Feb 23, 2022 - News

Home construction hits high water mark in Twin Cities

Data: HUD; Chart: Axios Visuals

Builders started construction on more housing in the Twin Cities metro in 2021 than they did in any of the last 20 years.

Why it matters: The big year is helping us dig out of a shortage of homes that has been driving up rents and housing prices.

By the numbers: Builders started construction on 21,777 homes in the seven-county metro in 2021, according to preliminary data from the U.S. Department of Housing and Urban Development.

Yes, but: We still are making up for about a decade of underproduction following the 2008 financial crisis, said Libby Starling, director of community development and engagement for the Federal Reserve Bank of Minneapolis.

  • "We may have dug out from maybe four years of underproduction with these last few years of higher production," she said. "We still have half a decade of production to catch up on."

The intrigue: In the mid-2000s, 70% of new housing in the metro was single-family homes — think of the farm fields just beyond the suburbs being turned into big houses on cul-de-sacs.

  • In 2021, only 38% of new housing was single family. New housing in recent years has been driven by high- and medium-density apartment buildings in urban areas and inner-ring suburbs.
  • Starling said the surge in multi-family is a response to an aging population that is looking to downsize into multifamily housing and senior living. And there’s been a trend toward more urban, centrally located living.

The bottom line: Hopefully the new units will eventually drive down housing costs or at least slow the increases.

  • However, most of the new production is market rate — new houses starting at $500,000 and one-bedroom apartments renting for at least $1,500.

What to watch: DFL lawmakers have pitched a $1.8 billion plan aimed at speeding up the production of — and preserving existing — affordable housing.

  • But it remains unclear if the plan will gain bipartisan support.

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