Housing construction in the Twin Cities increased slightly last month, with most of the gain coming from a hefty increase in apartment construction.
During August, homebuilders were issued 680 permits to construct 1,355 housing units in the metro, a 3.5 percent increase in total permits and a 33 percent increase in total units compared with last year at this time, according to the Keystone Report for Housing First Minnesota.
While single-family home construction increased more than 3 percent compared with last year, attached housing — mostly upscale rental apartments — improved about 80 percent. (A single permit can be issued to build more than one unit).
"It's been a decent summer for Twin Cities homebuilders," said Tom Wiener, president of Housing First Minnesota.
Though single-family housing construction has been posting healthy gains in some areas, the industry is struggling to keep pace with 2017.
During the first eight months of the year single-family construction was 2 percent ahead of last year; multifamily units are down 16 percent.
"While we've seen steady growth, the market needs a stronger rise in new home construction to help balance the housing market," Wiener said in statement.
Throughout the Twin Cities metro, an unprecedented shortage of entry-level houses on the market is bolstering demand for townhouses and other housing that's affordable to first-time buyers and baby boomers who are looking to downsize from their family homes in the suburbs.
Construction activity in the Twin Cities metro mirrors national trends. During July, the latest month for national data, housing starts rose only 0.9 percent to a 1.168-million unit pace, according to the U.S. Census Bureau. Starts for May and June, however, were revised slightly lower. Analysts said that while housing construction has been below expectations, confidence in the industry remains strong.
Builders said the rising cost of land, labor and materials makes it difficult to build enough starter houses to satisfy demand.
"We have a serious housing-supply problem in the Twin Cities," said David Siegel, executive director of Housing First Minnesota. "We need to address the labor shortage, regulatory burden and fees that are holding back homebuilders and pricing out home buyers."
During the month, Lakeville issued the most permits (65), followed by Lake Elmo (45) and Plymouth (38).