Housing Industry News Vol. 4 Issue 6 - December 2020

VOL. 4 ISSUE 6, DEC. 2020

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

Research by the Housing Affordability Institute found that 95% of permits had home valuations that were increased by the municipality.

More than $42.5 million in excess building permit fees reported for 2019 Analysis by the Housing Affordability Institute of publicly available data released late this summer found that there was $42.5 million in excess net revenue for building permit fees charged by cities in 2019. Additionally, while cities have improved in meeting the requirement to report their data, information from several key cities remained unavailable by the deadline established by the Minnesota Department of Labor and Industry (DLI), despite several extensions granted due to COVID-19.

“A deeper review of building permit finances for the 2019 report year reveals systemic flaws in building permit finances.

This is just one of the factors that is contributing to the high cost of housing in Minnesota,” said Nick Erickson, research director for the Housing Affordability Institute. “Because these permit fees are

passed on to the homebuyers, as are all added costs in construction, over-collected fees add thousands of dollars to new home prices. Builders do not pay these fees, homebuyers do.”

Not only did the review of the publicly available data show $42.5 million in excess revenue, deeper research by the Housing Affordability Institute found that 95% of permits had home valuations that were increased by the municipality. When home valuations are increased, their related building permit fees also rise. State law mandates that building permit fees established by municipalities must be by "legal means as a fee for service and must be fair, reasonable, and proportionate to the actual cost of the service for which the fee is imposed." These funds are collected to pay for the direct costs of plan review, building code compliance and safety inspections.

The Minnesota State Building Code Adoption Guide by DLI states, “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.”

The data is reported by municipalities via the Municipal Construction and Development Fee Revenue and Expenditures Annual Report (Annual Reports) requirement under Minnesota Statues 326B.145.

In the Housing Affordability Institute’s first report on building permit fees one year ago, there was a persistent lack of compliance in reporting by municipalities, where CONTINUED >> PAGE 7

INSIDE THIS ISSUE

2020 National Electrical Code goes into effect despite appeal PAGE 4

What's ahead for housing in the 2021 legislative session PAGE 6

Northern Design Build Expo offers fresh take on the trade show PAGE 12

DLI Commissioner: No new energy code Homebuilders finally have the answer to one of the biggest housing questions of the past several years, and many are pleased with the news.

Minnesota will not adopt a new residential energy code, keeping Minnesota's current residential energy code in place.

After reviewing the October recommendation from Judge Eric

Lippman stating a new energy code is not needed, Commissioner of Labor and Industry Roslyn Robertson concurring with his recommendation has decided not to open rulemaking for the residential portion of the International Energy Conservation Code.

CONTINUED >> PAGE 14

HOUSING INDUSTRY NEWS

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PRESIDENT’S NOTE

A look back and a look ahead No one could have anticipated the tremendous changes and challenges that 2020 brought to all of us.

A year ago, we were wrapping up 2019 and monitoring the key elements impacting the housing industry: interest rates, regulatory pressures, supply costs, labor constraints and the wild card of consumer confidence in an election year.

The first quarter of 2020 changed everything.

COVID-19 was new, mysterious and unsettling for all of us. A worldwide public health emergency was not on anyone’s radar and the suddenness of the COVID-19 onset sent shockwaves through our society and our industry.

The importance of home was quickly reinforced as much of our country was shut down for several weeks and people were spending the majority of their time at home. As the economy began to open up, schools and colleges remained closed and large swaths of our workforce shifted to a work-from-home model, further changing what home meant to families across Minnesota.

Suddenly, homes grew to be schools, offices, gyms and more. As we moved into early summer with economic uncertainty, consumers prioritized housing and the V-shaped recovery for housing was on its way. Once again, housing has driven a recovery with home construction, good-paying jobs and all of the positive economic activity relating to building and remodeling homes.

Of course, there have been challenges along the way with supply chain issues and process delays, but we are ending the year on solid footing and are positioned to keep growing in 2021.

It seems clear that home matters in a way that perhaps too many had forgotten. That clarity drives us into the new year with a renewed sense of purpose to deliver a healthy housing market to all of Minnesota. That will require continued innovation by our industry, and we will continue to ask our partners in the regulatory agencies and local governments to join us in reimagining housing.

HOUSING INDUSTRY NEWS December 2020, Volume 4, Issue 6 PUBLISHER David Siegel David@HousingFirstMN.org EDITOR Katie Elfstrom Katie@HousingFirstMN.org Gary Kraemer 2020 President, Housing First Minnesota

Looking toward 2021, there is an urgency in housing, and I’m hopeful that a year from now we can look back and be pleased that we have taken concrete steps toward creating the opportunity of homeownership for everyone, everywhere.

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Home is a lazy Sunday.

Homeownership is all of it.

HomeownershipMN.org

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HOUSING INDUSTRY NEWS

Housing First Minnesota is the voice for homebuilders, remodelers and all who are dedicated to building safe, durable homes at a price Minnesotans can afford.

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.

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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:

Taken individually, these forces are painful. Simultaneously, however, the combination of decreased supply, increased demand and higher input costs could result in a severe economic blight."

CHRIS YOUNT FORBES BUSINESS DEVELOPMENT COUNCIL MEMBER

…unnecessary and burdensome regulatory barriers are stifling housing supplies as demand increases, pushing up the cost of housing. Local zoning rules and permitting regulations dictate what you can build, where you can build it, and who can live where. As a result, rents and home prices have been rising faster than incomes for the past two decades, particularly for cities with good job markets—a trend the pandemic has only worsened.”

Despite the best intentions of home builders to provide more housing supply, the big short in housing supply will continue into 2021 and likely keep house price appreciation flying high.”

MARK FLEMING FIRST AMERICAN FINANCIAL CORPORATION

MICHAEL HENDRIX MANHATTAN INSTITUTE

We are simply facing a housing shortage, a major housing shortage. We need to build more homes. Supply is critical in the current environment.”

LAWRENCE YUN NATIONAL ASSOCIATION OF REALTORS®

In the pandemic, nothing has been more surprising—positively surprising—than single-family housing.”

Zoning, land-use and building policies that prevent housing construction, especially multifamily development, drive up home costs, strain the government’s limited subsidy programs and stifle economic growth.”

JAKE BLUMGART CITY MONITOR

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HOUSING INDUSTRY NEWS

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REGULATORY AFFAIRS

COVID-19 surge reinforces importance of worksite safety measures Since the last issue of Housing Industry News, the number of COVID-19 cases in Minnesota has increased significantly and public health experts have warned of a challenging winter. Below are construction-specific safety reminders and updates from the Minnesota Department of Labor and Industry.

1

Review and update your COVID-19 Preparedness Plans to strengthen protective practices and look for further opportunities to minimize interaction.

2

Manage your work sites, and operations, to further reduce the number of workers who interact and may be exposed to each other. This includes scheduling and coordinating activities to reduce the number of work crews/workers simultaneously at each work site, establish “cohorting” of work crews (i.e. same persons working together every day at consistent locations), and enforce requirements associated with social distancing and the use of face coverings.

3

All workers who are able to work from home must continue to do so. Re-evaluate your operations to identify job functions to ensure alignment with this provision.

4

All workers who are “symptomatic,” “COVID-19 positive,” who are “living with someone who is symptomatic or COVID-19 positive,” or who have been directly exposed to someone who has tested positive with COVID-19 must not report to work outside of their home. Please continue to perform a health screening for your workers on a daily basis.

5

Access to restaurants, bars and similar establishments will be limited to drive-thru, takeout and delivery. Ensure workers are aware and plan accordingly for their meal breaks. Many have implemented the practice that meal breaks be taken individually in the worker’s vehicle.

6

Venues will not be permitted to “host” business-related meetings or testing unless it is part of a professional licensure or certification program required for the business (See “Seated Entertainment and Meetings” requirements).

7

Within businesses and at work sites, in-person meetings and training are to be conducted only when absolutely necessary and must to the extent possible not exceed 10 persons. The use of virtual technology must be utilized as a priority over in-person meetings.

8

Restrict access to persons, and do not promote gatherings in small rooms and similar spaces.

Job trailers, job offices, meeting rooms, conference areas, etc. should not be used to support the gathering of large numbers of people or the transience of multiple persons/workers throughout the workday.

9

Remember: “Outdoors” may be “safer” than indoors, but that does not mean the same thing as being “safe” from the spread of COVID-19. Consistent social distancing and the use of face coverings are the primary means of protection and mitigation.

If you have individual questions related to COVID safety plans and precautions, contact the Minnesota Department of Labor of Industry – OSHA Workplace Safety Consultation: OSHA.consultation@state.mn.us or at 651-284-5060.

Health has never been more front of mind.

Offer your employees a powerful, industry-backed health insurance program at amazing rates. Housing First Minnesota members average 10-12% savings.* Contact your insurance agent to learn more about the most comprehensive and affordable group health insurance coverage in Minnesota.

The Housing First Minnesota association

Housing First Minnesota and the Builders Association of Minnesota both asked the Board of Electricity to delay the implementation of the 2020 NEC due to the appeal.

2020 National Electrical Code goes into effect despite appeal Following an October ruling by an administrative law judge, the 2020 National Electrical Code (NEC), unamended, went into effect as Minnesota’s Electrical Code on Nov. 17.

Judge’s ruling This past spring, homebuilders led by Housing First Minnesota requested that the proposed electrical code be heard before an administrative law judge. Following a delay due to COVID-19, the hearing took place in August and the subsequent comment period concluded in September.

During the hearing and comment period, both those for and those opposed to the implementation of the 2020 NEC as proposed made their cases to the judge. Opponents of the 2020 NEC said that the Board of Electricity’s short 44-day consideration and lack of amendments stood in stark comparison to other housing rulemaking efforts in Minnesota. Opponents also made the case that the Board did not appropriately consider the costs of the proposed mandates.

In her ruling, Judge Barbara Case determined that the Board of Electricity met the legal threshold for rulemaking in Minnesota and adequately considered the cost impacts of the new electrical code.

Appeal filed In mid-November, Housing First Minnesota appealed Case’s ruling. Following the filing of the notice of appeal, Housing First Minnesota and the Builders Association of Minnesota both asked the Board to delay the implementation of the 2020 NEC due to the appeal. The Board declined to delay implementation.

“Looking back to the landmark sprinkler ruling, it’s important to remember that similarly, the administrative law judge ruled in favor of the Minnesota Department of Labor and Industry, but we prevailed at the appellate level,” said David Siegel, executive director of Housing First Minnesota. “We do not believe the department provided adequate opportunity for industry input into the rulemaking process nor do we feel that the costs to implement the 2020 NEC were adequately considered and balanced against the important value of affordability in housing.”

A hearing date has yet to be scheduled.

Key changes There are several important changes to be aware of in the 2020 NEC. Under 314.27(C) all ceiling boxes must be prepared for suspended paddle fans. In bathrooms, Section 406.9(C) states that no receptacle can be within 3 feet horizontally and 8 feet vertically of a shower or bath. Exterior disconnects are required on dwellings under 230.85. GFCI protection is required on 250-volt receptacle under 210.8(A).

health plan (AHP) is fully insured by Blue

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HOUSING INDUSTRY NEWS

Note: COVID-19 supply disruptions have affected several of these new code changes.

For more information, read the regulatory update on page 5.

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REGULATORY UPDATE:

Regulatory affairs update: Plumbing code set, 250-Volt GFCI delayed, new MS4 permit issued The next iteration of Minnesota’s Plumbing Code, which adopts the 2018 Uniform Plumbing Code (UPC) with Minnesota amendments, has cleared its final hurdles. After two years of rulemaking, the last step to implementation is waiting until the 2021 effective date, which is yet to be specified.

Among the changes and amendments in the new plumbing code is the removal of the dishwasher air gap device, which plumbers, builders and homeowners all find unnecessary. Under the new code, residential builders will have the option of installing an air gap device or using the traditional method of installation.

In a letter to the Plumbing Board, David Siegel, executive director of Housing First Minnesota, said the removal of the dishwasher air gap underscores the importance of better rulemaking by all housing regulators.

“Over the years, the voice of product manufacturers and other special interest groups have drowned out the voices of contractors, skilled tradespersons and building officials, all seeking to protect home affordability in the development of the various model codes,” wrote Siegel. “All too often, code mandates are included to benefit the organizations advocating for their inclusion at the detriment of the homeowner who pays for all of these specious requirements.”

COVID-19 delays 250-volt GFCI provisions COVID-19 has impacted the availability of two-pole GFCI circuit breakers, and the Department of Labor and Industry (DLI) is delaying enforcement of the requirements for 250volt GFCI receptacles found in sections 210.8(A) and 210.8(F)

of the 2020 National Electric Code (NEC) that went into effect in Minnesota on Nov. 17.

According to a notice posted on DLI’s website, “GFCI circuit breakers may be commercially available, but the COVID-19 pandemic has created major manufacturing and supply-chain challenges, thus limiting the availability of these devices and the ability to complete work and obtain inspections. Section 90.4, of the NEC allows the authority having jurisdiction to refer to the most recent previous edition of the NEC adopted by the jurisdiction when materials are not yet available at the time the Code is adopted.”

Enforcement of these provisions is suspended until further notice.

New MS4 permit issued The Minnesota Pollution Control Agency’s 2020 Municipal Separate Storm Sewer System (MS4) General Permit took effect on Nov. 16. Minnesota’s MS4 permit outlines the requirements for municipal stormwater systems.

For residential development, developers can expect to see stormwater inspectors use a written checklist during compliance inspections, tracking compliance with stabilization of exposed soils (including stockpiles, stabilization of ditch and swale bottoms), sediment control Best Management Practices (BMPs) on all downgradient perimeters of the project and upgradient of buffer zones, storm drain inlet protection, vehicle tracking BMPs, preservation of a 50-foot natural buffer or redundant sediment controls where stormwater flows to a surface

The Minnesota Pollution Control Agency’s 2020 Municipal Separate Storm Sewer System (MS4) General Permit took effect on Nov. 16.

water within 50 feet of disturbed soils, owner/operator of construction activity self-inspection records, containment for all liquid and solid wastes generated by washout operations, and BMPs maintained and functional.

Municipalities with an MS4 permit will have until April 15, 2021, to complete and submit the permit application forms.

National Association of REALTORS® issues apology for policies that contributed to racial inequality

Even after the Fair Housing Act in 1968, measures like redlining, steering, racial covenants and other policies barred many minorities in Minnesota from buying homes.

Minnesota is frequently recognized nationally as a state with high-quality living, amazing parks and outdoor spaces, and exceptional educational outcomes. Residents proudly promote the “Minnesota nice” reputation, but Minnesota has a dark history it must acknowledge when it comes to racism in housing.

Even after the Fair Housing Act was enacted in 1968, measures like redlining, steering, racial covenants and other racist policies barred

many minorities in Minnesota from buying homes.

On Nov. 19, Charlie Oppler, President of the National Association of REALTORS® (NAR), the largest trade association in the country, issued a public apology for the ways in which the association promoted and practiced racist policies in the past and how they consequently contributed to the racial inequality seen today in America.

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"What Realtors did was an outrage to our morals and our ideals. It was a betrayal of our commitment to fairness and equality. I'm here today, as the President of the National Association of REALTORS, to say that we were wrong," Oppler said. "We can't go back to fix the mistakes of the past, but we can look at this problem squarely in the eye. And, on behalf of our industry, we can say that what Realtors did was shameful, and we are sorry."

Minnesota regrettably has the highest homeownership gap in the country between white and non-white people. According to the Minnesota Realtors®, 75% of homeowners are white, while only 23% of homes are owned by Black residents. Research shows that homeownership builds strong communities, leads to higher educational achievement, creates better mental and physical health, and accrues wealth that is passed on from generation to generation. Generations of minority groups have been and continue to be left out of these benefits.

In addition to its public apology, NAR also revealed its fair housing initiative, ACT (Accountability, Culture Change and Training), which aims to right the wrongs of the past as well as address ongoing prejudice in the industry.

Acknowledgments like the one the NAR has given are an essential first step. However, there is still work to be done. While Minnesota

Charlie Oppler President of the National Association of REALTORS®

is hailed nationally for being a great state in which to live and work, far too many are excluded from this narrative. Research also indicates that homeownership is desired by some 85% of Minnesotans, regardless of age, race, economic status or current living conditions.

Policymakers, other influencers and housing industry leaders in Minnesota must address the challenges to homeownership and lift the roadblocks to provide the opportunity for homeownership more broadly.

HOUSING INDUSTRY NEWS

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HOUSING ON THE HILL

What’s ahead for housing in the 2021 legislative session

gives people a sense of belonging. We need to make sure that all people can create what I call their “North Star” place that always leads home. We need to work on the fees, permits and zoning issues that prevent cost-effective houses from being built.

Q&A with legislators representing all four caucuses on the upcoming legislative session

Rep. Peter Fischer (DFL, Maplewood)

Rep. Jim Nash (R, Waconia)

Sen. John Hoffman (DFL, Champlin)

The 2021 Minnesota legislative session gavels in on Jan. 5. While the ongoing issues surrounding the global pandemic along with the economic recovery will take center stage, housing is expected to be a major topic at the capitol this legislative session. Housing Industry News asked members of all four caucuses a few questions regarding housing and the issues they expect to be discussed and addressed during the 2021 legislative session.

Sen. Draheim: The Senate has shown its

Q: It seems like housing has emerged as a larger priority for many Minnesotans over the past few years. Where does housing fit in the priorities of the legislature in 2021?

Q: There has been increased awareness around zoning and its impact on housing availability. How will zoning fit into the housing discussion in 2021?

Rep. Fischer: Housing and addressing home-

Rep. Fischer: As we look at our housing issues, I feel that zoning is an item that needs to be talked about. I understand that some cities have done a lot of work to be flexible with their zoning and offer the ability for increased densities for having all or a certain number of units that are built to be affordable or to provide housing for groups like homeless vets. I know that there are other communities that have tried to do this, and the residents became upset and voted people out of office and then tried to turn the city in a different direction.

It is imperative that all of us, cities, nonprofits, builders and under-served communities come together and figure out a way to put policies in place that can somehow tie the cities into doing the right things and not suffer the public's anger for doing so. Otherwise, I fear that we could end up with large parts of many cities set up in a way that those with average to lower incomes are not able to live there.

lessness will be a high priority in the House of Representatives. In the House we have two committees dedicated to addressing these issues. There is an understanding that we must look at policies and funding not only for increasing the supply of living units, but also in making sure that we have the necessary support in place to keep people from becoming homeless in the first place.

Rep. Nash: With the need to help our economy recover, housing becomes a priority near the top of the stack, I think. Now more than ever people are spending the majority of their day at home and many are looking for a permanent place to sink roots and invest in their community. Building new homes and having a healthy existing market is vital to creating an economic engine of jobs, and a great long-term investment is so important.

Sen. Hoffman: Housing will continue to be a major priority for legislators this session and will be for the foreseeable future. Housing has a been a priority the last several years as it has become more difficult to afford for many families across the state. The price of starter homes is unaffordable for many. While low interest rates might temporarily be helpful in making homeownership affordable, that isn't a housing strategy. We need to continue to engage stakeholders to determine the best path forward in making homeownership accessible to more Minnesota families.

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HOUSING INDUSTRY NEWS

commitment to housing and solving Minnesota’s housing crisis by establishing a standalone Housing Finance and Policy Committee. Since I arrived at the Senate in 2017, housing has been one of my top priorities and creating a better path to homeownership has been a mission of mine. I look to renew my commitment to this as Chair of this new committee.

Rep. Nash: Reigning in zoning, permitting

and fees are crucial to the success and longterm viability of the housing market.

Sen. Hoffman: I think there is a lot of inter-

est in trying to understand how government generally impacts that price of housing. The past several sessions we have seen many proposals attempt to loosen restrictions to allow builders to supply housing that meets the demand of consumers while respecting the rights of local units of government. I'm

Sen. Hoffman: I think the state needs to be a better partner with stakeholders in addressing homeownership affordability. However, we need to look across the spectrum of state services to create opportunity. In the last several bienniums, we have invested in equity programs that will create economic opportunity for more people throughout the state. While we need to examine how government is being a hindrance, we also need to look how we can deploy job training opportunities for people across the state.

Sen. Rich Draheim (R, Madison Lake)

hopeful that we can come together and make real strides in addressing these issues in the upcoming session.

Sen. Draheim: I chaired the Senate’s Select

Committee on Home Ownership Availability and Affordability in 2019 and the result of that was several bills to address the problems we’re seeing with zoning. One such example of this is the PUD process that at times forces builders to add more expensive finishes to newly constructed homes, resulting in unnecessarily higher-cost houses that drive many Minnesotans out of the homeownership market.

These bills made it through much of the committee process in 2020 and passed off the Senate floor last May as part of our comprehensive housing bill. Unfortunately, the DFL-led House and Gov. Walz did not take up this issue and our reforms failed to pass into law. This will continue to be one of my top priorities for the 2021 session.

Q: Minnesota has one of the worst housing equity gaps in the country when we measure white and non-white homeownership rates.

What can the legislature do to make progress here?

Rep. Fischer: Some of this is answered in

the previous question. The other part is to acknowledge that our system is inherently discriminatory. Study after study still shows that when you have people with the same income and backgrounds applying for mortgages or to enter into housing, the rejection rate for those who are white is substantially lower than for those who are of color.

To address this it is imperative that all groups impacted are brought together to figure out how to change this dynamic. We need to take a look at what policy changes we need to make. We also need to make sure that any state financial resources given must match the need in proportion to the community. As an example if 82% of those needing help are of color, then 82% of the dollars should go to the underserved community of color.

Sen. Draheim: The first thing the legislature needs to do is stop adding to the cost of housing because the biggest contributor to the equity gap is the high price of homes in Minnesota. The most significant thing the legislature can do is actively lower the price of housing and that starts with a lot of what my Select Committee worked on like zoning reform, reexamining the building code, Minnesota Housing Finance Agency (MHFA) reform, and reducing or eliminating unnecessary regulatory fees.

Q: With a projected biennial budget deficit, what is expectation for housing program investments from the legislature?

Rep. Fischer: Having a deficit does limit the

financial tools that we have to work with. It will be important for a large coalition to come together and push for a very large investment of housing bonds. I mean something that is two to three times larger than what we had in the current bonding bill. In addition, we need to make a large bonding investment to provide dollars for building shelters and transitional living places to make sure that we are not leaving anyone out of the equation.

Rep. Nash: The budget projections are chang-

ing day to day, but we are expecting a significant deficit in January. Subsequently, it’ll be difficult to make significant investments in many worthy areas.

Sen. Hoffman: Many people are bracing them-

selves for some very difficult news. Obviously, businesses aren't making money, people aren't working, and revenue isn't coming into the state. If states across the country do not get help from the federal government, they are going to face some significant challenges and Minnesota isn't any different. Housing is a top priority. However, if the news is bad it will be difficult for every budget area to be untouched.

Sen. Draheim: With so much uncertainty around the budget and how large the deficit will be in February, we can’t count on the state coffers to solve our housing shortage. Instead, we’ll need to do what we can to build more homes and to lower the costs of housing. *Answers were edited for length.

Rep. Nash: Being able to have a home cre-

ates long-term stability for families and

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Sen. Rich Draheim (R, Madison Lake)

Rep. Alice Hausman (DFL, St. Paul)

SOURCE: MICHAEL BROCHSTEIN/ZUMA WIRE/ALAMY LIVE NEWS

Legislature forms new housing committees

Rep. Aisha Gomez (DFL, Minneapolis)

Two new housing committees have been formed as the legislature gears up for what is expected to be a very active 2021 legislative session and a renewed bipartisan and bi-cameral interest in housing policy.

In the Republican-controlled Senate, Sen. Rich Draheim of Madison Lake will chair the newly formed Housing Finance and Policy Committee. Draheim had previously chaired the Senate Select Committee on Home Ownership Affordability and Availability in 2019.

In the DFL-controlled House of Representatives, the Housing Finance and Policy Committee from the last biennium will continue being chaired by Rep. Alice Hausman of St. Paul. DFL leadership has created a new Preventing Homelessness Division chaired by Rep. Aisha Gomez of Minneapolis.

President-elect Biden's plan calls for a first-time homebuyer tax credit of up to $15,000.

A look at President-elect Biden’s housing plan While housing itself may not have been one of the hottest issues during the 2020 election, there was a fair amount of discussion about “the suburbs.” President Trump and President-elect Biden often went back and forth about the federal government’s role in influencing and directing communities to accept or deny varying types of housing.

Days away from inauguration, we will now watch which policies from Biden’s housing plan will move forward. His plan is focused on three pillars: expanding the housing voucher program, requiring states receiving federal assistance to plan for affordable housing, and requiring communities to mitigate discriminatory housing policies. Altogether, Biden’s plan calls for more than $640 billion in investment, though he has yet to identify where this funding would come from.

Biden's plan calls for placing $100 million into an “Affordable Housing Fund” to assist in building and rehabilitating low-cost housing. It also calls for an expansion of Section 8 availability.

Additionally, Biden’s plan calls for a reinstatement of former President Obama’s Affirmatively Furthering Fair Housing rule which would require local municipalities that receive Housing and Urban Development funding to create plans to eliminate housing discrimination.

Biden's plan calls for “eliminating local and state regulations that perpetuate discrimination.”

Under this portion of the plan he is calling for advancing inclusionary zoning from local and state leaders.

Finally, Biden's plan calls for a first-time homebuyer or downpayment tax credit of up to $15,000. Details remain unclear and questions remain about this provision of his plan, but many laud the concept.

Overall, Biden's housing plan has mixed reviews from across the political spectrum. While many applaud his focus on trying to eliminate discriminatory practices and policies and providing additional resources to the most vulnerable, critics claim that the plan does little to address the severe housing supply issue.

CONTINUED FROM PAGE 1

More than $42.5 million in excess building permit fees reported for 2019 no more than 108 municipalities had filed the mandated annual report from 2014 to 2017.

Following the release of the initial report by the Housing Affordability Institute and the DLI’s increased emphasis on the data collection, 377 municipalities filed reports in 2018.

That number is down to 307 municipalities that filed the required reports in 2019 despite several deadline extensions granted by DLI in light of COVID-19.

Other key findings in the most recent data analysis of permit fee reporting found that building permit fees for the same home by the same builder varied by as much as $1,800 across the fastest growing cities. Also, fee structures across cities can vary widely, with a variance as high as 53% for the same project valuation.

“The Housing Affordability Institute analysis of the 2019 permit fee data shows clearly that reform is needed,” said Erickson.

“As policymakers look to address the various inefficiencies in housing policies, this area presents a straight-forward and manageable solution: simple reforms with the potential to reduce new home prices by up to several thousand dollars per home. Without changes, property owners will continue to be unfairly overcharged for building inspections and plan review services, and home affordability will continue to be negatively impacted," the report stated.

The top five municipalities with net surpluses from building permit fee collection were Minneapolis with $12.9 million, Shakopee with $3.2 million, Woodbury with $2.6 million, Minnetonka with $1.8 million and Plymouth with $1.7 million.

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HOUSING INDUSTRY NEWS

| 7

MARKET REPORT

Housing market report Minnesota housing market shows strength going into 2021 The homebuilding industry in Minnesota continued to demonstrate tenacity since the COVID-19 pandemic brought many economic sectors to a halt this past spring. Single-family construction in October was the best on record since 2005 with 712 permits pulled. This is 28% higher than October 2019. Statewide and metro home prices continue to increase. Home prices in the Twin Cities and Minnesota have increased 12.5% and 14%, respectively.

State of Minnesota

Moorhead

117 SOURCE: CITY OF MOORHEAD

18,833

Duluth

70

Year-to-Date Single-Family Construction Through October, 2020 SOURCE: U.S. CENSUS

SOURCE: U.S. CENSUS

St. Cloud

97

SOURCE: CITY OF ST. CLOUD

Twin Cities

13,015

Mankato

255

SOURCE: U.S. CENSUS

Rochester

273

SOURCE: U.S. CENSUS

SOURCE: U.S. CENSUS

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

OCT. 2020

OCT. 2020

$315,000 +12.5%

$285,000

OCT. 2019

+14%

$280,000

Y-Y Change

OCT. 2019

$250,000

2019

2019

$250,000

Twin Cities Median Sales Price

Minnesota Median Sales Price

SOURCE: MINNEAPOLIS REALTORS

SOURCE: MINNESOTA REALTORS

Twin Cities Construction Employment Past 5 Months

United States

82

South - 78

SOURCE: DEED

Midwest - 86

Northeast - 79

Regional Remodeling Market Indices, 2020 Q3 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.

8|

HOUSING INDUSTRY NEWS

SOURCE: DEED

Y-Y Change

$280,000

West - 84

Minnesota Construction Employment Past 5 Months

Employment Update Minnesota’s unemployment rate fell to 4.6% in October, according to the Minnesota Department of Employment and Economic Development (DEED). This is compared to the September unemployment rate of 6%. The national unemployment rate also declined from 7.9% in September to 6.9% in October.

Construction in Minnesota recorded a 5% employment decline, or 7,075 jobs, since October 2019.

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Pandemic and unrest lead to changes in Minneapolis housing market New report shows increasing listings and sales, but condo market is softening When the pandemic shut down much of the activity and businesses in downtown Minneapolis and civil unrest left the city with much to heal, many wondered how it would all impact the area housing market. Several months later, the Minneapolis Area REALTORS® (MAR) say there are some subtle changes they are seeing in the Minneapolis housing market.

Compared to other large cities across the region, Minneapolis is experiencing heightened activity compared to what the numbers were showing us this summer. According to MAR, in September of this year Minneapolis sellers listed 48% more homes than last September, reaching the highest level of new listings for the month since 2006.

With the number of homes listed for sale nearly doubling from the previous year, some may think that buyers would benefit and prices would soften. That did not happen. Demand from buyers looking to purchase homes in Minneapolis remains very high. According to MAR, Minneapolis buyers entered into 41.4% more purchase contracts compared to the same

period. This is the highest level for September since 2004, marking the strongest September sales figure in 16 years.

Condos, which make up 22% of Minneapolis home sales, are seeing a more notable shift in the market. According to MAR, new condo listings rose by 37% in September, while pending sales fell by 17%. The combination of increasing listings and dropping sales drove up the inventory of condos in Minneapolis to 6.1 months of supply. A balanced market typically has 5-6 months of supply (figures under 5 months indicate a seller’s market, over 6 months suggest a buyer’s market).

In contrast to single-family and townhome prices, both of which saw an increase compared to last year, Minneapolis condo prices were flat.

They still sold more quickly than last year, but both condo and townhome sellers accepted less of their share of their list price compared to a year ago.

MAR notes that while these numbers don’t exactly point to an exodus from the city, these numbers are worth watching.

NEW LISTINGS VERSUS CLOSED SALES SOURCE: MAR

2019

686

1,011

+47.4% NEW LISTINGS

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503

2020

622

+23.7% CLOSED SALES

Experts predict 1.5 million housing starts in 2021.

Economists and housing experts agree on pandemic rebound and job growth ahead in 2021 According to a survey done by the National Association of REALTORS® (NAR) of more than 20 top U.S. economists and housing experts, a post-pandemic economic rebound, improving job conditions and stable interest rates are all ahead in 2021.

Lawrence Yun, NAR chief economist and senior vice president of research, unveiled the consensus forecast on Dec. 10 during NAR's second annual Real Estate Forecast Summit.

"It is an understatement to say the year 2020 has been filled with challenges and full of surprises," said Yun. "Yet, one astonishing development has been the hot housing market as consumers eyed record-low mortgage rates and reconsidered what a home should be in a new economy with flexible work-from-home schedules."

Here are the key predictions from the survey: • Gross Domestic Product growth of 3.5% in 2021 and 3.0% in 2022.

• An annual unemployment rate of 6.2% next year with a decline to 5.0% in 2022.

• Average annual 30-year fixed mortgage rates of 3.0% and 3.25% for 2021 and 2022.

• Annual median home prices to increase by 8.0% in 2021 and by 5.5% in 2022.

• Housing starts of 1.50 million next year and 1.59 million in 2022.

• The share of the U.S. workforce working from home to be 18% in 2021—down from 21% in 2020—and 12% in 2022.

• Small declines in office and hotel vacancy rates in 2021, with a slight increase in retail vacancies next year.

When asked if the Federal Open Market Committee will change the federal funds rate in 2021, 90% of the experts surveyed said they expect no change in the current rate of 0%. For 2022, the experts predict a rate increase of 0.25%.

HOUSING INDUSTRY NEWS

| 9

MARKET REPORT

Record-low interest rates and an increased ability to work from anywhere has given many millenials momentum to get into the market.

New home sales are so 2006 Another indicator that housing continues to be a bright spot in the economy, new homes sales are on pace to have their best year since 2006. Nationally, new homes sales are up 41% compared to this time last year. According to the Census Bureau’s latest data for 2020, which goes through October, new homes sales have now had the strongest three-month stretch since mid-2006.

The Zonda New Home Pending Sales Index (PSI), which measures the number of new home pending contracts, hit a record high in October with 47% increase yearover-year. The Twin Cities market’s PSI ranked fifth in the country for the month with an 82% year-over year growth over last year.

“The U.S. economy flipped from a service-based economy to a goods-based economy, and right now, the most desired ‘good’ is a new home,” said Ali Wolf, chief economist for Zonda. “New home sales are unstoppable even as prices increase.”

The other top markets in the country were Stockton, Colorado Springs, Port St. Lucie and Reno.

“After spending more time at home for the majority of 2020, many home shoppers realized that more space or an extra bedroom would be nice,” said Wolf. “Today’s low mortgage rates can help them get there.”

Zonda predicts homes sales will remain at heightened levels in 2021, but that they will be relatively flat in comparison to 2020.

NEW HOME PSI SOURCE: ZONDA BY MEYERS RESEARCH, INDEX AS OF OCTOBER 2020. ANALYSIS AS OF NOVEMBER 2020.

UPDATED DECEMBER 3, 2020. NEXT RELEASE IS DECEMBER 21, 2020.

Supply chain hiccups cause delays Since the beginning of the pandemic, the housing industry, like most other sectors of the economy, has seen slowed global shipping on building materials, causing delays on current projects and longer lead times for new projects. Many builders and remodelers have experienced delays on lumber, decking, doors, millwork, hardware and appliances.

With limited inventory for many of these products, the pricing for existing inventory has also escalated.

“We have been working hard to place orders as far in advance as possible, along with scheduling the work earlier. With remodeling, however, you only have so much time to schedule. Clients don’t like to see a lag in construction work, especially when they’re living and working in the home! New challenges all around,” said Meg Jaeger, owner of Mega Remodel.

Though prices began drifting in the early fall, they ended the year on the rise. These increases are adding thousands of dollars to the price of new homes for buyers, and the industry continues to see major disruptions in the supply chain.

10 |

HOUSING INDUSTRY NEWS

Carla Warner, partner at Warners’ Stellian Appliance, reports that the combination of increased consumer demand with manufacturing constraints has caused a significant backlog in shipments for many categories in the housing industry during this pandemic.

“Appliance vendors continue to experience major delays in manufacturing for several reasons including parts delays from their suppliers, absenteeism from workers in their factories and new COVID-19-related protocols that have slowed down production,” says Warner.

With a vaccine on the horizon, the supply disruptions may start to ease. Although suppliers anticipate the products in the housing industry to remain constrained during the early part of 2021, vendors are expecting their supply to gradually improve during the first quarter, and it is anticipated that many categories will be getting back to a more standard supply level by quarters two and three of 2021.

Though lumber prices began drifting lower in the early fall, they ended the year on the rise yet again.

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Remote work impacts the housing market Last spring, companies across the nation began to operate remotely as employees moved operations to their living rooms, basements, home offices and spare rooms. What many believed to be a short-term circumstance has been extended largely into fall and winter months.

Companies like Target and General Mills are not anticipating employees returning to their offices and cubicles until mid-2021. Some companies are not planning to return their employees to the office after the pandemic and are instead opting for a shift to a full-time remote model.

As employees acclimate to the possibility of working from home on a permanent basis at least part-time, many are reevaluating how their living spaces fit this new reality. Whether it is remodeling an existing space to create a home office or even moving to a new geographic location, employees are taking advantage of workplace flexibility—so long as an internet connection is available.

Without the commitment of a commute, homebuyers are searching beyond the Twin Cities metro area. A trend began this past

summer that showed an uptick in buyers moving from city centers to more suburban and ex-urban neighborhoods and renters began to buy single-family homes in less densely populated areas. And as the fall progressed, buyers seemed to be pushing their geographical boundaries out even further.

According to the Minnesota Association of Realtors® (MAR), October home sales in north-central Minnesota were up 63% since October 2019. Buyers are looking for both primary and secondary homes further from the metro area. Additionally, buyers are also showing strong interest in destination areas like the North Shore and the cabin communities in Greater Minnesota.

This trend toward home buying outside the metro area has only been accelerated as buyers outpace sellers creating an affordability crunch.

As a result, the Twin Cities metro market has struggled to meet the increased demand from move-down and first-time homebuyers.

“In October we hit the highest median home price since records have been kept in

Without the commitment of a commute, homebuyers are searching beyond the Twin Cities metro area.

“In October we hit the highest median home price since records have been kept in Minnesota.”

Minnesota,” said Chris Galler, CEO of MAR. “Homebuyers and their Realtors are struggling to find homes for sale and competition is driving up the prices to record levels. Years of under production and high regulatory costs have made it hard for low- and middle-income families to take advantage of this unique marketplace.”

Chris Galler

CEO OF MINNESOTA ASSOCIATION OF REALTORS®

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HOUSING INDUSTRY NEWS

| 11

INDUSTRY IN ACTION

Anderson Windows does its part to protect poll workers Lakes Area REALTY and Movement Mortgage/Karis AMC's Foundation present $3,000 in match donations to the Housing First Minnesota Foundation.

SOURCE: ANDERSON WINDOWS

As election day approached, we saw many counties across the country scrambling to employ more poll workers. In the face of an ongoing pandemic, many of the retired individuals who typically work the polls opted out for safety reasons.

Anderson Windows saw a need and knew it could help make poll workers safer and more comfortable by providing free face shields to thousands of workers. In Minnesota alone, 8,900 face shields were donated, and Andersen Windows donated more than 35,000 face shields nationwide.

“One thing we have learned this past year is that our ability to react quickly and adjust course is not just a survival strategy, it can lead to the types of innovation and transformation that allow us to thrive in the midst of adversity,” said Jay Lund, Andersen’s CEO and chairman.

Andersen Windows donated more than 35,000 face shields to poll workers nationwide.

Andersen Windows also promoted the importance of civic duty internally and encouraged employees to register to be poll workers in their own communities, demonstrating once again their commitment to the community.

“One thing we have learned this past year is that our ability to react quickly and adjust course is not just a survival strategy, it can lead to the types of innovation and transformation that allow us to thrive in the midst of adversity.”

Jay Lund

ANDERSEN’S CEO AND CHAIRMAN

Give to the Max Day helps housing Project Build Minnesota participated in Give to the Max Day for the first time this year. Project Build Minnesota is the industry-wide nonprofit collaborative formed by Housing First Minnesota, the Minnesota Builders Exchange, Associated Builders and Contractors and The Builders Group, with a goal of attracting Minnesotans into the field of construction.

Give to the Max Day raised several thousand dollars of new contributions toward Project Build’s efforts, which will include a statewide conference for construction faculty this fall and strong outreach to Minnesota school counselors.

The Builders Group provided matching funds for the special day of fundraising.

While Give to the Max Day may be over, innovative industry efforts can always

use additional funds. If you wish to learn more about Project Build Minnesota and make a contribution, visit www.projectbuildmn.org.

The Housing First Minnesota Foundation also participated in Give to the Max Day. The Foundation, which works to build and remodel housing for homeless veterans and others in need, exceeded its goal of $10,000 during the one-day fundraiser.

Lakes Area Realty and Movement Mortgage/Karis AMC’s Foundation both provided $3,000 match donations to help the Foundation in its efforts to end homelessness. The money raised will immediately go to work helping to complete a Housing for Heroes build project underway in Minneapolis.

Northern Design Build Expo offers fresh take on the trade show For nearly 50 years, the Builders and Remodelers Show (BRS) has offered Minnesota homebuilders, remodelers and their suppliers an opportunity to connect and grow their business.

As the trade show environment, even pre-COVID-19, had started to shift, BRS leaders had decided it was time for a comprehensive reimagining of the annual show. What show planners didn’t foresee when they started planning for the new rebranded event was a global pandemic. Which means the first taste of the new event, rebranded as the Northern Design Build Expo, will also be a virtual one.

Nicole Coon, Northern Design Build Expo show manager, said the new format will focus more on content and opportunities for connection even as the first year of the event will be a virtual experience.

“We began this year planning a comprehensive reimagination of the Builders and Remodelers Show with a focus on content to help attendees grow their business and better opportunities to connect across the industry, all partnered with an exciting new brand,” said Coon. “Then COVID-19 struck, and we had to switch to thinking creatively about how we can continue to connect the industry in a virtual setting.”

12 |

HOUSING INDUSTRY NEWS

The Northern Design Build Expo will be held virtually on two consecutive half-days April 6 and 7.

The Northern Design Build Expo will be held on two consecutive half-days April 6 and 7, each featuring in-depth educational content. Virtual exhibitors will be able to promote their brand, provide videos, share products and services information, and create the opportunity for attendees to connect directly.

“It’s more important than ever in a socially distanced world to find opportunities for connection. The Northern Design Build Expo will offer unique, show-only educational content that will help these construction professionals enhance their business and thrive in the coming year,” said Coon. “Virtual platforms are ever increasing the ability for attendees to engage

with others via chat, video communication and with gamification, all of which will be a part of our virtual event.”

Taking the event to a virtual setting breaks down geographic barriers for attendance, allows for affordable participation, and requires fewer staff and less resources for an exhibiting company.

Northern Design Build Expo | April 6-7, 2021 | Exhibit sales open January 2021. More details about the Northern Design Expo can be found at housingfirstmn.org.

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HOUSING INDUSTRY NEWS

| 13

INDUSTRY GIVES BACK

Housing industry rises to the occasion to provide homes for heroes

CONTINUED FROM PAGE 1

DLI Commissioner: No new energy code

Decision keeps the current Minnesota Residential Energy Code in place until the next code cycle.

Housing First Minnesota Foundation Housing for Heroes project under construction in North Minneapolis.

As the economy began to shift with employee cuts, annual events canceled and decreased revenue projections, the task to begin a 2020 community build project looked impossible. But during this global pandemic, the need for shelter is on the rise in the Twin Cities metro area.

Companies and individuals rose to the occasion to help Twin Cities nonprofit organizations as they continued to adjust to the effects of the pandemic.

The Housing First Minnesota Foundation saw an increase in generosity from its build partners, donors and long-time supporters, which helped the nonprofit complete more build projects this year than ever before. This past year, the Foundation constructed and renovated 6,600 square feet of housing and partnered with 103 trade partners, four builders and three nonprofit organizations.

Housing industry members found additional ways to help through unconventional donations this year, such as a contribution of stocks for the value of a custom playhouse, bidding on a 1985 Chevy Corvette with a one-year membership to Corvette Classics of Minnesota, and in-kind donations of construction products and materials.

“The need for help is always greater than our ability to provide service,” said Donnie Brown, Housing First Minnesota Foundation director. “Community support is critical to moving individuals, families and veterans from homelessness to hopefulness through housing. The Foundation is grateful for these contributions and appreciates everyone who supports our work.”

Visit www.housingfirstmnfoundation.org for more information.

The residential energy code is the minimum to which new homes have to be built. This decision does not prevent any builder from building a more efficient home given the financial resources of the buyer.

Housing First Minnesota has been vocal on this issue for the past several years, making the case that a new residential energy code would benefit certain product manufacturers and other special interest groups at the cost of new homebuyers. In August, Housing First Minnesota brought together local builders association, NARI, Builders Association of Minnesota and Minnesota Realtors who all advocated for keeping the current

Minnesota Residential Energy Code in place.

“We saw incredible engagement statewide on this issue,” said Nick Erickson, director of research and regulatory affairs for Housing First Minnesota, who organized this coalition. “Builders, code officials and other players in the housing space came together to say that added product mandates are not needed at this time.”

This decision keeps the current Minnesota Residential Energy Code, the most efficient code of any high-production state, in place until the next code cycle.

ENERGY CODE • Minnesota adopted the 2018 IECC for commercial buildings on March 31.

• On August 3, a public hearing was held on whether DLI should adopt the 2018 IECC for residential buildings.

• The Administrative Law Judge concluded that the hearing record could support either determination by the Commissioner. Yet between the two alternatives, the Administrative Law Judge recommended postponement of the rulemaking.

• As a result, the department will not adopt the 2018 IECC for residential building, but will wait for the US Department of Energy (DOE) to review and evaluate the 2021 IECC.

SAVE THE DATE

April 6 + 7, 2021 8 a.m.–1 p.m.

For exhibit and sponsorship opportunities, contact show manager, Nicole Coon: Nicole@HousingFirstMN.org | 651.697.7571

NorthernDesignBuildExpo.com

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HOUSING INDUSTRY NEWS

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IN THE DIRT

A quick recap of housing news and development updates

SOURCE: MN HOUSING FINANCE AGENCY

SOURCE: DEREK MONTGOMERY, MPR NEWS

AN OVERVIEW OF THE PLAN SUBMITTED TO THE CITY OF PLYMOUTH TO BUILD HUNDREDS OF HOMES.

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Housing assistance distributed across the state

Cabin country continues to see strong demand

Property owners sue city of Plymouth

In July, the State of Minnesota allocated $100 million in federal CARES Act money to be utilized for struggling homeowners and renters. By early December all of that money had been utilized. Minnesota Housing Finance Commissioner Jennifer Ho said that they were able to help many renters and homeowners who applied for smaller-than-expected amounts.

The Minnesota Realtors® (MAR) October data showed that closed sales were up in almost every region of the state in October compared to October 2019. In the North Central region, sales were up 63.4% and in the Arrowhead region there was a 32.4% increase. Chris Galler, MAR’s CEO, told the Star Tribune, “Realtors in Greater Minnesota tell us that they have consumers buying second homes in rural areas, especially cabins, with funds they would have used on trips—especially foreign travel —pre-COVID.”

Following years of discussion and an ultimate denial to build a housing development on the Hollydale Golf Course in Plymouth, the owners and development team, Lakeview Development and Hollydale GC Development, have sued the city of Plymouth. Originally slated for 319 homes, the proposal eventually was reduced to 229 single-family homes ranging in price from $600,000 to more than $2 million and was still denied by the Plymouth City Council in a 4-3 vote against rezoning the land to residential. In their complaint it was stated that "The city was aware that it had two options if it desired for the property to be set aside in the future as green space. The city could either: (a) purchase the property through a voluntary transaction with the owners; or (b) exercise the power of eminent domain to take the property and pay the landowner just compensation."

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Your Go-To Team for Real Estate Law Larkin Hoffman has been a go-to real estate law firm for more than six decades.

We provide a comprehensive range of services including financing, tax increment financing, acquisitions and dispositions, construction, land use, environmental regulation, redevelopment, leasing, 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.

U.S. News Names Larkin Hoffman a “Best Law Firm” for 2021 Larkin Hoffman is proud to announce that we have been named a ‘Best Law Firm’ by U.S. News for 2021.

The firm’s land use practice received national recognition and several of the firm’s other practices received high rankings in regional categories including construction law, real estate litigation, environmental law, eminent domain and condemnation law, land use and zoning litigation, tax litigation, tax law and municipal law.

Peter Coyle “Attorney of the Year” Larkin Hoffman is also proud to announce that attorney Peter Coyle has been recognized by Best Lawyers in America® as a 2021 “Lawyer of the Year” in Land Use and Zoning Law. Only a single lawyer in each practice area and designated metropolitan area is honored as the “Lawyer of the Year,” making this accolade particularly significant.

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