Beware costly non-solutions to Minnesota’s affordable housing problem
We at the Center have long noted the relative expense of housing in Minnesota. And as I wrote earlier this year:
A price is not a problem so much as an indicator of a problem. A high price, which is how our affordable housing crisis manifests itself, acts like a big flashing light, screaming to us that demand is high relative to supply. The price is the symptom; the supply-demand mismatch is the illness.
In an op-ed for the Star Tribune, Jim Solem, Kit Hadley, Tim Marx, and Mary Tingerthal echo this point:
Housing production in Minnesota plummeted with the Great Recession (from more than 25,000 units in 2006 to fewer than 10,000 in 2011). The pace has picked up (almost 34,000 units in 2021), but not enough to keep up with household growth and to replace lost units.
Because we still don’t have enough housing, rents and house prices have risen rapidly as demand has outstripped supply.
To identify what we have to do to solve this mismatch of demand and supply, we have to ask what caused it and to do that we have to ask why is that mismatch so much worse here than in other states?
To put it simply, affordable housing is rare in Minnesota because it is effectively illegal to build it here. We impose taxes, fees, and regulations that are more onerous than in other states, so we have less housing and higher prices than they do. In another Star Tribune op-ed, Zak Yudhishthu writes:
Across many Minnesota towns and cities, housing restrictions are making housing more difficult and expensive to build. These restrictions come in many forms, such as minimum lot sizes, zoning that blocks multifamily housing, parking requirements on new developments and aesthetic requirements. Each of these rules biases new housing toward more expensive forms, and in the aggregate they reduce the amount of housing.
The solution is to reduce the burden of these taxes, fees, and regulations.
There are those who don’t see it this way. ‘Advocates’ are reported to want to spend $2 billion of the state’s forecast budget surplus on ‘affordable housing.’ This is, of course, simply asking the state government to spend $2 billion fixing a problem it partly created in the first place (local governments are at least as responsible). And it does nothing, of course, about the excessive taxes, fees, and regulations that have caused this situation.
But with a $17.6 billion surplus, politicians — never the most responsible custodians of your money — will find it very hard to resist calls to spend.