Priced out of new construction

New construction housing in and around St. Paul is rare and expensive. Builders who want to make a profit build them large and expensive.  The limited number of homes for sale continues to drive up housing prices. Normally we could build our way to a more affordable housing market. The supply of homes for sale could be increased by building more houses.

According to the non-profit Housing affordability Institute 

A third of the cost of a new home in the Twin Cities comes from regulation and local policy.

Even without the added cost of all those regulations the price for new construction is unaffordable for most.

New construction costs source: Report “Priced Out”

The study also concluded that “The Metropolitan Council’s growth boundary is unique to the region and has resulted in significantly higher land prices inside the established line. In concert with municipal land decisions, a land shortage has emerged which has a rationing effect in key areas, driving up prices. Land inside the Metropolitan Council’s growth boundary can be 3.8-12.8 times more expensive than comparable land outside of the boundary. In cities around the country that do not have urban growth boundaries, we do not see these kinds of price discrepancies.”

“State-level regulations, including the administration of federal rules, also affects affordability. Recently enacted state-level regulations in Minnesota have added more than $13,000 in costs per home.”

Regulatory costs make building permits more expensive. There are a lot of fees bundled into the permit.



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2 Replies to “Priced out of new construction”

  1. While I would never argue that all regulations are pro-consumer (pro-home buyer, in this case), I think it would be fair to state that some of the regulations that cost homebuyers “extra” in Minnesota are related to health and safety — for example, a building code that requires a tighter structure envelope and more insulation than is required in much of the rest of the country and requirements for a Certificate of Occupancy that do not exist in, say, the state on our eastern border.

    Similarly, it would be fair to mention that the urban growth boundary you mentioned (which I presume is the Met Council’s MUSA line) may artificially restrict the housing supply, but it does discourage unchecked urban sprawl, which results in levels of infrastructure investment (sewer lines, fresh-water supplies, roads, services, and the like) serving entirely too few homes.

    Rural counties in Minnesota already do not pay their own way for the infrastructure they have; not considering the eternal future taxpayer costs of providing suburban levels of infrastructure to less-densely-populated segments around the metro area is a point of view that serves the housing market and those associated with it but does not serve Twin Cities metro taxpayers, who will be paying to maintain lightly-traveled State Trunk Highway X, several counties away, for the next 50+ years.

    This incomplete accounting is good for the temp work that new construction provides and certainly gives people in the real-estate business more to work with. But let’s not ignore the cost of maintaining that new environment when even urban cities and counties clearly have difficulty maintaining the infrastructure that already exists (potholed roads, aging bridges, old sewer lines, etc.).

    1. Teresa Boardman says:

      I am not suggesting that we don’t need regulations. Yes, I agree the MUSA line is important for curbing urban sprawl. In general, I don’t sell new construction. I see it as a possible way to ease up the shortage of affordable housing. We need more housing and affordable in St. Paul.

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