Two months into 2018, there are growing signs it's going to be a busy-but-challenging year for Twin Cities homebuilders. A key challenge: trying to satisfy demand for entry-level housing at a time when labor is tight.

According to data compiled by the Keystone Report for Housing First Minnesota, a program of the Builders Association of the Twin Cities, 361 permits were issued to build 889 units during February. There was a notable increase in townhouse construction. During the month, 548 multifamily units were permitted, a 42 percent increase compared with last year. Single-family house permits increased to 341 in February from 332 in February 2017.

"As builders work to meet the demands of the market, we are seeing an increase in twin home and townhouse development," Tom Wiener, president of Housing First Minnesota, said in a statement. "These are great options for both millennials and boomers looking to downsize."

David Siegel, executive director of Housing First Minnesota, warned that the impact of the labor shortage on the market is starting to emerge. "This is a long-term structural challenge and is one of the primary concerns of builders for the foreseeable future."

These were the biggest projects permitted during the month:

• Frana Cos. was issued two permits to build 246 units.

• Reuter Walton Commercial was issued one permit to build 110 units.

• Yellow Tree Development Corp. was issued one permit to build 74 units.

These cities issued the most permits:

• Lakeville: 30 permits

• Plymouth: 26 permits

• Woodbury: 21 permits

• Savage: 20 permits

• Otsego and Minneapolis had 18 each.

Housing First Minnesota represents more than 1,200 builders, remodelers, developers and industry suppliers throughout the state.

Last week, the Associated General Contractors of America said that construction employment across the country increased by 61,000 jobs in February to the highest level since June 2008. Rising pay rates enabled the industry to attract more workers.

Total construction employment in February totaled 7.17 million, a gain of 254,000, or 3.7 percent, compared to the same month last year. Residential construction, which includes specialty trade contractors, added 107,500 jobs, or 4 percent, over the 12 months ending February. Nonresidential construction (building, specialty trades, and heavy and civil engineering construction) employment increased by 147,200, or 3.5 percent, over 12 months.

Jim Buchta