housing market outlook and affordable housing in the twin
TRANSCRIPT
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Housing Market Outlook
and Affordable Housing in
the Twin Cities Metro
Todd Graham [email protected]
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Overview of the presentation
• The Great Housing Market Collapse – and the
New Normal
• Recent affordable housing production in the
Twin Cities metro
• Future expectations: Population, and
Households Forecasts for 2010-40
• Work in progress: How will we assess
affordable housing need going forward?
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The Great Housing Market Collapse
Since 2007, BIG market adjustments:
• Real estate bubble burst, housing prices fell
• Core vs. periphery land price differentials
diminished
• Developers found it less profitable (or a loss) to
build where they were building prior to 2007
• Result: Home-building on hiatus
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2007-11: The lowest level of housing
production since World War 2
27,833
8,710
26,078
21,362
6,029
0
5,000
10,000
15,000
20,000
25,000
30,000
1970
1972
19
74
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Source: Metropolitan Council Residential Construction Survey
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The Great Housing Market Collapse
– and the New Normal
Since 2007, BIG market adjustments:
• Excess housing (built mid-decade) gradually
absorbed by market demand
• Still, region gains households: ~1% /yr
• Since household moves are mostly among
existing housing stock, there is less outward,
land-consuming expansion
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Residential Permits by Planning Area
16% 12% 19% 16%
10% 11% 20%
11%
18% 22% 19%
16% 18% 20%
22% 36%
57% 56% 52%
59% 66% 62%
54% 49%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007 2008 2009 2010 2011
Other Rural
Rural Centers and RuralGrowth Centers
Developing Suburbs
Developed Suburbs
Central Cities
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What happens next?
• Region gains households: ~1% /yr
• Musical chairs movement of households cannot
last. We are approaching housing scarcity.
• Short-term predictions for now–2015:
• Real estate values stabilize, turn upward
• Market-rate rents are already headed upward
• Higher levels of home-building
• The new housing will NOT be the product mix or in
same locations that were typical during ~1990–2007
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Residential Permits by Product
-
5,000
10,000
15,000
20,000
25,0002000
2001
2002
2003
2004
2005
2006
2007
2008
2009
20
10
2011
Re
cove
ry?
Multifamily (2+ units)
Townhomes
Single-Family Detached
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The New Normal
• Core vs. periphery land price differentials NOT
as steep as <2007: There is reasonably priced
land inside the beltway.
• Households have adjusted how they think
• Households showing preference for, and finding
value in, locating closer to the region’s core • Thus: Developers are finding value (and profit) in developing
closer to the region’s core
• In sum… the developing edge has lost some
formerly-perceived advantages
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Residential
Building
Permits in
2011
Source: Metropolitan Council Residential Construction Survey
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Residential
Building
Permits in
2011:
Townhomes,
Duplexes,
Triplexes
and Quads
Source: Metropolitan Council Residential Construction Survey
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0 10 205 Miles ¯6/14/12
DTQ_TH
2 units
3 - 4 units
5 - 6 units
7 - 9 units
Over 9 units
No permits
1 - 9 units
10 - 24 units
25 - 75 units
Over 75 units
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0 10 205 Miles ¯6/14/12
DTQ_TH
2 units
3 - 4 units
5 - 6 units
7 - 9 units
Over 9 units
No permits
1 - 9 units
10 - 24 units
25 - 75 units
Over 75 units
#*
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#*
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Residential
Building
Permits in
2011:
Multifamily
Source: Metropolitan Council Residential Construction Survey
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0 10 205 Miles ¯6/14/12
Multifamily
No permits
1 - 24
25 - 74
75 - 179
526 (Mpls) & 621 (Bloomington)
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Under 15 units
15 - 49
50 - 99
100 - 150
Over 150 units
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Multifamily
No permits
1 - 24
25 - 74
75 - 179
526 (Mpls) & 621 (Bloomington)
#*
#*
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Under 15 units
15 - 49
50 - 99
100 - 150
Over 150 units
22 communities in 2011
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Recent affordable housing
production in the Twin Cities
metro
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Affordable Homes Added, 1996-2011
• 53,195 affordable homes
added:
– 12,749 rental units
– 40,446 ownership units
• 16 percent in the central
cities
• 24 percent in the
developed suburbs
• 54 percent in the
developing suburbs
2,296
5,188 2,770
2,237
2,867
Total Number of AffordableUnits Added, 1996-2011
Under 200
200 - 499
500 - 999
1,000 - 1,500
Over 1,500
Unincorporated Community or CommunitiesNot Under Council Jurisdiction
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Affordable Homes Added, 2011
•1,154 new affordable
homes added
– 876 rental units
– 278 ownership units
• 62 percent in the central
cities
Total Number of Affordable Units Added in 2011
No Affordable Units
Under 10
10 - 49
50 - 100
Minneapolis (510 Units)
St. Paul (212 Units)
Unincorporated Community or CommunitiesNot Under Council Jurisdiction
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Affordable Homes Added, 1996-2011
•25 percent of all new
housing units have
been affordable:
– 24 percent of ownership
housing production
– 31 percent of rental
housing production
Percent of All ResidentialUnits Added That Were Affordable, 1996-2011
Under 5
5 - 14
15 - 29
30 - 40
Over 40
Unincorporated Community or CommunitiesNot Under Council Jurisdiction
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Future expectations:
Preliminary Population, and
Households Forecasts for
2010-40
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About the Council’s forecasts
• April 2012: Preliminary regional forecasts to
2040
• April 2013: Preliminary local forecasts
• February 2014: Adoption of the Thrive MSP
2040 plan and final local forecasts
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Forecasting methods
• REMI PI+, a regional economic model, forecasts
employment and population, to reflect economic
migration
• ProFamy, a demographic model, converts
population forecasts into household types
• National GDP projections from the long-term
baseline forecast used by Minnesota’s State
Economist
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Preliminary regional forecast to 2040
2010 2020 2030 2040
Population 2,850,000 3,144,000 3,447,000 3,743,000
Households 1,118,000 1,293,000 1,464,000 1,576,000
Employment 1,548,000 1,743,000 1,943,000 2,118,000
Source: 2010 data on population and households from U.S. Census; 2010 data on employment from Minnesota
Department of Employment and Economic Development. 2020-2040 forecasts from the Metropolitan Council.
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Employment forecasted to grow 37%
Total growth 2010-40: +570,000
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Components of Population Growth
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Population forecasted to grow 31%
Total growth 2010-40: +893,000
2/3 from natural growth
1/3 from migration
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Population by Age
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Households by Household Type
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Households count will grow 41%
Forecast model
assumes household
behavior, by group,
will follow observed
past patterns.
Council staff are
continuing work on
the demographic
modeling of
households.
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The mix of households is changing –
and growing market segments will
drive new housing production
• Among the 458,000 net additional households by 2040
– 1/2 of new households: 1 adult (1 income)
– Doubling of senior citizen households (1-2 persons)
– Over 2/3 of new households will not have children
– New immigrant families prominent among those that
do have children
– Thus changing housing sotck needs
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Implications of the Council’s
forecasts on Thrive MSP 2040
planning: An aging population?
• Growth of the senior population from 307,000 in
2010 to 770,000 in 2040
• How will the Council’s policies help seniors have: – Appropriate places to live
– Access to community, services, recreation
– Adequate transportation
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Implications of the Council’s
forecasts on Thrive MSP 2040
planning: Housing affordability?
• 1/2 of new households: 1 adult (1 income):
– How will the region’s policies ensure an adequate mix
of housing affordability?
– How might transit and transportation policies ease the
cost burden on the region’s households?
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Work in progress: How will we
assess affordable housing
need going forward?
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Heard through Thrive MSP 2040
listening sessions
• Location mismatch of affordable housing with (or
without) transit service
• Cities want preservation/rehab of affordable
stock to count toward affordable housing goals
• Market-driven production, without public sector,
doesn’t always match identified housing needs • Example: Land guided for medium-/high-density being reguided
for single family detached?
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Affordable Housing Need targets
from 2006
Based on the Next Decade study, Council and
partners expected:
• 7,200 existing under/unserved low-income HH
• + 64,100 growth in low-income HH (10 years)
• – 20,300 units become affordable to low-income
HH via depreciation (10 years)
• = 51,000 remaining need for newly built units
(over 10 years)
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Local allocation of Affordable
Housing Need targets from 2006
• How much households growth 2010 to 2020 – AHN targets in the range 2% to 52% of forecasted households growth
• Jobs / workforce balance – Higher expectations where local low-wage jobs outnumber local low-
wage workforce
• Credit for existing affordability – Is at least 30% of existing (year 2004) housing affordable?
• Local transit service availability
• Result: AHN targets in the range 2% to 52% of
forecasted households growth • www.metrocouncil.org/planning/Housing/AffHousingNeedJan06.pdf
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Local allocation of Affordable Housing Need
targets from 2006
= Highest
expectations as
% of growth
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Affordable Homes Added, 1996-2011
2,296
5,188 2,770
2,237
2,867
Total Number of AffordableUnits Added, 1996-2011
Under 200
200 - 499
500 - 999
1,000 - 1,500
Over 1,500
Unincorporated Community or CommunitiesNot Under Council Jurisdiction
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How will we assess affordable
housing need going forward?
• Recognize the 2006 targets are policy-based – Prioritized affordable housing production in places with low-
income workforce need + transit service
• Incorporate market dynamics and opportunities
into our assessment – Low-income households gravitate toward low rents
– Market dynamics favor low-income location in those same
neighborhoods
• Find the right balance: policy goals and market
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Spatially Weighted Rent Averages: Apartments Rent Equivalent Average (Weighted)
GISLibrary.DBO.TAZ2000
WRENTAPT
Less than 700
700 to 899
900 to 1,099
1,100 to 1,299
1,300 to 1,750
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Rent Equivalent Average (Weighted)
GISLibrary.DBO.TAZ2000
WRENTSFD
Less than 1,400
1,400 to 1,799
1,800 to 2,199
2,200 to 2,599
2,600 to 4,000
Rent Equivalent Averages: Single Family Homes
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Housing Market Outlook
and Affordable Housing in
the Twin Cities Metro
Todd Graham [email protected]