Twin Cities homebuilding gains are held back by shortage of construction workers

Three months into the year, housing construction in the Twin Cities has been dominated by apartments as builders struggle to find enough workers and sites for single-family houses.

So far this year, 1,294 permits have been issued to build 3,118 units, according to data released Thursday from the Keystone Report for Housing First Minnesota.

That was a slight decline in permits, but a 400-unit increase in total volume because of the scale of the multifamily buildings that were permitted. A single permit can be issued to build more than one unit.

In March, there was a significant increase in total units — 509 permits were issued to build 1,310 units. That included 487 single-family houses, slightly fewer than last year.

This is a critical time for builders. April is usually the busiest month of the year, and orders taken now will set the pace for the rest of the year. The Parade of Homes Spring Preview, the biggest annual marketing event for local homebuilders, just ended and early indications are that attendance was robust.

"Our builders are busy right now," said Tom Wiener, president of Housing First Minnesota. "We expect the permit numbers to rise as we get closer to summer and the more active home buying months."

David Siegel, executive director of Housing First Minnesota, said there's plenty of demand for new single-family houses but also a major constraint. "Our builders simply can't build more homes with the number of workers that they have right now," he said.

So far this year, Minneapolis was the busiest city for homebuilding in the metro area with permits for 886 units, mostly rentals. Woodbury and Eden Prairie were next. In March, Eden Prairie issued the biggest project permit, to Frana Cos. for the 222-unit Elevate@Southwest Station apartment building project.

The figures represent only planned residential projects in the 13-county metro area.

Also Thursday, Dodge Data & Analytics said that total spending on construction starts in the region total $457 million, a 63 percent increase over last year, including offices, retail, warehouses and other commercial buildings. Of that total, residential construction represented $348 million.

Builders are having a particularly difficult time satisfying demand for entry-level houses. At the Parkside at Humboldt Greenway project in north Minneapolis, the focus is on selling houses that are affordable to first-time buyers.

The base price for new single-family houses with 1,664 to nearly 2,000 square feet are priced from $300,000 to $330,000. That's a price point, she said, that's not widely available elsewhere in the metro where developable lots are scarce and expensive.

So far this year sales have far exceeded expectations, according to Sheri Rivera, sales manager for Minneapolis-based MyHomeSource. She said that during the Parade of Homes 10 to 15 groups toured the model house every weekend day. Since January the company has sold 19 houses, far more than expected.

"This price point is so in demand," Rivera said. "And many people want to be close to the city."

Jim Buchta • 612-673-7376