Minnesota needs thousands of new homes to address affordable housing crunch, report says

Minnesota needs to build thousands of extra homes per year to alleviate an affordable housing crunch, a problem state officials hope to tackle with a long list of possible solutions.

The scope of the crisis was laid out Tuesday by members of a task force, created by Gov. Mark Dayton last year, that presented a menu of 30 ideas that address the gap between the cost of housing and what Minnesotans can afford. The suggestions included additional state and local funding, reconsideration of government regulations, ways to grow the local construction industry, incentives for landlords and protection for tenants.

"This report is really a starting point," said Minnesota Housing Commissioner Mary Tingerthal. "It is a call to action."

Dayton acknowledged that there is not much he can do in his remaining months in office to tackle the issue, but said the report and its many recommendations could be a resource for his successor and legislators.

"The new administration can pick and chose which ones it wants to pursue, legislators can pick and chose which ones they want to pursue," Dayton said.

Tingerthal highlighted the interest in a new dedicated state funding stream for affordable housing. One option, which received a hearing at the Legislature this year, would give people a tax break for donations to an affordable housing fund, mimicking a program in North Dakota.

"Loud and clear from the very first meeting, we heard the desire for a dedicated revenue source that the state could use to attract more investment from the private sector," Tingerthal said.

The report also suggested spending public money to rehab deteriorating public housing units and to offer prospective buyers of apartment buildings incentives to keep rents affordable.

But one of the task force participants, state Sen. Rich Draheim, R-Madison Lake, was less convinced that more state money was the answer. He highlighted how some affordable housing projects have been built for $600,000 a unit, based on research from the University of Minnesota's Institute on Metropolitan Opportunity.

"I think it's about priorities more than it is about more funds," Draheim said. "And I'm not saying I'm against more funds, but we need a clear direction, and I don't think we have that."

Dayton said the magnitude of the problem has made it difficult to imagine what would make a statewide impact. The report says the state needs to build 10,000 more homes per year than it does already for the next five years to meet the demand.

"It is a private sector function that the public sector steps in where there are gaps, and it should," Dayton said.

Housing First Minnesota, an advocacy group representing homebuilders, praised the report for highlighting the need more housing construction, a review of burdensome regulations and additional workers in the construction trades.

"I suspect it's going to be a pretty extensive discussion in the coming session," said David Siegel, Housing First Minnesota's executive director. "Can we say that's all from this report? No … But I think it all adds to that equation."

Tingerthal said the task force's meetings across the state revealed the construction industries could benefit from improved technology. The report suggests creating a public-private Center for Residential Construction Innovation, committing state dollars to studying modular housing construction techniques, and expanding programs to build the construction workforce.

The report also acknowledged that the building code and development fees drive up selling prices and monthly rents.

It cited one paper that estimated regulatory reform could shave up to a quarter off development costs.

"We heard from cities and communities that those revenues from fees are really important for things like roads and parks and inclusionary housing," Tingerthal said. "But on the other hand, we heard that they can sometimes make it almost impossible to build housing in certain communities that can be cost effective."

The Minnesota Supreme Court recently dealt a blow to the fees cities charge developers, ruling that Woodbury inappropriately charged a developer for roadway improvements outside his subdivision. The ruling could have a ripple effect on other similar fees around the state.

The task force report also recommended policy changes for renters and landlords, including expanded rental assistance programs, reviewing tenant screening for discrimination, and having landlords pay moving expenses for renters driven out by rent hikes or evictions soon after the purchase of a building.

Cecil Smith, who represented the Minnesota Multi Housing Association on the task force, said it was necessary to offer the 30 recommendations rather than focusing on just a couple of ideas.

"The complexity of the problem means there's not five quick recommendations, or certainly not one silver bullet," he said.

Eric Roper • 612-673-1732 Twitter: @StribRoper