Housing is a top-of-mind issue for cities and states throughout the country. While housing affordability has long been an issue in large, higher-priced cities, it is now increasingly a topic of concern for smaller cities and towns throughout the country. As of 2022, the median sale price for a single-family home was 5.6 times higher than the median income in the US. A variety of factors contribute to affordability challenges, including limited wage growth for low-income households and the rising costs of essential services like child care. However, the major contributing factor is a supply shortage – homebuilding activity is well below the pace needed to meet current and future demand.
For some, this may seem like an outlandish claim – in many cities and suburbs, apartment construction boomed between 2016 and 2020. Large western metro areas like Portland and Seattle saw significant increases in population. But what appears to have been a boom was, in reality, far less building than was common prior to the Great Recession.
Leland Consulting Group is currently working on a downtown plan for the small but growing town of Elk River, in Sherburne County, Minnesota. Elk River is an exurb located between Minneapolis and St. Cloud along the Mississippi River. Prior to the Great Recession, two condo buildings (which have since been converted to apartments) were built in Elk River’s downtown. As part of our market research, LCG used the SOCDS building permit database to understand countywide housing production. The resulting graph for Sherburne County, shown below, was extremely similar to other cities and counties where we work:
Housing Permits by Structure Type
Sherburne County, Minnesota
Source: US Department of Housing and Urban Development (HUD) SOCDS Building Permit Database.
Between 2000 and 2006, an average of 1,221 housing units were permitted each year. Between 2008 and 2012, permitting dropped to an average of 113 units per year. Since that trough, permitting activity has increased – since 2017, an average of 509 units have been permitted annually. However, permitting is still well below pre-Recession levels, and is not enough to make up for the subsequent downturn.
This is not just happening in Minnesota or in the suburbs and exurbs of larger cities. LCG is also currently working on updating the Transfer of Development Rights program in rural Douglas County, Nevada, located just south of Carson City. With the exception of 2021, the trend in Douglas County is the same as in Elk River – high levels of construction between 2000 and 2006, a significant downturn during the Great Recession, and a modest recovery in construction activity since 2013.
Housing Permits by Structure Type
Douglas County, Nevada
Source: US Department of Housing and Urban Development (HUD) SOCDS Building Permit Database.
In Grand County, Colorado, where LCG is working on a comprehensive plan update for the city of Fraser, permitting activity only began to recover from the Great Recession in 2021. Grand County is a resort area just west of Boulder and Denver. Between 2000 and 2007, the county permitted over 550 units per year. Between 2008 and 2020, that dropped to an average of 192 units per year. Although permitting did increase significantly between 2021 and 2023, the average was 264 units per year – far lower than in the pre-Recession period.
Housing Permits by Structure Type
Grand County, Colorado
Source: US Department of Housing and Urban Development (HUD) SOCDS Building Permit Database.
Again, the same pattern can be seen in Clallam County, Washington, where LCG is currently working on comprehensive plan updates for Port Angeles and Sequim. The 168 units permitted on average each year between 2017 and 2023 is far lower than the average of 334 units per year permitted between 2000 and 2006.
Housing Permits by Structure Type
Clallam County, Washington
Source: US Department of Housing and Urban Development (HUD) SOCDS Building Permit Database.
Increasingly, jurisdictions of all sizes understand that improving affordability in their communities will require increasing permitting and building activity. However, rising labor and material costs coupled with relatively high interest rates and limited funding (especially for affordable housing) are making it challenging for cities of all sizes to meet their housing goals. There are a variety of tools communities can use to make housing development more attractive, including zoning changes that improve development feasibility, streamlined permitting systems that allow projects to move more quickly, dedicated affordable housing funds, and programs like the Multifamily Tax Exemption (MFTE) in Washington.
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