Twin Cities housing shortage worst in the nation

Shortage of housing is one of the biggest issues facing metropolitan regions. But according to the Star Tribune, the Twin Cities have it worse than all regions in the nation.

The housing shortage in the Twin Cities is now the worst in the nation, topping even high-demand metros such as Los Angeles, Seattle, Denver and Austin, Texas. Last year a mere 4.6% of all for-sale and rental housing in the metro was vacant, according to a new analysis of U.S. census data of the nation’s 56 largest metros by the Minnesota Population Center.


The state is expected to be 40,000 houses and apartments short of what’s needed over the next five years to keep pace with population growth, a new estimate from the Minnesota Housing Finance Agency finds.

Excessive rules and fees to blame

During the pandemic, low interest rates, as well as remote work needs, drove up demand for housing. At the same time, disruptions to housing supply due to shortage of labor or materials, as well as COVID-19 restrictions, suppressed new construction.

The housing shortage issue, however, has been around in the Twin Cities. The main reason for that is excessive fees and regulations that get in the way of increasing the housing supply. As the Star Tribune article explains,

Metro-area developers say zoning rules and fees have limited their ability to build the kind of houses buyers can afford in the places they want to live. They blame rules that impose restrictions on everything from the size of the home to the number of garage stalls.

This is not too surprising considering this fact about the metro region:

Nearly three-quarters of residential land in the 13-country metro is zoned solely for single-family detached homes, according to a Star Tribune analysis. Almost two-thirds of that land also requires a minimum lot size of at least a quarter of an acre — with some minimums as large as 5 acres, zoning practices that experts say is directly associated with higher prices.

The argument that excessive rules and regulations make housing scarce and expensive is a point that American Experiment research has made numerous times. Our 2020 report Out of House and Home by lawyer and politician Jeff Johnson, for instance, outlines just how excessive regulations and fees make housing tens of thousands more expensive relative to nearby states like Wisconsin, which is in many aspects identical to Minnesota.

For example, a home built in Lake Elmo, Minnesota costs $47,000 more than the same home built by the same builder in Hudson, Wisconsin—just across the border. Likewise, a home built in Blaine, Lakeville or Victoria, Minnesota costs at least $70,000 more than the same home built by the same builder in the southwest suburbs of Chicago.

Rent control is not the solution to affordable housing

This November, residents of St. Paul and Minneapolis will be voting on whether to enact rent control. Advocates of rent control claim it keeps housing affordable for low-income renters.

Leaving aside the negative effects of rent control that are very apparent, this report proves that housing issues in the Twin Cities will only be solved by increasing the housing supply.

Before policymakers look into giving developers, builders, and investors even more reasons to stay away from the Twin Cities housing market by enacting rent control, they need to look into loosening regulations that delay and increase the cost of housing development.