Housing Industry News Vol. 7 Issue 1 - March 2023

Zoning Modernization Takes First Steps at Capitol

As the legislature moves into its third month of the 2023 session, Minnesota’s crisis-level housing supply challenge took its first step forward.

Rep. Steve Elkins (DFL-Bloomington) authored HF 2235, a zoning modernization bill, calling it the ‘Legalize Affordable Housing Act’. The measure cleared its first hurdle, passing out of the House of Representative’s Housing Committee.

“We need more housing at all price points of all types and we’re not getting it because it’s not permitted to be built right now,” stated Elkins.

As is the case throughout much of the United States, Minnesota finds itself with more households than available homes. This foundational problem continues a cycle that drives home prices and hurts the state’s economic competitiveness. The barriers to building affordably priced homes is at the center of the state’s housing supply deficit, which experts say is as much as 95,000 housing units short of the demand.

Industry leaders say that HF 2235 has many provisions that would directly address these challenges, pointing to a series of barriers that make affordably priced homes all but impossible to construct in this market. HF 2235 attempts to address some of the major barriers, including outdated zoning standards and aesthetic mandates on new homes. The measure also proposes to add new street impact fee authority for local governments, which drew opposition from industry groups.

“It’s a positive step that this bill was heard and took its first step forward, but there are issues to resolve on the impact fee portion and a long road ahead”, said James Vagle, CEO of Housing First Minnesota.

Local government groups opposed the zoning modernization efforts at its first hearing, but a local city council member testified in support of the measure.

“I think the question presented for everyone is state legislation necessary to preempt cities on local zoning. And my

position from my experience in Minnetonka is, yes. I believe too many cities hide behind the phrase of local control that restricts the supply of housing,” stated Bradley Schaeppi, Minnetonka City Council member.

Prior to the measure’s early March hearing, the legislature had previously elected to focus on other priorities relating to housing

Data shows that Minnesota has the highest new home costs in the region and among the highest new home costs in the country. When comparing the average new single family home costs, new Minnesota homes cost on average $80,000 more than Wisconsin and Illinois.

The bill now moves to the State and Local Government Finance and Policy Committee. The legislative session continues throughout the spring and is set to adjourn in late May.

New WOTUS Definition Released States and Industry Groups File Multiple Legal Challenges as Supreme Court Considers WOTUS’s Fate

In the closing days of 2022, the Biden administration released the final definition of “Waters of the United States” (WOTUS), expanding which land use projects require federal permitting and review.

“When Congress passed the Clean Water Act 50 years ago, it recognized that protecting our waters is essential to ensuring healthy communities and a thriving economy,” said EPA Administrator Michael S. Regan. “Following extensive stakeholder engagement, and building on what we’ve learned from previous rules, EPA is working to deliver a durable definition of WOTUS

Slow Progress on Housing Supply at the Legislature

Coming into the new year with a new legislature there was hope that housing supply would rise to the short list of pressing issues facing our state.

The case for addressing our state’s undersupply of homes is straightforward. For the last decade-plus a series of barriers led to an underbuilding of new housing of all types. During this time, our population has continued to grow. Like any imbalance where demand strongly outpaces supply, prices soar and housing affordability and access erodes. This led to less homeownership opportunities for Minnesotans and today, threatens our state’s competitiveness.

The data on housing supply is not disputed, nor is the data on the lack of housing affordability across the state. All of which makes the legislature’s slow action on housing supply so surprising.

The minimal approach on housing supply and zoning modernization places Minnesota as an outlier nationally. While a bipartisan group of Governors and Legislators from across the country are working to lift housing barriers in their respective states, Minnesota stands alone as the one state inexplicably considering new barriers to homeownership.

As an industry, we know that homeownership is incredibly popular across the board. It is not a divisive political issue, we all recognize the benefit from a balanced housing market with choices at all price points.

These are difficult issues, but blue and red states alike are taking action to tackle this challenge head-on. Housing is a foundational issue, and these

HousingIndustryNews.org

states understand that housing supply must be primarily driven by our industry, building at scale. My hope is that we can come together on this issue with greater urgency throughout 2023. As an industry, we need to continue to press our elected leaders to look beyond the status quo of outdated housing rules, and we need to provide innovative approaches to get us back to building homes at all price points.

I encourage all of our industry to make an effort to connect with your local officials and ask them to prioritize housing supply and homeownership access. Waiting any longer will only make our challenges greater.

Make it a great Spring, John Q.

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March 2023, Volume 7, Issue 1

PUBLISHER

James Vagle James@HousingFirstMN.org

EDITOR

Katie Elfstrom Katie@HousingFirstMN.org

ASSOCIATE EDITOR

Laura Burt

GRAPHIC DESIGN

Emily Doheny

ACCOUNTING

Janice Meyer

ADVERTISING SALES

Brad Meewes

Kori Meewes

CONTRIBUTING WRITERS

Katie Elfstrom Katie@HousingFirstMN.org

Nick Erickson Nick@HousingFirstMN.org

Mark Foster Mark@HousingFirstMN.org

Kristen Ober Kristen@HousingFirstMN.org

Kate Wigley Kate@HousingFirstMN.org

James Vagle James@HousingFirstMN.org

Housing First Minnesota

James Vagle, Chief Executive Officer John Quinlivan, Board Chair

Housing Industry News is a publication of Housing First Minnesota. Housing Industry News is published and distributed four times per year to housing industry professionals and others associated with the 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 housingindustrynews.org

Housing Industry News is published by Housing First Minnesota Entire contents copyright 2023 All rights reserved

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.

John Quinlivan 2023 Board Chair, Housing First Minnesota

Across the country, there is much talk about housing

HERE ARE SOME OF THE LATEST QUOTES ON THE STATE OF THE INDUSTRY:

There has been NIMBYism on steroids, those who said, ‘Don’t come to my community, because you don’t look like me. I don’t want you here’. That has to be over. We need to act boldly.”

We'd urge everyone to think broadly. The federal government has a role in addressing housing trends but should be wary of any policy that would decrease incentives for investment. The same goes for local governments."

Private equity isn’t the first villain, and it likely won’t be the last, to be cast in the role of the housing scapegoat. Playing whack-a-mole with the villain of the moment won’t increase the amount of affordable housing.”

JERUSALEM DEMSAS THE ATLANTIC

More housing now is for people, for planet, and for prosperity. It’s for people who need a roof over their head and who want to recognize the dream of home ownership and wealth building. It’s for the planet to reduce our emissions and conserve water. And it’s for our prosperity as a state to ensure that businesses can hire people to power our economy. Let me be clear – Housing policy is climate policy.”

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New WOTUS Definition Released

that safeguards our nation’s waters, strengthens economic opportunity, and protects people’s health while providing greater certainty for farmers, ranchers, and landowners.”

New WOTUS Definition

The new definition reinstitutes the WOTUS rule in place prior to 2015, and includes any water, including wetlands, found to have a “significant nexus” to other waters. The definition also states that “adjacent wetlands are jurisdictional if they meet either the relatively permanent standard or the significant-nexus standard, or where the wetland is adjacent to a traditional navigable water, the territorial seas, or an interstate water.”

According to Nick Erickson, senior director of housing policy for Housing

First Minnesota, the WOTUS definition change will have serious impacts on housing. “The WOTUS rule has long been considered imperfect and is one of the few roadblocks to housing affordability and access that come directly from the federal government,” said Erickson. “By reverting to the pre-2015 definition, more wetlands will fall under federal jurisdiction, requiring federal reviews with added costs to homebuyers.”

Two Suits Filed

Even before the new WOTUS rule takes effect on March 30, multiple legal challenges have already begun.

A coalition of national trade organizations and the State of Texas filed separate federal legal challenges on Jan. 18, 2023, contesting the EPA’s revised definition of WOTUS, which regulates which land use projects require federal permits.

The initial suit, brought by the State of Texas, alleges the final WOTUS definition leaves too much open to interpretation. In the complaint, the state of Texas said the revised WOTUS rule “lacks clarity, leaving those wishing to identify the ambit of federal power over dry land or minor water features at the mercy of an expensive, vague and

arbitrary analysis, lest they face a staggering criminal or civil penalty.”

Texas also said that EPA should have waited for the outcome of a pending Supreme Court challenge before pushing through a new rule.

A second challenge, also filed on Jan. 18, was brought by 18 trade associations across agricultural, housing and infrastructure organizations. Industry groups National Association of Realtors, the National Multifamily Housing Council, and the National Association of Home Builders (NAHB) joined the lawsuit.

“By vastly increasing federal regulatory control over private property, the new WOTUS rule needlessly increases housing costs,” said Jerry Konter, chairman of NAHB. “Because the agencies have failed to craft a balanced rule, we have filed this lawsuit to seek a common-sense approach that will protect America’s waterbodies while also promoting job growth, economic development and housing.”

More legal challenges are expected. In a statement, North Dakota Gov. Burgum expressed support for his state taking similar action.

“It’s disappointing that the Biden administration is doubling down on this overreaching policy,” Burgum said in the statement. “The EPA’s reworked version of WOTUS has the same problems as its predecessor, violating landowner rights and creating confusion for farmers, ranchers and industry by adding red tape and erroneously classifying almost every stream, pond and wetland as a federally managed water.”

Awaiting Supreme Court Decision

The lawsuits filed in January are not the only legal challenge to the WOTUS rule.

In October, the nation’s highest court heard arguments in Sackett v. EPA, a case that challenges the EPA’s determination that wetlands classify as “Waters of the United States.”

A decision from the Supreme Court in Sackett is expected to be released by March when the new WOTUS definition is likely to take effect.

Housing Affordability Institute names

Nick Erickson as Executive Director

Housing Affordability Institute has named Nick Erickson to the newly created position of executive director. Erickson comes from Housing First Minnesota, the Institute’s parent entity, where he will continue to serve as senior director of housing policy.

“With Minnesota’s housing challenges continuing to grow, Housing Affordability Institute has asked industry expert, Nick Erickson, to lead its programming,” said James Vagle, president of Housing Affordability Institute and CEO of Housing First Minnesota. “Nick’s keen understanding of housing policy, strategic vision and passion for this issue make him uniquely qualified to direct Housing Affordability Institute’s efforts to address our housing affordability and access challenges.”

Erickson has assisted with Housing Affordability Institute since its inception in 2018, having served as author and lead researcher on the Institute’s past efforts. Erickson has played a critical role in the housing policy discussion in Minnesota since joining Housing First Minnesota in 2017, where he’s managed its regulatory advocacy and research programs.

“Both in Minnesota and nationally, we see immense housing affordability and access challenges,” said Nick Erickson, executive director of Housing Affordability Institute. “Housing Affordability Institute’s work is critical to helping key players in the housing discussion better understand the issue. It is an honor to be tasked with leading Housing Affordability Institute’s efforts to increase housing affordability and access.”

Erickson holds a degree in Business Communication from the University of St. Thomas’s Opus College of Business and was a Policy Fellow (2018-2019) at the University of Minnesota’s Humphrey School of Public Affairs. Erickson resides in Eagan, Minn., with his wife Lisa and daughters Elizabeth and Julia.

Nick Erickson Executive Director of the Housing Affordability Institute

Regulatory Affairs Update: New DLI Commissioner, Electrical Code and Stormwater Permit Changes, Energy Code Rulemaking, and New Environmental Review Requirements

Gov. Tim Walz appointed Nicole Blissenbach as commissioner of the Minnesota Department of Labor and Industry in December 2022.

"I am excited that Commissioner Nicole Blissenbach will continue to lead the Department of Labor and Industry,” said Governor Walz. “From successfully overseeing the Frontline Worker Pay program to improving workplace safety for Minnesotans across the state, she is the right person to fight for and represent Minnesota’s workers.”

Commissioner Nicole Blissenbach has been with the agency since 2019 and previously served as DLI’s deputy commissioner, overseeing the work of the Labor Standards, Minnesota OSHA Compliance, Minnesota OSHA Workplace Safety Consultation, the Office of General Counsel, Research and Statistics, and Projects and Planning work units. Her first role with the agency was as assistant commissioner for Enforcement and Compliance Strategies and Partnerships.

The State Senate confirmed Blissenbach’s appointment in February.

2023 Electrical Code

At its Jan. 31, 2023 meeting, the Minnesota

Board of Electricity adopted the 2023 National Electrical Code unamended.

Industry groups Housing First Minnesota and Central Minnesota Builders Association pushed for a more rigorous review for the code. “We thank the Board of Electricity for listening to the industry’s concerns over the process,” said Nick Erickson, senior director of housing policy for Housing First Minnesota.

The new electrical code will go into effect on July 1, 2023, pending completion of the final rulemaking process.

DLI Opens Rulemaking on Residential Energy Code

DLI will open rulemaking to adopt the 2021 Energy Code the agency announced in February. The technical review timeline has not been announced, but the agency is expected to form a technical advisory group and begin the review in 2023.

Opening rulemaking will be a lengthy process and will include technical reviews, stakeholder engagement and public comment periods, as well as a required durability analysis.

“Given the short window between the technical review of the 2021 IECC and the 2024

building code update, we don’t expect the Department to open rulemaking in 2024,” said Nick Erickson, senior director of housing policy for Housing First Minnesota. “On volume, Minnesota builds the most energy efficient homes in the country. We need to ensure that affordablility remains part of the conversation and that any changes don’t lead to code chaos.”

2023

Stormwater Permit

The Minnesota Pollution Control Agency released its draft 2023 Construction Stormwater

General Permit (General Permit) in early January.

The General Permit outlines erosion control requirements on construction sites one acre or larger throughout the state. The current General Permit expires on July 31, 2023, and the final 2023 General Permit will go into effect on Aug. 1. The MPCA updates the General Permit every five years.

MPCA accepted comments on the proposed 2023 General Permit through March 2, 2023.

The new electrical code will go into effect on July 1, 2023.

Commentary: Big Problems Require Bold, Ambitious Action – Housing Is No Different

by Nick Erickson, Housing Affordability Institute Editor's note:

Housing Industry News publishes a mix of commentaries online and in print.

Across the nation, legislators and governors are thinking big when it comes to housing reform. Massive issues like the housing inventory, affordability and access problems seen in a growing number of states require bold and ambitious action.

Leaders in New York, Virginia, Georgia, Washington, California, Colorado and Montana have turned their attention to the root causes of their state’s housing issues: a lack of housing inventory and regulatory structures and requirements that do not properly balance affordability and access against other concerns. Oftentimes, outdated local policies act as roadblocks to the adequate production of housing to supply for their respective states.

These lawmakers from across the political spectrum understand that to move the needle on housing, policymakers must think big and focus on addressing the causes of their state’s housing challenges. By seeking bold action, these leaders are not allowing themselves to get distracted by the symptoms of their housing crises.

Treating the illness alleviates the symptoms.

In Minnesota, we’ve seen much of the conversation in the housing space over the past few months turn away from the big picture and look to topics on rent stabilization, corporate conversion of single-family homes to rentals and other issues. These issues are symptoms of Minnesota’s broken housing ecosystem, not the causes.

Minnesota’s housing challenges are rooted in the lack of available housing, hindered by the region’s undersupplied market with the highest new, single-family construction costs. This lack of supply is what drove up existing home prices and rents over the past several years and invites companies to convert single-family homes from for-ownership to rental homes.

The solution to both challenges is to build more affordably-priced homes, condos and apartments, with special attention to the communities where new housing is needed most and growth is happening.

This was the conclusion of the 2018 Minnesota Housing Task Force formed by then-Gov. Mark Dayton. This group established a roadmap to solving Minnesota’s housing issues: erase the state’s housing deficit through a dramatic surge in market production of new housing, a focus on preserving the naturally occurring affordable housing (NOAH) in communities across Minnesota and the lifting of roadblocks to the construction of affordably priced new housing.

Unfortunately, the needed surge in production has fallen short. With the median new,

single-family cost nearly $100,000 higher than neighboring states, Minnesota clearly has a cost problem that our neighboring states do not. Without addressing the cost side of the equation, which includes outdated zoning laws, Minnesota will never be able to balance its supply and preserve NOAH.

Governors in Colorado, Montana, New York and Virginia understand this, as do legislators in California, Washington and Georgia. Minnesota’s problems, in many respects, are as large or larger than these other states.

California, Oregon and Washington waited until their housing crises boiled over and economic competitiveness was directly threatened. These state’s housing crises are several years ahead of ours. Minnesota has largely observed the problem the past four years and our state cannot afford to wait another five to 10 years to act.

As the Minnesota Legislature dives into housing, legislators should look to other states to see what action is needed here. A commonality in all these bold and ambitious plans exists: Zoning modernization that will enable the needed new housing to be built. Creating new regulatory structures to ensure affordability and access are a part of ensuring that new housing will be affordable.

Across the political spectrum we’ve seen policymakers think big on housing. The scope of their action speaks volumes about the depth of housing’s challenges in their states. They focus on addressing the causes of their housing crisis, not the symptoms.

Bold and ambitious action is needed in Minnesota. Our housing challenges are immense and its action here is long overdue.

Nick Erickson is the executive director of Housing Affordability Institute.

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Q: The Department of Labor and Industry (DLI) plays a key role in the housing industry. What are your top priorities as commissioner of DLI?

NB: DLI continues to seek ways to improve our efficiencies and services to stakeholders. This legislative session, our agency has several licensing proposals to reduce fees where possible and clarify when a contractor license is required for building a new or improving an existing house for resale.

This session, we are also looking to enhance safety and remove unnecessary regulatory burdens. One example of this is to remove a costly and ineffective requirement to install window-washing anchors on sloped roofs of multifamily housing structures, where it was never intended to be used. The goal is to expand the options available to building owners to have their windows cleaned in ways that are most appropriate to their particular building’s location, height and number of stories.

We continue to look for ways to mitigate the effects of climate change by improving the efficiency of our energy codes where possible and practical.

Improving efficiencies and enhancing services at DLI

Q & A with DLI Commissioner Nicole Blissenbach

Q: With oversight of codes, inspectors, safety and contractors, DLI is the key state-level regulator. How do you see the agency approaching the dual role of critical partner and enforcement regulator in the coming years?

NB: Our agency remains focused on engagement and outreach to affected stakeholders. We can’t successfully create enforceable codes or safety standards if we don’t collaborate with impacted industries to understand what needs to be addressed and how to do it in the most reasonable, cost-effective manner.

One of the most successful ways we have done this with the building code is through the Construction Codes Advisory Council’s (CCAC’s) Technical Advisory Groups (TAGs). DLI regulators work together with building industry representatives to review new model codes for adoption into the State Building Code and provide a review of and comment about proposed legislation.

DLI also meets annually with the leadership of our homebuilding partners to listen to their concerns, share ideas and identify ways we can mutually meet our goals by working together.

Minnesota OSHA (MNOSHA) Compliance offers free Construction Seminars that feature a presentation about a specific construction safety or health topic – with time for questions, answers and input – plus an update about what’s currently happening regarding investigations. The goal is to provide a safe environment for participants to ask real worksite questions and get honest answers that promote practical worksite safety and health solutions.

Q: This year marks the 50th anniversary of the Minnesota Building Code. What has made the past five decades a success?

NB: Our most recent successes include reforming how we adopt codes and make them available to all Minnesotans. Perhaps the biggest impact has been in the restructuring of CCAC’s TAGs, which I previously mentioned. These small, publicly-accessible working groups assign the most impacted stakeholders to study changes in new model codes. They publish their technical recommendations to the larger group of affected stakeholders for public input with final approval from CCAC.

Housing First Minnesota has been a valuable contributor in many of our TAGs. The TAGs have demonstrated their value in being an efficient way of analyzing new code changes and solicitating public input, while creating a transparent process.

Since 2015, we partnered with the International Code Council (ICC) to create custom codes for Minnesota. DLI removes much of the material in the code books that is not relevant to Minnesota and replaces it with amendments specific to Minnesota. These custom Minnesota code books are available in print and in a fully searchable online version.

We made the commitment in 2015 to ensure all of the Minnesota construction codes were available online at no cost. Since then, our code webpage is the most visited page on our website. We also provide free online access to a Spanish version of the Minnesota Residential Code.

DLI recently collaborated with ICC to create the first of its kind Illustrated Field Guide to the Minnesota Residential Building Code. The goal was to create something useful to simplify code compliance and minimize misunderstandings for both builders and building inspectors by using illustrations, pictures and plain language in a compact and affordable format.

Our most important code successes have been to protect the public’s safety and health. Most of this work is unseen. We will never

know how many lives have been saved from fire or structural failure or how many injuries have been prevented from falls, broken glass or electrical shock.

Q: Drawing on your days with Minnesota OSHA, what safety message would you like to send to builders and their trade partners?

NB: Historically, falls have been the leading cause of fatalities in construction, accounting for more than one-third of all fatalities in the industry. The Bureau of Labor Statistics reports that of the 986 construction fatalities reported in 2021, 378 were related to falls. MNOSHA Compliance recognizes incidents involving falls are generally complex events, involving a variety of factors. Consequently, the standard for fall protection deals with both human and equipment-related issues in protecting workers from fall hazards. These deaths can be prevented.

Each year in May, MNOSHA Compliance, along with federal OSHA and others, promotes and participates in the annual National Safety Stand-down to Prevent Falls in Construction to raise awareness among employers and workers about fall prevention.

During the stand-down, employers and workers are asked to pause their workday to talk about fall prevention in construction and discuss topics such as ladder safety, scaffolding safety and roofing work safety.

For more information about how to participate in this year’s National Safety Stand-down to Prevent Falls in Construction, May 1 through 5, visit dli.mn.gov/business/workplace-safety-and-health/ mnosha-compliance-falls

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Mid-session legislative round-up on housing

In March, DFL leaders from the House and Senate introduced its ‘All Roads Lead Back to Home” plan, a series of proposals aimed at addressing homelessness, investments in development infrastructure, and various rental support programs.

Several stand-alone bills are moving on several issues relating to housing regulatory and workforce policies. In many other states, lifting barriers to structure and lot size, and cutting process red tape have been top priorities. With the exception of the ‘Legalize Affordable Housing’ being discussed in the Minnesota House of Representatives, the housing priorities in Minnesota have been largely focused elsewhere.

Industry leaders say that some of the priorities under consideration would actually create new, additional barriers, increasing the likelihood that the state’s housing deficit grows.

Proposals cited as new barriers include the expansion of energy code adoption policies, banning the construction of single-family homes for rent, and a proposal to overhaul the industry workforce structure relationship between general and sub-contractors.

“The cost of housing and new construction in Minnesota is dramatically more expensive than all surrounding states. Weather and cost of building materials cannot be blamed for the cost difference because weather and the cost of building materials is comparable in surrounding states,” said State Senator Eric Lucero. “Unfortunately, the Democrat majority has put little effort into determining the root cause of expensive housing in Minnesota and even less effort into increasing supply of housing new construction. It is effectively illegal to build affordable housing in Minnesota. The only way to achieve more housing supply is to remove government barriers and over-regulation and getting government out of the way is among the priorities Republicans are fighting for.”

Housing industry leaders believe several legislative proposals this session would create additional barriers to housing.

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Location still number one desired feature for homebuyers

According to a recent consumer survey by Zonda location is still the number one feature homebuyers are looking for in their new home, followed by home design and price.

Zonda principal Mollie Carmichael shared her insights on the new survey results from over 60,000 consumers during her most recent outlook webinar on 2023 consumer trends.

“It's important to understand current product trends and what's going on in home design,” said Carmichael. “It’s going to trigger them to make a decision when rates are creeping up and they're just a little bit more sensitive to buying.”

Carmichael outlined which home trends buyers simply expect to see in 2023 new builds and trends that will go above and beyond, exceeding consumer expectations.

Some of the top trends expected in 2023 include smart-home technology, indoor-outdoor living, and the large primary suite. Trends anticipated to exceed consumer expectations include net-zero-ready features, large windows that add natural light, and new tech-savvy storage solutions.

Kitchen trends topping the survey results are large islands and multi-use spaces, bluetooth appliances, storage solutions, and walk-in pantries.

Top trends expected by buyers:

• Sustainable design and eco-friendly materials

• Smart-home technology

• Indoor-outdoor living

• Custom thought-out choices

• Primary suite with spa-like features

• Well-designed kitchens

• Storage, storage, storage

• Plan for pets

Top trends anticipated to exceed consumer expectations:

• Smaller footprints with more creative design

• Passive house with net-zero-ready features

• Use of light to make smaller spaces feel large

• More accessible design

• Healthy living, working, and aging

• Multi-generational housing/accessory dwelling units

• New tech-savvy storage solutions

• Metaverse engagement

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The HPR is at the heart of Minnesota’s Green Path, providing homebuyers with test results from third-party, independent HERS raters in an easy-tounderstand and comparable format. Green Path helps homeowners understand the energy efficiency of their homes and gives them the confidence that comes with independent, third-party testing.

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Mortgage rates rise again

The housing market over the last few years can largely be described as a fiercely competitive environment that was fueled by historically low interest rates and little available inventory across much of the metro and state.

However, the second half of 2022 marked a shift in buying activity as the Federal Reserve began to raise interest rates in an attempt to put pressure on the overheated economy. As a result, mortgage rates increased, and many potential homebuyers put a pause on their home searches.

Recently, mortgage applications fell to the lowest level since 1995. According to the Mortgage Bankers Association, applications for home loans fell 4% from the previous

week and 41% from the same time last year. Additionally, refinancing activity was down 72% from last year.

This comes after the federal reserve announced additional rate hikes in early February. Consequently, mortgage rates jumped over 20 points in one week.

“This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“The increase in mortgages rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.”

The 2023 metro housing market; a tale of two markets

According to new data from Minneapolis Area REALTORS® and the St. Paul Area Association of REALTORS®, the Twin Cities housing market last year was a tale of two markets.

The first half of 2022 reflected much of the all-out frenzied feeling of the previous year and a half. Fierce and competitive buyer activity with multiple offers over-asking situations were common throughout the beginning of 2022 due to the number of homes for sale sitting at the lowest level in 20 years.

But then, in the second half of the year, the Federal Reserve Bank began to increase interest rates in order to put pressure of the overheated economy.

Consequently, mortgage rates began to rise, more than doubling from an average 3.25% to 7% at their peak. Buyers began to see their projected monthly payments increase – leading to a slowdown in activity throughout many areas of the market.

According to the report, after hitting a 20-year record high in 2021, home sales retreated to the lowest level since 2014.

Sellers, more so in the second half of the year, also showed a hesitation in listing their homes – leading to an exacerbation of an already unbalanced market. In 2022, there was a 10% decrease of homes listings compared to 2021. The report notes that the Housing Affordability Index reached its lowest level since at least 2004.

“I went from sifting through more than 10 offers with my sellers to counseling them about being patient while on the market all within one year’s time,” said Jerry Moscowitz, President of Minneapolis Area REALTORS®. “Inflation may be turning a corner and rates could moderate by summer. If that happens, pent-up demand will surface and we’ll go right back to a competitive market with bidding wars where demand far exceeds supply.”

Source: FreddieMac

Housing market report

Twin Cities homebuilding activity continues to stall as mortgage rates hold homebuyers on the sidelines. Metro builders pulled permits for 328 single-family homes in January, a 46% drop from January of last year. Multifamily construction in the Twin Cities hit a slump as well with a 53% drop in total permitted untis from this time last year.

Employment Update

Minnesota’s non-seasonally adjusted unemployment rate jumped to 3% in January, according to the Minnesota Department of Employment and Economic Development. This is compared to the November rate of 2%. The national unemployment rate, however, dropped a tenth of a percentage point in December from the previous month to 3.3%. Construction employment in Minnesota fell 2.8% year-over-year.

According to the MN Department of Labor & Industry,

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Going green on the Parade of Homes

You might notice a little more green on this spring’s Parade of Homes. Out of the 383 homes in this spring’s tour, 228 will feature additional signage that notes these homes as built by Designated Green Path Builders.

Designated Green Path Builders commit to energy test a minimum of 75% of their new single-family homes and to attend annual training on green building. These builders are considered industry leaders in energy efficient residential home construction

The new signage will help consumers identify builders that have made this commitment to building energy efficient homes. While all new homes will save consumers money in energy efficiency, these energy tested homes with Minnesota Green Path’s home

performance reports can tell consumers how much money they may save.

The new signage speaks to what’s at the heart of Minnesota’s Green Path program. Green Path provides documentation – a Home Performance Report (HPR) – that displays the home’s HERS index or Home Energy Rating System index.

The HERS Index was created by Residential Energy Service Network (RESNET) in order to give homeowners and buyers a standard by which they could measure the energy efficiency of houses they currently own or are planning to buy. The lower a home’s HERS Index Score is, the better its efficiency.

Builders & Remodelers Show Returns After Hiatus

After a two-year break, the annual Builders & Remodelers Show was back this year. The 2023 event, held at Canterbury Event Expo Center, featured 100 exhibitors showcasing the latest products and services the industry offers. Among the event’s attendees were over 900 builders, remodelers, architects, interior designers, building officials and exhibitors from around the state.New to the event this year was the inclusion of several Genius Huddle session throughout the day. Presentation included topics from enhancing marketing plans to attracting and retaining employees.

Courtney Ernston of Midwest Business Law, PLLC was one of the featured speakers during the Genius Huddle sessions.

“Our interactions with the attendees both at our booth and during the Genius Huddle presentation at the 2023 BRS show far surpassed our expectations,” said Ernston. “The attendees were engaged and excited, and we had fantastic post-show interactions.”

The Best of the International Builders Show

The 10th annual Design & Construction Week drew its largest crowd yet in 2023, according to the National Association of Homebuilders. The combined event of the International Builders Show (IBS) and the National Kitchen & Bath Association’s (NKBA) Kitchen & Bath Industry Show (KBIS) brought over 200,000 housing industry members out to Las Vegas in early February.

Many Minnesota housing industry members made it out to the show and several presented as part of the event’s over 100 education courses.

The show, as always, featured the latest in design, technology, and trends for the homebuilding and remodeling industry.

Trends at this year’s show included more pops of color on everything from appliances, tile, cabinets, to even toilets by Kohler.

Each year NAHB recognizes outstanding building products and services from the companies exhibiting at the show. Over 400 product submissions were reviewed by 26 judges this year. The judges awarded winners in nine categories.

• Best Energy Efficient Product: SPAN Drive by SPAN

Best Home Software Product: BILT by BILT Inc.

• Best Home Technology Product: GE Profile UltraFast Combo with Ventless Heat Pump Technology by GE Appliances

• Best Indoor Product: Overture Automated Indoor Air Quality System by Broan-NuTone

Best Kitchen & Bath Product: BlueStar Dual Fuel Range by BlueStar

• Best Outdoor Product: HydAway Hydraulic Walls by HydAway Hydraulic Walls

Best Window and Door Product: Door Stud by Door Stud LLC.

• Most Innovative Building Material: Elevation Cable Rail by Barrette Outdoor Living

• Most Innovative Construction Tool: Mobile Carpenter Workshop Trailer by On-Site Building Solutions LLC

Todd Polifka(left) of Custom One Homes presents at IBS.

INDUSTRY GIVES BACK

In the Mix Gala

On Saturday, February 11th the industry came together to celebrate the 2nd annual The Mix Gala for Custom One Charities. A core company value of Custom One Homes is giving back, so in 2016 Custom One Charities was created in an effort to improve the lives of young people. Since then, they’ve raised funds for nearly thirty local organizations that serve a broad spectrum of needs. Custom One Charities held their first annual The Mix event in February of 2020 with the purpose to gather friends, families, and professional networks to share this mission and to grow their reach and impact. The event was postponed in 2021 and 2022 due to the ongoing pandemic. They were pleased to be able to hold the event again to raise funds for the good work of Custom One Charities.

Custom One Charities held their 2nd annual The Mix Gala in February.

THE FUTURE OF BETTER BUILDING IS NOW.

Every day our team of professionals is driven to be the best and deliver for our customers. We’re on a mission to develop next-generation solutions that accelerate, optimize and transform the homebuilding industry.

Through the acquisition of Paradigm, a building industry technology leader, Builders FirstSource is uniquely positioned to lead the digitization of our fragmented industry. Together, we will help homebuilders drive e iciency by reducing project costs and increasing labor productivity across the country.

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INDUSTRY GIVES BACK

Giving Back to Heroes

MACV, Lennar and Housing First Minnesota Foundation are building four new transitional homes in North Minneapolis Housing is a basic necessity and essential to a person’s well-being, especially for those that have endured trauma. The Foundation has partnered with Minnesota Assistance Council for Veterans (MACV) and Lennar to build transitional housing for veterans who are experiencing or at risk of homelessness.

This partnership has resulted in building seven veteran-based transitional homes in North Minneapolis within the past five years and home number eight is almost complete with three more new construction homes in the works to be finished in 2023.

Each home will feature four bedrooms, plus an ADU (accessory dwelling unit) with an additional bedroom, bathroom, and small living area. When completed, the home and ADU will be handed over to MACV. MACV will own and operate the home, providing wraparound services that help bring veterans back into a stable environment.

“This one project could serve up to 640 veterans over 50 years,” said Jessica Ryan, Housing First Minnesota Foundation Executive Director. “These Housing for Heroes homes will change the lives of veterans and will be a place of peace and healing.”

The 8th home for heroes is almost complete with three more new homes to be finished in 2023.

According to the Minneapolis Area Association of Realtors’ annual report, Minneapolis home prices are not keeping up with the rest of the metro. Over the past couple of years, we’ve seen the popularity of the urban core subside as buyers opted for more square-footage, work from home space to accommodate the hybrid-work model that’s clearly here to stay, and less of a need for proximity to a downtown. It turns out that trend is continuing as we saw the median sale prices in the central part of Minneapolis fall by 4.5% in 2022. Minneapolis is not undesirable though, with median sale prices still up 21% over the past five years and 1.6% in 2022. But they are failing to keep pace with the larger metro area, where the median sales prices increased by 7.4% in 2022.

Huber Engineered Woods, a North-Carolina based, has pulled the plug on the massive $440 million mill project just days after a state court ordered the city of Cohasset to reconsider its environmental review of the project. When plans to build the mill in Cohasset were announced in 2021, it was celebrated by legislators on both sides of the isle, including Governor Walz. The project would provide over 100 job opportunities in northeastern Minnesota and provide a bump to Minnesota’s dwindling forest products industry. The 750,000 square foot facility was scheduled to break ground in the spring of 2022 but has run into roadblock after roadblock, even after receiving over $50 million in incentives from the state Legislature and two state agencies, Iron Range Resources and Rehabilitation and Employment and Economic Development. “Due to delays that jeopardize our ability to meet product demand deadlines, we will pursue development of our sixth mill in another state,” said Huber Engineered Woods President Brian Carlson in a statement. A cautionary tale as Minnesota makes it more and more difficult to move new projects like this forward due to an excess of regulatory burdens and backstops. “Whether it be local, state, or federal compliance, it is too hard to permit a project,” Congressman Pete Stauber told MPR.

Minneapolis home prices lag compared to metro

Huber scraps plans for $440 million mill in Cohasset

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