In recent years a ton of political capital is being invested in promoting the idea that homes are too expensive and virtually out of reach for most Americans. This seems like an exaggerated position, so I went to the US Census to see if the information is corroborated with data. The Minneapolis-St. Paul Metropolitan area is a geographic area that enlarged its composition to include thirteen counties. For the purposes of this chart, I pulled just the original five-county area.
Comparing the total number of households (1,112,883) to the total number of housing units (1,170,643) leaves a generous surplus of 57,660 units. Of course, there is a need for a certain number of vacancies so people can circulate. But as long as there are vacancies it is difficult to make the argument that sellers and landlords hold a monopoly in the marketplace. As long as there are landlords with empty units then tenants impact the pricing through their choices.
Perhaps more importantly than availability is how the monthly cost of housing stacks up to monthly income. And in all three counties, the median debt-to-income ratios fall in what bank underwriters consider a comfortable range of 21-27%.
The cost of homes has indeed been on the rise. Many argue that the prices are simply regaining their position after plunging so deeply following the great recession. Perhaps the complaints that we are hearing so much about has more to do with the framing of where people think they should be able to live, rather than price.
If we go back one hundred years, families found shelter in properties similar to this one.
According to the tax records, this home has a foundation size of 660 square feet and a total above-ground living space of 1120 square feet. For a point of reference, that footage allows for a living-dining room, kitchen, and small room on the main level and a loft bedroom or perhaps two sleeping spaces upstairs as it does have a dormer window. The lot runs right along the railroad tracks and there is an outbuilding in the back of the property where they kept chickens.
I happen to know the history of this home. It was built in 1923 with insurance money. The original structure housed my grandfather’s family of seven kids and was destroyed when lifted off its foundation by a tornado in 1919. In all, forty-four city blocks in Fergus Falls, Minnesota, were destroyed. Families lived in a state of disrepair over several years until the funds came through for construction.
By mid-century, the one-level home (we call them ramblers in Minnesota) was the dominant style of choice. Huge tracks of land were parceled out into what became known as suburbia. Some would have you believe this was the result of a conspiracy, an evil plot to spread out and consume a lot of land. But the only force in play were families’ desires to live in two- or three-bedroom dwelling with one bathroom on a parcel they could call their own. Tour the new construction homes of today and you will note the conformity to consumer demand.
Both of these types of homes are available throughout the Twin Cities. Some are expensive, some are not. It all depends on their location. The dissatisfaction in the available housing seems to be about more than the structures of the homes. People seem to want to have more choices between areas. It’s not that there is no housing, it is that they feel the housing they aspire to is too expensive.
This story is compatible with what we see in the census numbers, but it doesn’t help those who desire a higher standard of housing. The solution here is to better match households with the neighborhood amenities which benefit them the most. Because what is acceptable at different stages of life will dictate where one finds the most suitable housing. And this should make people feel there is more value in their living situation.
The outcome of all this political interest in the cost of housing can be damaging. Recently the city of St. Paul established the most restrictive rent controls in the US. The data doesn’t support it. And already there are signs of disinvestment in housing projects. Activism without a cause always leads to inefficiencies.