Builders are favoring apartments over houses in Twin Cities
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The building of new housing in the Twin Cities is being dominated by apartments.
What's happening: Single family home building has slowed dramatically due to rising interest rates, while construction of apartments is staying hot.
Why it matters: Booming apartment construction has helped cool rents here, but homebuyers have a smaller inventory to choose from. That's helping drive up prices, even with heightened interest rates.
By the numbers: Last year, 67% of new building permits in the Twin Cities were for multifamily housing, the highest tally in at least 22 years, according to Housing First Minnesota.
- Construction began on nearly 16,000 multifamily units in 2022, the most in the metro since at least 2001, according to data from the U.S. Department of Housing and Urban Development.
The big picture: The boom in multifamily construction is also happening nationally.
- The demand for new apartments is being driven by an aging population and growth in single-person households, said Libby Starling, director of community development and engagement for the Federal Reserve Bank of Minneapolis.
- Older residents and singles tend to want smaller units, less maintenance and more freedom, Starling said in an interview with Axios last week.
Reality check: All this multifamily building doesn't mean we're becoming Manhattan. As of the end of 2022, the Twin Cities homeownership rate was 75.8%, which is the second highest of the largest 75 metro areas in the U.S., behind only Tucson, Ariz., according to U.S. Census data.
What they're saying: Homeownership is high here because people tend to stay here for a long time.
- "We tend to have a more stable population," Starling said. "We're not one of the places where people move in and out of as we might see in hot markets."