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Legislative News and Views - Rep. Linda Runbeck (R)

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Government policies affect housing affordability

Thursday, October 08, 2015

 

By Rep. Linda Runbeck

Did you know the Minneapolis-St. Paul area is ranked one of the best cities for housing affordability? That’s according to the 2015 Demographia International Housing Affordability Survey. This survey, now in its 11th year, collects and publishes data annually on 378 metropolitan markets in nine countries around the world.

The survey employs a measurement commonly used to evaluate housing prices called the Median Multiple. It compares the relationship between the average housing price in the area with the average household income. Housing is considered affordable if its rating is 3 or less meaning the average house price is 3x the average income in the area or less.

The Minneapolis-St. Paul area comes in at 3.2 in the 2015 survey, so we’re 17th among major U.S. markets and 106th internationally. The city of Rochester, Minn. comes in at 2.1 on the survey (fifth nationally and sixth internationally). According to the survey, “Severely Unaffordable” housing has a rating of 5.1 or more with the worst in the U.S. being San Francisco and San Jose at 9.2. Unbelievably, their average home prices are 9.2 times greater than average incomes!

Many major metropolitan areas are rated Seriously Unaffordable or Severely Unaffordable using this measurement. Australia had 33 of the 85 Severely Unaffordable markets, followed by the U.S. with 25.

What makes housing prices in some cities vary so dramatically from other cities? The answer is government policies. Often, the goal of these policies is to contain “urban sprawl,” so officials restrict the use of land, making it unavailable for development. This artificially creates land shortages and drives up the average price of urban properties and homes.

Unfortunately, under the latest “urban containment” policies put forth by the Met Council, home prices in our area will not remain “affordable”. The new policies are packaged in the Met Council’s “Thrive 2040 Plan” which aims to restrict land use via density mandates, income mix mandates and mass transit mandates.

Let’s take density. The Thrive 2040 plan for housing, approved by the Met Council earlier this year, will compel cities to increase housing densities from three units per acre to five units or 10 units per acre. In other words, cities will be prohibited from building neighborhoods of single family residences. As the supply of single family residences drops, the prices will rise.

The 2040 plan also mandates an income mix. The city of Andover has been notified that one-third of its new housing must be affordable to families making less than 50 percent of the area median income. And 60 percent of those units must be affordable to families of four making $24,850 or less.

For growing cities like Blaine, Hugo and Lino Lakes, population growth will be driven by Met Council mandates, not market demand. The Council appears ready to slow the growth in these cities in order to drive population increases in the core cities.

Is the Met Council’s new direction a response to a resurgence of people wanting to live in the core cities in multi-family housing? I don’t believe it is. Rather, it is the outcome of giving an unelected body only accountable to the Governor too much power and authority to tax and to issue mandates that have the force and effect of law and to compel city compliance by the issuance or denial of resources.

It is also the misbegotten belief that this unelected body of planners should control where we live, what our neighborhoods look like, how we travel and where we go.

Housing affordability is an enviable asset making the Minneapolis-St. Paul area truly a desired place to live. The Met Council’s policies threaten to destroy it.

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