New report shows population and household growth in the Twin Cities metro outpaces available housing

Posted In: Communities, Housing, Planning
Date: 8/10/2018

A new report from the Metropolitan Council this week shows that the Twin Cities metro region is facing a critical housing shortage as the population increases. In addition to needing more housing supply, changing demographics are increasing the need for more diversity of housing choices.

The MetroStats Research report, “What a difference a rate makes: population growth, housing production, and vacancy in the Twin Cities region since 2010,” (5 pages, pdf) shows that the seven-county metro region added 83,000 more households from 2010 to 2017, an increase of 7.4 percent. However, the number of housing units in the region during the same period grew by only 5.4 percent.

“A thriving region depends on an ample housing supply,” said Council Chair Alene Tchourumoff. “We put our region’s economic prosperity at risk if we fail to build more housing for the people who want to live in our region.

“For decades, our relative housing affordability has set the Twin Cities apart from the coasts and helped us attract and grow businesses, jobs, and talent,” Tchourumoff continued. “Today, however, a low vacancy rate combined with low housing production puts our region in a poor position to compete for continued economic growth.”

In addition to a growing population, changes in demographics and preferences are resulting in a need for more housing choices.

Researchers say today, more people live alone, there are fewer families with young children, the average household size is smaller, and there are more empty-nesters. This results in different housing preferences compared to when the baby boomers were younger, and people were getting married earlier and having more children.

While the region needs to continue to accommodate large households, demographic trends are shifting preferences toward housing that’s smaller and denser and in locations with connections to amenities.

More people, more housing

The 2017 estimated population for the seven-county region is nearly 3.1 million, a 7.9 percent increase over 2010 due, primarily, to more births than deaths, but also to net migration, more people coming than leaving. At the same time, the rate of household growth outpaced the growth in housing units, leaving a substantial gap.

Looking at the broader 16-county metro area, the disparity is even more pronounced. Comparing the broader region with peer regions, housing production in the Twin Cities area lagged behind all but San Francisco and Atlanta. Regions like Denver, Seattle and Portland all fared better at keeping residential construction aligned with growth.

When vacancy rate does down, housing costs go up

A healthy housing vacancy rate is considered to be 5 percent. The seven-county overall vacancy rate is currently 4 percent, down from 5.8 percent in 2010.

Since the Great Recession, the region has seen a slower pace of housing production. Though the region added more than 15,000 housing units in 2017, it would take another 13,500 units to achieve a vacancy rate of 5 percent, nearly double housing production in 2017.

Council researchers say a low vacancy rate can drive up housing costs. Combined with lack of housing and housing choices overall, the region is seeing the cost of housing increase dramatically.

About the data

More information is available in the Council’s MetroStats Research report, “What a difference a rate makes: population growth, housing production, and vacancy in the Twin Cities region since 2010.” (5 pages, pdf)



 

Posted In: Communities, Housing, Planning

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