May single-family permits fall 13%

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Single-family housing starts are still far below last year’s pace as the spring home-buying season heats up, but the gap between 2022 and 2023 is narrowing.

In May, cities in the 13-county Twin Cities metro area permitted 487 new single-family houses, down 13% from May 2022, according to the Keystone Report. Year-to-date single-family permits now stand at 1,742, down 38% from a year ago.

Homebuilding permits and planned units have been in negative territory all year. Still, in a hopeful sign, the percentage decrease in May was slight compared to April (-70%), March (-72), February (-48%) and January (-46%).

“We see that as an improvement,” James Vagle, CEO of Housing First Minnesota, said Friday.

Multifamily permit activity continues to slide sharply, however. During the past month, metro area cities issued permits for 514 new multifamily units, down 66%, which brings the year-to-date totals to 2,190 planned units, down 56%, according to Keystone.

Overall in May, cities permitted 1,001 new homes, down 52%, which brings the year-to-date totals to 3,932 units, down 49%.

Builders have blamed rising interest rates in part for the steep decline in homebuilding. Hoping to tame inflation, the Federal Reserve has raised its benchmark rate for 10 straight meetings to about 5.1%, a 16-year high, as reported by the Associated Press.

However, Fed officials have signaled in recent speeches that “they’re likely to support a pause in rate hikes at their next meeting in mid-June,” AP reported.

Despite the obstacles, the spring building season has been “a little stronger” than a lot of single-family builders anticipated, said Ben Minks, president of Ramsey-based Capstone Homes.

“They are replacing inventory they have sold, so I think — at certain price points — the market is moving OK,” Minks said. “It’s not the torrid pace that it was a year and a half ago, but I think there are some positives in the market right now.”

Two cities — Maple Grove (47 permits issued for 294 planned units) and Rosemount (19 permits, 230 units) — accounted for much of the activity in May. Minneapolis, normally a hub of apartment construction, permitted only 34 units overall, down from 351 a year ago.

Outside of the metro area, Rochester issued 34 permits for 131 planned units.

The biggest projects permitted in May include a 212-unit apartment building at 14211 Akron Ave. in Rosemount (Roers Cos.), and a 248-unit building at 9820 Garland Lane N. in Maple Grove (KJPL Maple Grove LLC).

Reducing barriers to home construction was a top priority for builders during the 2023 legislative session. Most notably, Housing First Minnesota backed a bill that addressed what builders call “outdated zoning standards and aesthetic mandates” on new homes.

The “Legalize Affordable Housing Act” didn’t make it into law this year, but Vagle is optimistic that the legislature will take a fresh look at it next year.

“We did get indications from legislative leaders that that will be on the table in 2024. We hope that next year we will get into a larger zoning modernization discussion. We desperately need that in Minnesota,” Vagle said.

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