Twin Cities Facing Affordable Housing Shortfall: Report

TWIN CITIES, MN — A new report by the Family Housing Fund says there is a lack of affordable housing in the Twin Cities area and, if the shortage isn’t addressed, could impede the region’s ability to attract new businesses and workforce.

According to data from the Bureau of Economic Analysis, the cost of living in the Minneapolis-Saint Paul metropolitan area is favorable compared to cities like Chicago, Denver and Seattle, but several regions — such as Charlotte, Austin, and Nashville — are more affordable and have lower costs of living.

However, recent trends suggest the Twin Cities region is on a similar trajectory to less affordable cities — one where rising housing prices and rents, increased traffic congestion and widening economic inequality erode the region’s competitive advantage, the report said.

Currently, more than 374,000 workers in the Twin Cities region are housing-cost burdened, which means they pay more than 30 percent of their income each month on housing costs. According to the report, there is a significant shortage of rental housing in the Twin Cities that is affordable to low and moderate income workers. Today, there is a gap of more than 63,600 rental units considered affordable to working households with incomes less than $25,000.

Other economic forecasts cited in the report predict the Twin Cities area to add approximately 368,000 new jobs by 2038, increasing the demand for affordable housing. It is estimated that the Twin Cities region is expected to add 273,000 new households (including workers in newly created jobs as well as all others) over a 20-year period. This suggests a need for 287,368 new housing units — assuming a five-percent vacancy rate — meaning the area would need to be adding 14,368 new housing units each year to successfully accommodate growth.

The conclusion? The Twin Cities region is not producing enough housing. From 2012 to 2017, the region added an average of 10,874 units per year, creating a gap of nearly 3,500 units. The report concludes that if the gap isn’t addressed, the area will exacerbate its affordable housing shortage and jeopardize the region’s economic competitiveness.

The report suggests adding more rental housing than currently available. Forecasts also indicate a shift towards more multifamily housing, which includes apartments, townhomes and condominiums. Today, about 40 percent of the region’s housing is multifamily, so the report suggests adding more emphasis on producing multifamily housing for new workers.

Additionally, about half of rental housing needed to accommodate new workers needs to be at rents below $1,250 per month to be considered affordable. About 80 percent of homes for sale needed to accommodate new workers need to be priced below $350,000. Currently, only about two out of every five homes for sale in Hennepin County are listed below $350,000, the report said.

Read the full Family Housing Fund report