Minnesota lawmakers look to address starter home shortage

ST. PAUL, Minn. (FOX 9) - A bipartisan group of Minnesota lawmakers said Tuesday that the state's shortage of affordable homes and apartments is a major concern, but one proposal to address it faces an uphill climb.

Home prices have soared across the state. In August, the median home sales price was up 22 percent in Minnesota over August 2019. Over the same two-year period, the average hourly wage in the state's private sector grew 8 percent. 

A housing shortage is causing the upward pressure on prices. Since the 2008 recession, Minnesota has added fewer housing units than necessary to keep up with population growth. The state is now 40,000 units short, the Minnesota Housing Finance Agency estimates.

"We absolutely do need to build at rates and scale we haven't yet seen," said Anne Mavity, executive director of the Minnesota Housing Partnership.

A proposal from state Rep. Steve Elkins, DFL-Bloomington, would force developers and cities to agree to relax regulations that make building starter homes in the Metro cost-prohibitive. But a representative from the League of Minnesota Cities told lawmakers Tuesday that the proposal amounts to "one size fits all."

The Legislature created a commission on affordable housing in 2019, but the legislative panel met Tuesday for the first time since February 2020, before the latest surge in housing prices. The panel has yet to agree on solutions, though a bipartisan group of lawmakers agrees the housing situation is a problem in need of a legislative fix.

During the COVID-19 pandemic, developers have increased new home construction. Yet some Minneapolis lawmakers noted that the construction skewed toward higher incomes and primarily benefitted suburbs and exurbs, not urban and rural areas.

Dave Siegel, executive director of Housing First Minnesota, said government intervention was needed in the starter home market. It's no longer economically feasible to build homes on smaller lots like Richfield, St. Louis Park and Hopkins saw after World War II, he said.

"It's hard to believe when you drive around and see as much development occurring in the Twin Cities that we've actually been undersupplying for well over a decade, but that's the reality," Siegel said.

Elkins' proposal aims to get developers and cities to loosen restrictions that he says is driving up the cost of homes. Among them: suburbs' requirements of multicar garages, half-acre lots, decorative siding, and neighborhood parkland.

State Rep. Jim Nash, R-Waconia, compared the complex problem to a "quadratic equation" and said zoning changes would be necessary.

"It's not just one thing. It's multiple things," Nash said. "People who take care of your mom, people who pour your coffee, people who work at the high school or elementary school, people who work at the hospital -- they all need a home. We need to remove impediments that are out there."

But Daniel Lightfoot of the League of Minnesota Cities criticized elements of Elkins proposal and said it effectively would force mandates on cities. Instead, he said cities needed more state aid to expand affordable housing.

"We think solutions should come from the bottom up rather than the top down," Lightfoot said.