Housing Market Outlookand Affordable Housing in  the Twin Cities Metro Todd Graham   todd.graham@metc.state.mn.us
Overview of the presentation• The Great Housing Market Collapse – and the  New Normal• Recent affordable housing productio...
The Great Housing Market CollapseSince 2007, BIG market adjustments:• Real estate bubble burst, housing prices fell• Core ...
2007-11: The lowest level of housing    production since World War 2 30,000              27,833                           ...
The Great Housing Market Collapse– and the New NormalSince 2007, BIG market adjustments:• Excess housing (built mid-decade...
Residential Permits by Planning Area100%90%80%                                                 Other Rural70%             ...
What happens next?• Region gains households: ~1% /yr• Musical chairs movement of households cannot  last. We are approachi...
Residential Permits by Product25,00020,000                                   Multifamily (2+ units)15,000                 ...
The New Normal• Core vs. periphery land price differentials NOT  as steep as before   •   There is reasonably priced land ...
Residential    Building    Permits in    2011Source: Metropolitan Council Residential Construction Survey
# ##                                   * *#                                      **                                       ...
#                                                   *                                                        No permits   ...
Recent affordable housingproduction in the Twin Citiesmetro
Affordable Homes Added, 1996-2011                              Total Number of Affordable• 53,195 affordable homes        ...
Affordable Homes Added, 2011                              Total Number of Affordable•1,154 new affordable         Units Ad...
Affordable Homes Added, 1996-2011                             Percent of All Residential                             Units...
Future expectations:Preliminary Population, andHouseholds Forecasts for2010-40
About the Council’s forecasts• April 2012: Preliminary regional forecasts to  2040• April 2013: Preliminary local forecast...
Forecasting methods• REMI PI+, a regional economic model, forecasts  employment and population, to reflect economic  migra...
Preliminary regional forecast to 2040                                           2010                2020               203...
Employment forecasted to grow 37%       Total growth 2010-40: +570,000
Components of Population Growth
Population forecasted to grow 31%     Total growth 2010-40: +893,000         2/3 from natural growth            1/3 from m...
Population by Age
Households by Household Type
The mix of households is changing –and growing market segments willdrive new housing production• Among the 458,000 net add...
Implications of the Council’sforecasts on Thrive MSP 2040planning: An aging population?• Growth of the senior population f...
Implications of the Council’sforecasts on Thrive MSP 2040planning: Housing affordability?• 1/2 of new households: 1 adult ...
Work in progress: How will weassess affordable housingneed going forward?
Heard through Thrive MSP 2040listening sessions• Location mismatch of affordable housing with (or  without) transit servic...
Affordable Housing Need targetsfrom 2006Based on the Next Decade study, Council and  partners expected:• 7,200 existing un...
Local allocation of AffordableHousing Need targets from 2006• How much households growth 2010 to 2020    – AHN targets in ...
Local allocation of Affordable Housing Needtargets from 2006                                           = Highest          ...
Affordable Homes Added, 1996-2011       Total Number of Affordable       Units Added, 1996-2011            Under 200      ...
How will we assess affordablehousing need going forward?• Recognize the 2006 targets are policy-based   – Prioritized affo...
Spatially Weighted Rent Averages: Apartments    Rent Equivalent Average (Weighted)    GISLibrary.DBO.TAZ2000    WRENTAPT  ...
Housing Market Outlookand Affordable Housing in  the Twin Cities Metro Todd Graham   todd.graham@metc.state.mn.us
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Housing Market Outlook and Affordable Housing in the Twin Cities Metro

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Housing Market Outlook and Affordable Housing in the Twin Cities Metro

  1. 1. Housing Market Outlookand Affordable Housing in the Twin Cities Metro Todd Graham todd.graham@metc.state.mn.us
  2. 2. 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?
  3. 3. The Great Housing Market CollapseSince 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
  4. 4. 2007-11: The lowest level of housing production since World War 2 30,000 27,833 26,078 25,000 21,362 20,000 15,000 10,000 6,029 8,710 5,000 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Source: Metropolitan Council Residential Construction Survey
  5. 5. The Great Housing Market Collapse– and the New NormalSince 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
  6. 6. Residential Permits by Planning Area100%90%80% Other Rural70% 54% 49%60% 57% 56% 52% 59% 66% 62% Rural Centers and Rural Growth Centers50% Developing Suburbs40%30% 19% 22% 36% Developed Suburbs 18% 22% 16%20% 18% 20% Central Cities10% 16% 12% 19% 16% 20% 10% 11% 11% 0% 2004 2005 2006 2007 2008 2009 2010 2011
  7. 7. 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
  8. 8. Residential Permits by Product25,00020,000 Multifamily (2+ units)15,000 Townhomes Single-Family Detached10,000 5,000 - 2001 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 Recovery? 2011
  9. 9. The New Normal• Core vs. periphery land price differentials NOT as steep as before • 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
  10. 10. Residential Building Permits in 2011Source: Metropolitan Council Residential Construction Survey
  11. 11. # ## * *# ** # * 0 # * 5 10 # * 20 Miles 6/14/12 ¯ # * No permits # * 2 units Residential 1 - 9 units 10 - 24 units # * # * 3 - 4 units 5 - 6 units 25 - 75 units ¯ # * 7 - 9 units Building 0 5 10 20 Miles Over 75 units 6/14/12 # * Over 9 units No permits Permits in #* 1 - 9 units 10 - 24 units # * # * 2 units 3 - 4 units 5 - 6 units 2011: # * # * 25 - 75 units Over 75 units 7 - 9 units Over 9 units Townhomes, Duplexes, T riplexes and QuadsSource: Metropolitan Council Residential Construction Survey
  12. 12. # * No permits # * Under 15 units 1 - 24 # * 15 - 49 # * Residential 0 5 10 20 Miles 25 - 74 75 - 179 6/14/12 ¯ # * 50 - 99 100 - 150 526 (Mpls) & 621 (Bloomington) # * Over 150 units Building No permits 1 - 24 # * Under 15 units # * 15 - 49 Permits in 25 - 74 75 - 179 # * # * 50 - 99 100 - 150 # * 2011: 526 (Mpls) & 621 (Bloomington) Over 150 units Multifamily 22 communities in 2011Source: Metropolitan Council Residential Construction Survey
  13. 13. Recent affordable housingproduction in the Twin Citiesmetro
  14. 14. Affordable Homes Added, 1996-2011 Total Number of Affordable• 53,195 affordable homes Units Added, 1996-2011 Under 200 200 - 499added: 500 - 999 1,000 - 1,500 – 12,749 rental units Over 1,500 – 40,446 ownership units 2,296• 16 percent in the centralcities 5,188 2,770 2,237• 24 percent in thedeveloped suburbs 2,867• 54 percent in thedeveloping suburbs Unincorporated Community or Communities Not Under Council Jurisdiction
  15. 15. Affordable Homes Added, 2011 Total Number of Affordable•1,154 new affordable Units Added in 2011 No Affordable Unitshomes added Under 10 10 - 49 50 - 100 – 876 rental units Minneapolis (510 Units) St. Paul (212 Units) – 278 ownership units• 62 percent in the centralcities Unincorporated Community or Communities Not Under Council Jurisdiction
  16. 16. Affordable Homes Added, 1996-2011 Percent of All Residential Units Added That Were Affordable, 1996-2011 Under 5•25 percent of all new 5 - 14 15 - 29housing units have 30 - 40 Over 40been affordable: – 24 percent of ownership housing production – 31 percent of rental housing production Unincorporated Community or Communities Not Under Council Jurisdiction
  17. 17. Future expectations:Preliminary Population, andHouseholds Forecasts for2010-40
  18. 18. 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
  19. 19. 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
  20. 20. 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 2,118,000Source: 2010 data on population and households from U.S. Census; 2010 data on employment from MinnesotaDepartment of Employment and Economic Development. 2020-2040 forecasts from the Metropolitan Council.
  21. 21. Employment forecasted to grow 37% Total growth 2010-40: +570,000
  22. 22. Components of Population Growth
  23. 23. Population forecasted to grow 31% Total growth 2010-40: +893,000 2/3 from natural growth 1/3 from migration
  24. 24. Population by Age
  25. 25. Households by Household Type
  26. 26. The mix of households is changing –and growing market segments willdrive 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 stock needs
  27. 27. Implications of the Council’sforecasts on Thrive MSP 2040planning: 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
  28. 28. Implications of the Council’sforecasts on Thrive MSP 2040planning: 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?
  29. 29. Work in progress: How will weassess affordable housingneed going forward?
  30. 30. Heard through Thrive MSP 2040listening 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?
  31. 31. Affordable Housing Need targetsfrom 2006Based 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 price adjustment / depreciation• = 51,000 remaining need for newly built units (over 10 years)
  32. 32. Local allocation of AffordableHousing 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
  33. 33. Local allocation of Affordable Housing Needtargets from 2006 = Highest expectations as % of growth
  34. 34. Affordable Homes Added, 1996-2011 Total Number of Affordable Units Added, 1996-2011 Under 200 200 - 499 500 - 999 1,000 - 1,500 Over 1,500 2,296 2,770 5,188 2,237 2,867 Unincorporated Community or Communities Not Under Council Jurisdiction
  35. 35. How will we assess affordablehousing 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
  36. 36. 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
  37. 37. Housing Market Outlookand Affordable Housing in the Twin Cities Metro Todd Graham todd.graham@metc.state.mn.us

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