We need more housing. - Metropolitan Council

The region’s residential development in 2018

Community Development Committee

We still need more housing.

June 3, 2019

2

• About the building permit survey

• Trends in residential development

– Has development leveled off?

– Is the region building enough new housing?

– Is the region providing choice with respect to housing type?

– Is the region providing choice with respect to location?

• Discussion

Overview

About the building permit survey

4

Building permit survey

• Data collected by the Council annually since 1970

• Developed in collaboration with local governments

• Validated with federal sources, other Council datasets

• 2018 response rate: 98.4%

• Single comprehensive look across the region

5

What we capture

• Housing type

• Number of units

• Permit type (new construction,

demolition, etc.)

• Location

• Whether age-restricted

• Value

• Nonresidential data

– Value

– Classification

6

What we don’t capture

• Tenure

• Affordability

• When units are started or completed

• Number of bedrooms

Coming later 2019

7

What we do with the data

• Summaries of development

– Community Profiles

– Interactive data visualization

– MN Geospatial Commons

• Key input into other data

sources

– Population estimates

– Foundation for affordable

housing production data

– Help advance a complete

count in the 2020 Census

Now available on metrocouncil.org/data

What are relevant trends in residential

development?

9

Residential development trends

Has residential development peaked? ?

Is the region building enough new

housing? ?

To what extent is the region providing

choice with respect to housing type? ?

To what extent is the region providing

choice with respect to location? ?

10

Permitted units: How many?

Source: Metropolitan Council Building Permit Survey.

Data reflect new construction only.

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

1970-2017

average:

15,327 units

per year

In 2018:

17,127

units

11

• Previous chart: just new construction (data for 1970 onward)

• Other kinds of permits also affect the housing stock

– Demolitions

– Conversions from (or to) commercial uses

– Remodeling that adds or subtracts units

• All subsequent slides: net housing change (data for 2000 onward)

Components of supply

12

Components of supply

5,258

6,032

11,10612,087

10,026

11,797

13,712

15,53416,492

2010 2011 2012 2013 2014 2015 2016 2017 2018

Added units

New construction

Conversion

Other addition

Lost units

Demolition

Other loss

Net change

Source: Metropolitan Council Building Permit Survey.

“Net change” is the total added units minus the total lost units.

13

Net change: How many?19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

2000-2017

average:

12,886 units

per year

In 2018:

16,492

units

Data on net change not available before 2000

Source: Metropolitan Council Building Permit Survey.

Data reflect net change resulting from all types of permits (including demolitions).

14

Residential development trends

Has residential development peaked? Not yet

Is the region building enough new

housing? ?

To what extent is the region providing

choice with respect to housing type? ?

To what extent is the region providing

choice with respect to location? ?

15

Housing unit growth: Peer regions

20.8%

12.9% 12.0%10.8% 10.5%

9.0%7.2%

5.3% 4.8% 4.8%

2.5% 1.6%

27.0%

17.4%16.1% 15.4% 14.8%

11.5%12.7%

8.5%7.2%

9.3%

-1.3%

0.4%

AUS DFW CLT DEN SEA PDX ATL MSP BOS SFO PIT CHI

Housing unit change (2010-2018) Population change (2010-2018)

Source: U.S. Census Bureau Population Estimates Program. Population growth rate includes only people in

households.

Divide these

→

How far

behind is

housing

production

relative to the

population

growth rate?

16

Housing unit growth: Peer regions

-23%

-26%-25%

-30%-29%

-22%

-43%

-38%

-33%

-49%

AUS DFW CLT DEN SEA PDX ATL MSP BOS SFO PIT CHI

How far behind

is housing

production

relative to the

population

growth rate?

[housing growth

exceeds

population growth]

Source: U.S. Census Bureau Population Estimates Program. Population growth rate includes only people in

households.

17

The importance of “healthy” vacancy rates

$0

$200

$400

$600

$800

$1,000

$1,200

0%

1%

2%

3%

4%

5%

6%

7%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: CoStar data on

multifamily rentals in the

seven-county Twin Cities

region. Data series begins

in the third quarter of 2009

(when the current period of

national economic

expansion began).

Rental vacancy rate

Average asking rent

Inflation

Average asking rent is

$175 higher than if rents

had risen with inflation

18

How far behind are we?

75,600 15,200

Units built since 2010 Census

(current vacancy rate = 3.8%)

Source: Metropolitan Council, 2018 preliminary housing stock and household estimates.

Additional units

needed for 5%

vacancy

19

Net change: How many?

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

An extra

15,600

units2000-2016 average:

12,733 units per

year

Source: Metropolitan Council Building Permit Survey.

Data reflect net change resulting from all types of permits (including demolitions).

20

Residential development trends

Has residential development peaked? Not yet

Is the region building enough new

housing?No, not even relative to other metros

To what extent is the region providing

choice with respect to housing type? ?

To what extent is the region providing

choice with respect to location? ?

21

Housing types

0

6,000

12,000

18,000

24,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Metropolitan Council Building Permit Survey.

Data reflect net change resulting from all types of permits (including demolitions).).

Share of total

net change,

2010-2018

Single-family detached

Duplex/triplex/quadplex

Townhomes

Multifamily

35%

-1%

7%

59%

22

• Forecasts of the “next 370,000

housing units” 2010-2040

Other

Single family detached

29%

Multifamily and attached

70%

Comparing forecasts and housing production

Multifamily and attached

65%

Single family detached

35%

Source: Metropolitan Council Regional Forecast and Building Permit Survey.

Data reflect net change resulting from all types of permits (including demolitions).

• Net change in housing units,

2010-2018

23

• Townhomes

– 2000-2009: 1/3 of all single-family permits

– 2010-2018: 1/6 of all single-family permits

• Duplex/triplex/quadplex

– Net loss in each of the last 12 years (-1,215 units total)

– Wiped out gains in 2004-2006

• Accessory dwelling units (ADUs)

– 2016: 29 ADUs added

– 2017: 27 ADUs added

– 2018: 18 ADUs added

The “missing middle”

Source: Metropolitan Council Building Permit Survey.

Data reflect net change resulting from all types of permits (including demolitions).

For units that tend to

be less expensive,

not many are being

added

24

Multifamily age-restricted permits

0

6,000

12,000

2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Metropolitan Council Building Permit Survey.

Data reflect new construction and conversions from commercial uses only.).

Share of total

permits, 2010-

2018

Older adults

Students or youth

General population

30%

5%

65%

25

Residential development trends

Has residential development peaked? Not yet

Is the region building enough new

housing?No, not even relative to other metros

To what extent is the region providing

choice with respect to housing type?

A mix of multifamily and single-family,

but not enough of the “missing middle”

To what extent is the region providing

choice with respect to location? ?

26

Cities with largest net change in 2018

-500 0 500 1000 1500 2000 2500 3000 3500 4000

Minneapolis

Saint Paul

Woodbury

Lakeville

Maple Grove

Eden Prairie

Apple Valley

Blaine

Chanhassen

Plymouth

Multifamily (5+ units)

Single-family detached

Other attached

Source: Metropolitan Council Building Permit Survey.

Data reflect net change resulting from all types of permits (including demolitions).

The most permits since

we began tracking!

27

Net housing change by community: 2018Net change in units, 2018

Added 3,652 units (Minneapolis) or

1,142 units (Saint Paul)

500 – 743 units

100 – 499 units

50 – 99 units

Fewer than 50 units

No additions or loss

Source: Metropolitan Council Building Permit Survey.

Data reflect net change resulting from all types of

permits (including demolitions).

28

Net housing change by community: 2010-2018Net change in units, 2010-2018

Added 20,730 units (Minneapolis)

5,706 units (Saint Paul)

900 – 4,112 units

450 – 899 units

Fewer than 450 units

No additions or loss

Source: Metropolitan Council Building Permit Survey.

Data reflect net change resulting from all types of permits

(including demolitions).

Because this map reflects nine years of permit activity, the

category boundaries are nine times the single-year map to

enable easier comparisons.

29

Net change by Thrive community designations

Source: Metropolitan Council Building Permit Survey.

Data reflect net change resulting from all types of permits (including demolitions).

Rural: 4.3%

Emerging Suburban Edge: 16.9%

Suburban Edge: 22.3%

Suburban: 18.4%

Urban: 8.5%

Urban Center: 29.6%

11,303 permits per year, 2010-2018

Rural: 9.1%

Emerging Suburban Edge: 22.0%

Suburban Edge: 28.7%

Suburban: 20.1%

Urban: 5.0%

Urban Center: 15.1%

14,091 permits per year, 2000-2010

30

Multifamily age-restricted permits (2010-2018)

4,315

10,608

25,387

0

132

3,308

5,537

9,372

3,140

Suburban Edge & EmergingSuburban Edge

Urban & Suburban

Urban Center

General population For students or youth For older adults

Source: Metropolitan Council Building Permit Survey.

Data reflect new construction and conversions from commercial uses only.).

Only 53% for general population

Only 44% for general population

31

Uneven development within communities

Source: Metropolitan Council Building

Permit Survey.

Data reflect net change resulting from all

types of permits (including demolitions).

Years before 2015 are excluded because

address-level permit data was incomplete.

Net change in units,

2015-2018

Added 250+ units

100-249 units

10-99 units

1-9 units

No change or lost units

32

Uneven development within communitiesNet change in units,

2015-2018

Added 250+ units

100-249 units

10-99 units

1-9 units

No change or lost units

Source: Metropolitan Council Building

Permit Survey.

Data reflect net change resulting from all

types of permits (including demolitions).

Years before 2015 are excluded because

address-level permit data was incomplete.

Areas of Concentrated Poverty

where at least half of residents

are people of color (ACP50s)

33

Residential development trends

Has residential development peaked? Not yet

Is the region building enough new

housing?No, not even relative to other metros

To what extent is the region providing

choice with respect to housing type?

A mix of multifamily and single-family, but

not enough of the “missing middle”

To what extent is the region providing

choice with respect to location?

Development is happening throughout the

region, but not in all places within cities

34

What’s next?

• Recession predicted in next couple years → housing demand drops

• Ownership market analysts predict:

– Seller’s market will become more balanced

– Probably no major crash in home values at most price points

• Rental market analysts predict:

– Strong market fundamentals should yield ongoing apartment development

– Ongoing rent increases despite increased vacancy rates

– 1,800 affordable units should be delivered in 2019 (Dougherty Mortgage), but still not

enough to meet demand

35

Rent increases are slowing

0%

1%

2%

3%

4%

5%

6%

2011 2012 2013 2014 2015 2016 2017 2018 2019

Faster rent

increases

Slower rent

increases

Chart shows year-over-year changes in rent by quarters

(three-month increments).

36

Contributors

• Elias Anthan (IS)

• Deb Conley (Research)

• Jim Dudley (IS)

• Joel Nyhus (Research)

• Julie Opitz (IS)

• Matt Schroeder (Research; presenting)

– Matt.Schroeder@metc.state.mn.us

Discussion