Housing Industry News Vol. 8 Issue 3 - September 2024 by Housing First Minnesota

Housing costs elevate as a campaign issue

As housing costs continue to rise, the issue of housing affordability has become a critical concern for voters, increasingly shaping the conversation on the campaign trail. With many Americans feeling the squeeze of these prices, the prospect of homeownership has become a distant dream for many.

A recent survey conducted by Redfin, which included 3,000 U.S. homeowners and renters, revealed that “housing affordability” is now one of the most pressing issues across all age groups. For Generation Z, in particular, it has emerged as the number one concern, with 91% of respondents deeming it “very important” or “somewhat important” when considering their choice in the presidential election.

This sentiment is echoed in a July poll by the Wall Street Journal, which found that housing ranks as the second biggest concern for voters in terms of high prices, second only to groceries. The struggle is especially pronounced in Minnesota, where a survey by the Center of the American Experiment found that 84% of 18-34-year-olds are concerned about their ability to afford a home.

“This trend has been building for many years,” said Mark Foster, vice

president of legislative and political affairs at Housing First Minnesota. “As housing costs continue to climb and new housing options are limited by government policies, it is no wonder that an increasing number of voters are asking candidates up and down the ballot to do something about it.”

The leading presidential candidates have acknowledged this growing frustration but offer differing approaches to addressing it.

Vice President Kamala Harris has proposed a $25,000 down payment assistance program for first-time homebuyers while also pushing for an increase in construction.

“There’s a serious housing shortage,” Harris said. “In many places, it’s too difficult to build, and it’s driving prices up. As president, I will work in partnership with industry to build the housing we need both to rent and to buy.”

On the other hand, former President Donald Trump has focused on borrowing costs in his recent comments on housing.

“Under this administration, our current administration, groceries are up 57%, gasoline is up 60% and 70%, mortgage rates have quadrupled,

US Supreme Court strikes down Chevron doctrine, limiting federal agency

PAGE 5

City of St. Cloud works on new strategies for more housing PAGE 9

Pillsbury Castle Project showcases design, history

Realtor commission lawsuit reshapes buyer and seller dynamics in real estate

A groundbreaking settlement by the National Association of Realtors (NAR) has sent ripples through the real estate industry, fundamentally altering the traditional framework of how broker commissions are negotiated and paid.

As of Aug. 17, the longstanding practice of sellers shouldering the responsibility for compensating buyer agents is no longer the default expectation. This shift comes in the wake of a $1.8 billion jury verdict and subsequent settlement agreements that are reshaping real estate transactions across the country.

housing affordability as a top concern, young voters are pushing the issue to the forefront of the upcoming elections.

Housing emerges as major issue in elections

As Minnesotans begin to consider their choices for this fall’s elections, housing and homeownership are emerging as major issues for voters. This concern isn’t confined to any one demographic but resonates across generations, reflecting the profound impact that housing affordability has on people’s lives. While housing and homeownership have always been popular among the citizenry, the urgency and prioritization of today is new and reflects just how challenging the under-supplied market and interest rates have been for so many.

According to a recent national survey by Redfin, a staggering 91% of adult Gen Zers consider housing affordability an important factor when deciding who to vote for in the upcoming presidential election. This makes it the top issue for that generation, surpassing other significant concerns. The younger generation’s focus on housing is a clear signal that they view this issue as critical to their future and wellbeing. And, as an industry, we know that these are our future customers and just how important

it will be to provide them with options to achieve homeownership.

But it’s not just Gen Z that’s concerned. A July Wall Street Journal poll revealed that voters of all ages rank housing as their second biggest concern regarding high prices — trailing only behind groceries. This marks a notable shift from a November 2021 poll, where housing was ranked below the cost of many other items. The increasing concern across all age groups underscores the growing awareness of the housing crisis’s impact on every aspect of life.

Locally, the importance of housing is echoed by voices and communities across Minnesota.

Housing concerns consistently rank among the top issues on voters’ minds, highlighting the need for effective solutions.

Understanding this widespread concern, we continue to focus on growing the bipartisan caucus of housing champions. The Housing First Minnesota PAC endorsements reflect an impressive, bipartisan group of leaders committed to prioritizing homeownership and housing

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affordability. As we approach the elections, these issues will undoubtedly remain at the forefront of voters’ decisions, shaping the future of housing in Minnesota.

Let’s Build it Together, Art Pratt 2024 Housing First MN Board Chair

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Across the country, there is much talk about housing

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

The housing market is challenged. It’s low volumes and pretty high price increases. And what that means is really tough affordability for buyers, especially first-time homebuyers. You put those two things with high interest rates we have, and it just makes it tough for a homebuyer.”

JEREMY WACKSMAN, CEO ZILLOW GROUP

This is still a somewhat fragmented market where activity truly varies from price point to price point and area to area. While we’re encouraged by more supply, the lack of affordability caused by higher mortgage rates and rising prices are still significant hurdles.”

JAMAR HARDY, PRESIDENT MINNEAPOLIS AREA REALTORS ®

Mortgage rates have been improving, and they are bringing potential buyers out early, many of whom gave up on buying, either because of the low housing inventory or the higher rate environment the past few years. For sellers, listing their house early may give them the opportunity to sell before their competition hits the market.”

TAN TUNADOR, VP ATLANTIC COAST MORTGAGE

Despite the downward movement in rates, purchase activity only saw small gains, with an increase in conventional purchase applications offset by decreases in government purchase applications. For-sale inventory is beginning to increase gradually in some parts of the country and homebuyers might be biding their time to enter the market given the prospect of lower rates.”

JOEL KAN, VP MORTGAGE BANKERS ASSOCIATION

There is no doubt that interest costs and limited financing availability are making it difficult to develop multifamily properties. However, financial markets may become more stable later in the year, as recent weak economic data make it more likely the Fed will cut interest rates.”

ROBERT DIETZ NAHB’S CHIEF ECONOMIST

EXPANDING OUR REACH

St Paul, MN (651) 224-3675

New Brighton, MN (651) 636-7260

Maple Plain, MN (763) 479-2966 Savage, MN (952) 736-8384 Minneapolis, MN (612) 729-7353

Coon Rapids, MN (763) 757-5077 Lakeville, MN (952) 229-1933 Eagan, MN (651) 452-1835

Building Code reviews ongoing Minnesota DLI initiates new TAG for single-stair apartments as Building Code revisions continue

Over the past 13 months, a series of Technical Advisory Groups (TAGs) have been meeting to go over changes to the model building codes and proposed Minnesota-specific amendments. These include the Residential Energy Code TAG, Residential Building Code TAG, Accessibility Code TAG, Administration and Minnesota Provisions TAG, Commercial Building Code TAG, Elevator Code TAG, Existing Building Code TAG, Fire Code Compatibility TAG, Mechanical and Fuel Gas Code TAG and Structural TAG. Each TAG consists of experts in their field, including on the construction and building official side.

Apart from the Residential Building Code TAG, all of these groups have been working through proposed changes to the Minnesota State Building Code. The Residential Building Code TAG will begin its work later this year as the delay in receiving new code books has prevented the TAG from starting. The Residential Energy Code TAG has been on pause since early 2024 and will also resume its work once the Minnesota Department of Labor and Industry’s (DLI) technical staff have had the opportunity to review the 2024 IECC.

A new TAG was formed after the Legislature directed DLI

Impact of the US Supreme Court term on the development industry

It has been a few months since the U.S. Supreme Court issued its final opinions for the October 2023 term. The legal community is still sorting out the impact of this term’s consequential opinions. For the development community, three aspects of the term deserve special emphasis. First, the effect that overruling Chevron U.S.A., Inc. v. Natural Resources Defense Council will have (or not have) depending upon whether a federal or state regulator is at issue. Second, what the Sheetz v. County of El Dorado exaction decision established, and what exaction questions remain open. Third, the number of high-profile cases dismissed on standing grounds.

End of the Chevron doctrine

Much has been written about the Court’s jettisoning of the Chevron doctrine. Under Chevron, federal courts deferred to plausible agency statutory interpretations when the statutes were ambiguous. Put another way, if a statute could reasonably be read several ways, the federal courts would adopt the agency’s view of the statute’s meaning. In Loper Bright Enterprises v. Raimondo, the Court overruled Chevron based upon its interpretation of the federal Administrative Procedure Act, known as the “APA.” From here on, federal courts must make their own determinations regarding correct statutory

interpretation using the common tools of statutory interpretation. The decision will substantially level the playing field in litigation between federal agencies and regulated parties. However, the APA applies only to federal agencies – for example, the federal Department of Housing and Urban Development and the federal Environmental Protection Agency. States have their own procedure acts applicable to state agencies. States may have adopted their own doctrines similar to Chevron under these state procedure acts. These state deference doctrines remain in effect unless and until revisited by state courts. Hence, depending on state law, the degree of deference accorded by state courts to state agencies may substantially exceed the deference given in federal courts to federal agencies.

Sheetz v. El Dorado

The legality of local development exactions remains a hot topic at the Court. In Sheetz v. County of El Dorado, the Court definitively and unanimously resolved the question of whether development fees are exempt from review under the Takings Clause of the Fifth Amendment simply because they are adopted legislatively (such as by a fee schedule) rather than on an ad hoc basis. In an opinion written by Justice Barrett, the Court ruled that the Takings Clause

to examine single-stair apartments. This TAG will begin its work later this year.

Plumbing Code Review Continues

T he Plumbing Board’s Ad Hoc Committee has been reviewing the latest edition of the Uniform Plumbing Code and Minnesota amendments. Work reviewing changes to the Plumbing Code is expected to continue into 2025 and the final rulemaking on the code will be completed after work on the Building Code wraps up.

applies to legislative as well as administrative permit conditions. In a particularly memorable line, Justice Barrett wrote that a permit condition requiring a landowner to pay for a party for members of a planning commission would amount to “an out-and-out plan of extortion.”

Sheetz leaves open several important questions, one of which is whether an exaction applicable to a class of properties is subject to the same “essential nexus” and “rough proportionality” test as an exaction applicable to only one property. The majority opinion did not address the issue. Justice Gorsuch offered a concurring opinion that the constitutional test must be the same, remarking that “whether the government owes just compensation for taking your property cannot depend on whether it has taken your neighbors’ property too.” Three members of the Court (Justices Kavanaugh, Kagan and Jackson) appeared to have a different perspective, observing a “longstanding government practice” of using “reasonable formulas or schedules that assess the impact of classes of development.”

Especially after these dueling concurrences, it appears likely that the question will ultimately be decided by the Court.

Standing challenges

The Court dismissed several challenges to

COMMENTARY

Bryan Huntington is a shareholder with the law firm of Larkin Hoﬀman where he represents his clients in the enforcement of their property rights. This commentary has been repurposed with permission from the original publisher, Housing Aﬀordability Institute.

government action after finding the plaintiffs lacked standing. For example, in Murthy v. Missouri, the Court dismissed First Amendment claims brought by two states and five individuals after determining the plaintiffs could not prove causation between the conduct of federal government agencies and social media company restrictions. In Food and Drug Administration v. Alliance for Hippocratic Medicine, the Court dismissed a suit brought by individual physicians and medical associations challenging the FDA’s decision to relax restrictions applicable to drug use and distribution. The Court ruled, among other things, that the doctors had not demonstrated a concrete economic injury sufficient for standing purposes. These recent decisions underscore how important it is in litigation against the government to explain how specific government action causes the plaintiff particularized harm. In the development context, the plaintiff should demonstrate how the government action impacts their bottom line or future sales. Expert opinion evidence may be useful in establishing causation.

Realtor commission lawsuit reshapes buyer and seller dynamics in real estate

Settlement and its impact

The catalyst for this transformation stems from a series of antitrust lawsuits, notably the Sitzer/Burnett case, where plaintiffs argued that NAR’s practices artificially inflated commission costs for home sellers. Historically, sellers were required to offer a commission to buyer agents as a condition of listing on the Multiple Listing Service (MLS), which kept commission rates between 5% and 6% on average. The settlement reached by NAR in March 2024 changes this, removing the mandate for sellers to offer any commission to the buyer’s agent.

Under the new rules, compensation negotiations between buyers and their agents will become more transparent and flexible. Buyer agents must now enter into written agreements with their clients before showing any properties, clearly outlining their fees and services. This measure is designed to ensure that buyers understand their financial obligations upfront, eliminating confusion and empowering them to negotiate their agent’s compensation directly.

Implications for buyers and sellers

For buyers, this shift represents a newfound autonomy in how they engage with real estate agents. No longer bound to a system where the seller dictates agent compensation, buyers will now negotiate directly with their agents, which could lead to more competitive pricing. The settlement encourages greater transparency and, by extension, a more competitive marketplace where agents may lower their fees to attract clients.

On the seller’s side, the changes alleviate the burden of compensating both their agent and the buyer’s agent, which has been a contentious point for many. Surveys indicate that a significant percentage of sellers were unaware that they were expected to cover the buyer’s agent commission in the first place.

As the new rules take effect, sellers will now have the option to contribute to the buyer’s agent commission but will not be required to do so. This could make homes more affordable for buyers, as sellers may lower listing prices to offset their reduced financial obligations.

Implications for builders

Aside from homebuyers and Realtors, another major impacted party is homebuilders. With the settlement, each builder can choose how they wish to proceed with paying buyer commissions. Some may choose to pay a fixed percentage, a set dollar amount or not pay commissions at all.

Industry-wide repercussions

The real estate industry is bracing for significant adjustments. In August, Zillow announced how it would be responding to the change. The Zillow Touring Agreement, developed in response to the NAR settlement, helps agents comply with new industry requirements without needing an exclusive commitment upfront. It clarifies expectations of representation early in the homebuying process, providing transparency for buyers regarding services and fees. This agreement enables agents to meet the terms of the NAR settlement while helping buyers understand the value of agent services before committing fully

Many experts predict that the average commission rate for buyer agents will drop. This decrease in commission rates could have a cascading effect on traditional brokerage models. Some anticipate a migration toward lower-cost brokerage firms that allow agents to retain a larger portion of their earnings, allowing them more room to reduce their fees while maintaining profitability.

US Supreme Court strikes down Chevron doctrine, limiting federal agency

As the United States Supreme Court closed out its 2024 term, the Court issued its muchawaited decision in Loper Bright Enterprises Et Al. v. Raimondo, Secretary of Commerce, Et Al, a case that challenged the extent to which federal agencies can interpret rules and laws without judicial or congressional input.

In its 6-3 decision, the Court said that the Courts, not federal agencies, overruled a 1984 decision establishing the so-called Chevron doctrine, granting federal agencies wide latitude in interpreting rules and regulations.

What is the Chevron doctrine?

The Chevron doctrine refers to a legal principle stemming from the U.S. Supreme Court’s 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. It established that courts should defer to federal agencies’ interpretations of ambiguous statutes they administer unless the interpretation is unreasonable. This deference allowed agencies to interpret laws within their expertise, giving them significant latitude in rulemaking and enforcement. This deference has been central to the regulatory state for decades, shaping U.S. policy across all sectors.

In recent years, the doctrine has faced growing criticism, particularly from conservative legal scholars and judges, who argue that it grants too much power to unelected bureaucrats at the expense of judicial authority and the separation of powers. Opponents contend that courts should not abdicate their role in interpreting the law,

especially when agencies take positions that expand their own regulatory powers.

What was this case about?

Loper Bright Enterprises, a family-owned fishing company from New Jersey, operates in the waters off New England. The company estimated that complying with federal monitoring requirements cost them around $700 each day. In February 2020, Loper took legal action by filing a lawsuit in the U.S. District Court. The case argued that the National Marine Fisheries Service, which manages marine resources, lacked the authority under the Magnuson-Stevens Act to compel the fishing industry to cover the costs of its monitoring.

Th is legal dispute revolved around the Chevron doctrine, a Supreme Court ruling from 1984 that instructs courts to defer to a federal agency’s interpretation of a law it enforces if the law is unclear, and the agency’s interpretation is deemed reasonable.

How will this impact the housing industry?

While the case was about fisheries, the ruling in Loper extends to all federal regulations. Critics of the Chevron doctrine have often expressed worries that permitting agencies to interpret the laws they implement can lead to “regulatory creep” and constantly shifting rules and regulations. Although the decision was only recently issued, the Loper ruling will curtail federal agencies’ ability to enforce new regulations that Congress hasn’t explicitly or clearly approved.

The Supreme Court overturned a four-decade-old rule that required federal courts to give deference to agencies’ reasonable interpretation of ambiguous statutes.

Buyer agents are now required to have a written agreement with their clients before showing properties, detailing their fees and services upfront.

Navigating the new 14-factor test

Department of Labor and Industry Commissioner Nicole Blissenbach on key changes in worker classification for the construction industry

Since January 2023, Nicole Blissenbach has led the Minnesota Department of Labor and Industry (DLI) as commissioner, following a period as temporary commissioner beginning in August 2022. With a career deeply rooted in labor and employment law, Blissenbach has dedicated her work to ensuring Minnesota’s workplaces and living environments are equitable, healthy and safe. The department serves employees, employers and the public by regulating buildings and workplaces through education and enforcement. Here, Blissenbach shares key changes in worker classification for the construction industry.

HIN: What are the biggest changes in worker classification?

NB: A new 14-factor test to assess independent contractor status in the construction industry will go into effect on March 1, 2025. DLI will continue to apply the existing nine-factor test from now until March 1, 2025.

Other changes to the misclassification of construction employees’ law (Minnesota Statutes

§ 181.723) went into effect on July 1, 2024. These include:

• additional prohibited activities related to independent contractor status;

• individual and successor liability for prohibited activities;

• recordkeeping requirements regarding assessing independent contractor status; and

• damages and penalties for violations.

HIN: What are the key deadlines and dates for industry members to be aware of?

NB: The 14-factor test to assess independent contractor status in the construction industry goes into effect on March 1, 2025. The other changes addressed above went into effect on July 1, 2024.

HIN: What actions should general contractors and subcontractors take?

NB: Be aware of record-keeping requirements. You must keep documents and information regarding what the independent contractor status determination was based on for at least three years.

Legislators honored with 2024 Housing Leadership Award

Housing First Minnesota named 21 Minnesota state legislators as recipients of the 2024 Housing Leadership Award. This honor recognizes legislators who went above and beyond to promote housing affordability and homeownership during the 2024 legislative session.

For the first time in decades, housing supply, affordability, land use and zoning reform took center stage at the Capitol. With the announcement of the “Minnesotans for More Homes” agenda in February, a

bipartisan coalition of legislators attempted to address the housing crisis afflicting the state by allowing the construction of more homes of all types and price points.

“All-in-all, we saw the most important landuse and zoning discussions we’ve had at the Minnesota Legislature in a generation,” said Mark Foster, vice president of legislative and political affairs at Housing First Minnesota.

“We thank these legislators for their tireless efforts to move towards opening up more homeownership opportunities for all.”

Recognize the 14-factor test will apply to change orders as well. Change orders cannot be used to disguise that the test is not met and reasons for legitimate change orders should be identifiable.

Contractors should ensure subcontractors have responsible forepersons or supervisors who direct details of their work, written contracts accurately reflect the nature of the relationship and obligations of the parties and that contract negotiations are documented.

HIN: Why is there an industry-specific, 14-point test?

NB: Under existing law (Minn. Stat. § 181.723), there is an industry-specific nine-factor test. Many of the elements of the 14-factor test that will go into effect on March 1, 2025, are the same or similar to the elements of the nine-factor test.

There are a number of industry-specific independent contractor tests in Minnesota, including those found in Chapter 5224 of Minnesota Administrative Rules.

One of the recommendations in the Office

“Minnesota is over 100,000 housing units short of what would be considered a healthy housing market,” Foster added. “The bills that were brought forward attempted to address this deficit and allowed for a variety of more housing options. The broad and diverse coalition supporting these items is laser-focused on solving these issues and we hope the Legislature and governor will address these desperately needed policy changes in 2025.”

of the Legislative Auditor’s report about worker misclassification was “the Department of Labor and Industry should propose to the legislature updates to the construction worker classification requirements outlined in Minnesota Statutes 2023, 181.723.”

The report further states that “stakeholders and DLI staff described challenges with the construction worker classification test in law.” DLI believes the new test will provide clarity to regulated parties about the appropriate classification of workers in the construction industry.

New laws impacting housing industry businesses

In the recent legislative biennium, the Minnesota Legislature passed many bills that will impact businesses, small and large. Here’s a timeline of when these new laws will be in effect.

• October 2024: Minnesota OSHA fines/penalties indexed to inflation.

• Januar y 1, 2025: Increases to the minimum wage; salary range in job postings disclosure is required.

• Mar ch 1, 2025: Changes to construction independent contractor test.

• December 2025: Employer notification deadline for paid family and medical leave mandate.

• January 1, 2026: New paid family and medical leave mandate and new payroll taxes imposed.

• April 30, 2026: Paid family and medical leave quarterly payroll taxes due.

CONTINUED FROM PAGE 1

Housing costs elevate as campaign issue

and the fact is, it doesn’t matter what they are because you can’t get the money anyway,” said Trump. “Can’t buy houses. Young people can’t get any financing to buy a house.”

In July, the Twin Cities experienced a year-overyear inflation rate increase of 3.5%, outpacing the national rate of 2.9%. Much of this inflation was driven by escalating housing costs, underscoring the urgency of the issue.

“Housing affordability is likely to remain a top-tier issue for some time,” said Foster. “Without needed policy changes, our supply and cost issues simply will not resolve themselves.”

Nicole Blissenbach Department of Labor and Industry Commissioner

Rep. Jamie Long (Minneapolis)

Rep. Larry Kraft (St. Louis Park)

Rep. Alicia Kozlowski (Duluth)

Rep. Brian Johnson (Cambridge)

Rep. Michael Howard (Richfield)

Rep. Jeff Dotseth (Kettle River)

Rep. Esther Agbaje (Minneapolis)

Rep. Jim Nash (Waconia)

Rep. Shane Mekeland (Clear Lake)

Rep. Joe McDonald (Delano)

Rep. John Petersburg (Waseca)

Sen. Gene Dornink (Brownsdale)

Sen. Rich Draheim (Madison Lake)

Sen. Omar Fateh (Minneapolis)

Sen. Mark Johnson (East Grand Forks)

Sen. Eric Lucero (St. Michael)

Sen. Andrew Mathews (Princeton) Sen. Erin Maye Quade (Apple Valley) Sen. Susan Pha (Brooklyn Park)

Sen. Lindsey Port (Burnsville)

Sen. Jordan Rasmusson (Fergus Falls)

Central Minnesota Builders Association supports youth through ‘Tools for Schools’ program

The Central Minnesota Builders Association (CMBA) has established itself as its region’s local leading resource for homebuilding contractors and suppliers. However, the association’s commitment extends beyond its current membership and into the future, exemplified by its “Tools for Schools” program. This initiative encourages high school students to explore careers in the trades and fosters a skilled and prepared workforce for the future.

“The potential in young people today is amazing, and their future opportunities in the trades are bright!” said Wanda Schroeder, CMBA’s executive director. “The members of the CMBA want to ensure that Central Minnesota students will be equipped to discern the best fit for their future. Ultimately, this will benefit us — our community — as we will have skilled, intelligent and savvy workers and business owners in the trades.”

CMBA’s Tools for Schools program inspires high school students to explore various trades through hands-on experiences and community engagement. A cornerstone event of the program is the annual Bags for Tools bean bag tournament. This event serves as both a fundraiser and a collaborative effort that brings together students, instructors and industry professionals.

High school industrial tech students from Central Minnesota build the board sets used in the tournament, showcasing their

craftsmanship in a contest that awards the best-crafted board set with a trophy. The event is open to the public, and school industrial tech instructors are encouraged to attend and network with CMBA members, including homebuilders, associates and suppliers. This interaction helps instructors understand the current needs of the industry and how best to guide their students toward successful careers in the trades.

According to Schroeder, the variety of trade careers students can explore is extensive.

“It’s not just commercial and residential construction workers; it’s electrical, heating, air conditioning, banking, closing companies — so many hands are involved in building homes and growing homeownership in the state of Minnesota,” she explained.

This breadth of opportunities is crucial because it underscores that students have many opportunities in the trades to achieve a successful and fulfilling career. For many students, working with their hands and engaging in practical, skilled trades is more appealing and suited to their strengths.

The impact of the Tools for Schools program is significant. On average, 20 to 30 high schools participate each year, with approximately 100 students per school benefiting from the program. This means that about 3,500 students annually are exposed to the latest tools and equipment,

such as CNC routers, engravers, 3D printers, and a variety of hand-held battery-operated tools.

The financial support provided by the CMBA is substantial, with between $25,000 and $30,000 awarded annually. The most recent Bags for Tools tournament, held on June 20, raised over $15,000, contributing to a cumulative total of well over $100,000 over the years. These funds are used to purchase tools and equipment tailored to each school’s projects, from building Habitat for Humanity houses to constructing sheds and deer stands.

Schools also reach out to the CMBA throughout the year to request leftover building

materials for various projects, such as shingles for dog houses built for the humane society or extra wiring for high school classes. This practice ensures that resources are maximized, and students gain valuable hands-on experience. CMBA encourages community members to contribute to the Tools for Schools program, either through monetary donations or by donating used tools. The funds raised are kept within the region where CMBA members are located, maximizing the impact on the local community and ensuring the development of the next generation of skilled tradespeople.

Every school year, about 200 students experience Becker High School’s Woods and Construction Technology classes which benefits from the CMBA’s Tools for Schools grants. Photo courtesy of Central Minnesota Builders Association

Central Minnesota communities plan to hold development fees mostly steady for 2025

Cities in the Greater St. Cloud area have signaled they want more housing development, and do not want to increase municipal fees that could make it more difficult to build needed housing at affordable price points.

Each summer, Central Minnesota Builders Association (CMBA) surveys area communities ahead of city budget approvals for an early indication of municipal fees and changes that could impact home building in the coming year.

“Local communities tell us they want and need more housing, especially affordable workforce housing,” said CMBA executive director, Wanda Schroeder. “They realize adding to fees and other costs only makes that more difficult.”

A couple of local communities plan minor fee increases for 2025, but most are holding steady. The survey includes the communities of St. Cloud, Sartell, Waite Park, Sauk Rapids, St. Augusta, St. Joseph, Clearwater and Foley. CMBA also surveys Stearns and Benton counties.

City of St. Cloud works on new strategies for more housing

St. Cloud needs more housing, and the city is looking at all options to spur more residential construction. The Central Minnesota Builders Association (CMBA) Government Affairs Committee hosted a discussion with St. Cloud community development director, Matt Glaesman, for its July meeting.

“We are running very low on single-family lot supply,” said Glaesman, who noted St. Cloud needs 100-150 lots per year. “One year of supply of buildable lots is questionable. Two, three and four years are at the point where we simply will run out of lots for singlefamily home construction.”

Glaesman said it is time for new approaches. The city of St. Cloud recently passed a new ordinance allowing the building of Accessory

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Dwelling Units (ADUs) on single-family lots and is also considering reducing minimum lot sizes, allowing increased density (including duplexes and triplexes on single-family lots), changing setback requirements and reducing the number of off-street parking spaces required for each residential unit.

Some of these measures were also part of a major housing bill that CMBA and Housing First Minnesota supported earlier this year at the Minnesota Legislature. The bill gained significant momentum toward making changes to address a growing statewide housing shortage of more than 100,000 units. CMBA members and St. Cloud Mayor Dave Kleis testified in support of major portions of the bill.

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Housing market report

Multifamily sector continues to see declines

The multifamily housing industry is navigating a period of significant change in 2024.

Rising construction costs, driven by increased material prices and labor shortages, have made new developments more expensive and less profitable. Additionally, higher interest rates have led to tighter financing conditions, making it more difficult for developers to secure funding needed for new projects.

These challenges have been exacerbated by ongoing economic uncertainty. Concerns

about a potential recession, coupled with volatile financial markets, have made developers more cautious about launching new multifamily projects. As a result, many are postponing or canceling developments previously in the pipeline.

According to a recent survey from the National Association of Home Builders (NAHB), multifamily builder sentiment toward production conditions dropped 12 points in July over the previous year. In the survey, builders

rated current conditions on a scale from one to 100; the July assessment came in at 44.

Locally, multifamily units have consistently been down throughout much of the last year.

Builders pulled permits for 150 multifamily units in July. Although this is an increase over the previous month, overall units were still down 303% from July 2023.

The slowdown in multifamily construction is having a ripple effect on the broader housing market, particularly in terms of housing supply and

affordability. With fewer new units being built, the supply of rental housing is tightening, which could lead to higher rents in the coming months.

“There is no doubt that interest costs and limited financing availability are making it difficult to develop multifamily properties,” said NAHB’s chief economist, Robert Dietz. “However, financial markets may become more stable later in the year, as recent weak economic data make it more likely the Fed will cut interest rates.”

Amid recession worries and market volatility, developers are increasingly cautious, leading to delays or cancellations of new multifamily projects.

Minnesota’s housing crisis worsens, especially for communities of color

Minnesota Housing Partnership (MHP) recently published its “State of the State Housing Report” which illustrates critical insight into homeownership trends, racial disparities and the affordability crisis in Minnesota. Housing affordability remains a significant challenge throughout much of the state. The cost of housing has increased sharply, with some areas seeing as much as a 50% rise in home prices since the COVID-19 pandemic.

This surge in prices is attributed to increased material and labor costs and the shrinking inventory of all housing types.

One of the major findings of the report is the pronounced racial disparity in homeownership across Minnesota. White households have significantly higher homeownership rates compared to households of color. In Central Minnesota, 81% of white households own their homes, compared to just 53% of non-white households.

This trend is consistent across different regions, including the Twin Cities, where 76% of white households own homes, compared to 47% of non-white households.

To attempt to address some of these challenges, various initiatives have been introduced. The Midwest Minnesota Community Development Corporation is launching the Forgivable First-Generation Homebuyers Community Down Payment Assistance Fund

in 2024. This fund will provide eligible homebuyers with up to 10% of the home’s purchase price, capped at $32,000, as a zero-interest loan forgiven over five years if the buyer remains in the home as their primary residence.

However, MHP’s report concludes that although programs like this are a step in the right direction, the significant racial disparities and rising housing costs underscore the need for continued efforts

Potential rate cuts could impact year-end market activity

As of August 2024, mortgage rates are holding relatively steady, with the average 30-year fixed-rate mortgage hovering around 6.5%, according to Freddie Mac. This steadiness comes as the Federal Reserve signals potential interest rate cuts in response to cooling inflation and a slowing job market. Analysts predict that the Fed might begin cutting rates as early as mid-September, with additional cuts expected later this year or early next year.

These potential rate cuts could exert downward pressure on mortgage rates, providing some relief to prospective homebuyers who have

faced higher borrowing costs over the past year.

The Fed’s anticipated actions are in response to inflation trending closer to its 2% target.

However, while these cuts could lead to slightly lower mortgage rates, the impact on the broader housing market remains uncertain.

The National Association of Realtors (NAR) has noted that even with potential declines, mortgage rates are still expected to remain higher than pre-pandemic levels, potentially dampening the affordability of homes for many buyers.

Additionally, the ongoing challenges in the multifamily sector, including a recent downturn

in construction and falling developer confidence, could limit the availability of new housing stock, further complicating the market dynamics.

In the Twin Cities, the housing market remains tight, and home prices continue to rise, according to a recent report by the Minneapolis Area Realtors. The metro median sales price was up 2.7% in July at $385,000.

This local trend mirrors national patterns, where inventory shortages continue to drive up prices, making it challenging for first-time buyers to enter the market even if mortgage rates do decline.

Even with potential declines, mortgage rates are still expected to remain higher than pre-pandemic levels.

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Pillsbury Castle Project showcases design, history

The 12,000-square-foot, 120-year-old Pillsbury home was renovated and open for tours in July.

A collaborative effort between the American Society of Interior Designers (ASID) and the National Association of the Remodeling Industry (NARI) gave visitors in the Twin Cities an exclusive look at one of the region’s historic castles. The Pillsbury Castle Project opened the doors of the redesigned historic home in Whittier from July 12-28.

“NARI of Minnesota is excited to participate as a collaborator on the Pillsbury Castle Project. Our members will bring professionalism and quality to ensure the legacy of the home continues for another 100 years,” said Beatrice Owen, executive director for NARI of MN. “The contracting and products will largely be provided by NARI members in our area. We are honored to support Design Home 2024.”

The home featured the work of more than 20 designers and seven remodelers with more than 20 rooms remodeled in the home. Each room was redesigned and curated with incredible detail and style and gave visitors details on the historic home’s famous former owner.

Founded in 2023, the Pillsbury Castle Project is an activation to preserve a historic home built in 1903 for Alfred F. Pillsbury, son of Pillsbury co-founder John S. Pillsbury. The home is prominently situated on a corner lot in the Whittier neighborhood of Minneapolis with two and a half stories of Platteville limestone.

In 2025 the home will open again as a featured property in the MSP Home Tour.

Fall home tours open doors to new homes across the state

Minnesota’s homebuilding industry has geared up for its much-anticipated fall home tours. These events offer a prime opportunity for builders to showcase their latest work and connect with prospective buyers.

Fall Parade of Homes

Running Sept. 6-29, the Fall Parade of Homes from Housing First Minnesota will feature more than 330 homes across the Twin Cities metro and beyond. This year’s event highlights the latest trends in new construction, from energy-efficient designs to smart home technologies and multi-generational living spaces. With a diverse array of homes on display, this tour offers something for every type of buyer. ParadeofHomes.org

Fall Tour of Homes

The Central Minnesota Builders Association hosts its Fall Tour of Homes Sept. 13-15 and 20-22. This tour showcases more than 10 new builds for homebuyers to explore and

connect with their trusted partner for their dream home. CMBAonline.org/tour-of-homes

Fall Remodelers Showcase

From Sept. 27-29, the Remodelers Showcase will feature over 40 transformed homes, demonstrating the skill and creativity of local remodelers. Projects range from kitchen renovations to full home makeovers. This event offers inspiration for homeowners looking to refresh their existing spaces and connects them with local remodelers. ParadeofHomes.org

Fall Artisan Home Tour

For those interested in luxury living, the Artisan Home Tour, taking place weekends Oct. 4-20, offers a glimpse into some of the finest custom-built homes in Minnesota. These homes showcase the highest levels of design, craftsmanship and detail, reflecting the vision of the region’s top builders and remodelers. ArtisanHomeTour.org

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Larkin Hoﬀman has been a go-to real estate, land use and construction law firm in Minnesota and the Upper Midwest for over six decades. Pete Coyle | Matthew Bergeron | Jake Steen | Bryan Huntington | Megan Rogers

For builders and remodelers, these home tour events provide an invaluable platform to connect with potential clients. | Photo: Nordy Photography

Heat pump water heaters: worth a fresh look

If you could help homebuyers save approximately $550 annually on energy bills with a household appliance they will use every day, would you consider the investment? This is the promise of modern heat pump water heaters (HPWHs), a technology that has evolved significantly since its inception in the 1980s.

Heat pump water heaters represent a leap forward in energy efficiency and environmental conservation. Manufacturers have made substantial improvements, making them a viable option for today’s homes. As the push for sustainability intensifies, adopting HPWH technology presents a unique opportunity for contractors to distinguish themselves and meet the evolving needs of their clients.

Benefits

The benefits of HPWHs are significant. According to ENERGY STAR®, these products create the same hot water while using 70% less energy than conventional water heaters, which is significant considering water heaters are the second largest source of energy consumption in the home. HPWHs use less energy

there is no reason you shouldn’t install a heat pump water heater,” Campbell says. “They eliminate the need for fossil fuels, are emission-free and enhance the overall health, safety and comfort of the home.”

Past challenges

Historically, the high upfront cost and noise of HPWHs have posed challenges. However, recent technological advancements and financial incentives have addressed these issues, making HPWHs more affordable and quieter than ever. Federal tax credits, state rebates and utility incentives now help reduce the initial purchase price. For instance, Xcel Energy provides rebates starting at $400 for HPWHs, and most models come with a 10-year warranty, according to Rob Buchanan, Xcel Energy program manager. Today’s HPWHs are as quiet as a running refrigerator, a significant improvement from earlier models.

The long-term energy and cost savings are substantial. Over the appliance’s lifespan, this can total more than $5,600 in savings, according to ENERGY STAR.

Cold climate ready

For those concerned about performance in colder climates, modern HPWHs are designed to handle a range of temperatures. They work best in environments where the air temperature remains at or above 38°F, well below the year-round temperature of most Minnesota basements. Hybrid models can provide hot water even if the temperature drops below this threshold. ENERGY STAR-certified units are versatile, suitable for various locations from basements in Minnesota to garages in Southern California. Most models can be installed in the same location as existing water heaters.

Equal space

In terms of space, HPWHs have a similar footprint to traditional units but with fewer overhead components. “They have a filter, but it’s no more complex than the one in your furnace,” Campbell explains. Most units feature a 12-inch filter that is easily maintained, and some come with a backup electric resistance element for high hot water demand.

Compared to a standard electric resistant water heater, a heat pump water heater can save a family of four an estimated $550 a year on their energy bill with an expected average lifetime savings of more than $5,600.*

*Source: ENERGY STAR

will need to use heat pump technology, compared to just 3% today.

Now or later

With the 2029 DOE deadline approaching, the choice is whether to embrace this technology now or wait until the mandate takes effect. Either way, homeowners and builders should prepare for new designs and innovations aimed at making the transition to heat pump water heaters as smooth as possible. The benefits in terms of energy savings and environmental impact make it a compelling option for those looking to future-proof their homes and con-

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Pulte Homes golf tournament drives support for building industry nonprofit

The 14th annual Pulte Group Charity Golf Tournament teed off on July 17 at Dwan Golf Course in Bloomington, bringing together more than 144 golfers to support the Housing First Minnesota Foundation’s mission to build much-needed housing for homeless Minnesotans.

Following the 18-hole scramble, participants gathered in the clubhouse to enjoy a live and silent auction, accompanied by a selection of delicious food.

“This year’s tournament exceeded all expectations,” said Jamie Tharp, division president of Pulte Group, Inc. “Coming together as partners for an afternoon to support such a worthy cause highlights the incredible people in the Twin Cities’ building industry. For the Pulte Group team, this event is especially meaningful,

and achieving a new milestone this summer makes it all the more memorable.”

The tournament raised nearly $25,000 this year, pushing the cumulative total raised by the Pulte tournaments to over $250,000. These funds directly support the Housing First Minnesota Foundation’s projects aimed at creating housing solutions for those experiencing homelessness.

“We are incredibly thankful for the continued partnership, support and generous funds raised through this year’s Pulte tournament,” said Sofia Humphries, executive director of the Housing First Minnesota Foundation. “Partnerships like this enable us to deliver concrete housing solutions as we continue to make an impact on homelessness in Minnesota.”

Custom One Charities’ hosts annual golf tournament for local charities

Custom One Charities hosted its 8th Annual Charity Golf Tournament, The C1 Classic, on July 18 at Prestwick Golf Course. The event raised an impressive $83,000, highlighting the community’s generosity and commitment to charitable causes.

More than 160 golfers participated in the tournament, enjoying a day of friendly

Mark D. Williams Custom Homes and Joy Collaborative host fundraiser at luxury lake home

Mark D. Williams Custom Homes, in partnership with Joy Collaborative, hosted an evening of games, food, and philanthropy at their Game Night and FUNdraiser event on Aug. 1. Held at a luxury lake home designed by Mark D. Williams, the event successfully brought together community members to support a great cause.

The event featured various engaging yard games, a delicious spread of food and drinks, and a silent auction. Proceeds from the auction and the evening’s activities went directly to Joy Collaborative, a Twin Cities-based nonprofit organization that designs and creates empowering spaces for youth with life-limiting conditions. The event highlighted the organization’s dedication to transforming challenging situations into joyful, functional environments.

“This event was more than just a fundraiser; it was a backyard barbecue with a purpose,” said Mark Williams, owner of Mark D. Williams Custom Homes. “We are proud to support Joy Collaborative and its work to create spaces that bring joy and hope to those facing difficult circumstances.”

Toward the conclusion of the event, attendees were invited to participate in an interactive art experience called “Hit the Mark,” where they could purchase an opportunity to hit Williams and Mark Ostrom, founder and executive director for Joy Collaborative, with vibrant paint colors as they stood in front of a large backdrop. Each paint splatter added a unique touch to the evolving artwork, which was then up for auction, with all proceeds supporting the charity’s initiatives.

One of the highlights of the evening was the Joy Mobile, a multi-sensory experience designed by Joy Collaborative. Attendees had the chance to tour this innovative project which exemplifies the organization’s commitment to enriching lives through thoughtful and empathetic design.

competition while supporting the mission of Custom One Charities and its philanthropic partners. The funds raised will help various organizations, including a significant contribution to My Very Own Bed, a local charity that provides children with a comfortable place to sleep.

Following the event, Custom One Charities presented a $12,000 check to My Very Own Bed. The donation was made possible thanks to a special matching partner, whose support helped boost the fundraising efforts.

“We are thrilled with the success of our charity golf tournament, The C1 Classic, raising an incredible $83,000! A huge thank you to our generous sponsors and enthusiastic participants,” said Todd Polifka, president of Custom One Homes. “The funds raised with not only helps us advance our mission, but that of our philanthropic partners.”

As Custom One Charities continues to champion its mission, its efforts serve as an inspiration for others to engage in philanthropic initiatives that create lasting change.

The golf tournament raised nearly $25,000 to support the Foundation’s build projects for Minnesotans experiencing homelessness.

The Game Night and FUNdraiser included an interactive art experience called “Hit the Mark.” The paint splatters added a unique element to the artwork, which then went up for auction.

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Hope K event brings community together for a day of fun and philanthropy

The 16th Annual Hope K 5K/10K and Kids Fun Run, hosted by Tradition Companies, brought hundreds of participants to the Spirit of Brandtjen Farm community on June 22 for a day of fitness, fun and charitable giving.

The morning kicked off with the 5K and 10K races, followed by the HopeWalk for HopeKids families and a lively Kids Fun Run. In addition to the races, the event featured a wide array of free family-friendly activities, including a DJ, rock climbing wall, inflatable sports, and more. Altogether, the event helped raise more than $210,000 in contributions which will play a crucial role in providing hope and support to children with life-threatening medical conditions and their families.

Tradition Companies’ event brought the community together to fundraise for local nonprofit HopeKids.

Habitat for Humanity to break ground on the Heights

Twin Cities Habitat was selected as the 2024 Jimmy & Rosalynn Carter Work Project. The project will launch Habitat’s construction eff orts at The Heights, a major redevelopment of the former Hillcrest Golf Course on the east side of St. Paul. Twin Cities Habitat plans to build up to 150 homes on the 112-acre site, making it its largest development to date. A volunteer homebuilding crew will help build the first 35 homes of the development during the week of the Carter Work Project, which runs from Sept. 29 - Oct. 4.

Lino Lakes halts development

The city of Lino Lakes voted 4-1 to pause all development in the northeast quadrant of the city for a year. Most notably the moratorium will put a halt to the Madinah Lakes project which would include the construction of 434 homes along with businesses and a mosque. Supporters of the moratorium say the pause is necessary as the large project would put too much stress on the city.

A federal court recently held that a Rochester restaurant’s as-applied challenge under the Takings Clause can proceed. The Tap House, a restaurant in Rochester’s Historic Third Street district, was assessed an $80,739.17 Traffic Improvement District (TID) fee by the city. The court concluded that a reasonable fact finder could determine that the city did not meet its burden to show that the TID fee assessed to Tap House was roughly proportional to the traffic impact.

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Energy-tested homes are evaluated by a third-party, independent RESNET rater to provide a Home Performance Report and HERS Index Score.

LEVEL #2: MN GREEN PATH ADVANCED CERTIFIED:

The homes that achieve this mid-level certification meet rigorous energy testing standards and incorporate additional green features.

These builders have one or more homes that have recently achieved advanced certification: Cuddigan Custom Builders, LLC; D.R. Horton, Inc. – Minnesota; Eternity Homes, LLC; Hanson Builders, Inc.; Lennar; and Stonegate Builders

LEVEL #3: MN GREEN PATH MASTER CERTIFIED:

The top level of green building, homes at this level exceed rigorous standards, showcasing the highest commitment to energy efficiency.

These builders have one or more homes that have recently achieved master certification: Custom One Homes; Hagstrom Builder; and McDonald Construction Partners, LLC

PHOTO: MADINAH LAKES

PHOTO: HABITAT FOR HUMANITY

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PHOTO: TAP HOUSE

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