Housing Industry News Issue 3 Dec. 2017 by Housing First Minnesota

M I N N E S O T A

HOUSING INDUSTRY NEWS

INSIDE State Officials, Builders Prepare for Building Code Updates [PG. 5] Addressing the Labor Shortage

NEWS AND INFORMATION FOR HOME BUILDERS AND REMODELERS BY HOUSING FIRST MINNESOTA • HOUSINGFIRSTMN.ORG

[PG. 7]

VOL. 1 ISSUE 3, DEC. 2017

Minnesota Supreme Court to Hear Impact Fees Case Review Follows Court of Appeals Win for Industry The Minnesota Supreme Court announced on Nov. 28 that it will review the Harstad v. Woodbury case. Woodbury appealed the Sept. 18 Court of Appeals decision upholding a district court’s ruling that Woodbury’s Major Roadway Assessment (MRA) fees violate state law. In the Court of Appeals’ opinion, Judge Diane Bratvold said Woodbury “lacks express or implied authority” to impose its MRA fee. This published opinion and decision by the court upheld the long-held belief that cities cannot impose additional taxes or fees upon developers in order to pay for transit-related improvements outside of signed development agreements. Twin Cities’ developer Martin Harstad sued the city of Woodbury in 2016, contending the city’s MRA fees, which are used to pay for traffic-related improvements throughout the city, were not permitted under state law. The Court of Appeals

upheld a lower court’s ruling that these fees are unlawful. For his 183-home Bailey Park project, Harstad was asked to pay $1.3 million in MRA fees on top of paying for all the development’s transportation-related infrastructure. In November 2016, the district court sided with Harstad, saying the MRA fees were illegal. In his decision, Judge Richard Ilkka called the longtime practice “unlawful and unenforceable.” Rochester-area developer Frank Kottschade, Housing First Minnesota and the National Association of Home Builders filed a friend-ofthe-court brief in support of Harstad for the Court of Appeals decision, citing a similar case between the city of Eagan and Country Joe Homes in the 1990s. The Minnesota Supreme Court has not yet set a hearing date for the case.

2018 Legislative Session: What Lies Ahead? The Minnesota Legislature will gavel in the 2018 Legislative Session on Feb. 20. Housing First Minnesota and the Minnesota Association of Realtors will once again present a collection of proposals that will make up the Minnesota Homeownership Initiative. These solutions will address many of the obstacles currently facing the housing industry: labor, regulatory burden and affordability for first-time buyers.

Minnesota Supreme Court Chambers, State Capitol

First-Time Homebuyer Savings Account Last session, the legislature took a positive step forward in encouraging Minnesotans to save more of their own money to purchase their first homes through the establishment of the First-Time Homebuyer

Savings Account. However, work remains. As current law allows, first-time homebuyers and those re-entering the housing market can establish savings accounts to be used towards the purchase of a house and/or closing costs. Married joint filers can contribute up to $28,000 and individuals up to $14,000 each year in a standard savings account. Interest and dividend gains can be claimed as a state tax deduction. In order to incentivize more Minnesotans to save for their dream home, the Minnesota Homeownership Initiative will propose expanding the state tax deduction beyond the interest earned.

CONTINUED >> PAGE 3

2960 Centre Pointe Drive Roseville, MN 55113 HousingFirstMN.org

HOUSING INDUSTRY NEWS M I N N E S O T A

PRSRT STD U.S. POSTAGE PAID PERMIT # 93652 TWIN CITIES, MN

HOUSING INDUSTRY NEWS

| 1

Finishing Strong—Looking Ahead to 2018 By BOB MICHELS Housing First Minnesota bob@bmichels-const.com

2017 was a banner year for housing! As the president of Housing First Minnesota, I am so pleased with our industry’s and our Association’s accomplishments over the past year. Here are a few highlights: Housing Production Heights The housing industry was busy, I hope you and your business enjoyed growth! We reached heights in housing production that had not been seen in a nearly a decade. Remodeling was strong throughout the state. This means our trade partners and suppliers were busy as well. We drive the economy like no other industry – when we are strong, our Minnesota economy is strong. See page 11 for a review on how we’ve performed this year. Historic Legislative Session Housing had its most impactful

legislative session in a generation by creating and advancing the Minnesota Homeownership Initiative, a common-sense collection of proposals to encourage homeownership and housing affordability. Created by the Minnesota Association of Realtors and Housing First Minnesota, the Homeownership Initiative was a major success. New laws on the books include the creation of a First-Time Homebuyer Savings Account; jump-starting the condo and townhome market with a much-needed balancing of the construction claim process; requiring that property owners be notified prior to a housing moratorium, and codifying that a home sprinkler mandate does not extend to twin homes. What a session! Landmark Court Decision Harstad v. Woodbury

The major victory at the Minnesota Court of Appeals on the Woodbury’s illegal traffic impact fee

is a high point for the year and underscores the importance of holding local governments accountable and maintaining affordability. Final stop is the Minnesota Supreme Court in 2018. Housing First Minnesota supported Harstad with an amicus brief at the appeals court.

“We drive the economy like no other industry. Our efforts to address workforce challenges, create greater housing affordability and advance homeownership for Minnesotans are a cause we can all rally around.” Creation of Project Build Minnesota

Everywhere I’ve been this year, industry

members

have

talked

to me about labor and workforce

challenges. It is clear that this is among the biggest obstacles facing our industry and it will be facing us for some time. Housing First Minnesota has joined with The Builders Group, Minnesota Builders Exchange, Associated Builders and Contractors and several other organizations to create Project Build Minnesota. This new organization will provide a platform to shift the conversation about jobs in the construction industry. Housing Industry News We’ve been so pleased with the positive response to the creation of Housing Industry News, which was launched mid-year 2017. I hope you continue to enjoy the content and I invite you to connect with me or any of the Housing First Minnesota team with feedback or suggestions. None of these accomplishments are possible without strong industry leadership, both from volunteers and from the staffs executing these

Bob Michels, president, Housing First Minnesota and Michels Homes

plans. Thank you to everyone who had a hand in these successes! As we prepare for an extremely busy 2018, I am reminded how important our work is for the homeowners of Minnesota and our state’s economy. We drive the economy like no other industry and our efforts to address workforce challenges, create greater housing affordability and advance homeownership for Minnesotans are a cause we can all rally round.

Recruiting Workers During the Labor Shortage

Project Build Minnesota Continues to Gain Momentum

How do you find workers when there is a significant labor shortage? We spoke with Stephanie Peterman, a Lyman Companies recruiter, who is currently working to help fill more than 100 open positions, on the challenges she faces and how she addresses those issues.

Project Build Minnesota filed paperwork this fall to become a new 501(c)(3) organization, including bylaws and articles of incorporation. Dennis Medo, former director of insurance at The Builders Group, will serve as executive director of Project Build Minnesota. This designation makes the organization its own independent entity with the sole purpose of addressing the construction workforce challenge. Its new independence encourages greater collaboration and makes contributions to the organization tax deductible. The 501(c)(3) designation also clarifies that Project Build Minnesota is for the greater good of the construction industry. With the help of significant donations and contributions from

Q: How often or how many positions does Lyman need to hire for?

A: Lyman is almost always looking to hire anywhere from 50-80 employees, and the majority of our needs are for carpenters. Q: What is the biggest challenge you see right now when recruiting workers to the construction industry?

A: Our biggest challenge is finding people that actually want to do the job. Most jobs in the construction industry are labor intensive. Q: What works best when looking for job applicants?

A: We find that going to the schools and job fairs, putting our jobs online, and allowing candidates to text us are some of the best ways we get job applicants.

Stephanie Peterman, Lyman Companies Recruiter

and buildings, and putting ads on the radio. Q: What do you think would help our industry fill jobs?

A: I think it would help to have more industry specific job fairs or events where job seekers interested in the industry could come and talk to employers in the construction industry. More personal touches where potential applicants can get more information on the jobs available would be good too.

A: Continue to recruit in places “outside of the box.” We have found ourselves going to high schools, colleges, workforce centers, putting signs on our trucks

2 |

HOUSING INDUSTRY NEWS

Project Build MN Board of Directors Robert Heise President, Associated Builders & Contractors (Board President) Tom Getzke Executive Director | Minnesota Builders Exchange (Board Treasurer)

Q: What’s the best advice you have for others looking to hire in the construction industry?

David Siegel Executive Director | Housing First Minnesota (Board Secretary) Why do you love working in the housing industry? Let us know at Info@HousingFirstMN.org

industry members, Project Build Minnesota plans to move ahead in 2018 with its first round of marketing. The primary goal is to drive traffic to the website and get 16-to22-year-olds interested in construction careers. Project Build Minnesota will use social media, blogs and other digital ads. Online marketing will not be their only form of outreach. Board members plan to attend a number of conferences and exhibits, including the Minnesota School Boards Association, the Minnesota Association of Secondary Administrators, the Minnesota School Counselors Association, the Northwest Lumberman’s Association show and the

Stu Thompson CEO | The Builders Group Jessica Freeseman Project Manager | Shingbee

Jake Bauer President | Carciofini Company Cody Nurenberg President | Northwest Lumber Association Lowell Pratt Pratt Homes John Eischen Executive Director | Rochester Area Builders & Builders Exchange of Rochester

Housing First Minnesota Builders and Remodelers Show. While they are excited to get started with the marketing campaign, additional funding is needed. When the 2018 legislative session starts this February, the organization will share its mission with legislators and seek state assistance to further strengthen Project Build Minnesota. They hope to share with lawmakers the importance of solving the labor shortage as it’s vital that we build new homes in this state not only for our economy, but to ensure that the American dream of homeownership is achievable for all Minnesotans.

Project Build MN Executive Director Dennis Medo Executive Director, Project Build MN

If you are interested in contributing or getting involved with Project Build Minnesota, contact Dennis Medo at 612-221-9849.

CONTINUED FROM PAGE 1

2018 Legislative Session: What Lies Ahead?

and project delay represents a real cost that is

Addressing the Regulatory Burden

ers include:

The regulatory costs associated with new construction have surged over the past decade. Regulations are needed to ensure safety and durability in new home construction, but the regulatory structure must meet these objectives at a price that families can afford. The cost of complying with local and state government regulations negatively affects the affordability of housing. Every mandate, fee

· Homebuyer Access

passed on to homebuyers. Some of the challenges faced by homebuy-

In Minnesota, for every $1,000 increase in the price of a home, about 4,000 households are priced out of the market for a median-priced new home. · Regulatory Costs Have Soared National estimates show that, on average, regulations imposed by government at all

levels account for nearly 25 percent of the final price point of a home. · Affordability Gets Lost in Regulatory Process Well-intentioned policy work in the various state agencies aims to meet regulatory goals, but too often it misses the equally important goal of minimizing cost impacts for homeowners. · Homeownership is less Attainable for too Many The homeownership rate is at decades-low levels both in Minnesota and nationally.

Greater affordability in all homes means more homeownership for all. During the 2017 legislative session, Rep. Bob Vogel (Elko New Market) and Sen. Mary Kiffmeyer (Big Lake) proposed a bill that would allow for the legislative committee with jurisdiction to review rulemaking proposals which would impact individual homeowner costs to purchase or remodel a home by $1,000 or more. Similar bills are expected to emerge this session.

A PRODUCT AND SERVICE EXPO

2 01 8 T H E M E

Greatest Hits SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGFIRSTMN.ORG

April 12, 2018 M IN NE AP OLI S CONV E NT I ON C EN TER H ALL C | www.batcbrs.org

HOUSING INDUSTRY NEWS

| 3

Housing at theAFFAIRS Capitol REGULATORY

Regulatory Affairs Roundup

OSHA—Top 10 Construction Violations, 2017 NUMBER 6

NUMBER 1

5,378 Citations

Regarding Fall Protection: Duty to Have Fall Protection

Citations

Regarding Aerial Lifts

4 |

HOUSING INDUSTRY NEWS

Waters Of The United States Rule Delayed The Environmental Protection Agency is looking to delay the effective date of the Waters of the United States (WOTUS) Rule by two years, the agency announced in November. WOTUS, enacted in 2015, gives the Environmental Protection Agency and the Army Corps of Engineers the ability to protect “navigable waterways,” the effect of which was been costly federal permits to build or modify lands near covered waterways. Implementation of the WOTUS Rule was halted in 2015 by the U.S. 6th District Court. In addition to the two-year delay, the EPA previously announced it is looking to revise which

For the past year, a workgroup made of state agencies and interested parties has been examining how various state agencies should approach water refuse rulemaking. While not a binding rule, this draft report will outline a process and standards from which future water reuse rules will be based. The final report, to be issued in November, will provide guidance on housing-related water reuse including stormwater reused for irrigation and water reuse within a home. Included in the report will be a breakdown of which state agency has authority over a specific water reuse rule, water quality standards and additional criteria for water reuse.

Stay up to date on the latest regulatory and code updates at HousingFirstMN.org/ housing-industry-news or facebook.com/ HousingFirstMN.

Citations

NUMBER 9

NUMBER 4

603

Citations

Regarding Fall Protection: Training Requirements

Regarding General Safety and Health Provisions: General Safety and Health Provisions.

NUMBER 5

NUMBER 10

Citations

1,125

556

Regarding Personal Protective and Life Saving Equipment: Eye and Face Protection

Regarding Fall Protection: Fall Protection Systems Criteria and Practices.

Citations

Water Reuse Guidelines

NUMBER 8

629

1,353

The Minnesota Pollution Control Agency is in the process of finalizing the draft language of the 2018 Construction Stormwater Permit. Once the draft 2018 Permit has been released, a public meeting will be held to solicit feedback from stakeholders and to explain the new permit. Notable changes include: Format: The permit is being reconfigured and will look very different from what it is today. This will include a 20 percent reduction in the amount of text and the use of simpler, more direct language. Ditch Stabilization: Clarifications over what is and is not permitted for ditch stabilization in varying conditions. Contamination: Clarification on work in contaminated soils/ with contaminated water tables. Infiltration Tables: There will be an adjustment on the use of infiltration rates. Effective Date: Permit would go into effect once the payment is processed (no longer a seven-day timeframe). MPCA is looking to issue an 18-month phase-in for the new

Citations

NUMBER 3

Regarding Ladders

protected waters fall under the WOTUS Rule.

NUMBER 7

Regarding Toxic and Hazardous Substances: Hazard Communication

1,989

2018 Permit on all existing permits from the date the new Permit takes effect. MPCA is expecting the 2018 Permit to go into effect in Q1 2018. Housing Industry News will have a copy of the draft 2018 Permit posted at HousingFirstMN.org/ housing-industry-news once it is available.

Regarding Personal Protective and Life Saving Equipment: Head Protection

688

Regarding Scaffolds

Construction Stormwater Permit

Citations

NUMBER 2

2,644

Silt fencing on a worksite in Blaine

700

Citations

Lead Paint/RRP Rule: Industry Pushes Reform Department of Health Continues to Modify Draft Rules Due to Industry Concerns The Minnesota Department of Health released an updated draft of its Renovate, Repair, and Paint (RRP) Rules in late September in response to the housing industry’s collective unease with previous drafts released by the MDH. The state’s proposed RRP Rules governing remodeling and renovation practices in pre-1978 homes will replace the Environmental Protection Agency’s RRP Rule in Minnesota once adopted. Housing First Minnesota and other industry groups have been concerned that remodeling costs of pre-1978 homes would soar under Minnesota’s proposed RRP Rules, due to costly requirements that exceed the current EPA rule. The September draft, which followed two alternative drafts submitted by Housing First Minnesota and a meeting with representatives of the housing industry in late August, included 32 changes from the draft RRP Rules released in July. Following the release of the September draft, Housing First

Minnesota submitted a list of 23 changes recommended by industry experts in mid-October. The MDH responded in November, agreeing to make 15 changes directly related to Housing First Minnesota’s proposal. “The changes the department have made so far are a step in the right direction,” said Nick Erickson, regulatory affairs manager for Housing First Minnesota. “While the department has come a long way to ensure remodeling of pre-1978 homes remains affordable, there are still opportunities for improvement.” The Minnesota Association of Realtors, National Association of the Remodeling Industry’s Minnesota Chapter, the Minnesota Multi Housing Association and the Central Minnesota Builders Association have participated in in Housing First Minnesota’s activities.

The latest draft of Minnesota’s RRP Rules will be posted at HousingFirstMN. org as soon as it is available.

Update on Contractor Registration Q & A With Department of Labor & Industry’s Charlie Durenberger requirements, then they are an independent contractor. Q: With registration expiring, what steps do currently registered contractors need to take?

A: Registered contractors who have not yet renewed their registration should do so as soon as possible, as all registrations expire Dec. 31, 2017. The registration renewal process is very similar to the initial registration process in that it’s free and done completely online at: secure.doli.state.mn.us/license/conregrenew. Questions about the registration or renewal process should be directed to DLI.register@state.mn.us or (651) 284-5074. Q: For general contractors, what do they need to do to ensure they’re using registered contractors when the new year begins?

Charlie Durenberger, Department of Labor & Industry, presenting at Housing First Minnesota’s Office

For the first time since its creation, registrations through the Minnesota Department of Labor & Industry’s (DLI) Contractor Registration Program expire on Dec. 31, 2017. The Contractor Registration Program was created by the legislature to assist DLI in its investigation of worker misclassification (treating employees as independent contractors). Contractors involved in the construction of physical improvements of the

home who do not have a valid contractor license, exemption from DLI or were excluded when the law was created, must register with DLI. Hiring unregistered contractors is a violation of law and can result in fines. By law, an unregistered “subcontractor” is presumed to be an employee of any contractor that hires them. If the hiring contractor can prove that the relationship between them and the subcontractor meets DLI’s nine

A: General contractors should go on the DLI website and use the License Lookup tool on the home page (dli.mn.gov) to verify that their subcontractors are registered and that their registration is in good standing through Dec. 31, 2019. When looking up a subcontractor, it’s most helpful to have the sub’s registration number, but if you only have the sub’s name, typing in as little as possible will make it more likely that the right name will show up in the results of the lookup. There’s no need to use a wildcard when looking up a sub’s registration. Q: Aside from verifying registration, what steps should general contractors take when hiring subs?

A: Most importantly, a general contractor should be confident that

they understand the difference between an employee and an independent contractor. The reason we have a registration program is to help DLI and other state agencies regulate the classification of workers in the construction industry. When an employee is treated as an independent contractor, that is considered worker misclassification. Worker misclassification is a significant problem in the construction industry. The primary issue that a general needs to look at is whether their subcontractors meet all nine factors of the nine-factor test that has been in state law for decades. If a subcontractor fails to meet all nine factors, he or she is deemed to be an employee of the hiring contractor, even if the worker operates under a business entity and has their own workers’ compensation and liability insurance. Paying workers on an hourly basis is one of the most common forms of worker misclassification. Information on the nine-factor test and other issues relating to the proper classification of workers can be found on DLI’s website at dli.mn.gov. Generals should also make sure that their subs’ business entities are up to date with the Minnesota Secretary of State, that they use written contracts or accept written invoices from their subs, and that payments are made to the subs’ business entities, not the individual business owners. Subs that have no employees of their own are not required by state law to carry workers’ compensation or liability insurance, but most general contractors’ insurance carriers will insist that the general make sure that

they collect insurance certificates for workers’ comp and liability from all its subs. Q: What do general contractors need to do when hiring subs?

A: It’s difficult to gauge whether the misclassification of workers has been reduced by DLI’s enforcement activity, but our investigators have spent the majority of their efforts in educating contractors that they encounter in their investigations. Our focus has and continues to be education rather than punishment. That said, we have suspended many contractor registrations for failure to cooperate with our investigations. These suspensions also carry monetary penalties, usually in the neighborhood of $5,000. We’ve also found that most general contractors are classifying their subs correctly. Misclassification occurs most often when we get down to the lower tier subs (subs of subs). When we identify misclassification, it’s usually at the level of the individual or company that pays the workers who perform the actual construction work, most frequently in drywall, floor covering, painting and roofing.

To register or renew your contractor registration, visit: dli.mn.gov To verify a contractor’s registration, visit: dli.mn.gov

State Officials, Builders Prepare for Building Code Updates Members of the state’s Construction Code Advisory Council met on Nov. 30, to begin the process of updating the state’s building codes. During the meeting, the Construction Code Advisory Council appointed the official members of its 10 Technical Advisory Groups (TAGs), the bodies responsible for reviewing changes to each code: Accessibility Code, Building Code Administration, Commercial Building Code, Elevator Code, Energy Code, Existing Building Code, Fire Code Compatibility, Mechanical and Fuel Gas Code, Structural and the Residential Building Code. Process and Timing Earlier this year, staff at the Department of Labor & Industry (DLI) cataloged each from the 2015 and 2018 building codes. Each change is to be reviewed by a TAG of at least six experts comprised of DLI staff, code officials and

industry representatives. The TAGs will recommend which changes should be put forward. The Construction Code Advisory, Council will then review the TAGs recommendations and submit its findings to the DLI Commissioner, before the final proposed code is published. The final draft codes will be opened for public comment before going into effect, with drafts expected by June 2018. The new codes will likely take effect in March 2020.

plywood is required behind foam sheathing; New provisions for brick tie attachment over foam sheathing up to 2 inches thick. Projections: Heavy timber and fire-retardant-treated wood as options to meet the fire-resistance rating. Townhomes: Option of two 1-hour fire-resistance rated wall assemblies to separate townhomes reinstated. Windows: Maximum U-Factor decreased from .32 to .30 in climate zones 5-8.

Changes To Expect

Industry To Seek Reforms

With the changes from both the 2015 and 2018 codes up for review, builders and code officials have a clear picture of what changes to expect. Major home-related code changes to be reviewed by the TAGs include: Masonry Veneer: Minimum 7/16-inch OSB sheathing or

According to home builders, the 2014 building code changes added between $8,000 and $14,000 to the base price of a new home in Minnesota. Advocates for the industry point out that new-home buyers can’t afford another increase of that size. “With the dramatic increase in

home prices due to the regulatory process, more and more Minnesota families are being priced out of the new home market,” said Nick Erickson, regulatory affairs manager for Housing First Minnesota. Erickson says Housing First Minnesota is prepared to offer several dozen amendments aimed at improving home performance and safety, while reducing the cost to consumers. “Today’s homes are the safest and highest preforming in history,” said Erickson. “We need to work to ensure they remain affordable.”

TRACK THE CONVERSATION ON TWITTER: @housingfirstmn #MNHomeownership

GET HOUSING NEWS AS IT HAPPENS: Sign up at HousingFirstMN.org

Industry Representatives Residential Building Code Brent Nygaard | Lennar Building Code Administration Mike Swanson | JMS Custom Homes Structural Mike Barden | Pulte Group Energy Code Ross Anderson | The Energy Network HOUSING INDUSTRY NEWS

| 5

HOUSING ON THE HILL

Housing Becomes Part of the 2018 Discussion In less than 11 months, Minnesotans will go to the polls to determine who will become their next governor. Health care, education and the economy are sure to dominate the conversation throughout the primary season and run-up to the general election. But housing has also been elevated as part of frequent discussions among the 2018 contenders. The housing industry makes up approximately 15 percent of Minnesota’s GDP. From providing good-paying jobs for construction workers to building the American dream, the housing industry is an integral part of Minnesota’s economy. That’s why Housing First Minnesota has had conversations with many of the leading gubernatorial candidates in the past few months. “We know that regardless of who is elected, we need to be able to communicate the key issues that are facing the housing and construction industry,” said Daryl Doehr, senior regional sales manager of Marvin Windows and 2017-18 Housing First Chair.

Former Rep. Keith Downey (Edina) meets with Housing First Minnesota leadership.

“Since July, we have had quality conversations with candidates from both major parties.” Daryl Doehr, 2017-2018 HOUSING FIRST CHAIR, SENIOR REGIONAL SALES MANAGER, MARVIN WINDOWS

You can continue the conversations by following our social media @HousingFirstMN on Twitter and Housing First Minnesota on Facebook.

Rep. Erin Murphy (St. Paul) and Sen. David Osmek (Mound) each spend time discussing housing issues and their respective campaigns.

Housing Advocate Elected to Bloomington City Council Shawn Nelson, housing industry advocate and former Housing First Minnesota President, won a special election for Bloomington City Council on Nov. 7. With his victory over incumbent Eldon Spencer, Nelson will represent the 2nd district in Bloomington. He took the oath of office on Nov. 20 and his term runs until January 2020. Nelson owns and operates his remodeling business, New Spaces, in Burnsville. He is a long-time Bloomington resident, husband to Ann and father of two daughters. Nelson was endorsed by the Housing First PAC in October.

“We congratulate Shawn on his victory. For years he has demonstrated his support for a strong housing market, which ties together the communities of our great state. He is a proven leader in the Bloomington community who shares our goal of building safe, smart and durable homes, at a price that families can afford.” Bob Michels, HOUSING FIRST MINNESOTA PRESIDENT Bloomington Councilman Shawn Nelson in the City Council Chambers.

TEXT HOUSINGFIRST TO 52866 Are you willing to contact your elected officials on behalf of the housing industry? Join the Housing First Advocate Network (HFAN). When our industry is faced with challenges, it’s important elected officials hear directly from their constituents in the industry. The Housing First Advocate Network is a grassroots network utilized to advocate for the industry at all levels of government.

Join the Housing First Advocate Network

6 |

HOUSING INDUSTRY NEWS

Addressing the State’s Workforce Challenges Rep. Barb Haley Discusses How the Legislature Can Address Workforce Obstacles We have low unemployment and slow labor force growth. We face a persistent achievement gap and low graduation rates among our immigrant and minority populations. And, the education and skill requirements in our industries are rapidly changing. We have the perfect storm of a people shortage and a skills gap in a changing economy.

Rep. Barb Haley (Red Wing)

The construction industry represents one of the largest growing segments of the Minnesota economy. One of the biggest obstacles that is standing in its way is a serious workforce shortage. Rep. Barb Haley has an extensive background in addressing workforce challenges. She currently sits on the Education Innovation Policy and Higher Education and Career Readiness Policy and Finance committees in the Minnesota House of Representatives. Q: What are some of the biggest workforce obstacles facing the state?

Rep. Haley: First of all, the demographic impact of aging and retiring baby-boomers and fewer young people will be with us for decades.

Q: What did the legislature accomplish last session to address these issues?

Rep. Haley: We coupled our tax policy, higher education investments and K12 policy to begin to address these challenges. We passed a ‘first in the nation’ tax credit for student loan debt to entice new graduates to come work in our state. We supported the education of our future workforce by investing in our post-secondary institutions, by offering tax incentives for families who are saving for college expenses, and by providing scholarships for students going into high demand fields such as agriculture, advanced manufacturing, IT and healthcare. In the area of K12 policy, we revamped our teacher licensing system to allow for community experts to support classroom

instruction in needed subjects like career and technical education. Q: What are you planning for this upcoming session?

Rep. Haley: I have lots of ideas brewing! I firmly believe that we need to have a focused and aligned strategy to address our workforce shortage and our skills gap. This will require lots of conversations between our business, education and policy leaders. I’d like to see incentives for school districts to hire career and post-secondary counselors who have experience in the marketplace and could advise students about in-demand fields like the trades. I want to work on expanding the Youth Skills Training program (that was a result of legislation chief authored by Rep. Jason Rarick) and getting the V-PSEO bill passed. (Rep. Jim Nash is the chief author.) I am passionate about connecting education and industry and giving students opportunities for hands-on learning and skill development. Q: Are there any industries in particular that are currently facing the greatest pinch?

Rep. Haley: All industries will face the labor shortage challenge, but the most in-demand fields in our state

help us spread the HELP US SPREAD message: THE MESSAGE:

TELL US WHY YOU LOVE THE HOUSING INDUSTRY

Rep. Barb Haley (Red Wing) speaks on the House of Representatives floor during the 2017 legislative session.

who are feeling the greatest pinch are construction and the trades – with highest demand in welding and machining; IT; healthcare – particularly in home care for the disabled and seniors, and advanced manufacturing. Q: How does Minnesota compete with other states for labor?

Rep. Haley: Minnesota not only competes with neighboring states for labor, but we compete nationally and globally. Today’s workforce is

highly mobile and, with technology, people can now live where they choose and don’t necessarily make a work decision based on a company’s location. We compete based on our educational system, our tax structure, our availability of housing, and other factors such as energy and health insurance costs. We are known for the quality and education level of our workforce and for having a history of innovation.

CONTACT DENNIS MEDO AT 612-221-9849

HOUSING INDUSTRY NEWS

| 7

Housing theTHE Capitol HOUSINGatON HILL

Housing Industry Headed to St. Paul Housing Day at the Captiol is one of the largest gatherings at the Minnesota Capitol with more than 600 attendees. Home builders, remodelers, Realtors and other housing industry advocates from throughout Minnesota will descend upon the State Capitol in St. Paul on March 14. “Housing Day at the Capitol is an incredible opportunity for both sides of the real estate profession — construction and sales — to come together to educate legislators with one voice. When it comes to being ‘housing market experts’, who better to talk to than builders and realtors,” said Tracie Fogelson, president of the Minnesota Association of Realtors/Realtor Broker with Rochester Coldwell Banker.

Majority Leader Paul Gazelka (Nisswa), center, meets with 2017 Housing Day attendees.

Caleb Prohaska and Ed Roskowinski, Vujovich Design Build, Inc.

“Housing Day at the Capitol is an incredible opportunity for both sides of the real estate profession—construction and sales—to come together to educate legislators with one voice.” Tracie Fogelson, MINNESOTA ASSOCIATION OF REALTORS PRESIDENT, ROCHESTER COLDWELL BANKER

More than 600 attendees are expected during the 2018 Housing Day at the Capitol.

Sen. Karin Housley (St. Mary’s Point)

8 |

HOUSING INDUSTRY NEWS

Sen. Melisa Franzen (Edina) met with constituents during the 2017 Housing Day at the Capitol.

Rep. Paul Anderson (Plymouth)

Join the

HOUSING MOVEMENT BECOME A HOUSING FIRST ADVOCATE AND GET: 1

Printed edition of Housing Industry News mailed quarterly to primary contact at company

Digital edition of Housing Industry News to all additional contacts from company

30% discount for all company contacts to attend Housing Day at the Capitol

All company contacts are enrolled in the Housing First Advocate Network

PER YEAR PER COMPANY (Includes All Employees)

Become an Advocate at HousingFirstMN.org

New Home Affordability Nears Decade-Low

Twin Cities Minnesota

55 %

Affordability Ratio (%)

The percentage of Minnesotans that are able to consider new homes as a housing option is on the decline. New data shows that 38.6 percent of Minnesota households earn the household income needed to purchase a median-priced new house. This is down from 40.4 percent in 2016 and is the second-lowest ratio in the past nine years.

New Home Affordability Ratio

40 %

25 %

HOUSING INDUSTRY NEWS

| 9

MARKET REPORT

Millennials Buy Into Homeownership in Minnesota Minneapolis-St. Paul Area 72.62%

Homeownership Rate

Minnesota millennials are ahead of the rest of the nation when it comes to buying their first home. According to Abodo, 42.4 percent of millennials in the Twin Cities own a home, which is the highest when comparing the largest 45 metro areas. Nationally, 35.6 percent of millennials are homeowners. The homeownership rate for millennials has now grown for three consecutive quarters. Nick Hackworthy, president of Creative Homes, says they are seeing an uptick in millennials that are looking at new construction. “We are seeing that once millennials have the buying power they are attracted to new homes,” said Hackworthy. “Even if they can’t afford to buy new right now they are looking at it for the future. Many are attracted to the fact that a new home requires little repair or maintenance and they like the simplicity of the new layouts.” The overall homeownership rate rose from 63.7 percent to 63.9 percent in the third quarter. The Midwest outpaced the national average at 69.1 percent and Minnesota outpaced the Midwest with a 72.8 percent homeownership rate.

71.59% 71.35%

71.27%

Time Period SOURCE: US CENSUS. U.S. BUREAU OF THE CENSUS, CLARITAS, ZONDA BY MEYERS RESEARCH | UPDATED 2017

IN THE TWIN CITIES,

42%

OF MILLENNIALS ARE HOMEOWNERS

“Many are attracted to the fact that a new home requires little repair or maintenance and they like the simplicity of the new layouts.” Nick Hackworthy, PRESIDENT, CREATIVE HOMES

New Home Prices at Record Highs Across Minnesota Home price appreciation is outpacing both inflation and wages. The median closing price for a new detached home in the Twin Cities region increased 2.9 percent yearover-year to $411,357 in November. The median closing price for a new detached home in Minnesota increased by 3.2 percent to $390,098.

Twin Cities

$464,000

Median New Single-Family Closing Price

$288,000

Minnesota

2.9%

MEDIAN CLOSING YEAR-OVER PRICE

$112,000

Mortgage Rates Remain Low The average 30-year fixed mortgage rate has declined from 4.3 percent to 3.9 percent recently, remaining well below the long-term average of 8 percent. Through November, the Federal Reserve raised short-term interest rates twice. Additional hikes are expected in 2019.

10 |

HOUSING INDUSTRY NEWS

3.9%

30 YEAR FIXED MORTGAGE RATE (PREVIOUSLY 4.3%)

Get Housing Industry News as it happens: Sign up at HousingFirstMN.org Follow us on Twitter @housingfirstmn

Housing Market Report Year-To-Date Single-Family Construction in Select Cities Minnesota residential construction had its best year in a decade in 2017. Year-to-date through October, Minnesota single-family permits are up 10 percent. Single-family construction in the Twin Cities is up 14 percent.

State of Minnesota

Moorhead

104

SOURCE: CITY OF MOORHEAD

12,863

Duluth

New Single-Family Mankato Permits

(Census Data Fargo/Moorhead 948)

101

SOURCE: US CENSUS

St. Cloud

211

MINNESOTA SINGLE-FAMILY PERMITS

10%

SOURCE: CENTRAL MINNESOTA BUILDERS ASSOCIATION

Twin Cities

7,404 406

(St. Cloud-Area Data Not Reported to US Census)

THROUGH OCTOBER 2017

Mankato

164

SOURCE: US CENSUS

Rochester

SOURCE: US CENSUS

TWIN CITIES SINGLE-FAMILY PERMITS

SOURCE: US CENSUS

14%

SOURCE: US CENSUS. HOUSING FIRST MINNESOTA COLLECTED THE ABOVE PERMIT INFORMATION FROM AVAILABLE PUBLIC RESOURCES.

THROUGH OCTOBER 2017 United States

6.8%

Y-Y Change

OCT. 2017

$265,000

2016

$249,900

Y-Y Change

OCT. 2017

$220,000

2016

$205,900 West - 59

Twin Cities Median Sales Price

Minnesota Median Sales Price

SOURCE: MINNEAPOLIS REALTORS

SOURCE: MINNESOTA REALTORS

South - 59

Midwest - 55

Northeast - 54

Regional Remodeling Market Indicies SOURCE: NAHB

The Overall Remodeling Market Index is calculated by averaging the Current Marketing Index and the Future Market Indicators Index. Any number over 50 indicates that more remodelers view remodeling market conditions as higher than the previous quarter. Results are seasonally adjusted.

Minnesota Construction Employment Past 6 Months

Twin Cities Construction Employment Past 6 Months

SOURCE: DEED

HOUSING INDUSTRY NEWS

| 11

INDUSTRY IN ACTION

Home Builders Honor Twin Cities’ Best More than 830 home building industry members attended this year’s Building Industry Gala at Mystic Lake Casino and Hotel in Shakopee on Oct. 26. The red-carpet event honored this year’s top Twin Cities’ builders, remodelers, suppliers and individuals. Once again, WCCO’s Jason DeRusha emceed the event. More than 150 awards were handed out including the presentation of the coveted Builder of the Year, Remodeler of the Year and Associate of the Year trophies. “Building and remodeling families’ homes is an extremely rewarding career, and our awards gala is a chance for the industry to all come together and celebrate the amazing work that we get to do every day,” said Bob Michels, president of Housing First Minnesota. “The BIG

Night is truly a celebration of the homes and communities we’ve built that make the Twin Cities an amazing place to call home.” Other top awards presented included the Housing Industry Leader of the Year, the Robert L. Hanson Lifetime Achievement Award for industry service and the Advocate of the Year Award for work by a housing industry member in the advocacy arena. Housing First Minnesota also bestowed its Legislator of the Year award to State Representative Dennis Smith (R-Maple Grove) and Senator Dan Hall (R-Burnsville) for their support of the housing industry at the Capitol.

(L to R): 2017 Advocate of the Year Bill Gschwind, 2017 Associate of the Year, Admit One, Inc. 2017 Legislators of the Year, Rep. Dennis Smith (Maple Grove), Sen. Dan Hall (Burnsville)

“The BIG Night is truly a celebration of the homes and communities we’ve built that make the Twin Cities an amazing place to call home.” Bob Michels, PRESIDENT OF HOUSING FIRST MINNESOTA

(L to R): 2017 Builder of the Year, John Kraemer & Sons, Inc. and 2017 Remodeler of the Year, James Barton Design-Build, Inc.

2017 Robert L. Hanson Lifetime Achievement Award, Len Pratt, Pratt Homes

12 |

HOUSING INDUSTRY NEWS

2017 Housing Industry Leader of the Year, Lennar

The show floor featured products and services of over 200 companies in 2017.

Builders and Remodelers Show Continues to Innovate The largest building industry product show in the Midwest takes place this April at the Minneapolis Convention Center. The Builders and Remodelers Show (BRS) will feature a new floor plan this year with more than 225 vendors showing off their newest and best products and services. For decades BRS has been the best area event to discover new trends in the home building industry.

“BRS is a great spot to see all these products and services in one location, super convenient to see what people have to offer.” Ali Awad, AWAD & KOONTZ ARCHITECTS BUILDERS, INC.

WHEN:

THURSDAY, APRIL 12, 2018

TRADE SHOW OPEN: EDUCATION:

2-8 P.M.

1-3 P.M.

WHO CAN ATTEND: BUILDERS, REMODELERS, ARCHITECTS AND DESIGNERS

VISIT BATCBRS.ORG Your Innovative Resource for the Building Industry Discover new trends, build new relationships, and gain the tools you need to succeed: • • • •

Networking New Products and Services Relevant Business Education NEW Mobile ‘App’: Includes show info, exhibitor directory and profiles (including categories), booths, sponsors, floorplan, schedule and sessions, speakers and profile • Refreshed Floorplan

Meeting with new customers, connecting with old friends, discovering new tools to succeed, it’s all at BRS.

HOUSING INDUSTRY NEWS

| 13

Other Housing News Lennar Acquires CalAtlantic

Judge Orders Lake Home to be Demolished

Minnesota’s two largest national home builders will merge in 2018. In November, the two companies announced Lennar’s $5.7 billion acquisition that will make Lennar the largest home builder in the country. Lennar has been the largest builder in the Minnesota for the past 11 years. CalAtlantic, which formed in 2015 through a merger involving Ryland Homes, has been the number two builder in Minnesota for the past two years.

A judge in Stearns County ruled in September that a new home on Grand Lake in Rockville, Minn., be demolished in a lawsuit from the owners’ neighbors. According to court records, Kathleen Mimbach and Matt Mimbach, her grandson, applied for four building permits to remodel the structure on Grand Lake in April 2015, with the project’s cost estimated to by $75,000. The permits were granted in May of 2015. Instead of the permitted remodel with a new addition, the Mimbach’s neighbors said the entire structure was torn down and a new, larger home was built in its place. Only the footings to the original structure, a cabin built in the 1950s, were left. Neighbors Thomas and Holly Ruether sued the Mimbach’s in April 2016, saying the project violated setback ordinances and that the Mimbach’s misrepresented the scope of the project in the permitting process. In the September ruling, Stearns County Judge Vicki Landwehr said the new structure must be torn down and criticized the City of Rockville, a codefendant in the case, for addressing concerns of the project with “indifference and neglect.” Matt Mimbach served as the general contractor for the project.

Get Housing Industry News as it happens: Sign up at HousingFirstMN.org Follow us on Twitter @housingfirstmn

Lennar home in Minnesota

Home that judge ruled needs to be torn down.

CLASSROOM & ONLINE COURSES B U I L D E R · R E M O D E L E R · R E A L E S TAT E · B U I L D I N G O F F I C I A L

Classroom Courses to Select From

Hour Online Course

Roseville Maple Grove

14 |

HOUSING INDUSTRY NEWS

Expert Instructors

January—March 2018

$79 to $98 Full Day - Get your CE Credits or Just Come to Learn! Plus EPA Lead Initial Certification and Refresher Courses *Lead Renovator Courses are additional

Lunch Included with All Full-Day Courses Everyone is Welcome to Attend

W W W. C O N T R AC TO R U. C O M

M I N N E S O T A

HOUSING INDUSTRY NEWS December 2017, Volume 1, Issue 3 PUBLISHER David Siegel David@HousingFirstMN.org EDITOR Katie Elfstrom Katie@HousingFirstMN.org GRAPHIC DESIGN Dawnita Parmely Caroline Ellingboe Shields Hannah Swan

Remodel Changes Lives in St. Michael The BATC Foundation proudly showed off its latest project in October with a moving ribbon cutting ceremony. Working with the St. Michael Foundation and build partner Minnesota Design and Construction Inc., the BATC Foundation expanded and remodeled a group home in St. Michael for four young men with special needs. Chief among the improvements was a new kitchen, where these residents like to gather at the new center island, cook together or enjoy a meal

at the dining room table. The BATC Foundation’s addition included a large deck and new flooring throughout much of the home. “We took an unsafe kitchen badly in need of repair and elevated this group home to greater access and efficiency,” said Bob Bennett, the BATC Foundation manager. Parents of the residents, St. Michael Foundation volunteers and staff from the home joined BATC Foundation leadership, Minnesota Design &

INDUSTRY GIVES BACK

Construction staff, Senator Mary Kiffmeyer and Representative Eric Lucero at the ribbon cutting.

Are you making a difference in your community? We’d love to highlight your community service project in Housing Industry News. Send your story to info@housingfirstmn.org

ACCOUNTING Janice Meyer CONTRIBUTING WRITERS Katie Elfstrom Katie@HousingFirstMN.org

Nick Erickson Nick@HousingFirstMN.org

Mark Foster Mark@HousingFirstMN.org

David Siegel David@HousingFirstMN.org

James Vagle

James@HousingFirstMN.org

ADMINISTRATIVE STAFF Kate Wigley Kate@HousingFirstMN.org

Housing First Minnesota David Siegel, Executive Director Bob Michels, President

Rep. Eric Lucero (Dayton) and Sen. Mary Kiffmeyer (Big Lake) with residents of the St. Michael Foundation home

The Housing Industry News is a publication of Housing First Minnesota. The Housing Industry News is published and distributed four times per year to housing industry professionals and others associated with the home building industry. Neither the advertisers, nor Housing First Minnesota, will be responsible or liable for misinformation, misprints, typographical errors, etc., herein contained. For address change information, contact Housing First Minnesota. Suggestions, ideas and letters are welcome. HOUSING INDUSTRY NEWS 2960 Centre Pointe Drive Roseville, MN 55113 info@housingfirstmn.org www.HousingFirstMN.org Housing Industry News is published by Housing First Minnesota

Stephen Roche, Sen. Kiffmeyer (Big Lake) and Bob Bennett

Bob Bennett, David Siegel and Rep. Eric Lucero (Dayton)

Shelly Zahler, St. Michael Foundation Supervisor

Housing First Minnesota is the voice for home builders, remodelers and all who are dedicated to building safe, durable homes at a price Minnesotans can afford. Housing First Minnesota was created to advance the interests of the housing industry, engage industry members, and to be the leading resource for housing-related issues in Minnesota.

BE SEEN.

Housing First Minnesota is a modern, comprehensive advocacy program that is dedicated to helping industry professionals grow their businesses. Housing First Minnesota recognizes its role as the state’s voice for the housing industry and engages industry members in advocacy opportunities related to grassroots advocacy, legislative lobbying, regulatory issues with state agencies, political elections, and events such as Housing Day at the Capitol. Our advocacy work has never been more important. The housing industry remains under intense regulatory and political pressures that impact Minnesota homeowners’ ability to buy, build, and remodel their dream home. Housing First Minnesota supports reasonable regulations and protections, but our call for balance in rules and affordability for families is a voice that must be heard.

SPONSOR THE HOUSING INDUSTRY NEWS

For more information contact :

KORI MEEWES 612-801-9874 kori@batc.org

BRAD MEEWES 651-269-2399 brad@batc.org

HOUSING INDUSTRY NEWS

| 15

JOIN US! MARCH 14, 2018 · INTERCONTINENTAL SAINT PAUL RIVERFRONT HOTEL

H O U S I N G D AY M N .O R G

Presented by:

16 |

HOUSING INDUSTRY NEWS