VOL. 6 ISSUE 5, OCT. 2022
THE MINNESOTA HOUSING INDUSTRY NEWS SOURCE BY HOUSING FIRST MINNESOTA • HOUSINGINDUSTRYNEWS.ORG
INSIDE THIS ISSUE
State Supreme Court hears Puce v. Burnsville park fee case The Minnesota Supreme Court heard oral arguments in Puce v. Burnsville on Oct. 4 in the Minnesota State Capitol. Puce v. Burnsville is a challenge to the city’s park fee ordinance. Under Minnesota law, any development fees or dedications must have a direct connection to the project and the impact must be specific to that project. The case involves a commercial property at 2208 Old County Road 34 Place, where landowner Almir Puce sought to open an automobile shop and bakery. The city of Burnsville ordered Puce to pay a $37,804 parkland dedication fee before later knocking the fee down to $11,700. The city of Burnsville won in the initial challenge in Dakota County Court, and the Minnesota Court of Appeals overturned the district court ruling in favor of Puce. The appeals court found Burnsville illegally imposed a parkland dedication fee on a commercial developer without reasonably determining the city needed to acquire, develop or improve parkland as a result of the development. Puce v. Burnsville could have significant impact on the development process. The Burnsville City Council voted to seek further legal review after the Minnesota Court of Appeals ruled against the city, sending the case to be reviewed by the Minnesota Supreme Court. The League of Minnesota Cities submitted an amicus brief in favor of Burnsville and Housing First Minnesota submitted an amicus brief in favor of Almir Puce. Editor’s Note: Housing First Minnesota is the publisher of Housing Industry News.
Housing Industry News will continue to follow this story and provide updates in future issues of both its online and print editions.
Energy Code review PAGE 4
45L tax credit returns PAGE 7
Building material prices climb as lumber prices fall PAGE 9
Permits for new single-family homes have fallen 16% year-to-date in the Twin Cities.
Housing inventory remains low even as housing market shifts Across the country rising mortgage rates and inflation have had a stifling impact on the housing market. It is no surprise when considering that from the start of the year, mortgage rates have more than doubled, increasing from 3% in January to rates now over 6% this fall. Permits for new single-family homes have fallen 16% year-to-date in the Twin Cities, according to the Keystone Report for Housing First Minnesota. While that is a notable drop, single-family permit activity remains on pace with pre-pandemic construction levels, with a 1% increase in the number of single-family permits pulled year-to-date compared to 2019. “Rising inflation and climbing interest rates are having a clear impact on the housing market as more buyers are priced out of homeownership,” said James Vagle, CEO of Housing First Minnesota. 18 million U.S. households have been
priced out from purchasing a $400,000 home since interest rates rose from 3% to 6%, according to John Burns Real Estate Consulting. During its latest National Housing Market Update, Zonda noted that monthly payments have risen 40% to 60% depending on the market.
“Rising inflation and climbing interest rates are having a clear impact on the housing market as more buyers are priced out of homeownership.” James Vagle, CEO OF HOUSING FIRST MINNESOTA
“A lot of buyers have been pushed to the sideline and are going through some of the shock. I was talking to millennials from
South Dakota, Ohio and California — all three are renting and they all absolutely want to own a home. They were all trying to buy a home and have all been moved to the sidelines,” said Ali Wolf, chief economist for Zonda. “That is an opportunity for how we reach these buyers and get them to a point to convert to homeownership.” With so many buyers being priced out, overall housing inventory has started to tick up from its historic lows. Inventory of homes for sale in Minnesota climbed 2% in August, up to 13,271 homes for sale, but is still down 41% from the number of listings available in August 2019. Many builders are offering rate buydowns as incentives to help homebuyers with the affordability issues from rising rates, but Wolf noted that even when builders offer these incentives there seems to be a disconnect for the buyers. CONTINUED >> PAGE 7
Fed raises rates by 75 basis points In its continued effort to fight inflation, the Federal Reserve raised the federal funds target rate another 75 basis points mid-September. This is the third consecutive increase of 75 basis points. The large hikes are sending shockwaves through the financial markets and the overall economy. Federal Reserve officials have now hinted at plans to continue tightening monetary policy and keeping it tight for years to come. CONTINUED >> PAGE 8
HOUSING INDUSTRY NEWS
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