The report by BATC-Housing First Minnesota’s Housing Affordability Institute, Priced Out: The True Cost of Minnesota’s Broken Housing Market unveils a sobering conclusion that many in the home building industry already know: By nearly every measure, new homes in the Twin Cites cost more to build than new homes in any other Midwest market.
With too few new homes available at an affordable price, more and more Minnesota families are being priced out of the housing market. This is placing pressure on the rental market, limiting move-up options and leaving the region’s housing ecosystem broken.
“Although the new homes being built today may look similar to new homes built over the past 30 years, the final price far exceeds what buyers paid years ago, even after adjusting for inflation,” said David Siegel executive director of BATC-Housing First Minnesota. “This disappearance of affordable new homes is not due to a change in buyer or builder preferences, but to homebuilders simply being unable to build at a price that many buyers in the region can afford.”
Why this study matters:
State leaders and economists agree: Minnesota needs a surge in new home construction, 300,000 new units by 2030. That surge is not feasible today because there is simply no way to build enough homes affordably for middle class families due to the highest land and regulatory costs in the Midwest.
Some Key Numbers in the Report:
- A new home in Lake Elmo, MN costs $47,000 more than its identical home in Hudson, WI – located just 10 miles apart. The cost differences are caused by land, infrastructure, and regulatory costs.
- Using the same payment schedule – this same home in Hudson, WI would be paid off almost 7 years faster than its identical home in Lake Elmo, MN.
- A new home in Victoria, MN costs 25% more than a similar home built by the same builder in the SW Chicago suburbs — a difference of $82,000.
- The Twin Cities is home to one of the highest gaps between new and existing home prices in the nation. Median existing home: $275,000 — Median new home: $417,000 = $142,000 difference.
- Up to one-third of a new home’s price in the Twin Cities is due to regulations and policies from the local, regional and state level. We can all agree that’s simply too high and unsustainable.
- Midwestern housing markets like Chicago, Kansas City, St. Louis, and Nashville all build between 50-80% of their new homes at $325,000 or less. Our region builds less than 1/3 of our homes at $325,000 or less.
Our broken housing market is greatly reducing options for typical middle class families – where in order to pick the community they want to live in, for work, education, or family reasons, they have to make stark economic choices.
Our ultimate goal in this endeavor is to change the way our state approaches regulatory requirements and to ensure that affordability rises to the top as housing policy discussions occur. We will continue to support sensible regulations to ensure safety and durability, and we are leading the charge to make affordability an equal goal for all existing and future regulations from cities, watershed districts, and the state agencies.
It is important to note that as we advocate for greater affordability, we continue to celebrate the outstanding work and quality homes produced by all BATC-Housing First Minnesota members. Our message to consumers will remain optimistic and forward looking: it’s a great time to buy for many families, and if we can fix what is broken in the housing market, we will expand homeownership opportunities to even more Minnesota families.
