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5 |MARKET UPDATE: AFFORDABLE RENTAL HOUSING IN THE TWIN CITIES
<br />PRODUCTION VS. NEED: BIG CHALLENGES REMAIN
<br />MEASURING AFFORDABLE RENTAL PRODUCTION VS. DOCUMENTED NEED
<br />The Metropolitan Council, the regional governing body for the Twin Cities, previously produced 2011-2020 affordable housing need
<br />estimates for each community in the seven-county metropolitan area. In the chart below, Dougherty Mortgage aggregated these
<br />figures by submarket, estimated the proportion of need correlating to rental units at or below 60% AMI, and determined to what
<br />extent production has satisfied need across the Twin Cities.
<br />PRODUCTION IS MEETING JUST ONE-FOURTH OF DEMAND
<br />Production is on pace to deliver about 10,400 new affordable rental units in the Twin Cities this decade; 8,926 have been/will be
<br />delivered thus far through 2018. Given the need estimate of more than 42,000 new units for the full decade, production will only
<br />satisfy about 25% of affordable rental demand. This represents an affordable rental market penetration rate of 7% of new
<br />households in the Twin Cities; however, the rate should be closer to 30%. The current decade's production shortfall carries forward
<br />in the form of higher numbers of cost-burdened renters and households living in crowded or substandard units.
<br />VAST LACK OF SUPPLY IN THE OUTER SUBURBS
<br />The lack of new affordable rental production is particularly acute in the second- and third-ring suburbs, where 55% to 65% of
<br />Twin Cities residents live and/or work. Each year this decade, the four outer suburban regions should have collectively added
<br />nearly 3,400 new affordable rental units to keep up with household growth. Instead, they have produced just 390 new units per
<br />year on average. By the end of this decade, affordable rental production will have fallen about 30,000 units behind need in the
<br />outer suburbs. Any effort to increase production of affordable rental units in the outer suburbs is vital.
<br />The outer suburbs have made the best progress with affordable senior housing. Approximately 56% of new affordable rental units
<br />for seniors have been built there. In addition to helping older adults stay in their long-time communities as their housing needs
<br />change, new affordable rental construction for seniors produces a positive effect on the ownership market; seniors moving to
<br />affordable rental housing often free up a single-family home that is suitable for a family with children.
<br />DETAILED REVIEW OF EACH SUBMARKET
<br />The following pages discuss production details and affordable rental need in each of the seven Twin Cities submarkets that
<br />Dougherty Mortgage tracks.
<br />Affordable Rental Housing Production vs. Need
<br />Twin Cities (7 Counties) l 2010 – 2019
<br /> New Affordable Estimated Affordable Affordable Progress Toward Remaining
<br /> Rental Units Household Rental Housing Rental Units Decade Rental Units
<br />Submarket Delivered1 Growth2 Penetration Rate Needed3 Production Goal Needed
<br />Minneapolis 2,649 18,234 14.5% 3,379 78.4% 730
<br />St. Paul 1,399 12,329 11.3% 2,100 66.6% 701
<br />First-Ring Suburbs 1,395 12,165 11.5% 3,078 45.3% 1,683
<br />Southeast Suburbs 1,157 21,094 5.5% 9,138 12.7% 7,981
<br />Northwest Suburbs 1,059 19,838 5.3% 7,086 14.9% 6,027
<br />Southwest Suburbs 651 26,163 2.5% 11,987 5.4% 11,336
<br />Northeast Suburbs 616 17,600 3.5% 5,288 11.6% 4,672
<br /> 8,926 127,423 7.0% 42,056 21.2% 33,209
<br />1) Dougherty Mortgage Multifamily Database.
<br />2) Metropolitan Council: Thrive MSP 2040 Forecasts, January 2018; 2010-2020 decade growth averaged over nine years.
<br />3) Metropolitan Council: 2011-2020 Allocation of Affordable Housing Need (10/4/17). Affordable rental (<60% AMI) need is calculated at 80% of the total
<br />need estimate for the Twin Cities, equating to 42,056 new affordable rental units needed in the current decade.
<br />2010 – 2018 (9 YEARS)FULL DECADE 2010 – 2019
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