The Minneapolis-St. Paul metro area is a great place for ordinary folks to buy a house, put down roots and pursue the American dream. For now — but likely not for much longer.
Today, fully two-thirds of homes in the metro area are affordable to a family of four making $63,900 — which is 80 percent of the 2014 area median income for such a family, according to the Metropolitan Council.
But a new, top-down “housing policy plan” from the Met Council, our unelected regional government, now threatens to drive up housing costs for everyone — ironically, in the name of creating more affordable housing.
Freshly amended in July to more clearly define the council’s “expectations,” the housing plan is part of “Thrive MSP 2040,” the council’s 30-year master plan to transform how we live to conform to government planners’ vision of an ideal society.
The Met Council believes that too many of us live in single-family homes and have neighbors who look too much like us. Its housing plan has two primary goals: 1) to herd many more of us into dense enclaves of multifamily, stack-and-pack housing, and 2) to rearrange people in communities across the metro area in a government-approved mix of income and skin color.
To advance its crusade, the council’s new housing plan requires each sewered city among the metro area’s 186 municipalities to plan for and accommodate a precise, arbitrarily determined number of taxpayer-subsidized, high-density housing units for low-income people. Cities must set aside land and demonstrate how they will change land-use policies and use “fiscal tools” and community resources to do all they can to ensure that this housing is constructed.
The housing plan flows directly from the council’s 2012-14 “Choice, Place and Opportunity” project, which mapped every census tract in the seven-county area by race, ethnicity and income. The project’s purpose was to identify racially concentrated areas of poverty and high-opportunity “clusters”— essentially areas with low crime and good schools. Now the council is using its housing plan to disperse urban poverty by locating new low-income housing, wherever possible, in higher-income communities and municipalities on the suburban edge.
Here’s how the new housing plan will play out in Andover, a community of 32,000 on the far north edge of the metro area. The Met Council has instructed Andover to plan for one in three of all new housing units built there between 2021 and 2030 to be affordable to families making 50 percent of area median income or below. Sixty percent of those units must be affordable to people of extremely limited incomes: $24,850 or below for a family of four in 2014.
But Andover is a very challenging place for people in poverty to live. It has no public transit, job training or public-assistance-related services, and access to jobs is limited. Without transit, many of the people the council is pushing to move there will be stranded — and set up for failure.
It makes little sense to build housing for families of very limited means in Andover and similar outlying communities. Yet the council will pay “mobility counselors” to urge people to move there.
In short, the Met Council is attempting to compel cities to plan for and accommodate low-income housing without regard to whether low-income households will actually want to live there or will benefit from living there. Cities must plan for this even if, like Plymouth and St. Louis Park, they lack the vacant land necessary to comply with council-imposed numbers. For many cities, the exercise will be a costly and wasteful game of “let’s pretend.”
Moreover, the council is imposing these dictates despite the fact that the massive sums required to build all of this new housing are not there. The council says its plan will require more than $5 billion in public subsidies (or more than $500 million a year from 2021 to 2030) to meet its projected need for units affordable at 50 percent of area median income or below.
Clearly, funding on this scale is not in the cards — at the federal, state or regional levels. So the council is strong-arming cities to promote construction of the housing themselves by tying their receipt of vital transportation funding — and perhaps other council-controlled benefits — to compliance with its arbitrarily determined housing numbers. Cities that fall short may be penalized for failing to do the impossible.
The housing plan will have other adverse consequences. It will likely drive up the cost of single-family homes across the region by creating an artificial oversupply of land zoned as high-density. People will respond by leapfrogging outside the seven-county metro area to find the homes they can afford.
The plan will also drive up property taxes in many cities. New residents will generate increased costs for roads, parks, public safety and stormwater infrastructure, which residents paying market rate will be required to subsidize. Developing cities will face even greater challenges to growth if the council requires them to set aside substantial land for costly high-density, low-income housing — much of which may never be built.
Before the Twin Cities region embarks on a new, wildly ambitious $5 billion affordable-housing scheme, we should consider how efficiently and effectively such funds are being used now.
Today, the average public subsidy for metro-area affordable units — excluding single-room-occupancy facilities — is a whopping $185,000 per unit, according to the Met Council. In some cases, the subsidy is far higher. Per-unit costs for affordable-housing projects at Fort Snelling and the Pillsbury A Lofts — both historic properties — are a jaw-dropping $526,000 and $693,000 per unit, respectively. What’s affordable about that?
By contrast, the median home price in the Minneapolis-St. Paul area is $229,000 — just 24 percent more than the public subsidy for the average new affordable unit. Twin Cities-area taxpayers could actually buy three such market-value homes and rent them to low-income households rather than subsidize one small “affordable” unit in the Pillsbury A Lofts.
Taxpayers who live in those $229,000 market-rate homes often have to scrimp and save to make ends meet. Yet, in many cases, they are being required to subsidize people who live in newer, better-appointed spaces than they do.
If we are concerned about regional prosperity, we should move beyond a narrow focus on subsidizing “affordable housing” for a fraction of our population to the broader issue of how to make all housing more affordable.
Today, 25 percent of the cost of the average new home built for sale in our nation is attributable to government regulation, according to the National Association of Home Builders (NAHB). This includes permit, hookup and impact fees, and the costs of increasingly onerous building and energy codes, among other factors.
Prudent regulation is necessary, of course. But we must weigh the increases in, say, a home’s safety and energy efficiency against their cost. Every $1,000 increase in the price of a new home in the Minneapolis-St. Paul area places it beyond the financial reach of 2,000 additional households, according to the NAHB. By reducing the current regulatory burden in a responsible way, we can increase the affordability of all homes.
For decades, metro-area policymakers have struggled to identify policies that will consistently and reliably improve the lives of low-income residents. Yet poverty has been growing. Perhaps it’s time to look at the housing question from a different perspective.
Evidence suggests that the fundamental problem we face is not a shortage of affordable housing. It’s that too many people lack the education and stable family structure necessary to hold down a well-paying job.
The only way to effectively address this challenge over the long term is to adopt policies that will encourage the formation of strong families, bring about serious education reform, and promote a lower-tax, business-friendly economic environment that will generate the jobs our region’s people need.
Today, minority citizens are streaming into Twin Cities suburbs as they climb the economic ladder. The Met Council threatens to hinder that natural process by cultivating an entitlement mentality — confusing the ability to live somewhere with a right to live there.
A bedrock principle of the council’s new housing plan is that all metro residents have a right to live wherever they want — or in the council’s words, in the “communities where they would like to live”— regardless of their ability to pay.
But encouraging this entitlement mentality — which severs the tie between housing and work — is counterproductive to those it aims to help. It is demeaning, creates dependency, and in the long run is unlikely to lead to self-sufficiency or self-respect.
Today, African-Americans and other minorities are doing best — as measured by income, employment and homeownership — in cities that keep housing costs low and create the most jobs, especially for mid-skilled workers, according to a recent study by the Center for Opportunity Urbanism.
A regional housing policy should aim to make all housing more affordable — enhancing prosperity and expanding choice for people at every income level. And it should do so while respecting the rights of diverse local communities to determine where and how they will grow.
Today, “localism” is all the rage at hip restaurants and farmers markets. At the same time, as Forbes.com columnist Joel Kotkin has pointed out, urban planners — who may insist on locally sourced vegetables at their natural-foods store — are leading an “assault on local control” on a matter of far greater importance: a self-governing people’s ability to decide where and how they wish to live.
Katherine Kersten is a senior fellow at the Center of the American Experiment. The views expressed here are her own. She is at email@example.com.