Housing fuels building boom, especially in Minneapolis

New housing helped fuel a record amount of construction in Minneapolis last year, with the city issuing more than $1.2 billion in building permits — the second year in a row that permits exceeded the $1 billion mark and double the amount spent just three years ago.

"This is more proof that we've pulled out of the recession in a really strong way," said Jeremy Hanson Willis, Minneapolis' director of community planning and economic development.

The boom has been driven primarily by strong demand for new rental housing, especially in the Uptown, North Loop and University of Minnesota neighborhoods, where dozens of upscale apartment buildings have been built to satisfy deep demand for rental units.

The $1.2 billion figure includes commercial projects, but the vast majority was housing. The city permitted 3,552 new units, including houses, rental apartments and for-sale condominiums, an increase of 249 units from 2012 and nearly 3,000 more units than 2011. There were some renovation projects and single-family houses in the mix, but only one new condominium building.

Because of the apartment boom, Minneapolis outpaced housing construction in the suburbs, where builders have focused on building single-family houses. New data from the Builders Association of the Twin Cities shows that more than 10,300 units were built throughout the metro area, only about half of what was built in 2003.

Attached housing, mostly luxury apartments, accounted for half of all new housing in the region and Minneapolis led the pack by a mile; Maple Grove came in second with just 608 units.

Bob Denk, vice president of forecasting and analysis for the National Association of Home Builders (NAHB), said that many communities are still struggling to regain the momentum they had before the crash.

"It's a fairly unusual position for a city to be in," he said.

Denk said that Minneapolis is fortunate to have a relatively strong economy, and that the city is one of many experiencing an urban renaissance. The key, he said, is job growth that creates new households that help drive the need for new housing. Much of that is coming from young people who move out of their parents' home and are splitting up with roommates and moving into their own apartments. Baby boomers who are shedding big houses in the suburb are contributing to the trend, as well.

On Tuesday, the NAHB's First American Leading Markets Index, which tracks housing and economic data nationwide, shows that only 56 of 350-plus metro areas have matched or exceeded their last normal levels of economic and housing activity.

Nationally, the index stood at 0.86, which indicates that based on current permits, prices and employment data, the nationwide average is running at 86 percent of normal economic and housing activity.

"More markets are slowly returning to normal levels and we expect this upward trend to continue," said NAHB Chairman Rick Judson, a homebuilder from Charlotte, N.C.

Hanson Willis said that with several big commercial projects on the drawing board, including the new Vikings stadium and Wells Fargo towers, he expects 2014 to set a record.

"And when you have more than $1 billion of construction in back-to-back years, that means thousands of new jobs," he said. "That's a huge economic boost to the city."

Jim Buchta • 612-673-7376