Housing Industry News Vol. 4 Issue 2 - April 2020 by Housing First Minnesota

VOL. 4 ISSUE 2, APR. 2020

THE MINNESOTA HOUSING INDUSTRY NEWS SOURCE BY HOUSING FIRST MINNESOTA • HOUSINGINDUSTRYNEWS.ORG

Lennar sets up a handwashing station for workers.

Housing pivots in response to sudden, historic challenges COVID-19 brings complex changes to the housing industry The strong start to the 2020 housing market was swept into a sea of uncertainty as the novel virus COVID-19 bore down on Minnesota and across the world. School closures, event cancellations and the norms across all industries were impacted as this unfolded throughout late February and into March and April. COVID-19 had an immediate impact on all corners of the housing industry. The strongest spring in a decade featured a housing market with strength across the board and was buttressed by record-strong employment figures and historic interest rates. The strong momentum was changed in short-order, requiring an industry pivot to a new way of doing business for an uncertain period. “The first two months of 2020 were strong across all housing sectors, and then COVID-19 switched the focus virtually overnight,” said David Siegel,

executive director of Housing First Minnesota. Pending sales in the Twin Cities metro had reached 10-year highs in the weeks before the March pivot, a sign not only of the strength in housing demand, but also an indicator of what the near-term industry work will entail as the crisis unfolds. Questions about the industry continuing throughout the crisis were answered in Executive Order 20-2020, which designated homebuilding as a critical sector during the shelter-in-place period. “There are thousands of projects which started prior to the pivot, those projects are critical to the families of Minnesota and are carrying on this spring as an essential service,” added Siegel. The industry changes were not limited to the job sites, product deliveries and sales centers. As housing construction

was surging, the Minnesota legislature was deeply engaged in substantive debates on housing funding, permitting and zoning. As mid-March approached, that discussion quickly shifted to emergency measures to address the crisis, leaving the housing policy and funding debates for another day. “The 2020 legislature had as deep of a housing discussion as we’ve seen in years, perhaps decades,” said James Vagle, vice president of advocacy of Housing First Minnesota. “That changed quickly as legislators pivoted and put their focus on responding to this crisis.” COVID-19 brought fast changes and disruptions to real estate transactions as well. The industry norms of open houses to visit and view homes changed dramatically as the crisis emerged. Gatherings CONTINUED >> PAGE 6

INSIDE THIS ISSUE

New building code takes effect PAGE 4

Financial assistance for small businesses PAGE 11

Industry members answer the call PAGE 16

Groundbreaking housing legislation advances before Legislature takes prolonged recess The 2020 Legislation Session started unlike any other. From the moment legislators gaveled in, housing emerged as a top-tier issue, with groundbreaking legislation advancing rapidly.

A press conference was held in the early days of the session, announcing a series of proposals aimed at “Legalizing the American Dream” of homeownership. Legislative committees began hearing these and CONTINUED >> PAGE 8

HOUSING INDUSTRY NEWS

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2960 Centre Pointe Drive Roseville, MN 55113 HousingFirstMN.org

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PRESIDENT’S NOTE

The importance of home

Gary Kraemer 2020 President, Housing First Minnesota

The strong start to 2020 across the housing spectrum came to an abrupt halt in early March when seemingly everything changed in an instant. Our industry was impacted, but we were deemed a critical infrastructure industry and the strong start to the first quarter is carrying our industry right now as we perform critical housing work for Minnesotans across the state.

We are all watching the economic indicators closely. Unemployment is rising which will undoubtedly impact things, though there are sectors of the economy doing better than others. Where we saw the Great Recession cascade upon our industry with an oversupply of homes and a foreclosure crisis, we enter this period of uncertainty with housing undersupplied, relative strength in home values and a mobilized state and federal response to help our country through this. Important work continues not only on current housing projects in the pipeline, but on future projects as well. Our industry relies on a critical sequence of approvals and infrastructure work that must continue during the coming months. Our team at Housing First Minnesota is working closely with local leaders to ensure that this can be safely done in a way that allows a comprehensive review and approval process for all projects.

As this crisis unfolds, most of us are operating from home. While we all would like to be able to head out, attend events and spend time with family and friends, we know home is where we need to be right now. The products that our industry provides, homes, have never been more central to the lives of Minnesotans. Our industry has always taken pride in our contribution to the lives of our customers throughout the state. But living through this period and looking into the future, I think there will be even more clarity on the importance of home. I wish safety and health to all of the housing industry as we work through this challenge. We will all get through this together more unified, grateful and stronger.

HOUSING INDUSTRY NEWS April 2020, Volume 4, Issue 2 PUBLISHER David Siegel David@HousingFirstMN.org EDITOR Katie Elfstrom Katie@HousingFirstMN.org GRAPHIC DESIGN Hannah Swan Clare Buche ACCOUNTING Janice Meyer ADVERTISING SALES Brad Meewes Kori Meewes

Onward,

CONTRIBUTING WRITERS Katie Elfstrom Katie@HousingFirstMN.org

Gary Kraemer

Nick Erickson

Nick@HousingFirstMN.org

Mark Foster

Mark@HousingFirstMN.org

HousingIndustryNews.org

Kristen Ober

Kristen@HousingFirstMN.org

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

David Siegel David@HousingFirstMN.org

James Vagle

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James@HousingFirstMN.org

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

Housing First Minnesota David Siegel, Executive Director Gary Kraemer, President

News Tips Have an idea for a story for our next issue? Contact Editor Katie Elfstrom at Katie@HousingFirstMN.org or send your story to Info@HousingIndustryNews.com

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 six times per year to housing industry professionals and others associated with the homebuilding 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 2020 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 Minnesotans can afford.

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HOUSING INDUSTRY NEWS

Housing First Minnesota is dedicated to advancing the American dream of homeownership for Minnesotans and is the leading resource for housing-related issues in Minnesota. This 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 policies, regulations and protections, but our call for affordability for families is a voice that must be heard. Learn more at 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:

The Draheim-Elkins proposal should be supported by both parties. It’s rare such an effort to solve the affordable housing problem is bipartisan.” MANKATO FREE PRESS EDITORIAL BOARD

While affordability is tricky to measure, the homeownership rate isn’t. When homes are less affordable, you expect the homeownership rate to go down. And it has gone down for people in their 30s, considered the prime years for first-time homebuying.” HOLDEN LEWIS NERDWALLET HOME AND MORTGAGE EXPERT

The word ‘affordability’ — when it comes to home sites you couldn’t say a happier word for a land developer to hear. We would do everything we can to make as many affordable sites as possible.” CASEY WOLLSCHLAGER SUMMERGATE DEVELOPMENT

Non-profit housing is too expensive because of the unique costs of subsidies as well as ambient regulations that constrain all production of housing across the whole sector, non-profit and for-profit alike.”

There is, simply put, a dire shortage of housing in places where people and companies want to live and reactionary local politics that fight every effort to add more homes.” THE NEW YORK TIMES

The Great Affordability Crisis hides in plain sight... ANNIE LOWREY THE ATLANTIC

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REGULATORY AFFAIRS

Regulatory roundup: Building code takes effect The latest version of Minnesota’s Residential Building Code, Chapter 1309, went into effect on March 31. Chapter 1309 adopts the 2018 International Residential Code with Minnesota amendments. As of printing, there has been no progress on the adoption of a new residential energy code. The 2020 Minnesota Residential Code is the culmination of more than two years of work by the Minnesota Department of Labor and Industry’s (DLI) technical staff. DLI has highlighted the following changes as being significant. Administration and Definitions: Added definition of transient and directs code users to the IBC for requirements for dwellings intended for transient use. Sections R310.1 and R310.6 Provisions for Emergency Escape and Rescue Openings for New and Existing Basements: Emergency escape and rescue openings are required in new basements and bedrooms created in existing basements unless the entire basement area, all portions of the means of egress to the level of exit discharge, and all areas on the level of exit discharge are protected with an automatic sprinkler system. Sections R314 and R315 Smoke Alarms and Carbon Monoxide Detectors: Existing homes are permitted to be equipped with battery-powered smoke alarms and carbon monoxide detectors that are not interconnected unless alterations or repairs result in the removal of interior wall or ceiling finishes. Hardwired, interconnected smoke alarms are not required in existing homes where the basement or attic provides access to the hardwiring. New homes continue to require hardwired, interconnected smoke alarms. Table R402.2 Minimum Specified Compressive Strength of Concrete: Clarified that 5,000psi concrete is not required for post footings decks or porches, wood foundations, slab-ongrade foundation walls and footings for floating slabs. Section 404 Foundation and Retaining Walls: Table R404.1(1) includes prescriptive requirements for foundation walls up to 10 feet in height. The 2020 Minnesota Residential Code also includes these significant changes from the 2018 IRC: Section R301.2.1: Wind design criteria require dwellings to be constructed using ultimate design wind speed (Vult) instead of basic wind speed (Vasd). Table R301.2.1.3 provides conversions from Vult to Vasd. The actual design wind loads will be equal or slightly less using ultimate wind design speed instead of basic wind speed. Section R324 Solar Energy Systems adds new provisions for solar energy systems. Roof-mounted solar PV systems must allow for roof access, including access pathways from the lowest roof edge to the ridge and setbacks at the ridge. Section R507 Exterior Decks reorganizes and clarifies requirements for decks, including requirements for materials and fastener and fastener connections. Appendix Q addresses tiny houses by providing certain allowances for homes less than 400 square feet in size.

New electrical code could add $2,000 to the cost of a new home.

Electrical Code Implementation Delayed From March 16 to April 15, the DLI solicited comments on the adoption of changes to Minnesota’s Electric Code, Chapter 1315. The rule proposed by the Board of Electricity would adopt the 2020 edition of the National Electric Code as proposed by the National Fire Protection Association, without any changes or amendments. Among the changes proposed, all new one- and two-family homes would need an exterior electric disconnect, surge protection in all new homes, all ceilings boxed for paddle fans and GFCI in all basement receptacles. Industry estimates are that the changes would add roughly $2,000 to the cost of new homes. Unlike with the various building codes adopted by DLI and the Plumbing Code adopted by the Board of Plumbing, the Board of Electricity does not adopt Minnesota-specific amendments. “If the Board of Electricity, by practice, does not consider amendments to the Electric Code on the basis of affordability, it raises significant questions about the process,” said Nick Erickson, director of research and regulatory affairs for Housing First Minnesota.

“If the Board of Electricity, by practice, does not consider amendments to the Electric Code on the basis of affordability, it raises significant questions about the process,” Nick Erickson

DIRECTOR OF RESEARCH AND REGULATORY AFFAIRS HOUSING FIRST MINNESOTA

In its comments to the Board of Electricity, Housing First Minnesota opposed the 2020 changes affecting new homes, and called for a public hearing alongside two dozen members of the industry. Due to COVID-19, a hearing on the Electrical Code has been rescheduled for Aug. 19, 2020, delaying the new electrical code, which had been scheduled to go into effect on July 1.

At the time of printing, the comment period was still open. A complete update on the status of the Electrical Code adoption will be printed in the June issue.

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Training and certification deadlines extended In response to COVID-19, Minnesota agencies involved with certification and licensing of contractors have made changes to their usual operations. The Minnesota Department of Labor and Industry has suspended all license exams and has not yet announced when it will be able to resume examinations. Continuing education deadlines have been extended 90 days for licenses that expire in March, April and May 2020. License renewals must still be submitted prior to the current expiration date. Late fees will apply to renewals submitted after the expiration date. Asbestos certifications and lead licenses expiring on or after March 16 have been granted an extension to complete the required Minnesota Department of Health-approved refresher course to become recertified or relicensed in Minnesota.

Builders post worksite signage with OSHA’s recommendations and guidance during COVID-19.

OSHA recommendations for worksites during pandemic The COVID-19 pandemic is a quickly evolving situation and has required rapid adaptations across all job sectors. Employers are implementing new precautionary measures to protect their employees, customers and the public. The construction industry continues to build on job sites across the nation with added safety measures. The Occupational Safety and Health Administration (OSHA) has released new guidance for employers to prevent the spread of COVID-19 on construction sites. Many of OSHA’s guidelines are based on the principle of placing controls on workplace procedures to remove potential occupational health hazards. The administration

recommends these controls to be precautionary instead of a reaction to a possible worksite outbreak. There is a wide range of recommendations from encouraging sick workers to stay home to providing soap and alcohol-based hand sanitizer for proper hygiene to implementing drive-through services for customers to observing social distancing. In addition, appropriate personal protective equipment (PPE) should be provided to all employees to prevent potential exposures. Examples of PPE include gloves, goggles, face masks and respiratory equipment, where appropriate. Employers are obligated to provide and

train their employees on how to properly wear and use their PPE. However, OSHA reminds those using PPE that there is still an obligation to follow recommendations of social distancing and proper hygiene practices. In the event of a workplace outbreak, employers should inform and encourage all employees to self-monitor for signs and symptoms of COVID-19. All workers should be distanced while working and if an employee should display any symptoms, they should be isolated from other employees, customers and members of the public. A full list of recommendations and guidance can be found at www.OSHA.gov.

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HOUSING INDUSTRY NEWS

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REGULATORY AFFAIRS

Short spring road restrictions season The annual headache of seasonal road restrictions has brought a needed sense of normalcy to the housing industry. Spring load restrictions went into effect on March 6 for the south, southeast and metro regions; March 9 for the central region; and March 13 for the north and north central frost regions. In the southeast and metro areas, seasonal load restrictions were lifted

on April 13. At the time of publishing, load restrictions were still in effect for the rest of the state In previous years, MnDOT policy has cited an eight-week intent for the length of road restriction. MnDOT has a three-day notice period for any changes in the status of load restrictions. Overweight permits for vehicles more than 80,000 gross pounds will continue, and new permits will be

allowed if all axle and group weights are legal. Permits for full-summer overweight permits can be issued during this restriction period for travel on the interstate travel system only. Middle-range overweight permits will not be issued in each frost zone until the spring load restrictions are fully lifted. In the southeast and metro areas seasonal load restrictions were lifted on April 13.

Stormwater pollution and prevention enforcement continues through COVID-19

The MPCA may allow reporting and operator certification extensions, among other reliefs.

Following Gov. Walz’s declaration of a state of peacetime emergency in Minnesota, the Minnesota Pollution Control Agency (MPCA) released guidance for regulated entities who may have felt the impacts of the order. Reduced workforce volume has made it difficult to maintain normal operations for some facilities. These facilities are still obligated to ensure compliance with environmental laws, regulation and permit requirements. In situations where a regulated entity will experience an unavoidable noncompliance situation due to the COVID-19 outbreak, the MPCA has released new guidance. Affected entities should follow the MPCA procedure to request consideration for a form of regulatory relief. Where possible, the MPCA may allow reporting deadline extensions and operator certification extensions, among other reliefs.

The MPCA released guidelines for regulatory relief requests. Requests may come from the responsible entity, along with the permit number and phone number. Any request must include the reason for the variance, the citation for any state statutes, Minnesota rule or permit citations, and a one-paragraph explanation of what is being requested. Applicants for relief must also include bulleted points of what measures will be taken to mitigate or minimize the potential environmental impacts and the specific time period that the request. The MPCA will work with each entity to come to an appropriate solution for each individual situation. Regulated entities who have been affected should send an email to MPCA.COVID19REGFLEX@state.mn.us with specific information related to their request for regulatory relief.

CONTINUED FROM PAGE 1

Housing pivots in response to COVID-19 of large crowds were discouraged and, in some cases, barred by executive order, requiring yet further changes. The housing industry responded by instituting an array of measures including appointment-only model visits, virtual tours and digital transaction options. “The challenges and sudden changes have impacted all of us, but the response and innovative approaches from housing professionals have been remarkable,” said Siegel. Looking forward to an uncertain period, housing firms will face the challenge of balancing multiple priorities. These include promoting and maintaining public safety, carrying on essential services and managing businesses in uncertain economic conditions.

Stay up to date with the latest COVID-19 housing industry updates Blog.HousingFirstMN.org Creative Homes promotes virtual tours of its models.

HOUSING INDUSTRY NEWS

Department of Labor and Industry sent out a memo stating that municipalities that have adopted the State Building Code are still obligated to enforce the code.

Permitting and inspections during COVID-19 In March, organizations across Minnesota started to modify operations due to COVID-19, including municipalities performing building inspection services. In some cases, builders reported being unable to obtain a certificate of occupancy as expected. This forced buyers to postpone their closings and caused a ripple of delayed closings across the housing chain. As cities began to cease building inspections and permitting services, there was initial confusion over what to do when the permitting entity ceases operations. The Minnesota

Department of Labor and Industry (DLI) sent out a memo stating that municipalities that have adopted the State Building Code are still obligated to enforce the code through their designated building official. To help the industry track the status, Housing First Minnesota reached out to the state’s fastest growing communities and regional centers to establish a listing. Contract building inspection firms offered to step in if cities ceased inspections. According to DLI, the local building official can accept

reports of inspection by approved agencies or individuals. There is also latitude for establishing specific processes or procedures based on using technology to assist with varying forms of inspections.

Having issues getting an inspection? Contact the Minnesota Department of Labor and Industry at dli.contractor@state.mn.us.

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REGULATORY AFFAIRS

Housing and lot development during a pandemic Q&A with housing policy expert Peter Coyle of Larkin Hoffman Q: What changes have you seen implemented from review agencies at the local and state agency levels as they process applications?

Peter Coyle As an attorney for Larkin Hoffman, one of the focuses of Coyle’s practice is advising land owners, developers and contractors who are seeking local and state regulatory approvals for new development projects.

The most consistent change has been to use group teleconferencing to discuss pending applications. The state agencies in particular have been stating that they are fully engaged on any pending applications. For local government entities, it is more varied owing to the challenge of engaging specific staff members. But we are interacting regularly and effectively with staff at many cities via traditional email and teleconferencing platforms. The biggest change is the extent to which agencies are using video conferencing to conduct business. Even the Minnesota Senate has been streaming live oversight hearings through Zoom and Facebook Live. There are challenges, but the systems appear to be working. This assumes a given agency has access to the staff and technology sophistication to use this media regularly and reliably. Q: How important is it, from a timing and sequencing standpoint, to keep land use applications for housing moving over the next six months?

We all understand the time lag associated with locating, entitling, acquiring and developing land. It is not unusual for this process to consume several years before the first home is built. If that process is halted it will force the entire chain of events to

grind to a halt, delaying the date by which that first home can be constructed. We are very sensitive to the concerns of local agency staff that proper safety precautions be followed, but we also need to balance that concern with maintaining a flow of projects to try and meet current and future housing demands. Q: What has been the impact of COVID-19 for the Legislature, in terms of priorities and processes?

As of March 17, the Minnesota Legislature has suspended its regular operations and is unlikely to resume normal operations before its constitutional adjournment date in May. The Legislature and Gov. Walz have an agreement to only act on consensus legislation relating to COVID-19 as conditions warrant. The Legislature and Gov. Walz have adopted several policy and funding measures in response to the emergency. The Senate has begun conducting special oversight hearings through a Select Committee which are being live-streamed; while admittedly constrained, they are able to accommodate testimony as needed to provide meaningful oversight. In addition, we understand that both houses of the Legislature have been conducting regular caucus briefings in private to identify potential legislation that can be advanced in the current environment. Absent agreement of all caucuses, no specific legislation will be taken up.

We have had to communicate through individual legislators and key staff to make sure our interests are being addressed responsibly. While it is still possible that a capital bonding bill will be enacted this session, it is not certain. It is more than likely that no other meaningful legislation will advance this year, including the slate of housing reform bills being supported by Housing First Minnesota. Q: Legal and legislative processes have been premised on gathering in public spaces and allowing broad participation—any thoughts about how this will impact these going into the future?

There is legitimate concern about the lack of public awareness and involvement in the proceedings of government protected by the First Amendment, whether in the courtroom or legislative chambers. Yet, there is no practical alternative short of shutting everything down. The silver lining in this, hopefully, is that state and local governments will now be compelled to adopt new processes to complete their work through the use of video conferencing and similar platforms—absent the crisis there would have been no pressure to experiment with new, potentially more efficient, processes. For those interested, the current environment will be a fertile testbed for experimentation; for others reverting to the traditional way of doing business can’t come soon enough.

CONTINUED FROM PAGE 1

Groundbreaking housing legislation advances before Legislature takes prolonged recess other housing-related bills throughout the following weeks. Numerous bills related to zoning reform, creating permitting efficiency and promoting transparency in housing regulatory costs were heard in various committees and were poised to advance further. Then came COVID-19. In an unprecedented move, the Minnesota Legislature officially recessed on

HOUSING INDUSTRY NEWS

March 17, after approving a funding bill for combating COVID-19. Since then, the legislature has held various remote hearings and gathered numerous times to approve necessary legislation related to COVID-19 and its impacts to the economy. All other legislation unrelated to the pandemic has been temporarily put on the sidelines. Housing First Minnesota’s Nick Erickson testifies in front of the Senate Agriculture, Rural Development and Housing Policy Committee.

HOUSING ON THE HILL

Legislative Commission on Housing Affordability gavels in The Legislative Commission on Housing Affordability held its inaugural meeting on Feb. 24. The agenda included the election of the Commission’s co-chairs, rules and a review of the 2018 State Task Force on Housing’s report. The Commission was established during the 2019 legislative session and is comprised of eight legislators—four DFL members and four Republican members. House Members • Rep. Peter Fischer (DFL, Maplewood) • Rep. Barb Haley (R, Red Wing) • Rep. Kaohly Her (DFL, St. Paul) • Rep. Jim Nash (R, Waconia)

REP. PETER FISCHER (DFL, MAPLEWOOD)

REP. BARB HALEY (R, RED WING)

REP. KAOHLY HER (DFL, ST. PAUL)

REP. JIM NASH (R, WACONIA)

SEN. RICH DRAHEIM (R, MADISON LAKE)

SEN. KARI DZIEDZIC (DFL, MINNEAPOLIS)

SEN. KARIN HOUSLEY (R, ST. MARY’S POINT)

SEN. ERIK SIMONSON (DFL, DULUTH)

Senate Members • Sen. Rich Draheim (R, Madison Lake) • Sen. Kari Dziedzic (DFL, Minneapolis) • Sen. Karin Housley (R, St. Mary’s Point) • Sen. Erik Simonson (DFL, Duluth) Authorized for five years, the Commission is set to define and study housing affordability and supply issues, including policy roadblocks to housing. Rep. Peter Fischer and Sen. Karin Housley were elected as Commission co-chairs.

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HOUSING INDUSTRY NEWS

| 9

HOUSING ON THE HILL

Legislature passes $330.6 million package to address the impact of the COVID-19 pandemic in Minnesota.

State Legislature returns to pass COVID-19 relief package In an unprecedented move, the Minnesota Legislature officially recessed on March 17, but allowed themselves the ability to return upon agreement from legislative leaders. On March 26, both the House of Representatives and Senate gaveled back in for just the afternoon. Each body approved an additional $330.6 million package to address the impact of the COVID-19 pandemic in Minnesota. “This is just the beginning, but it is an important first step,” said House Majority Leader Ryan Winkler (DFL-Golden Valley). “It will be our job to help Minnesota recover, revive and move on.” Sponsored by Winkler and Senate

Majority Leader Paul Gazelka (R-East Gull Lake), HF4531*/SF4451 was passed 99-4 by the House and 67-0 by the Senate. It was then signed into effect by Gov. Walz on March 28. The Legislature had previously appropriated about $221 million to support the Department of Health’s response and to help health care providers. This additional bill covers a larger range of efforts, most notably a $200 million general fund appropriation to create a COVID-19 Fund that Minnesota Management and Budget would draw upon to help state agencies respond to the outbreak. A COVID-19 Response Commission,

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made up of legislative leaders and chairs of the House and Senate finance committees, would be created to review expenditures from the fund greater than $1 million. Other budget items proposed in the bill include provisions for small businesses, emergency services, childcare providers, veteran support and housing support, among various other sectors. Policy measures in the bill encompassed a variety of protections and exemptions for groups affected directly by the COVID-19 pandemic such as employees laid off or furloughed. The package also provides exemptions to the state’s standard purchasing process

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to allow Minnesota to buy necessary supplies and services from other states more quickly. In the education space, this relief package includes provisions to allow flexibility in student loan repayment and aligns state and federal work-study guidelines to allow students to receive payments, among other measures. Legislative leaders maintained the capability to return to the Capitol in order to approve additional necessary legislation related to COVID-19 and its impacts on the economy. All other legislation unrelated to the pandemic has been temporarily put on hiatus.

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HOUSING INDUSTRY NEWS

Economic relief package creates new financial assistance programs aimed to stabilize small business and individuals As the impacts of the COVID-19 outbreak are seen and felt, small businesses and individuals alike are being financially impacted. In response, President Trump signed the largest economic relief package in American history. The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocates funding to small businesses and industries hardest hit and directs financial assistance to most individuals. Included in the CARES package is $376 million in aid designated for small businesses and American workers. The Small Business Administration (SBA) notes that in addition to traditional funding that SBA offers, there are temporary programs that have been set up to meet financial needs during the COVID-19 pandemic. SBA Loans From Feb. 15 until June 30 the SBA can offer 100% federally backed loans to small businesses. These loans are to be used to cover business operational costs like payroll, insurance premiums, utilities,

health insurance for employees and dependents, and rent. Eligible organizations include any small business, tribal business, nonprofit or veterans’ organization with 500 employees, certain types of businesses with fewer than 1,500 employee, nonprofits and veterans’ organizations.

suspended due to orders from a government entity limiting travel, commerce, group meetings, etc. Additionally, to receive this loan a business must experience a yearover-year (comparing calender quarters) reduction in gross receipts of at least 50% until gross receipts exceed 80% year-over-year.

Paycheck Protection Program Loan Guarantee Unlike the SBA loans, this category of loans is guaranteed by the SBA, but come from local lenders. Like the SBA loans, these loans are offered to small businesses with fewer than 500 employees (certain types of business with fewer than 1,500 employee), nonprofits and veterans’ organizations. Importantly, self-employed, sole proprietors, freelance and gig economy workers are also eligible to apply, provided the business entity was in operation before Feb. 15. Payments for these loans are deferred up to six to 12 months. To qualify, a business must have its operations fully or partially

Direct Assistance The CARES Act also provides provisions for individuals. Most notably is the “recovery rebates.” These direct cash aids are provided to every eligible American taxpayer. The base rate is $1,200 per taxpayer, plus an additional $500 per child. Income limitations based on filing status apply.

FINISH

PREFINISH

CARPENTRY

CABINETRY

DOORS

HARDWARE

MILLWORK

DESIGN STUDIO

More information and resources are available at www.sba.gov

Included in the CARES package is $376 million in aid designated for small businesses and American workers.

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| 11

MARKET REPORT

Housing market report

State of Minnesota

Strong start to the year for residential construction

Moorhead

Following a solid year in 2019, new home construction continued a positive trend in the first couple of months in the new year. According to the U.S Census, the statewide number for single-family permits thus far in 2020 amounted to 1,265 new units. This is an 8% increase from this time last year. However, statewide and metro home prices continue to increase. Home prices in the Twin Cities and Minnesota have increased 6.3% and 7.6%, respectively. Home inventory remains tight for first-time buyers and downsizers.

1,265

Duluth

Year-to-Date Single-Family Construction Through Feb. 2020

through Apr. 1, 2020

SOURCE: U.S. CENSUS

SOURCE: CITY OF MOORHEAD

SOURCE: U.S. CENSUS

St. Cloud

through Jan. 20, 2020

Twin Cities

SOURCE: CENTRAL MINNESOTA BUILDERS ASSOCIATION

1,072

St. Cloud-area data not reported to U.S. Census

Mankato

SOURCE: U.S. CENSUS

Rochester

SOURCE: U.S. CENSUS

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

FEB. 2020

+6.3%

FEB. 2020

$282,000

$255,000

FEB. 2019

+7.6%

$265,187

Y-Y Change

Minnesota Construction Employment Past 5 Months SOURCE: DEED

$237,000

Y-Y Change

2019

$265,187

$237,000

Twin Cities Median Sales Price

Minnesota Median Sales Price

SOURCE: MINNEAPOLIS REALTORS

SOURCE: MINNESOTA REALTORS

Twin Cities Construction Employment Past 5 Months United States

SOURCE: DEED

West - 60

South - 63

Midwest - 50

Northeast - 59

Regional Remodeling Market Indicies, 2019 Q4 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.

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HOUSING INDUSTRY NEWS

Employment Update Minnesota added 2,315 jobs on a seasonally adjusted basis since February 2019 according to the Minnesota Department of Employment and Economic Development (DEED). The state’s seasonally adjusted unemployment rate remained steady at the previous month’s rate of 3.1%. Construction, as an industry, continued to grow with 3,159 new jobs added since February 2019; a 3% increase, overall. These employment numbers reflect the job market conditions prior to COVID-19 impacts.

US unemployment climbs quickly in March According to the U.S. Department of Labor, total nonfarm payroll employment fell by 701,000 jobs in March, and the unemployment rate rose to 4.4%. The sudden change reflects the effects of COVID-19 and the efforts to contain it. This is the largest over-the-month increase in the rate since January 1975, when the increase was also 0.9 percentage point. The job sector with the biggest losses in March was leisure and hospitality, which saw job losses near 500,000. Notable declines also occurred in health care and social assistance, professional and business services, retail trade and construction. Construction job losses were largest in nonresidential construction, down 11,000 jobs and civil engineering construction, down 10,000 jobs.

Prior to March, construction employment had increased by 211,000 jobs over the prior 12 months. While the COVID-19 outbreak has thousands lining up for unemployment, there are sectors looking to staff up now to meet a new surge in demand. An increase in demand for delivery and online-based services has companies like Amazon, Walmart, Target and Fed-Ex hiring.

Civilian unemployment rate, seasonally adjusted

Get the Latest. FOLLOW THE CONVERSATION ON TWITTER: @HousingFirstMN #MNHomeownership NOTE: SHADED AREA REPRESENTS RECESSION, AS DETERMINED BY THE NATIONAL BUREAU OF ECONOMIC RESEARCH SOURCE: U.S. BUREAU OF LABOR STATISTICS

Questions on economy abound as pandemic unfolds Where we started Up until the COVID-19 crisis, experts had been calling the U.S. economy ‘resilient but vulnerable’ as it brushed off shock after shock over the past 18 months including a trade war and mortgage rates that stumbled over 5%. Over the past year and a half, the economy has seen job openings that exceeded the number of people looking for jobs, wages that were on the rise and an incredibly strong housing market. In fact, February was one of the best months for housing ever. Compared to our last start of an economic downturn, personal savings were high. What has changed The vast majority of states have issued some sort of shelter-in-place order, and billions across the globe are now under restricted travel orders. The U.S. now has unemployment claims that are breaking records each week. The U.S. stock market has lost all of its recent

record gains. According to Ali Wolf, the chief economist for Meyers Research, says the bad numbers are just beginning. “We need to expect to see those headlines, that companies will have to do layoffs and furloughs,” said Wolf. By the technical definition, a recession is here Consumer spending makes up 68% of our current economy. That’s homebuying, going out to eat, shopping, vacations and events. All of which are about to face major impacts from COVID-19. In a recent webinar, Wolf even went as far as to say she is very confident February 2020 will be when we declare this recession started. The next big indicator, she says, will be what scenario of recessions plays out. Case 1: Short Recession Meyers Research first scenario is a short recession based on the strength with which our economy

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started. This would be a 6-month slowdown in economic activity and a very quick return to strong growth. Case 2: Long Recession The other scenario is worst-case, which would mean a longer recession that lasts throughout the rest of 2020. This takes into account the impact of the slowing economies around the world, the ongoing trade war and the uncertainty surrounding the presidential election. The good news So how do we reach one scenario over the other? Wolf points to policy decisions, government’s ability to slow the virus and containment measures. She is optimistic at this point, as so far policymakers are working together to make decisions early and fast for the most part. Wolf is optimistic that the measures taken both at federal and state levels to help the unemployed and small business will help avoid a worst-case scenario long recession. The economy is about to face major impacts from COVID-19.

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HOUSING INDUSTRY NEWS

| 13

MARKET REPORT

REALTORS® Take: The impact of COVID-19 on the Twin Cities housing market For the first three months of the year, all signs pointed to 2020 being a very strong year of homebuying activity. As more and more news started to come in about COVID-19 and the concern over the pandemic grew, homebuyer activity started to change. According to data from the Minneapolis Area Association of REALTORS®, the impacts from COVID-19 can be seen pretty clearly in MLS data. A look at the daily showing activity in the Twin Cities from January to March clearly illustrates the impact of the virus on the housing market. “Starting around March 7, showing activity flattened out quickly and a directional change was evident by March 16 and 17. That downward trend accelerated—particularly after March 18—and pushed showing activity down to levels consistent with an early February market, again

at a time when we’d expect increasing showing activity,” explains David Arbit, the Minneapolis Area REALTORS director of research and economics. But Arbit points to the fact that the number of daily showings does not reveal the whole picture. He says the demand side of the market, pending sales, reveals that the impact from COVID-19 is not the same across all price points of the market. “An important takeaway is the fact that not all price ranges behave the same,” Arbit says. “Pending sales have actually been rising as recently as last week in the affordable brackets, $250K-350K, while weakening notably in the luxury brackets, especially above $1 million.” As homebuyers in the lower price points are more price sensitive, low interest rates and the less crowded marketplace where they have a better chance of an offer being accepted may keep

Consumer sentiment sees historic drop The economic shutdown due to COVID-19 has consumer sentiment hitting a new low. According to the University of Michigan’s monthly report, consumer sentiment plunged 18.1 index points in early April, the largest monthly decline ever recorded. When combined with last month’s decline, the two-month drop of 30.0 index points was 50% larger than the prior record. Of the two index components, the Current Conditions Index

plunged by 31.3 index points, nearly twice the prior record decline of 16.6 points set in October 2008. In contrast, the Expectations Index fell by 9.7 points, a substantial decline, but not nearly as steep as the record 16.5 point drop in December 1980. University of Michigan chief economist Richard Curtin notes that the lesser drop in the Expectations Index hints that consumers are still hopeful that the economy will restart soon.

them in the market during this uncertain time. These homebuyers looking to take advantage of the less crowded market may have an even tougher time finding a home if there are no listings to choose from. Recently, new listing activity in 2020 fell below already-suppressed 2019 levels, which could be related to the shelter-in-place order or simply a reaction to less foot traffic or growing concerns around the pandemic. Arbit believes the drop in listings and pending sales will not last forever. “Real estate activity isn’t usually canceled outright; it’s usually displaced sooner or later than originally planned, in this case–definitely later,” said Arbit. “This typically leads to pent-up listing or sales activity, meaning agents who are prepared and equipped to capture that on the other side of this pandemic will be best-positioned for success.”

David Arbit Arbit is the director of research and economics at the Minneapolis Area of REALTORS with a background in housing research and market analysis.

Index of Consumer Sentiment (7-day moving average)

120 110 100 90 80 70 60

Feb.01

Feb.08

Feb.15

Feb.22

Feb.29

Mar.07

Mar.14

Mar.21

Mar.28

Apr.04

University of Michigan 2020

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HOUSING INDUSTRY NEWS

Mortgage rates respond to Federal Reserve actions Responding to continuous economic stress caused by COVID-19, the Federal Reserve has made policy decisions to encourage economic activity. Freddie Mac acknowledges actions on behalf of the Federal Reserve have caused mortgage rates to drop, which could help offset a softening in real estate demand. “The combination of the Fed’s actions and pending economic stimulus will provide substantial support to the mortgage markets,” said Sam Khater, Freddie Mac’s chief economist, in a statement released by Freddie Mac. On a regular basis, Freddie Mac surveys a wide variety of lenders across multiple lending institutions and publishes these results weekly. Averages from the beginning of April show rates for three common mortgage products, the Fix-30 at 3.33%, the Fix-15 at 2.82% and the 5-1 Arm at 3.40%. While the COVID-19 pandemic has the housing industry operating in fluid terms, Freddie Mac points to lower interest rates and their ability to inject confidence into the housing industry.

SOURCE: FREDDIE MAC PRIMARY MORTGAGE MARKET SURVEY®

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

SOURCES: FREDDIEMAC.COM/RESEARCH/FORECAST/20191220_OPTIMISM_ HEADING_INTO_2020.PAGE FREDDIEMAC.GCS-WEB.COM/NEWS-RELEASES/NEWS-RELEASE-DETAILS/MORTGAGE-RATES-DROP-AGAIN

HousingFirstMinnesota

@HousingFirstMN

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HOUSING INDUSTRY NEWS

| 15

INDUSTRY IN ACTION

Industry members answer the call As news spread of the needs in our communities during COVID-19, many housing industry members stepped up to do their part. From financial donations to protective gear drives to simply just lending a helping hand, there have been countless stories of good being done during this uncertain time. Here are just of the few stories we’ve heard. Dakota County Lumber Offers the Right Tools for the Job Dakota County Lumber donated the use of their trucks to help deliver 10 tons of donated food to the Farmington community. The lumber company was also able to help by bringing along a few forklifts to help move the goods around and tents to keep the volunteers dry. Dakota County Lumber owner, Sunny Bowman, stated in a Facebook post that she was grateful her team could help out. “Growing up my dad would always say, ‘you’ve got to have the right tool for the job.’ I thought it was just a funny quirk of his personality then, but as I’ve gotten older, I’ve learned better,” wrote Bowman. “Feeling extra grateful today for the solid foundation that my dad left this business on, and that my team and I had the opportunity to use all of these right tools to help out where it was needed.”

D.R. Horton collects PPE for hospital workers.

16 |

HOUSING INDUSTRY NEWS

D.R. Horton Holds Donation Drive to Help Protect When the team at D.R. Horton heard the call that health care workers were in need of personal protective equipment (PPE), they took action. Over a couple of days, they collected nearly 2,000 N95 facemasks and over 400 sets of eye protection. Jim Slaikeu, division president, says they were happy to be able to contribute to the effort. Many other members of the housing industry have stepped up to donate PPE as well. Lunch Money Raised for the Front Line Kristen Reinitz, director of business development and sales at Admit One Home Systems, said she felt helpless as she watched her sister, a nurse manager for North Memorial’s Emergency Department, prepare for the worst of this health crisis. She thought of one simple thing she could do. Reinitz started a GoFundMe to buy lunch for the nurses and doctors at North Memorial Hospital that are on the front lines of this pandemic. “The hospital staff are currently overworked and yet they keep showing up. My sister said, ‘This is what I have been training to do my entire life,’" Reinitz stated in her GoFundMe post. The GoFundMe quickly raised over $5,000 to help feed the emergency department.

Dakota County Lumber unloads food for the community.

Over $5,000 raised by industry member for North Memorial Emergency Department.

Minnesota ranks among the top for energy-efficient homes in 2019 According to the Residential Energy Services Network (RESNET), Minnesota once again took fourth place among all states for its average Home Energy Rating System (HERS) score of 50 in 2019 and ranked in the top spot for average HERS score when compared to states that test more 5,000 homes per year. A HERS score or HERS index is a rating given to a home by an independent rater that ranks energy efficiency. The lower the HERS score, the better the home’s energy efficiency. According to RESNET, in 2019 there were 241,909 homes in the U.S. that were HERS rated and issued a HERS index. This broke the record for the number of homes HERS rated in a year. The previous record was 236,116 homes HERS rated in 2018. Minnesota tested 7,287 homes in 2019. With the help of Minnesota’s

Green Path Program, builders in Minnesota were provided with Home Performance Reports (HPRs). These easy-to-understand documents serve as the energy “window sticker” for a home, allowing buyers to compare home energy scores. The U.S. average HERS score in 2019 was 59. This is 41% more efficient than a standard code-built home. RESNET calculates that buyers who purchased HERS-rated homes in 2019 created more than $178 million in annual energy bill savings as compared to the HERS reference home. In addition, they calculated that the average HERS rated homes will reduce carbon dioxide emissions by over 449 tons annually. According to the EPA calculator, that equals 1,494 passenger vehicles being taken off the road for one year.

States with the most homes tested SOURCE: RESNET

TEXAS

45,096 FLORIDA

21,090 ARIZONA

20,298 NORTH CAROLINA

16,849 COLORADO

14,385 INDIANA

10,294 States with the lowest average HERS Index Scores SOURCE: RESNET

VERMONT

CALIFORNIA

HAWAII

CONNECTICUT

SOUTH DAKOTA NEW YORK

MINNESOTA

OREGON

MN GREEN PATH IS SPONSORED BY

Minnesota’s average HERS score was 50 in 2019.

Opinion: We cannot make the same labor mistakes again Project Build Minnesota President David Siegel on the labor shortage during this current health and economic crisis Whiplash. That’s how I might describe the events of the past month. We had the busiest spring for homebuilding and remodeling in a decade. The industry was desperate for workers and by all accounts, 2020 looked to be a very strong year. In fact, it was so busy that most builders and remodelers have remained on the job even as retailers, restaurants and others have struggled with COVID-19 and drops in demand. But the outlook for summer is dimming. In the shortterm, our labor crunch may lessened. But we will recover and here’s what’s undeniably true: The workforce shortage we’ve been facing remains. It’s a matter of simple demographics—many in our industry are retiring (which may be accelerated by our current crisis), and too few are entering. As we come out of this, the demographics don’t change—we have too few people to fill the construction jobs of our future. Perhaps some of our building techniques adapt as we come out of the COVID-19 fog. Maybe modular or panelized construction grow. But I remain convinced that we will nonetheless need Minnesota’s youth to consider a construction industry career. And I also think more will be inclined to do so. The prospect of more than $100,000 in college costs (and commensurate loans) in an uncertain economy is scary. Technical SIGN UP TO BE A PART OF THE HOUSING MOVEMENT • HOUSINGINDUSTRYNEWS.ORG

education, with the well-paying jobs in construction it brings, will seem ever-more attractive. We have great pride in what we do—we can drive by a building, an apartment complex, a house and say “I built that.” Researcher Daniel Pink in his book “Drive” writes about the three keys to motivation—autonomy, mastery and purpose. We provide all three in our industry. Those who work in construction have a tremendous amount of autonomy, clearly become masters of their trade and are passionate about building. When we began Project Build Minnesota, we noted the importance of keeping a steady stream of marketing with regard to our industry. During the last crash, construction as an industry stopped reaching out to prospective employees. That was a mistake and as the market recovered, we found ourselves woefully short of employees. We cannot make that mistake again. It’s vital that all of us as industry leaders continue to reach out to today’s young people, their parents, counselors and influencers to share the great story of construction careers. Now as much as ever we continue with our mission of making construction attractive to Minnesota’s hard-working youth and others in need of a tremendous career.

Following the last economic downturn the housing industry found itself drastically short of employees. HOUSING INDUSTRY NEWS

| 17

INDUSTRY GIVES BACK

New home provides stable housing for veterans

More than 60 celebrate the exchange of keys.

The Housing First Minnesota Foundation completes third home for veterans.

On March 5, more than 60 project volunteers, Housing First Minnesota Foundation supporters, city officials and legislators gathered to commemorate the completion of a four-bedroom, three-bathroom home in Bloomington that will be used as transitional housing for four veterans. The individuals living in the home will work with Minnesota Assistance Council for Veterans (MACV) case managers to receive critical support to overcome barriers and find the confidence to once again achieve success in their community. “As the need for housing increases so does the number of veterans who are in need of housing. The fight to end veteran

This four-bedroom home will be used as transitional housing for veterans.

homelessness is solvable through projects and partnerships with homebuilders, nonprofits and local government entities,” said Donnie Brown, Housing First Minnesota Foundation manager. At the ribbon-cutting ceremony, a program and dedication was held in the lower level of the home. The program featured comments from Foundation President Jody Kern, build partner Lennar, service recipient MACV and representatives from the city of Bloomington. “We are thankful for Lennar’s commitment and for their trade partners’ willingness to step up to partner with us to build

transitional housing for veterans in our communities. We are also grateful to the city of Bloomington HRA for donating the land for this project,” said Brown. “This home will serve the clients of the MACV for years to come.” It was a celebratory event that included public, private and government entities collaborating to provide a safe place for our nation’s veterans.

After

The Housing First Minnesota Foundation renovated a dilapidated Minneapolis apartment and made it comfortable for a family in need.

Apartment to house women in recovery at Avivo The Housing First Minnesota Foundation partnered with Avivo, a nonprofit that specializes in helping individuals and their families facing complex barriers to success, to complete the Family Recovery Housing project. The Foundation was able to renovate a dilapidated Minneapolis apartment and make it comfortable for a family in need through partnerships with local remodelers and donated dollars. Avivo identified a single mother along with her 2-year-old child to live in the apartment.

18 |

HOUSING INDUSTRY NEWS

“During these times of uncertainty, it is more important than ever that decent housing is available for those experiencing homelessness, especially for mothers and their children,” said Donnie Brown, Housing First Minnesota Foundation manager. The project needed more work than estimated in the original scope of work, but the Foundation’s project build partners, Cardinal Remodeling, Mega Remodel and their trade partners, never wavered during the process. “Our generous build partners transformed

space once used for storage into a beautiful living space where mothers can heal and nurture their children,” said Brown. The family in need will also be in an addiction recovery program provided by Avivo, the only recovery program in the state where mothers are given the opportunity to live with their children during their treatment.

Before

For more photos and information on this project and to make a donation, visit HousingFirstMNFoundation.org.

IN THE DIRT

A quick recap of housing news and development updates

SOURCE: CITY OF MAPLE GROVE

SOURCE: FINANCE & COMMERCE

SOURCE: CITY OF STILLWATER

Gonyea moves forward in Maple Grove

Lennar plans 362 homes in Rogers

Micro unit apartments for Edina

Rare market-rate rentals for Stillwater

Elm Road South Inc., a partnership between developer Jake Walesch and Gonyea Homes, owner Dave Gonyea, is proposing to build 106 homes on about 60 acres of bare land the company owns in Maple Grove. According to the development narrative, the custom homes will range in price from $750,000 to $1,500,000. Development is anticipated to begin in the early summer of 2020, with completion of the utilities and the street construction.

Lennar has plans to build on 148 acres in Rogers, according to plans submitted to the city. The project would include 190 single-family homes, 48 twin home units and 124 townhome units. The project is located in the northwest and southwest quadrants of the intersection of Territorial Road and Tilton Trail. The first phase is set to begin construction in 2020.

Lund Real Estate Partners is looking to bring one of the first micro-unit formats to Edina, according to city documents. The proposal would consist of a four-story building above two tiers of parking garage, and would replace the vacant single-story office building on the southeast corner of 77th and Computer Avenue. The project would include micro, studio, one- and two-bedroom units and amenities including a club lounge, workspace, fitness area and third level outdoor courtyard. During a March 4 meeting, the city council supported that the affordability component was scattered throughout the project and suggested expanding the project by one level to provide more units.

As part of the central commons development planned for the south side of Manning Avenue and Highway 36, Stillwater may get its first new market-rate apartment units in 15 years. According to the development narrative, the project will be anchored by a new full-size Hy-Vee Food Store and C-Store and a 260-unit apartment project. In addition, the site has other land area available for commercial and retail development as this project progresses. The tentative construction schedule for the project site is to begin site grading in the fall of 2020 and the installation of site utilities and pavements in 2021.

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