Housing Industry News Vol. 3 Issue 3 - September 2019

M I N N E S O T A

HOUSING INDUSTRY NEWS VOL. 3 ISSUE 3, SEPT. 2019

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

State legislators stand with David Siegel, Executive Director of Housing First Minnesota, during the press conference following the release of the report.

Legislators call for building permit refunds, audits Permit to profit? New report says some cities over charging for building permits The Housing Affordability Institute released its latest report, Building Permit Fees: Boosting the Bottom Line for Minnesota Cities, in August. This first fulllength, single-subject paper reviews and raises questions about the proportionality of building permit fees in cities.

Under Minnesota law, municipalities collecting more than $5,000 in construction and development revenue annually are required to submit data to the Department of Labor and Industry (DLI).

A review of the reports sent to DLI from 2014-2018 reveal that Minnesota municipalities gained at least $78 million in excess permit revenue.

“I make my decisions as a legislator based on facts, and we clearly have facts pointing to a problem,” said Rep. Barb Haley (R-Red Wing), member of the Legislative Commission on Housing Affordability. “I consider $78 million in overcharges to be an illegal tax on housing. This is something we have to

address, in addition to many more, in order to bring down the cost of housing.”

Chapter 1300 of the Minnesota State Building Code dictates that building permit fees “be by legal means and must be fair, reasonable, and proportionate to the actual cost of the service for which the fee is imposed.”

While building permit fees are not required to be the exact cost paid by the homeowner, the fees should be roughly proportional, meaning municipalities should see only slight over- and under-collections from year to year.

In its guide to building code administration, DLI further outlines that building permit revenue is not to be used to raise additional general fund revenue, nor can it be used to fund projects and activities unrelated to building code enforcement: “Each municipality is to evaluate local costs associated with the enforcement of the code. From this local evaluation, a

fee structure can be established to cover associated and related code enforcement responsibilities” DLI guidance says.

Again, “by Minnesota Rule, the fees are to be commensurate with the services required/provided; building permit fees may not be used as a tool to raise additional monies for the municipalities’ general fund… “…Ideally, when a citizen purchases a permit, it is considered a “fee for service” charge that should be set-up to balance out at zero. Building permit applicants should not be charged additional or extra fees to support a municipalities’ general fund or other special interest projects undertaken by the municipality.”

“This is one of dozens of potential road blocks to affordability, and frankly, it should be one of the easiest to solve,” said David Siegel, executive director of Housing First Minnesota. “Find CONTINUED >> PAGE 4

INSIDE THIS ISSUE

Housing First Minnesota sues Dayton over transportation fee PAGE 5

Frank Kottschade: Setting the precedent for property rights PAGE 7

Parade of Homes Twin Cities features net-zero home PAGE 17

A first of its kind: Select Committee on Homeownership convenes In a historic moment for homeowners in Minnesota, state senators on Aug. 13 convened the Select Committee on Homeownership Affordability and Availability at the Minnesota Senate Office Building. A first-of-its-kind forum, the Select Committee was approved by the Minnesota Senate in the closing days of the 2019 legislative session.

The committee, chaired by Sen. Rich Draheim (R-Madison Lake) and comprised of members from both political parties, will make findings and recommendations to the Minnesota Senate on ways to increase homeownership opportunities across the state.

CONTINUED >> PAGE 11

HOUSING INDUSTRY NEWS

| 1

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

PRESIDENT’S NOTE

Getting to work on housing affordability

John Rask, 2019 President of Housing First Minnesota, Vice President of Land for M/I Homes

The first meeting of the Select Committee on Homeownership Affordability and Availability occurred on Aug. 13 and was a key moment for Minnesota’s housing industry and, more importantly, our current and future customers, as well as homeowners and renters throughout the state.

As the Select Committee heard from all testifiers, our housing market is in a precarious position with a lack of inventory and an affordability

crisis that holds us back from properly supplying the market. I expressed a sense of urgency to the committee, because as housing professionals, we know how long it takes to bring homes to market. This problem is getting worse each month, and we don’t have time to ease into these policy discussions.

As you’ve heard from Housing First Minnesota throughout 2019, we need to reimagine housing. That means addressing inefficiencies wherever we find them, be it in construction processes, materials or regulating for safety and durability.

The reimagination will require some challenging conversations and acknowledgments.

Some of these challenging issues surfaced in the Select Committee hearing, and certainly the release of the Housing Affordability Institute’s study on building permit fees has sparked challenging but critically important discussions. All stakeholders in the housing discussion are at the table and it will be important to look at the roadblocks with the end user in mind – the homeowners and future homeowners in our state.

M I N N E S O T A

HOUSING INDUSTRY NEWS September 2019, Volume 3, Issue 3

The housing regulatory process is a massive, largely disconnected network of policies, requirements, fees and negotiated agreements.

Our housing market can’t afford these traditional ways of doing business. Well-intended policies and regulations have failed to balance housing affordability with resource protection and durability. We are now getting to work on resetting and balancing housing policy and regulations with an eye toward increasing the supply of housing. It is a big task, but current and future generations of Minnesotans are counting on us to fix this problem. I look forward to joining all stakeholders in this important work which will keep our region vibrant and strong.

PUBLISHER David Siegel David@HousingFirstMN.org

Onward,

Nick Erickson

EDITOR Katie Elfstrom Katie@HousingFirstMN.org GRAPHIC DESIGN Clare Buche ACCOUNTING Janice Meyer ADVERTISING SALES Brad Meewes Kori Meewes CONTRIBUTING WRITERS Katie Elfstrom Katie@HousingFirstMN.org Nick@HousingFirstMN.org

Mark Foster Mark@HousingFirstMN.org

David Siegel David@HousingFirstMN.org

James Vagle

James@HousingFirstMN.org

ADMINISTRATIVE STAFF Kristen Ober Kristen@HousingFirstMN.org

HousingFirstMN.org

Housing First Minnesota David Siegel, Executive Director

Subscribe

John Rask, President

Stay up to date on the latest housing news. Subscribe to our blog at HousingFirstMN.org

Advertising For advertising information, rates, editorial calendar and production specifications, contact: Brad Meewes at 651-269-2399 (Brad@BATC.org) or Kori Meewes at 612-801-9874 (Kori@BATC.org)

News Tips Have an idea for a story for our next issue?

Contact Editor Katie Elfstrom at Katie@BATC.org or send your story to Info@HousingIndustryNews.com

Follow Us Go to HousingFirstMN.org for subscriber exclusives, breaking housing news and features.

Be a part of the growing housing movement in Minnesota.

Twitter: Follow us @HousingFirstMN Facebook: Facebook.com/HousingFirstMinnesota

Housing Industry News is a publication of Housing First Minnesota. 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 Entire contents copyright 2019 All rights reserved

Housing First Minnesota is the voice for home builders, remodelers and all who are dedicated to building safe, durable homes at a price

help us spread the message 2|

HOUSING INDUSTRY NEWS

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.

Housing First Minnesota features 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

PROJECTBUILDMN.ORG

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.

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

THE HOUSING BEAT

Across the country, there is much talk about housing HERE ARE SOME OF THE LATEST QUOTES ON THE STATE OF THE INDUSTRY:

There are many issues impacting housing – but as challenging as it may be – we must confront the use of subdivision agreements to extract and extort unfair conditions and cash from would-be homeowners.”

We all agree we need to build more homes for first-time and down-sizing homebuyers.”

CHRIS GALLER CEO OF MINNESOTA REALTORS®

DAVID SIEGEL HOUSING FIRST MINNESOTA

It is time to modernize local land use policies, including zoning and permitting, with a focus on rebalancing housing supply and demand.”

BROOKS RAINWATER NATIONAL LEAGUE OF CITIES

…Local fees on development are so burdensome that they are reducing the ability to construct needed housing and increasing the cost of living for residents. If we have any hope of lifting our communities out of this crisis, then our local fees must be aligned with our statewide production needs.”

CALIFORNIA LEGISLATIVE ANALYSIS

Housing is as important a kitchentable issue as health care and education. Housing expenses are the largest item in most households’ monthly budgets.

Housing affordability…has gotten worse for middle-class families over the past two decades.”

Lower homeownership for young adults means lower economic growth.”

If we treated housing in the same way, we’d invest our public resources to make it easier for producers of housing to compete by eliminating the costs of infrastructure. And that would mean no fees and publicly funded infrastructure to support more housing.”

JENNY SCHUETZ BROOKING INSTITUTION

SAM KHATER CHIEF ECONOMIST OF FREDDIE MAC

ROGER VALDEZ FORBES CONTRIBUTOR

NATURAL GAS: THE LATEST ATTRACTION IN HOMES. Build in the value of natural gas appliances. It’s safe, cost-effective and convenient. Natural gas is reliable and ready to use when they need it. Xcel Energy makes it easy to switch to natural gas for you or your customers.

Get more details at xcelenergy.com/NaturalGasBuilders.

© 2019 Xcel Energy Inc.

9.75x6.675_MN-HousIndustNews-Aug2019_P01.indd 1

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

8/2/19 12:21 PM HOUSING INDUSTRY NEWS

| 3

REGULATORY AFFAIRS CONTINUED FROM PAGE 1

Report reveals $78 million in excess permit revenue an efficient way to review plans and inspect projects for safety and durability – price those services fairly – and charge that price to the homeowner.”

“Today is about taking steps towards a better understanding of how we can begin to address and remove roadblocks that are keeping us from being able to supply our market with affordably priced homes,” said Chris Galler, CEO of Minnesota REALTORS. Legislators Respond “I’m all for local control, but this is local outof-control,” said Rep. Jim Nash (R-Waconia), member of the Legislative Commission on Housing Affordability.

“In the backdrop of a housing affordability crisis, this is unacceptable. Building permits are supposed to be a Rep. Jim Nash fee-for-service, a pass-through if you will, not a way to fill city coffers. At a time when housing costs are increasing faster than wages, we need to find ways to make homes more affordable. For cities to knowingly be making the problem worse is appalling.”

“This latest report highlights the need for homebuilders and cities to come together to find common ground on policies that will promote the construction of more Rep. Steve Elkins affordable housing,” said Rep. Steve Elkins (DFL-Bloomington).

“It is no secret: Minnesota lacks affordable homeownership opportunities across the state,” said Sen. Rich Draheim (R-Madison Lake), chair of the Senate Select Committee on Homeownership Affordability and Availability. “Research shows that for every $1,000 increase in the cost of housing, 4,000 individSen. Rich Draheim uals are priced out of the market. Anything that artificially drives up the cost of housing, such as excessive permit fees, further increases that problem. Cities should not use these fees as an extra source of revenue.”

Whistleblowers Emerge with Permit Fee Concerns Housing First Minnesota reports that this issue surfaced in 2018 when whistleblowers began contacting the organization to share their first-hand accounts of how permit fee income is used in their cities. Since last fall, Housing First Minnesota has met with a former planning commission member and local building officials who have shared stories of how permit fee revenue has been gathered and allocated. Each of these whistleblowers came forward independently, either to a legislator or to Housing First Minnesota directly.

“I have spoken with an anonymous whistleblower that has received immense pressure to turn building permits into an additional revenue source,” said Rep. Shane Mekeland (R-Clear Lake). “This individual said building officials are under immense pressure from senior city staff to make money for the city. He Rep. Shane Mekeland also spoke of how it is common for senior staff to raid building department budgets for unrelated purchases – rent and overhead for unrelated functions, snow plows, mosquito control, the fire department, etc. We need to know how the money that was collected was spent. The audits we are calling for will get to the bottom of that.”

Permit Revenue History: Legislature and Legal Actions The legislature addressed the issue of permit fee revenue nearly 20 years ago when evidence emerged that some cities were overcharging significantly for permits, leading to surpluses.

The legislature responded by requiring that municipalities report their building- and development-related revenues annually to the state. The transparency measure was created to serve two key objectives: public confidence in permit costs and to provide a picture of the math used by municipalities in determining a legally compliant, proportional building permit fee structure.

Housing First Minnesota, then known as BATC, sued the cities of Shakopee and Elk River for overcharging for building permits based on this reported data. The parties reached agreements with consent decrees.

According to Finance & Commerce coverage of the 2006 settlement with Elk River, the League of Minnesota Cities said cities need to review their fee schedules annually for compliance with state law. The precedents set in the Shakopee and Elk River cases could be used to bolster the case for refunds. Builders contacted

by Housing Industry News regarding these latest overpayments all reported that they would assist cities to ensure that homebuyers who overpaid receive money to which they could be entitled.

Call For State Investigations While discussing the report’s findings with reporters, Rep. Nash called for state investigations into the matter. Later that day, Representatives Nash and Mekeland met with both the Legislative and State Auditors regarding possible state investigations into the report’s findings.

State Auditor Julie Blaha’s office has direct oversight over local government spending and could perform a special investigation or audit.

Since DLI collects a state surcharge on building permits, if a city overcharged for its permits, the state may have collected revenue from improper fee calculations, which falls under the jurisdiction of Legislative Auditor Jim Nobles.

Housing Industry News will continue to follow the story in both its online and print editions.

4|

HOUSING INDUSTRY NEWS

Legislative, DLI Action Likely The Legislative Commission on Housing Affordability and the Senate Select Committee on Homeownership Affordability and Availability are both expected to address this topic before the legislative session begins in mid-February of next year.

One idea that building code officials and builders are already discussing is a shift from valuation-based permit fees to per-squarefoot rates. Currently, building permits must be based on the valuation of the project. Shifting to a fixed rate per square foot would help municipalities to create a more transparent fee reflecting the actual cost incurred for the inspections and plan review. Other states across the country have already moved in this direction.

Under such a proposal, municipalities would set a fixed per-hour rate for inspections.

That rate multiplied by the square footage of the home would result in the fee.

Additionally, DLI is expected to change the format of its building permit report, requiring that municipalities provide greater detail annually. Legislators have also discussed giving DLI investigative powers related to permit fees.

“We look forward to working with legislators and others to fix building permit fees for Minnesota homebuyers. It’s frustrating that we first raised this issue 20 years ago and yet abuses continue. We’ve now got an affordability crisis on our hands and if we cannot solve a simple issue like building permit fees, how will we tackle the more complex issues necessary for housing affordability,” Siegel concluded.

THE LAW 1300.0160 FEES Subp. 2. Fees commensurate with service. Fees established by the municipality must be by legal means and must be fair, reasonable, and proportionate to the actual cost of the service for which the fee is imposed.

Building permit fees may not be used as a tool to raise additional monies for the municipalities’ general fund.

Building permit applicants should not be charged additional or extra fees to support a municipalities’ general fund or other special interest projects undertaken by the municipality.

Source: Minnesota State Building Code, Code Adoption Guide, Minnesota Department of Labor and Industry

MUNICIPALITY RANKINGS BY REPORTED EXCESS REVENUE (CUMULATIVE 2014-2018)

MUNICIPALITY

TOTAL

City of Woodbury

$13,660,268

City of Edina

$12,537,725

City of Plymouth

$11,220,361

City of Minnetonka

$8,323,247

City of Shakopee*

$4,542,590

City of St. Louis Park

$4,186,422

City of Lakeville

$3,873,363

City of Lake Elmo**

$3,237,053

City of Golden Valley

$3,219,694

City of Buffalo

$2,813,744

*Filed 2015, 2016, 2017 and 2018 Annual Reports; did not file 2014 Annual Report **Filed 2016 and 2017 Annual Reports; did not file 2014, 2015 and 2018 Annual Reports

HousingFirstMinnesota

@HousingFirstMN

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

CITY OPTIONS FOR OFF-SITE TRANSPORTATION PROJECTS: Special Assessments: Known as Chapter 429 assessments, this financing tool is used successfully by many Minnesota cities to fund collector street projects.

The local government generally issues the debt upfront to carry out the project, and benefiting properties pay their portion as parcels develop, ensuring that a connection to the street project and the new development is present.

Dayton City Hall

Housing First Minnesota sues Dayton over transportation fee Following the city of Dayton’s decision in July to create an off-site transportation fee, Housing First Minnesota initiated a legal action against the city in Hennepin County District Court. Housing First Minnesota contends that the creation of such a fee is in violation of established law in the State of Minnesota.

The Minnesota Supreme Court addressed this issue just last year, when it unanimously

ruled that requiring off-site transportation fees are illegal in the Harstad v. Woodbury case.

“Dayton’s attempt to use a development agreement to make the transportation fee requirement appear ‘voluntary’ is simply against the law,” said David Siegel, executive director of Housing First Minnesota. “Our developments pay for themselves to ensure all

infrastructure is in place for the development to commence and be successful.”

“At a time when we are facing a housing affordability crisis, adding on illegal and unauthorized costs to housing is the last action any city should be considering,” said Siegel.

“Cities should be working to remove housing affordability roadblocks, not add them.”

Housing First Minnesota communicated its opposition of the new fee to the city of Dayton prior to its decision on this issue and urged the city to take a different approach.

Dayton must now respond to the complaint. A hearing is expected to be scheduled for early fall 2019.

YOUR CHOICE FOR: WALL & FLOOR PANELS

LUMBER FRAMING LABOR

NEW IN 2019!

EWP PACKAGES

ROOF & FLOOR TRUSSES

STRUCTURAL DESIGN CONSULTANTS

INNOVATIVE TURNKEY FRAMING SOLUTIONS JL SCHWIETERS CONST. INC. 13925 FENWAY BLVD N HUGO, MN 55038

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

SAVING YOU TIME & WASTE ON JOB SITES SINCE 1980.

651-762-1110 WWW. JLSCHWIETERS.COM INFO@JLSCHWIETERS.COM

HOUSING INDUSTRY NEWS

| 5

REGULATORY AFFAIRS

New laws in effect; are you compliant?

Cities Must Provide a Consultant Estimate Cities and towns routinely use technical consultants to provide expertise in evaluating various permits, licenses or other applications in which special expertise is required. Applications in which outside consultants are used include: residential and commercial building permits, cell tower/water tank permits, grading and utility permits or similar requests.

In these situations, while the municipality hires and directs the outside consultant, the fees charged by that consultant are paid by the applicant as an added charge to the permit itself. Such consulting fees routinely run into the thousands or tens of thousands of dollars and even more depending on the complexity of the permit application.

The amount of these fees is often a surprise to the applicant. If the permit applicant objects to the amount of the fees charged by the city’s consultants, they are not able to obtain their permit.

During the 2019 Legislative Session, Chapter 27 was signed into law by Governor Walz. This new law allows applicants to request that

a city provide a written nonbinding estimate of the consulting fees. If the applicant requests this estimate, the application shall not be deemed complete until the city has: • provided an estimate to the applicant; • received the required application fees, as specified by the city; • received a signed acceptance of the fee estimate from the applicant; and • received a signed statement that the applicant has not relied on the estimate of fees in its decision to proceed with the final application from the applicant.

Minnesota Statute § 15.99 requires that cities must approve or deny written land use applications within 60 days (the “60-Day Rule”).

An application is not complete for purposes of the 60-Day Rule until all four requirements of Minnesota Statute § 471.462 are met.

Hands-Free Cell Phone Law This new statute expressly allows a driver to use a cell phone to make calls, text, listen to music, podcasts, and receive directions, but only by voice commands or single

touch activation without holding a cell phone. The statute applies when a motor vehicle is in motion or a part of traffic. A motor vehicle is not in motion or part of traffic if the vehicle is lawfully stopped, is in a location that is not designed or ordinarily used for vehicular travel, and is not obstructing traffic. While stopped at a stoplight, a vehicle is still considered to be part of traffic.

The fine for the first violation of

this new statute is $50 and $225 for a second violation.

Wage Theft Regulations and Disclosure Requirements Employers in Minnesota are subject to new regulations and requirements as part of this law, including new record-keeping requirements, additional requirements for data sharing with the Department of Labor and Industry (DLI), and new

penalties and fines on employers found guilty of wage theft.

Most notably, any contractor convicted of wage theft will have their business name removed from the state’s “responsible contractor list.”

Further, employers who repeatedly commit wage theft against employees will be fined a new, $5,000 fee and are subject to further enhanced penalties under Minnesota’s criminal statutes. For additional information go to www.dli.mn.gov.

New statute allows cell phone use, but only by voice or one touch.

STILL USING 1980’s VENTILATION? Choose Quarrix for the best style and performance

Before

After

FREE TRAINING

“Ventilation Best-Practices” Best for hail, snow & rain

6|

HOUSING INDUSTRY NEWS

On-roof intake vent

Frost-free & Lead free

Install 60x faster

Rainscreen solutions

Go to Quarrix.com/TrainMe

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

Frank Kottschade: Setting the precedent for property rights U.S. Supreme Court ruling cites Housing First Minnesota member Frank Kottschade The U.S. Supreme Court issued a landmark industry victory in its decision to remove an obstacle to address government takings of property. In Knick v. Township of Scott, the court overruled a 1985 precedent (Williamson County) that required a property owner who claimed a regulatory taking to first approach the state court before being allowed to gain access to federal court.

At issue, was the catch-22 where a property owner was forced to go through state courts first, but if the court ruled against the owner, the claim is barred from appeal to the federal courts.

Housing First Minnesota member Frank Kottschade has long been a pioneer in precedent-setting property rights court cases and has been involved in this particular effort for decades. Kottschade was in Washington, DC at the Supreme Court to hear arguments. Fifteen years earlier, Kottschade sought to entice the U.S. Supreme Court to reconsider the 1985 Williamson County case with a challenge of his own.

In that case, Kottschade had obtained approval from the City of Rochester in 2000 to develop townhomes on about 16 acres of a 220-acre development site in south Rochester. The city approved the townhomes but, as is all too common, attached myriad, onerous conditions to the approval, which amounted to a taking and ultimately killed the project.

The Minnesota Court of Appeals

said, “The city’s imposition of the conditions reduced the buildable area to 4.93 acres, and resulted in a site that could accommodate only 26 of the proposed 104 townhome units.” That made the finances impossible and Kottschade was forced to abandon the project. He challenged the conditions on grounds that they were unconstitutional exactions.

Kottschade had knowledge of the Williamson County case and the requirement to seek redress in the state court before being able to bring a property taking case to the federal courts. He asked the City of Rochester for a variance from the conditions it had just imposed. The city denied the request, as expected, and Kottschade sued in federal court for a regulatory taking as a challenge to the Williamson precedent. Both the U.S. District Court and the U.S. Court of Appeals for the Eighth Circuit dismissed the suit based on the Williamson case.

But the Eighth Circuit pointed out that litigants such as Kottschade face a real dilemma.

The Rose Mary Knick case the Supreme Court just decided remedies Kottschade’s problem and he was asked to submit an Amicus Brief in the case based on his earlier experience with Rochester and a subsequent Amicus Brief he filed in a similar case involving the San Remo Hotel.

In their brief, they state the following: “The primary purpose of this brief is to make sure that the Court understands that the

conflicts and confusion created by Williamson County are not simply the stuff of law review articles and rarefied judicial debates on jurisdictional ripeness. This issue has real world consequences. It affects families, business, and livelihoods including many people who are not large developers.”

In the supporting amicus briefs, Kottshcade and colleagues point out that governments do not take property from a majority, but rather from a political powerless minority.

“It is all too easy for legislators to impose exactions on a few property owners, rather than explain tax increases to all of the voters.” The fundamental purpose of the Fifth Amendment is “to bar Government from forcing some people alone to bear the public burdens, which in all fairness, should be borne by the people as a whole.” Armstrong v.

United States.

As a result of the case, litigants can decide whether bringing a property taking claim is best done at the state court or whether they want to move directly to federal court, an action that was previously unavailable. As Chief Justice Roberts wrote, “Fidelity to the Takings Clause” requires “overruling Williamson County and restoring takings claims to the full-fledged constitutional status the Framers envisioned when they included the Clause among the other protections in the Bill of Rights.”

Frank and Bonnie Kottschade on U.S. Supreme Court Steps.

IMPORTANCE TO THE INDUSTRY Housing developers face a daunting challenge when faced with unfair or illegal government takings, especially when they were forced to file these claims in the local, district court. Giving property owners the option to have immediate federal review of a local government taking, versus the expensive, drawn out state and local court proceedings. “…for decades local and state governments backed by the courts have treated the Fight Amendment as the poor stepchild in the Bill of Rights.

Wall Street Journal Editorial Board

Minneapolis renter screening proposal draws industry criticism

Minneapolis proposes to throw out background checks for renters.

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

A move by the City of Minneapolis to change how renter applications are screened has drawn criticism from the housing industry.

In the latest version of the proposal, the new renter screening process would throw out the current applicant background check process, limiting the use of criminal records, rental history and credit history.

Another proposal makes changes to security deposits.

Critics of the proposals say limiting the use of relevant criminal, rental and credit history will increase rates of disruption and turnover, which in turn will increase rent.

Those limitations and the arbitrarily

low limit on damage deposits will increase costs and make it harder for property managers to take chances on people with troubled pasts. The inability to use damage deposits commensurate with actual risk will limit opportunities.

Multi-family housing financiers have warned the city the proposals will make it harder to finance new multifamily construction, compounding the housing scarcity problem.

Mortgage brokers have told the city the proposed ordinances will increase rental property insurance by 40% or more, further driving up rental costs.

In its comments to the City of Minneapolis, the Minneapolis Association of REALTORS® highlighted how the city’s proposals are untested, inconsistent with other treatment of criminal records, and will make the city an outlier.

The Wilder Foundation and Family Housing Fund are partnering with Minnesota Multi Housing Association members to study the impact on criminal, rental and financial history on market-rate rental outcomes. The goal of this study is to help policy makers develop informed decisions around rental screening laws.

HOUSING INDUSTRY NEWS

| 7

REGULATORY AFFAIRS

Regulatory Affairs Roundup: building codes inch forward Since July, the Minnesota Department of Labor & Industry has been working on issuing the proposed building code changes slated to go into effect in March 2020. As of Aug. 30, half of the codes had been published.

Full text of the proposed building codes is available at housingfirstmn. org/building-code-changes.

As for the adoption of a new residential energy code, DLI has yet to make a formal decision. Housing groups remain opposed to a new residential energy code on affordability grounds. Energy groups, however, are strongly advocating for a new code.

If DLI declines to issue a new energy code for residential construction, the housing industry could see its first code cycle without significant cost increases for homebuyers in recent history.

The next meeting of the Construction Codes Advisory Council is scheduled for Oct. 21, 2019.

Other Rulemaking Initiatives Progressing In its report to the Minnesota Board of Plumbing, the board’s Ad

FINISH CARPENTRY PREFINISH MILLWORK

Hoc Rulemaking Committee proposed to make the dishwasher air gap optional for residential construction.

The report was included on the agenda of the Plumbing Board’s Aug. 29 meeting.

Multiple requests for the removal of the air gap were submitted, including those from Housing First Minnesota, the Northwest Chapter of Building Officials, Kitchens By Design, and M&D Plumbing and Heating. The final timeline for the new plumbing code has not yet been announced.

As for the RRP (lead paint) Rule from the Minnesota Department of Health (MDH), public comments were due in June. Under the proposed rule, the MDH would take local custody and enforcement of the RRP Rule from the Environmental Protection Agency regional office in Chicago, allowing Minnesota to put its own rule in place.

In its comments, Housing First Minnesota reiterated its request that the MDH adopt the EPA’s RRP Rule by reference in place of forming its own rule.

Building Code Administration, Chapter 1300

Proposed rules issued July 22. Comments were due Aug. 21, 2019.

Simplified Wind Loads, Chapter 1303.2200

Proposed rules issued July 29. Comments were due Aug. 28, 2019.

International Building Code, Chapter 1305

Proposed rules issued Aug 12. Comments are due Sept. 18, 2019.

Elevators and Related Devices, Chapter 1307 Proposed rules not available at time of publishing.

Residential Building Code, Chapter 1311

Proposed rules not available at time of publishing.

Commercial Energy Code

Proposed rules not available at time of publishing.

Accessibility Code, Chapter 1323

Proposed rules issued July 29. Comments were due Aug. 28, 2019.

Fuel Gas and Mechanical Code, Chapter 1341 Proposed rules not available at time of publishing.

Minnesota Fire Code, Chapter 7511

Proposed rules issued Aug. 19. Comments due Sept. 25, 2019

DOORS CABINETRY HARDWARE DESIGN STUDIO 2018 WINNER OF FIVE TRILLIUM AWARDS

651.407.1618 | SCHWIETERSCOMPANIES.COM 8|

HOUSING INDUSTRY NEWS

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

HOUSING ON THE HILL

Rep. Peter Fischer discusses new legislative commission and housing affordability

Rep. Peter Fischer

Rep. Peter Fischer is the new chair of the Legislative Commission on Housing Affordability. Rep. Fischer represents District 43A, which includes Maplewood, White Bear Lake and Mahtomedi

Q: The commission format has seemingly worked well in other complex policy areas like water and pensions. Do you envision the Legislative Commission on Housing Affordability will work similarly?

A: Housing affordability is a serious and complex issue that impacts every Minnesotan. That’s the reason the Minnesota House chose to prioritize having a committee entirely devoted to housing. The addition of a bipartisan, bicameral commission allows us to dig deeper and find points of commonality.

The commission format is generally less partisan and allows more time to explore an issue. It’s a whole different dynamic. We’ve found this to be the case on the Legislative Water Commission, which I co-chair. I’m hopeful that it will work just as well for housing and help us gain more insight into possible solutions that will help reduce the equity gap in housing and identify possible legislative responses to suit the unique needs of communities throughout the state.

Q: During the 2019 session, there was much talk about the need to build thousands more housing units at all levels from single-family homes, condos, apartments, etc.

How can the commission encourage and allow builders to try to keep up with the demand?

A: A lot of work that we can build on has already been done. Looking back to the recommendations of Governor Dayton’s Task Force on Housing is a good place to start. Their final recommendations spanned six key areas, including producing more homes, as well as preserving the affordable housing we have; increasing housing stability; connecting housing to other needed services; strengthening homeownership; and prioritizing more homes.

These items are all related. I think it’s important for the commission to look at those findings to see how they could help inform solutions to our current affordability crisis.

This is a big issue that we need to approach from a number of angles.

It’s also important we make sure no one is being left out of the conversation. The Legislature should see itself as a facilitator in these conversations. These decisions will impact builders, cities, homeowners,

tenants, and those who currently lack housing. When we bring a variety of voices to the table, we may find that there are underlying issues that may not immediately be obvious. For example, your most recent report about city fees raises questions not only about fees, but whether disparities exist in how communities are funded. Other issues that impacted communities have spoken of inclusionary zoning and density issues, local tools to incentivize housing, funds that can be used towards housing, industry workforce shortages, and encouraging industry innovation. Solutions we may not have initially thought of can come to light when we’re willing to set aside our assumptions and bring everyone to the table for an honest conversation.

Q: The commission is tasked with defining housing affordability. How would you define it?

A: I’m not sure if there is a single definition for housing affordability.

In my work, I see so many people that work hard, but aren’t making wages that allow them to afford safe and stable housing. Even when that’s not the case, it’s frustrating when you have people that are making a decent wage but can’t even afford a down payment or deposit.

Whatever definition the commission ultimately decides on, we need to do what we can to ensure that keeping a roof over your head isn’t a burden for Minnesotans.

Legislative housing forums progress During the 2019 legislative session, the Legislative Commission on Housing Affordability and the Senate Select Committee on Homeownership Affordability and Availability

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

dearth of affordable options and overall inability for the housing industry to construct affordably priced homes, highlight the many roadblocks impacting the market.

Legislative Commission Key Policy Role Make recommendations to the legislature on issues relating to housing affordability. The commission model has served other complex policy areas well by providing specific legislation that has broad support from the underlying Commission.

Key Objectives • Study issues relating to housing affordability • Review emerging issues impacting housing affordability and homeownership access • Review housing policy innovations and workforce issues • Review policies to reduce the homeownership equity gap • Define housing affordability

Timeline The commission expires on June 30, 2023.

Legislative Commission on Housing Affordability

Chair, Representative Peter Fischer

Representative Kaohly Her

Representative Jim Nash

Representative Barb Haley

(DFL, St. Paul)

(R, Waconia)

(R, Red Wing)

Senator Scott Dibble

Senator Susan Kent

Senator Rich Draheim

Senator Karin Housley

(DFL, Minneapolis)

(DFL, Woodbury)

(R, Madison Lake)

(R, St. Mary’s Point)

(DFL, Maplewood)

Senate Select Committee Key Objectives Review and study issues relating to homeownership, housing affordability and housing availability.

Q: What do you envision are some of the early issues that the commission may examine and try to tackle?

A: The most important thing is for the commission to take a comprehensive look at the issue. What’s keeping people from being able to afford housing? Any solution to housing affordability needs to identify the barriers people face and how to remove them. These barriers may look different or play out in different ways for different communities across the state. They may vary based on geographic location, race, or income. Barriers could be zoning, credit, wages, designated short-term rentals, etc. Hearing from a variety of voices and approaching the work from these angles will help us come up with the most impactful solutions.

were established. The new forums come at a time when the region’s housing ecosystem is experiencing a myriad of structural challenges. The chronic lack of supply of available homes for sale,

Key Policy Role Make findings and report recommendations to the Senate regarding issues affecting the availability of affordable owner-occupied housing.

Timeline The Select Committee dissolves by the constitutional deadline to adjourn the 2020 legislature.

Senate Select Committee on Homeownership Affordability and Availability

Chair, Senator Rich Draheim

Senator Karin Housley

Senator Mark Koran

Senator Kari Dziedzic

Senator Dan Sparks

(R, Madison Lake)

(R, St. Mary’s Point)

(R, North Branch)

(DFL, Minneapolis)

(DFL, Austin)

HOUSING INDUSTRY NEWS

| 9

HOUSING ON THE HILL

President Trump creates White House council on eliminating barriers to affordable housing development

New White House council to study the effect of regulations on housing.

As more and more communities across the nation are facing growing housing affordability and availability concerns, President Trump signed an executive order that establishes a new White House council to focus on eliminating regulatory barriers to construction of new housing.

The new council will produce a study quantifying the effect of regulations on the housing

10 |

HOUSING INDUSTRY NEWS

market and the U.S. economy as a whole. Its members will include representatives of the Treasury Department, the Labor Department, the Environmental Protection Agency and the Agriculture Department, which will also examine ways to roll back federal regulations inhibiting housing development.

“These are things that can be solved. A lot of [these rules] have been on the books for

excessive amounts of time. They’re not particularly relevant anymore,” Ben Carson, secretary of the U.S. Department of Housing and Urban Development, told The Wall Street Journal.

As Minnesota faces one of the worst housing inventory shortages in the country, Housing First Minnesota issued the following statement.

“It is critical that we are able to build homes

at all price points in order to balance our broken and under-supplied housing market,” said David Siegel, executive director for Housing First Minnesota. “We are encouraged to see our leaders in Washington, D.C. take concrete steps to reduce the numerous levels of regulation and fees that are driving up the cost of home construction and leaving many homebuyers priced out of the market.”

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

CONTINUED FROM PAGE 1

A first of its kind: Select Committee on Homeownership convenes The first committee hearing featured testimony from Minnesota Housing Finance Agency (MHFA) Commissioner Jennifer Ho, along with several professionals from the housing industry.

Commissioner Ho emphasized the lack of housing inventory, which is driving up housing costs throughout the state. Her message was echoed throughout the two-hour hearing.

“We are facing a two-part crisis: supply and affordability. Multiple generations are competing for homes at the same price point,” remarked Paul Eger, vice president of governmental affairs for the Minnesota REALTORS®.

David Arbit, director of research from the Minneapolis Area REALTORS®, said the housing market has exhibited ominous red flags over the past few years that are continuing to impact the market. “Something scary

happened in 2017 when for the first time ever more of our homes were listed for over $300,000 than under $300,000,” he said.

With an inventory challenge negatively impacting the housing market, experts have found consensus in calling for a surge of newly built single-family homes, condominiums, townhomes and apartments over the next 10 or more years.

David Siegel, executive director of Housing First Minnesota, addressed this issue at the hearing.

“While a sustained surge in homebuilding is the clear answer to our housing market’s challenges – we face an even larger one. We simply can’t build the necessary homes today because it costs far too much to construct workforce homes in Minnesota,” he said.

Throughout the hearing industry leaders reiterated concerns about regulatory costs

impacting the ability to deliver affordably priced homes.

“Where water oversight is conducted by a single agency in comparable markets, it’s not unusual for a Minnesota project to have five or six agencies conducting oversight,” said John Rask, vice president of M/I Homes.

Industry leaders laid out a broad overview of the housing regulatory footprint, which includes federal, state, regional and local government regulations. They stated that the most challenging and impactful regulatory bodies for housing are local governments, highlighting their reliance on subdivision agreements, where the details and requirements for developing a neighborhood are negotiated in a contract between the property owner and a city.

These agreements are oftentimes referred to as Planned Unit Developments (PUD).

“I can tell you that the PUD process in today’s world always makes homes more expensive and less affordable,” said Rask.

The Select Committee heard repeatedly about how elusive inventory is for first-time homebuyers and others. Tony Wiener, vice president of Cardinal Homes, offered a real-world example about the disconnect between what homeowners are looking to spend and the price points available to them.

“On a weekly basis, I hear from customers who are interested in learning more about building a new home, however, their budgets are nowhere close to what we can build for them,” said Wiener.

The Select Committee will be convening throughout the fall and is expected to recommend specific solutions to address homeownership and affordability.

“Something scary happened in 2017 when for the first time ever more of our homes were listed for over $300,000 than under $300,000.”

David Arbit

DIRECTOR OF RESEARCH AND ECONOMICS, MINNEAPOLIS AREA ASSOCIATION OF REALTORS

“On a weekly basis, I hear from customers who are interested in learning more about building a new home, however, their budgets are nowhere close to what we can build for them.”

Tony Wiener

VICE PRESIDENT, CARDINAL HOMES

Top left: L to R: Siegel, Rask, and Wiener; bottom left: Committee deliberation with GOP and DFL members; right: Senator Draheim, chair along with members and staff of the Committee hear testimony

HOUSING FIRST MINNESOTA MEMBERS RECEIVE A $750 JEFF BELZER’S EXCLUSIVE REBATE!

Jeff Belzer's is proud to partner with Housing First Minnesota.

As a premier auto dealership in the Twin Cities area we are honored to provide exclusive auto sales and service benefits to members of Housing First Minnesota. Offering 7 new vehicle franchises in 2 locations, you are certain to find a vehicle that will be a perfect fit for your business.

WWW.BATC.ORG/AFFINITYPROGRAMS SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGFIRSTMN.ORG

HOUSING INDUSTRY NEWS

| 11

MARKET REPORT

Housing market report Hot summer for singlefamily construction

State of Minnesota

The summer months prompted steady growth in Minnesota’s residential construction markets. Single-family permits across the state rose 12% from July 2018. Minnesota added 2,076 jobs in construction over the last five months, a 10.5% increase. According to the Minneapolis Area REALTORS®, the median sales price of a home in the Twin Cities increased by about 6% to $283,700 this July. This ongoing trend of increasing home prices in the Twin Cities is a direct reflection of low inventory and continues to leave potential homebuyers on the sidelines.

Moorhead

13

SOURCE: CITY OF MOORHEAD

8,297

Duluth

43

Year-to-Date Single-Family Construction SOURCE: US CENSUS

SOURCE: US CENSUS

St. Cloud

52

SOURCE: CENTRAL MINNESOTA BUILDERS ASSOCIATION

Twin Cities

5,255

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

Mankato

51

SOURCE: US CENSUS

Rochester

179

SOURCE: US CENSUS

SOURCE: US CENSUS

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

JUL. 2019

JUL. 2019

$283,700

$259,900

JUL. 2018

+5.9%

+6.1%

$268,000

Y-Y Change

JUL. 2018

SOURCE: DEED

$244,900

Y-Y Change

2018

2018

$268,000

$244,900

Twin Cities Median Sales Price

Minnesota Median Sales Price

SOURCE: MINNEAPOLIS REALTORS

SOURCE: MINNESOTA REALTORS

Twin Cities Construction Employment Past 5 Months

United States

55

West - 54

South - 55

SOURCE: DEED

Midwest - 54

Northeast - 60

Regional Remodeling Market Indicies, 2019 Q2 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.

12 |

Minnesota Construction Employment Past 5 Months

HOUSING INDUSTRY NEWS

Employment Update Minnesota lost 1,300 seasonally adjusted jobs in July and the state’s unemployment rate edged up one tenth, according to data released by the Minnesota Department of Employment and Economic Development (DEED). The U.S. unemployment rate remained steady.

July’s seasonally adjusted loss represents the first decline after four continuous months of gains that added 7,000 jobs. Minnesota’s labor force participation rate held at 70%.

Over the month, four major industry sectors gained jobs. Construction gained the most (up 1,600) followed by education and healthcare (up 1,000).

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

REALTORS® perspective on the housing market

July 2019 by the Numbers compared to a year ago

Despite lower interest rates and modest inventory gains as tailwinds, the persistent shortage of homes on the market and affordability headwinds remain. We asked Minneapolis REALTORS® Director of Research, David Arbit, his thoughts on the Minnesota real estate market so far in 2019.

Q: How would you describe the housing market so far for 2019?

A: The market was off to a curious start at the beginning of the year, because of weather and inventory constraints.

When mortgage rates spiked to 5% in 4Q2018, that affected confidence, offers, purchase agreements and ultimately sales in early 2019. The dramatic inventory shortage is still driving the marketplace.

We’re still seeing competitive bidding and multiple offers on the most sought-after listings.

Sales, however, have been oscillating between year-overyear gains and losses—likely pressured by inventory and the result of buyer fatigue.

Prices are still rising in the 5.0 to 7.5% range year-over-year.

But days on market is rising and the ratio of sold to list price is falling slightly—two

indicators that suggest the landscape could be shifting.

There are also early signs that inventory is rising, but not in the most demanded price points and locations.

Q: Any predictions for the rest of 2019?

A: There’s a lot going on that isn’t captured by our metrics, including consumer confidence, interest rates, inflation, increasing risk of recession, political and economic uncertainty, a global slowdown, trade wars, Brexit, etc. Even if the fundamentals appear sound, would-be buyers sometimes pull back at the first whiff of trouble. Any potential hardship or any perceived or real threat to paying a mortgage on time could be ample reason for some to stay put. And in part due to the 5 L’s (lots, labor, lending, lumber

• Sellers listed 7,827 properties on the market, a 1.8 percent increase from last July David Arbit

and laws), many more people are “stuck” because of supply and affordability challenges.

Q: When you look through the data what chart are you watching?

A: I’d say there are two charts that are worth paying attention to as they show important shifts (but aren’t direly alarming) — days on market and the percent of sold price to list price ratio. Both of these indicators are reflecting some of the shifting dynamics between buyers and sellers.

Days on market has shown slight increases while sellers are accepting or yielding a slightly lesser share of their original list price. It’s worth noting that both of these metrics still indicate we’re in a seller’s market, but perhaps a less extreme seller’s market that’s rebalancing.

• Buyers closed on 6,628 homes, a 4.5 percent increase • Inventory levels decreased 4.4 percent from last July to 11,961 units • Months Supply of Inventory was down 4.0 percent to 4 months • The Median Sales Price rose 5.9 percent to $283,700, a record high for July • Cumulative Days on Market remained stable at 38 days, on average (median of 18) • Changes in Sales activity varied by market segment • Single family sales rallied 6.0 percent; condo sales increased 2.2 percent; townhome sales rose 0.8 percent • Traditional sales increased 5.6 percent; foreclosure sales dropped 17.6 percent; short sales fell 37.5 percent • Previously owned sales were up 5.6 percent; new construction sales rose 4.5 percent Source: Minneapolis REALTORS®

They say mastering a craft takes 10,000 hours.

How does 93 years sound?

We’ve been innovating for a very long time at Pella.® It’s an obsession that’s led us to over 150 patents throughout our history. We offer a full line of beautifully crafted windows, patio doors, and entry doors in a wide variety of styles to fit every design taste and budget. With dedicated window experts, showrooms across the region, and service after the sale, your local Pella team is ready to help you master your next project.

PELLA WINDOWS AND DOORS PERFECTLY BEAUTIFUL

pro.pella.com

Southern Minnesota

Twin Cities Metro Area

Central & Northern Minnesota

Wisconsin, North & South Dakota

Mankato, MN | 507-625-6933

Plymouth, MN | 952-915-6080

Brainerd, MN | 701-404-0977

Eau Claire, WI | 715-836-9301

Rochester, MN | 507-285-1200

Woodbury, MN | 651-704-9939

Duluth, MN | 218-348-7193

Fargo, ND | 701-281-1390

NEWLY REMODELED!

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

HOUSING INDUSTRY NEWS

| 13

MARKET REPORT

Built-for-rent on the rise in Minnesota As the housing affordability crisis grows and more families are priced out of homeownership, a new trend has emerged – built-for-rent single-family housing. According to the National Association of Home Builders (NAHB) approximately 42,000 homes were builtfor-rent over the last year, representing about 5% of single-family construction.

The trend started during the downturn, when real estate investors amassed large portfolios of distressed properties and turned them into rentals. Danielle Leach with Metrostudy says these rentals were in high demand given the number of households that recently foreclosed and no longer qualified to buy, but their needs remained the same – meaning access to good schools, close to employment, neighborhood living, yard space, etc. As the volume of distressed properties dwindled and real estate investors still had large investment dollars, build-for-rent was a logical growth proposition.

“This was all occurring while consumers in the US were making strong cultural shifts,” said Leach. “The stigma of renting was quickly going away, meanwhile consumers were placing a higher value on a live-work-play,

NAHB analysis of Census data finds the following differences between for-sale and new single-family homes built-for-rent (SFBFR): • SFBFR are typically smaller with fewer bedrooms and bathrooms.

• SFBFR are more likely to be a singlestory building.

Built-for-rent represented 5% of single-family construction in 2018.

experienced-based lifestyle rather than accumulating material items.”

The build-to-rent business is growing fast on a national scale, with several large builders dipping into it. Toll Brothers recently announced a $60 million investment. Significant growth has been seen in this sector in the Twin Cities as well.

“Several real estate investment trusts are already active in the Minneapolis and St. Paul area with plans to expand, and there are several national new home builders that have announced plans to expand in the build-for-rent space,” said Leach. “In addition, there are some regional players, for example Watermark, that have already experienced success with build-for-rent in the market.”

According to NAHB single-family built-for-rent homes differ from your average new construction single-family homes. For rent single-family tend to be smaller than their for-sale peers. They also possess certain structural differences. NAHB notes that 61% of built for rent homes have just one story compared to 40% of for sale homes.

Experts agree that as the housing affordability challenge continues to grow, the trend of built-for-rent single-family housing is going to rise. With the majority of families still looking to own a single-family home, many families will seek to rent a single-family home as the next best thing.

• SFBFR are seven times more likely to be a townhouse (single-family attached).

• SFBFR are more likely to be located on a smaller lot.

• SFBFR are more likely to have a vinyl siding exterior and less likely to have stucco.

• SFBFR are more likely to have a one-car garage or no garage.

• The highest share and count of SFBFR construction is found in the West South Central Census division (Texas, Oklahoma, Arkansas and Louisiana).

Source: NAHB

Lyman Companies are Minnesota’s leading resource for your interior and exterior building product needs. We specialize in what we know and love, which means we understand your business inside and out. Whether your project is residential, commercial, multi-family or remodeling, we offer the products and services you need to get the job done right.

• Cabinets

• Roofing

• Decking

• Windows

• Stairs

• Trusses

• Countertops

• Siding

• Railing

• Doors

• Moulding & Millwork

• Building Materials

LymanCompanies.com 14 |

HOUSING INDUSTRY NEWS

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

The R-word and the potential impact on the housing market Every day there are more headlines about a potential upcoming recession, yet many economic indicators continue to show signs of health. Job growth in June averaged over 200,000, Gross Domestic Product (GDP) is performing around potential, and the stock market despite growing concerns continues to bounce back after losses. But, we have started to see some warning signs in the economy.

After nine rate increases since December 2015, Federal Reserve officials decided a rate cut was appropriate in July. While rate cuts could help lead to prolonged economic growth and help the housing market, they also often occur just before a recession starts. When times are good, the Fed will opt to raise rates, but it will lower rates in a weaker economic environment.

Graphs and Laughs Economist Elliot Eisenberg predicts that while the low rates will help the housing market, they won’t be enough in the current market conditions.

“Builders still cannot build entry-level housing,” said Eisenberg. “We continue to under build and that is why inventory is low and that is why existing sales do not much improve despite the much lower rates.”

There are other warning signs besides the Fed’s rate cut. Trade disputes appear to be weighing on manufacturing and business confidence. Corporate spending on capital expenditures is slowing. Globally major economies across the world, including China and Germany are slowing. And, of course the ever-dreaded inverted yield curve between two- and 10-year Treasury bonds, which has predicted every recession since 1950.

®

The good news is many economists, including Eisenberg, predict that even if the economy does fall into a recession, the housing market will not be impacted nearly as badly as in recessions past.

“The housing industry should be concerned, but less than in leadups to prior recessions,” said Eisenberg. “With new residential construction activity so weak, and virtually non-existent at the entry level price, a recession should not do deep damage to new starts.”

So how long until the next dreaded R word hits? Statistically, 18-24 months following the inverted yield curve which happened this summer. While Eisenberg says there are loads of concerning trends he is watching right now, there are two that would signal a recession is imminent.

“I am looking at manufacturing, exports, the strength of the dollar but the really key ones are monthly job growth and the unemployment rate. If those last two start to deteriorate, we are in trouble. There is no evidence of that happening, but that is how the recession will probably get started.”

TRACK THE CONVERSATION ON TWITTER: @HousingFirstMN #MNHomeownership

AGENDA 7:30 - 8:00 AM:

Breakfast & Networking

8:00 - 9:00 AM:

Panel Discussion: City Sustainability and Green Initiatives

Discover the latest in green building and learn about energy efficient building techniques at the 2019 Green Path Building Conference.

Learn how cities are becoming more “green,” how that impacts your business, and how builders and remodelers can work with their cities to encourage energy efficient homes.

9:00 - 11:00 AM:

The Exterior Wall Envelope: Learn About Cavity Wall Insulation and Continuous Insulated Wall Sheathing Peter Kulczyk, Green Code Knowledge Ross Anderson, The Energy Network Worldwide

THURSDAY, NOVEMBER 7, 2019

BLOOMINGTON HILTON

7:30 AM - 12:00 PM

3900 American Blvd W Bloomington (near I-494 & France Ave)

Registration: $49/person includes breakfast and free parking

Learn, connect, and leave invigorated and inspired!

This segment will be eligible for two hours of MN contractor + building official credits, pending approval from the MN Dept. of Labor & Industry.

11:00 AM - 12:00 PM:

Panel Discussion: How to Effectively Communicate Your Commitment to Green Building

2019 Green Path Sponsor

Details & registration at MNGREENPATH.ORG

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

HOUSING INDUSTRY NEWS

| 15

INDUSTRY IN ACTION

Twin Cities fall Parade features hundreds of homes For more than 70 years, the Parade of Homes Twin Cities has been connecting homebuyers with builders across the Twin Cities. This fall’s event features homes across the spectrum of price, style and location, with 385 new homes for consumers to tour for four weekends this September. The semi-annual event runs Sept. 7-29 with homes open Thursdays-Sundays from 12-6 p.m.

The tour provides an opportunity for consumers to see homes they might purchase. More broadly it celebrates home ownership and highlights the industry’s commitment to addressing the inventory and affordability challenges. A wide variety of home types and styles are showcased on the tour, from condos to single-family homes and townhomes to single-level-living floor plans.

Fall Parade of Homes features 385 homes.

Fall Parade of Homes by the numbers

$ $

Lowest-Priced Parade Home

127 Builders participating

Number of homes priced

under $300,000

$238,144

12 homes

#355 in Cambridge

(17 in Fall 2018; 22 in Fall 2017)

Most Expensive Parade Home $3,000,000

#185 in Minnetonka

Number of homes priced

over $1,000,000

Total value of all homes on the tour:

33 homes

$238,135,871

(34 in Fall 2018; 36 in Fall 2017)

65

41

21

Number of builders with one entry

Number of builders with 2-4 entries

Number of builders with 5+ entries

Cities with the most Parade Homes Lakeville: 31

Lake Elmo: 23

Woodbury: 19

TOUGHER THAN THE ELEMENTS Stands up to storms and harsh weather Water resistant to protect against swelling, warping and cracking; also resists mold damage ®

®

James Hardie fiber cement products are Engineered for Climate . For Won’t be eaten by animals or insects ®® uncompromising performance, our HZ5. For siding and trim are specifically James Hardie fiber cement products are Engineered for Climate ® designed to resist shrinking, and cracking even after of wet uncompromising performance, our HZ5 siding and trimswelling are specifically Fire years resistant ® ® James Hardie® fiber cement products are Engineered for Climate®. For or freezing A James Hardie exterior designed to resist shrinking, swelling conditions. and cracking even after years of wetcan help keep your homes James Hardie® fiber cement products are® Engineered for Climate®. For uncompromising performance, our HZ5 and trim specifically James Hardie® fiber cement products are®siding Engineered for are Climate . For ® or freezing conditions. A James lookingHardie beautiful longer no matter whathomes nature brings. Helps reduce time and money spent on exterior can– help keep your uncompromising performance, our HZ5 and trim specifically James Hardie fiber cement products are®siding Engineered for are Climate . For designed to resist shrinking, swelling and cracking even after years of wet ® ® uncompromising performance, our HZ5 siding and trim are specifically maintenance ® looking beautiful longer – no matter what nature brings.

James Hardie fiber cement products are Engineered for Climate .

For designed to resist shrinking, swelling and cracking even after years of wet uncompromising our HZ5 siding and trim are specifically ® performance, ® or freezing conditions.

A James Hardie exterior can even help keep your homes ® cracking designed to resist shrinking, swelling and after years of wet James Hardie fiber cement products are Engineered for Climate .

For uncompromising performance, our HZ5 siding and trim are or freezingtoconditions.

A James Hardie exterior can even help keepspecifically your homes designed resistlonger shrinking, and cracking after years of wet ® Achieve instant curb appeal and lasting character. looking beautiful no swelling matter nature brings. or freezing A–James Hardie exterior can helptrim keep your ® ®homes Contact a sales representative: uncompromising performance, ourwhat HZ5 siding and areyears specifically designed toconditions. resist shrinking, and cracking even looking beautiful longer –James no swelling matter what nature brings.

James Hardie fiber cement products are Engineered forafter Climate .ofForwet or freezing conditions.

A Hardie exterior can help keep your homes Visit jameshardiepros.com looking beautiful longer no matter what brings.

Kevin Morel | (612) 323-6358 Contact ®nature designed to resist shrinking, swelling and cracking even after years of wet a sales representative: or freezing conditions.

A– Hardie can help keep your homes uncompromising performance, our what HZ5exterior siding and trim are specifically looking beautiful longer –James no matter nature brings. kevin.morel@jameshardie.com Kevin Morel | (612) 323-6358 or freezing conditions.

James Hardie can help keep your homes looking beautiful longer –Ano matter what nature brings. designed resist shrinking, swelling andexterior cracking even after years of wet Contact ato sales representative: kevin.morel@jameshardie.com looking beautiful longer – no matter what nature brings.

Contact a sales representative: or freezing A323-6358 James Hardie exterior can help keep your homes © 2019 James Hardie Building Products Inc. All Rights Reserved.

AD1511-MDW-03/19 Kevin Morel | (612) Contact a conditions. sales representative: Kevin Morel | longer (612) 323-6358 Contact a sales representative: looking beautiful – no matter what nature brings. kevin.morel@jameshardie.com © 2019 James Hardie Building Products Inc. All Rights Reserved.

AD1511-MDW-03/19 Kevin Morel | (612) 323-6358 ®

Contact a sales representative: kevin.morel@jameshardie.com Kevin Morel | (612) 323-6358 kevin.morel@jameshardie.com Contact a sales representative: Kevin Morel | (612) 323-6358 © 2019 James Hardie Building Products Inc. All Rights Reserved. kevin.morel@jameshardie.com © 2019 James Hardie Building Products Inc. All Rights Reserved.

Kevin Morel | (612) kevin.morel@jameshardie.com © 2019 James Hardie Building Products323-6358 Inc. All Rights Reserved.

Contact a sales representative: 2019 James Hardie Building Products Inc. All Rights Reserved. kevin.morel@jameshardie.com 16 | HOUSING INDUSTRY NEWS©©Kevin Morel | (612) 323-6358 2019 James Hardie Building Products Inc. All Rights Reserved. kevin.morel@jameshardie.com © 2019 James Hardie Building Products Inc. All Rights Reserved.

AD1511-MDW-03/19 AD1511-MDW-03/19 AD1511-MDW-03/19 AD1511-MDW-03/19 AD1511-MDW-03/19

AD1511-MDW-03/19

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

Parade of Homes features first net-zero home As environmental concerns grow, more people are looking for homes that offer exceptional energy efficiency and healthy qualities throughout. That’s why Amaris Homes, a Minneapolis green homebuilder specializing in energy-efficient homes, is featuring a net-zero home in Afton in the fall Parade.

According to Raymond Pruban, founder and chief manager at Amaris Homes, this four-bedroom, threeand-a-half-bathroom net-zero rambler is expected to have no energy usage over the course of a year, with projected annual energy bills of $0.

“We are seeing a lot of people of all ages interested in these homes,” Pruban says. “From retirees living on a fixed income to millennials who are looking at these homes from a philosophical perspective — because it’s the right thing to do.

Many people are intrigued by this level of efficiency in home design.”

Amaris achieves this energy conservation by using the latest technologies, including super insulated exterior concrete walls, exceptionally efficient windows, and highend HVAC and large solar voltaic systems. Pruban estimates this adds about 5% to the home’s cost based on industry standards, but in turn it allows the homeowner to reduce their annual energy costs to zero, which is not easily achieved in Minnesota’s harsh winter climate or summer heat.

Although a net-zero home, design is not sacrificed. “The goal with this home is incorporating high-end finishes and all the ‘creature comforts’ that consumers want, while also getting an added benefit of having $0 annual energy bills and exceptional air quality,” Pruban says. “It is a very healthy home — for the environment and the homeowners, alike.”

Amaris Homes features first net-zero home in Afton.

Project Build Minnesota reaches students

You can help expand the reach of Project Build Minnesota in several ways: 1 Join the Project Build Minnesota outreach effort. Let Executive Director Dennis Medo know (information below).

2 Post about Project Build Minnesota on your social media channels.

3 Make a financial contribution to help Project Build Minnesota grow. Contact Dennis Medo.

Project Build made stops at several county fairs this summer.

As the new school year begins, Project Build Minnesota has several programs in progress that will continue to elevate the construction industry.

“We’re just closing out our second year as a formal nonprofit and we’ve made some really good advances getting out the message regarding construction industry careers, but much more work lies ahead,” said Dennis Medo, Executive Director of Project Build.

Medo cited these key efforts as evidence of progress: • The development of a strong website that continues to see growth in traffic.

• Increased efforts reaching counselors, principals and school

boards by exhibiting at their annual conferences regularly.

• A growing social media presence that now includes a YouTube channel and short videos.

• Strong outreach efforts that include multiple county fairs, school speaking engagements, job fairs and connections with high school construction faculty.

Three particularly exciting opportunities are in development, reports Board Treasurer David Siegel.

The first is the creation of a Boy Scouts of America Explorer Post in construction. These co-ed Explorer Posts provide career exploration to students ages 14-21. The post will meet once per month guided by volunteer leadership to provide

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

exposure to a wide array of construction-related careers.

The second is expansion of the student team activity at the annual Builders and Remodelers Show.

Organizer Housing First Minnesota plans to have 12 teams of four students demonstrating their skills as they construct play houses during the show. Donations of materials and advisors to help guide the students are needed. This effort is being spearheaded by the Education and Workforce Development Committee of Housing First Minnesota. Please contact Tom Gavaras of Housing First Minnesota at tom@batc.org if you are interested in participating.

The third involves development of construction-industry short

courses for interested youth. Working with The National Center for Construction Education and Research (NCCER) core construction curriculum, Project Build Minnesota is scheduling two short courses in basic construction.

“These three efforts are just a portion of the array of activities Project Build is tackling,” said Siegel. “We’ve spent the past three decades telling all youth in Minnesota they have to go to college, and we won’t undo that mindset quickly,” he said. “But we are making progress.

I’m very excited about what this next school year will bring for our fledgling non-profit.”

4 Add your jobs to the job board (it’s free!). Visit the website at projectbuildmn.org and click on jobs.

Dennis Medo PROJECT BUILD MINNESOTA EXECUTIVE DIRECTOR

612-221-9849 dennis@projectbuildmn.org

HOUSING INDUSTRY NEWS

| 17

INDUSTRY GIVES BACK

Golfing for a good cause The housing industry took a little time during the busy summer construction season to have some fun on the golf course and give back to the community at the same time Custom One Homes held their 3rd annual Custom One Charities Golf Tournament at Prestwick Golf Club in July. The event raised $65,690 to benefit Make-A-Wish Minnesota and other local organizations.

Pulte Homes held their annual Pulte Charity Golf Tournament in July at Dwan Golf Club. The day on the course raised more than $18,000 for the BATC-Housing First Minnesota Foundation. The foundation will use the money raised from the event to help build and remodel homes for homeless veterans and others in need.

Pulte Golf Tournament raises $18,000 for BATC-Housing First Minnesota Foundation.

Custom One Team pose at annual tournament.

Golfers pose at Pulte Golf Tournament.

Golfers raise $65,000 at Custom One Charities Golf Tournament.

Have a story idea for this publication?

Let us know! Send your story to info@housingfirstmn.org

Real Estate Law at Every Level Larkin Hoffman has been a go-to real estate law firm for more than five decades. We provide a comprehensive range of services including financing, tax increment financing, acquisitions and dispositions, construction, development, land use, environmental regulation, property conversions and redevelopment, leasing, renewals, eminent domain and inverse condemnation, property tax appeals, and litigation. This full-service approach ensures we can address and manage every element of our clients’ real estate matters.

Peter Coyle pcoyle@larkinhoffman.com 952-896-3214

18 |

HOUSING INDUSTRY NEWS

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

IN THE DIRT

A quick recap of housing news and development updates

SOURCE: ROBERT THOMAS HOMES, INC.

SOURCE: ZEHNDER HOMES, INC.

SOURCE: FINANCE & COMMERCE

SOURCE: MANKATO FREE PRESS

1

2

3

4

Tradition plans single-family homes, townhomes in Woodbury

Zehnder Homes’ moves forward in Minnetonka

New rental townhomes in Lakeville

North Mankato approves developer deal

Zehnder Homes, Inc. plans to demolish an existing 3,200-square-foot home and build 13 new homes on the 12-acre property in Minnetonka. The location is in an established neighborhood near interstates I-494 and I-394.

A preliminary plat for the subdivision called Bird Song went to the planning commission on Aug. 1 with a city staff recommendation to approve.

Gated townhouse-style rentals are planned for Lakeville. Menomonee Fallsbased Continental Properties paid $4 million for 15.45 acres of farmland at the northwest quadrant of Cedar Avenue and Dodd Boulevard.

The apartment developer plans to build 260 market rate apartment units in 13 buildings.

The Lakeville City Council approved the project on Aug. 5.

The North Mankato City Council approved an agreement to extend road and sewer services to The Landing housing development in the northeast part of the city. The project involves extending Lexington Lane, as well as a potential culde-sac, along with sewer services for 23 homes.

Developer KWS approached the city this spring asking for North Mankato to provide sewer services ahead of the neighborhood’s construction. According to the Mankato Free Press, this is the first agreement of its kind for North Mankato since the Great Recession.

Tradition is planning a development with 129 single-family homes, 47 town homes and a large park on 80 acres in Woodbury. The Briarcroft of Woodbury development will be east of the Highcroft of Woodbury development that opened last year.

The townhomes will be clusters of four to six homes with a common wall.

The plans call for numerous private trails throughout the development and a large park and pond.

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

HOUSING INDUSTRY NEWS

| 19

OUR SERVICE GUARANTEES On-time estimates on the agreed upon date

YOUR SOURCE FOR

Pick up of returns within 24 hours of request

TOP-QUALITY BUILDING

MATERIALS & SERVICES

CABINETS & COUNTERTOPS

COMMERCIAL SERVICES

COME VISIT US AT OUR

NEW LOCATION IN ALBERT LEA!

Delivery of your confirmed orders on the same day Warranty claims to vendors initiated within 24 hours of request

WINDOWS & DOORS

POST-FRAME BUILDINGS

1 7 F U L L S E R V I C E L U M B E R YA R D S BIG LAKE

RED WING

GLENCOE

STILLWATER

HASTINGS

WATERTOWN

AMERY

RICE LAKE

CHIPPEWA FALLS

RIVER FALLS

HAYWARD

SIREN

HUDSON

SPOONER

ALBERT LEA KASSON

MILLTOWN

CABINET & COUNTERTOP SHOWROOM WOODBURY, MN

FEATURING

ABC-CLC.COM BUILDING MATERIALS 20 |

HOUSING INDUSTRY NEWS

DRAFTING SERVICES

CABINET DESIGN

FREE DELIVERY

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