New housing

With fewer than 200 permits for new single-family homes issued in Rice and Steele counties in 2020, the region’s housing shortage shows no sign of slowing. (Metro Creative Images)

Even as coronavirus ravaged so much of the local and national economy, the housing shortage that has become an increasingly troublesome barrier to continued economic growth showed no sign of abating.

Yet while the numbers vary by city, it appears that the need for new single-family homes isn’t being met fully by demand. After issuing 40 permits for new residential buildings in 2019, Northfield issued just 13 in 2020. According to city records, that’s the smallest number in seven years. That lower 2020 total might be seen as something of a reversion to the mean for Northfield, since the number of permits issued in 2019 was so high. Each year between 2014 and 2018 the city issued between 23 and 29 permits, according to the Rice County Assessor’s Office.

Neighboring Dundas made up for part of that decline, thanks to a pre-planned development in the Bridgewater Heights area. 34 new housing permits were issued by the city in 2020, according to Dundas City Administrator Jenelle Teppen. That total is the highest since 2006, when 109 single-family permits were issued amid another large planned development. By contrast, Dundas issued just six single family housing permits in 2019 and 19 in 2018.

In Faribault, the number of new housing permits jumped from 17 in 2019 to 22 last year. In total, the estimated market value of that new single-family housing construction comes in at more than $4.3 million, which breaks down to just under $200,000 per house.

Most crucially though, 2020 saw the approval of three multi-family housing developments that will have a big impact on Faribault’s economy and housing market for years to come. In total, those developments will cost more than $28 million and add 203 units to the market.

Even though it’s far smaller than either Northfield or Faribault, Lonsdale continues to be a popular place to build a home. According to City Planner Ben Baker, 34 new home permits were approved in Lonsdale during 2020, with an overall value of about $8.4 million.

Though that’s significantly higher than the numbers Faribault and Northfield posted, it represents a fairly significant decline for Lonsdale. In 2019, the city issued 47 permits and the year before, it issued 46.

In Rice County’s rural townships, 44 single-family housing permits were issued, the same as in 2019. Bridgewater, Cannon City, Erin, Richland and Webster townships issued more permits than 2019, while Forest, Northfield, Shieldsville, Walcott and Wheatland issued fewer.

Steele County permits

In Owatonna, the total number of new housing permits issued was 35, according to records provided by Permit Technician Jennifer Nelson. The total estimated value of that new housing construction comes out to more than $10 million for an average of $285,714.

On the multi-family side, numbers were a bit more modest than Faribault but the city will still add 79 units between two projects. The combined value of those two developments, Eastgate Apartments and The Pointe @ Merchant Square Apartments, comes out to $10.83 million.

Other small towns in the area added but a handful of homes. In Morristown a permit for one new home was issued, in Blooming Prairie and Medford two new housing permits were issued, and in Ellendale three new housing permits were issued.

Boosting new housing construction is a priority across the region. Faribault is nearing the completion of a new housing study which will identify its market’s needs and challenges, while Owatonna completed one last year.

For those who can find one, a new house in Rice or Steele County can be appealing. The region benefits from lower property taxes and home values than metro area counties but is still in close proximity to the Twin Cities, with I-35 providing easy access.

However, lower property values are a double-edged sword because they don’t work out as well for builders as homebuyers. While home values in the Twin Cities are generally higher, the cost of building a home is comparable, so the incentive for builders is to build in the metro. The issue is compounded by the growth of local manufacturing and industrial businesses in Rice and Steele counties, along with the workforce shortage. When affordable housing isn’t available locally, it makes it much more difficult for those businesses to compete for employees.

In Faribault, the Lofts at Evergreen Knoll project at Western Avenue and Fourth Street NW will provide 76 rent-controlled apartments once complete, while the Straight River Apartments downtown will provide an additional 111 units. In addition to those two major developments, several other smaller projects are in the works.

Other ideas have been proposed to deal with the housing shortage, from a mobile home park to a relaxation of some permit fees. However, discussion is on pause until the housing study is complete, which Faribault Community Development Director Kim Clausen says could come by the end of the month.

Reach Reporter Andrew Deziel at 507-333-3129 or follow him on Twitter @FDNandrew. © Copyright 2020 APG Media of Southern Minnesota. All rights reserved.

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