increase in median resale price.

Builders in market are reacting to strong housing demand. Contract sales are outpacing starts with are outpacing closings. Builders are selling inventory faster than they can get it started or closed. Has to do with supply and labor shortages. All indicate strong demand.

Builders are trying to capture entry level buyer demand with entry level priced products (still priced high), as well as luxury buyers. Huge growth in town home units, up 60% year over year.

Observed year over year growth in starts for product base-priced $450,000+ . There's little available product in the market priced under $350,000

Products (housing) selling faster than being supplied. Project count has continued to decline over last 12 months. We are projecting a 1% growth in starts in 2022. Entry level buyers are being priced out of the market. Land costs expensive, supplies (lumber) + labor also going up

Next testifier: Luke Bell manages government relations and public affairs at Zillow. He has filed written testimony with the committee for more details on his presentation. Zillow is interested in reducing barriers to housing, the equity challenges created by housing crisis.

2021 unprecedented housing demand with historic supplies shortage. We expect home values will continue to climb, increasing by 16% nationally by the end of 2022 compared to 2021.

This housing affordability crisis perpetuates race inequalities.

Black homeownership is 26% in TC. White home ownership is 76%. This is the lowest Black home ownership in entire nation, also the largest white-black gap in the nation. We believe result of missing middle housing opportunities which this bill would help create.

Zillow research, reforming residential zoning rules to allow for more construction and density would be most effective to increase housing supply and affordability.

Over last 10+ years MN has had a historic shortage in housing construction.

Relaxing zoning rules to allow more efficient construction will be most effective way to increase housing supply. There's broad public support for these measures. 57% of respondents in St Paul support building more houses (more density) in their communities.

Neighborhoods made of single family detached homes are whiter and more racially segregated.

If MN doesn't build enough housing, we won't be able to keep up with a) demand b) Minnesota's population growth.

The status quo is likely to produce most houses in single family homes and large apartment buildings, it won't create the missing middle (2-4 unit buildings) that will be more affordable for groups that have been left out.

Homes in duplexes, triplexes and small-to-medium sized multifamily buildings are more affordable + more accessible for groups who don't have savings/access to intergenerational wealth to buy detached singe family home. Addressing zoning laws is the way forward to address this.

Rep Quam (R) - We need to see disaggregated data, not just Minneapolis and St Paul. There may be specific issues with those two cities not representative of the whole state. Going into the details, need more data.

Libby Starling - Community Development and Engagement division of Federal Reserve Bank of Minneapolis

Speaking to challenges + opportunities to housing affordability in Twin Cities

Lack of new housing, new affordable housing, and low homeownership among BIPOC communities

Challenges in homeownership market + low availability for rental & for sale housing throughout TC

4.6% of all housing was vacant in 2020 in TC. This makes the Twin Cities the lowest housing availability/worst housing shortage in the nation (worse than LA, Seattle, Denver etc).

This is a result of decade long trend of new housing starts not keeping up with what's the demand. Overall need for new units needed to be built is in 15,000-20,000 units needed.

In the last 4 years, # of new building permits has increased the need. We're proud housing starts are over 20,000 but it doesn't make up for the loss in new housing we say 2006-16.

Most needed are multifamily homes (5 units of more) and single family detached homes.

We're behind by 80,000 missing units that were not built over the last 15 years to keep up w/demand = increased competition with existing homes.

Low homeownership among BIPOC
Peak black homeownership in MN in 1950, was 46%. Nearly half of Black communities in MN owned a home in 1950. In 2019 it's about 23% (and white is 77%.)

We need longterm opportunities for wealth building among communities of color.

3rd presenter: David Arbit from Minneapolis Area Realtors

Not a lot of lot sales 2021. Lot sales plummeted during Great Recession, skyrocketed 2012-13, and then stayed steady 2014-19. But not enough to keep up with demand.

Lot prices have increased, especially between 2020-21.

Last year prices rose 11% to $340K (from $305K in 2020)

2012 was the turning point for new house price listings. Before then, many (at one point, majority of) houses were available under $300K - tho the trend has been moving downward. Since 2012, most new homes are listed $300K+

The market is a spectrum, we need both housing under $300K and housing at a million. One end of that spectrum is thriving, the other end isn't.

Salim Furth now presenting on the rights and responsibilities of the MN state (Mercatus Center, George Mason University)

PUDS (Planned unit developments) are housing developments not subject to standard zoning requirements, created for cluster development. This cluster dev for specific purpose can be good, but not good if replacing traditional development.

PUDS aren't inherently bad but can be if they're the only focus (as is currently in many MN suburbs).

Now presenting Rep Steve Elkins (DFL) - MN cities are not making new land available for new lots fast enough to allow for development supply.

The process is broken when you see % of houses in suburbs being built under the PUD process
We need enough new affordable housing to provide shelter for every family in our growing region

MN is a Dillons Rule state, cities have authorities granted to them by the State. It was in 1995 zoning reforms were made and zoning was subordinated to the Comprehensive Plan.

Now testifying: Scott McLellan, with Dept of Labor and Industry.

Now testifying: Amber Backhaus - MN Auto Dealers Association.

Now testifying: Ethan Roberts, Jewish Community Relations Council of MN and the Dakotas

Now testifying David Werschay of Werschay Homes. We want homes people can afford, this bill is an important step in right direction. #hf3256

Home building is at the tip of the economic spear. we need this bill to help developers and builders build what's needed at a reasonable price point.

Fees and regulatory burdens are huge part of the cost. This bill ends mandated luxury material upgrades and building code conflicts. Lets owner and builder decide what they want and can afford.

We do not like articles 1 and 2 on the bill which will take us backwards in terms of affordability (adds costs)

Now testifying Paul Heuer of Pulte Homes. I've worked for cities and as a land developer. We see strong demand for first time home buyers esp detached single family homes, we're not able to satisfy this demand.

Decrease in affordability has been verified. Why? Accumulated regulations are a major contributor to this. It's complex.

Peter Coyle now testifying. Lawyer lobbyist representing Housing First MN. Housing crisis is real. Housing companies in other regions are able to meet the demand for affordable durable housing, but MN's regulatory environment has not allowed for that to occur.

Transportation fees: we oppose provision that will make housing more expensive in MN, having said that Rep Elkins bill introduces topics that need to be addressed. We understand transportation infrastructure is expensive. We object to the piling on that occurs in the development+

process, esp thru the use of PUDs. The goal needs to be that MN supports policy that drives down cost of house building and provides more affordable homes to more MNans.

It's appropriate for legislature to be involved in this conversation on housing, legislature has authority to influence the cities on this.

Too many fees being added and conditions making housing production too expensive.

Cities get to set the terms of their zoning ordinance

Paul Eger, MN Assoc of Realtors

We support Rep Elkins efforts to increase supply of (affordable) housing. Few items in bill we oppose.

Meeting adjourned.