What Housing Affordability Institute’s latest research reveals about Minnesota’s housing market—and what it means for the professionals building it
Over any given news cycle, an abund-ance of national headlines declares the United States has a housing problem: Builders are constructing fewer homes. Affordability continues to erode. First-time buyers are older than ever. Homeownership is becoming increasingly difficult to achieve.
These headlines are true, but they’re also incomplete. Because while nearly every state is navigating some version of the same housing story, Minnesota’s chapter reads a little differently.
Housing Affordability Institute’s latest United States of Housing report compares all 50 states using measures like housing production, affordability, and homeownership. At first glance, Minnesota appears to be performing relatively well. The state still boasts one of the nation’s highest homeownership rates, household incomes remain strong, and demand for housing has hardly disappeared. Look closer, however, and another throughline begins to emerge—one where Minnesota isn’t simply participating in national trends but, in several key measures, is falling behind its closest competitors.
For builders, remodelers, and industry partners, these numbers help explain many of the conversations happening every day: buyers who can’t quite qualify, projects that no longer pencil, communities waiting longer for development, and businesses trying to plan for an increasingly uncertain future.
A Pipeline Under Pressure
If you judged Minnesota’s housing market by 2025 alone, you might conclude that construction activity has begun to stabilize, and builders may finally be finding their footing after several turbulent years.
But that single-year snapshot hides a much larger picture. Zoom out five years, and Minnesota begins to separate itself from the rest of the country—albeit not in a way anyone should automatically celebrate. Between 2021 and 2025, total housing permitting fell 37.75%—the fifth-largest decline in the nation. Single-family permitting declined nearly 23% during that same period.
That distinction matters because a permit isn’t just paperwork. It’s a future neighborhood, a framing crew’s next project, and a cabinet supplier’s production schedule. It’s an excavator’s workload and a landscaper’s contract. A mortgage written. A family moving in. Every permit that disappears represents work that never enters Minnesota’s housing economy.
The slowdown has been especially pronounced in the Twin Cities, where permitting declined 43% between 2021 and 2024—substantially more than comparable metropolitan markets, including Chicago. That leaves Minnesota attempting to overcome an estimated statewide housing shortage of 98,000 homes. At today’s pace of construction, closing that gap would require roughly four-and-a-half years of production.
“I work for one of the oldest family-owned building companies in Minnesota,” says Steven Behnke, AIBD, senior project manager at Traditions by Donnay Homes, LLC. “This is a company that has ranked in the top 25 in Minnesota, closing in the low 100s every year but now struggles to close over 50. The staff is now at 50%, or smaller, than the size it was during the ‘boom times.’ Land is not being purchased for long-term strategies—the look-ahead for development is measured at 2-3 years.”
“Production in Minnesota is declining because housing affordability is not improving, and that’s a policy choice,” says Nick Erickson, executive director of Housing Affordability Institute. “The rate shock hit all states equally. We’ve seen states like Colorado, Montana, and Texas respond by making it easier to build. Despite the loud calls in Minnesota, that hasn’t happened here yet.”
Erickson highlighted that since the “Montana Miracle” package of land use reforms passed in 2023, the median closing price of a new single-family home has fallen 21% from its peak, while single-family permitting has begun to recover after a steep decline from 2021-23.
The First Rung of the Ladder
Minnesota has long enjoyed one of the highest homeownership rates in the country. A young couple purchases its first home. Years later, they outgrow it and build new. Another family purchases that existing home. Eventually someone remodels, downsizes, or builds again. Every successful first-time buyer creates movement elsewhere in the market.
That’s why Housing Affordability Institute pays close attention to homeownership trends. Minnesota’s homeownership rate rebounded slightly to 71.2% in 2025 after suffering its largest one-year decline in four decades the year prior. The state’s rate remains well above the national average of 65.2%, but the longer-term trend suggests Minnesota’s traditional advantage is becoming more difficult to maintain.
The Institute’s earlier research from November 2025 helps explain why. When too few homes are built, would-be buyers compete for existing inventory. Existing-home prices rise. More households remain renters longer. Higher rents make saving for a down payment more difficult. The pathway into homeownership narrows, and the self-enforcing cycle repeats.
“Five years ago, clients came in with a wish list and we worked from there,” recalls Rebecca Remick of City Homes, LLC. “Today, we’re talking about budget almost from the beginning. … [Clients] may choose to build a little smaller or eliminate something, but they still care deeply about quality, craftsmanship, great windows, sustainability, and the spaces they use every day. A big part of our job now is being responsible with our clients’ money and making sure we’re designing to a budget from the start—instead of designing the dream house and finding out later that it costs too much to build.”
“Builders are problem-solvers by nature, and they’re passionate about homeownership,” adds Erickson. “They’ve worked with trade partners on mitigating the impact of more cost increases, but that can only go so far. We remain the costliest state for homebuilding in the region—much of it driven by government policies.”
For the industry, the shrinking path to first-time ownership is not a problem confined to entry-level builders. Why? Because housing is a progression. A first-time buyer eventually becomes a move-up buyer, remodeling client, custom-home customer, or seller, whose existing home becomes another buyer’s starting point.
When fewer households can enter that progression, the entire housing ladder moves more slowly. Existing homeowners remain in place longer. Inventory tightens. Families delay additions, major renovations, or moves into newly built homes because their next step has become too expensive or uncertain. Over time, fewer first-time buyers can mean fewer future clients for nearly every segment represented by Housing First Minnesota.
It also changes what buyers expect from builders and remodelers. Households stretching further to qualify might demand greater certainty around final price, operating costs, maintenance, and long-term value. The companies best positioned to respond might be those that can clearly communicate not only purchase price but also durability, energy performance, lifecycle costs, and the value of professional construction.
Demand Isn’t the Problem
At first glance, Minnesota’s affordability numbers almost seem encouraging. New-home prices increased just over 2% in 2025, slower than several neighboring states. But slower appreciation doesn’t necessarily mean greater affordability when Minnesota entered the race carrying the region’s highest price tag. Today, it remains the most expensive Upper Midwest state for both new and existing single-family homes. In fact, Housing Affordability Institute’s research from late last year found that more than half of Minnesota households cannot afford the state’s median-priced existing home, while roughly three out of every four households cannot afford the median-priced new home.
That’s an important distinction for us, because the issue isn’t whether people want to buy homes—they do. The issue is whether enough households can reach the price point where building those homes becomes economically feasible. “Demand for great homes hasn’t gone away, but clients are definitely thinking longer and harder about what they’re spending and what they’re getting for it,” says Remick.
“Despite the deepening of the housing crisis, we’ve seen the government respond with more barriers,” Erickson adds. “Tree replacement programs, increased fees, punitive moratoriums, and the state’s 2038 energy code mandate are new challenges the industry has to fight against.”
Looking Beyond the Numbers
Reports like United States of Housing inevitably produce rankings, charts, and comparisons, but for Minnesota’s housing industry, the numbers matter less than what they represent: families waiting longer to buy their first home; builders navigating narrower margins and more complicated projects; remodelers serving homeowners who are staying put because moving no longer makes financial sense; and trade partners trying to forecast workloads in an increasingly uncertain market.
They also represent opportunity, because while national housing trends provide context, Minnesota’s challenges—and its solutions—will ultimately be local. Understanding where the state stands today is not only an exercise in data but is also the first step toward ensuring Minnesota remains a place where builders can build, businesses can grow, and homeownership remains an attainable goal for the next generation.
To learn more about Housing Affordability Institute, visit HousingAffordabilityInstitute.org
