Major changes ahead in Twin Cities housing

Here's how much the physical character of the Minneapolis-St. Paul metro area is likely to change between now and 2040:

• 820,000 additional people will live in the seven core counties.

• There will be no need for any additional single-family, large-lot houses. Zero.

That's an astonishing reversal from the housing pattern that has dominated this region's growth since the 1950s. But, as a new report commissioned by the Metropolitan Council suggests, demographics dictate market. And demographic projections suggest a sharp decline in the types of households that typically drive demand for single-family homes — younger families with children.

Between 1990 and 2010, households in their peak housing years (with adults ages 35 to 64) made up 80 percent of the growth in housing demand. By 2030, those households are expected to account for just 9 percent.

That's not to suggest that no new single-family homes will be built. Rather, it's to say that the current stock of homes can more than absorb all of the expected single-family demand, while the focus shifts toward building thousands of new, smaller units, either attached or on small lots and preferably with neighborhood conveniences and amenities close by. In other words, the trend is toward more density and more efficiency, both in the city and the suburbs.

Empty nesters are driving these changes. Adults over 65 accounted for just 20 percent of the new housing demand between 1990 and 2010, but they will drive 85 percent of the demand by 2030. A more general rise in households without children, coupled with a surge in immigration, is also expected to stimulate smaller-footprint living.

The housing report, "Trends, Preferences and Opportunities," written by University of Arizona real estate Prof. Arthur C. Nelson, was commissioned to help guide the Met Council's 2040 housing plan, scheduled to be completed late this year. If adopted, it would be the first such plan since 1985 and a welcome addition to regional thinking, given the sweeping changes just ahead.

Nelson sees the 1950-2010 era as an aberration in housing patterns or, as he calls it, "the baby boom time warp." In the coming quarter-century, he anticipates a return of the tighter live/work/shop neighborhoods that dominated during the streetcar era of the early 20th century.

Citing surveys, Nelson reports that more than half of Twin Cities residents would prefer to live in walkable neighborhoods, with shops and other attractions close by. But only about one in five has that option now. About 40 percent would choose to own or rent an apartment or a townhouse if it offered close-by shopping and a short commute, he notes. Of the 60 percent who prefer single-family homes, most (60 percent) would prefer a smaller lot if the surrounding neighborhood were walkable and filled with amenities.

Aside from changing demographics, unpredictable fuel prices and declining incomes play a part in these calculations, Nelson asserts.

As for commercial development, he predicts a redevelopment trend that will more than double the commercial space that was in place in 2010. "Nothing less than staggering," is how he describes changes that will fill up parking lots and find new purposes for older buildings.

That's good advice. Projections are tricky; unforeseen events could trigger a wholly different outcome. But the Met Council's most fundamental task is to anticipate, as best it can, the future market as a way to ensure "orderly and economical" development and to position the Twin Cities as a thriving competitor on the national scene.