Housing Costs

1
Housing Costs Affordability

• Homes for All! 2006 Convention
• December 7, 2006

2
Definitions

• Affordable Housing
• Intended to provide housing for the truly
  disadvantaged in society
  
• Housing Affordability
• Housing cost is deemed affordable when less than
  30 of annual household income is expended for
  housing (owner or rental)

3
Home Price Trends
Source Jeff Allen, Minneapolis Area Association
of Realtors
4
Home Price Trends

• Over the past 14 years, median home price has
  increased 161 while median household income has
  increased 51
  
• Recently the housing market has seen price growth
  flatten, but this should regain momentum to 3-4
  growth annually
  
• For every 5,000 increase in cost, over 13,000
  households are priced out of the Twin Cities
  market

Source Minneapolis Area Association of Realtors,
National Association of Home Builders
5
Home Price Trends

• Why is housing so expensive?

6
Home Price Trends

• Land 25
• Labor Materials 50
• Regulation and Soft Costs 15
• Profit 10

7
Why is Housing so Expensive?

• Land Costs
• Cost of land includes grading, utilities and
  roads
  
• Raw lot cost is 50.3 of final lot price
• Development process/site improvements account for
  49.7 of lot price
  
• Final lot price accounts for 25 of home price

Source National Association of Home Builders
8
Why is Housing so Expensive?

• Direct Costs Sticks Bricks
• Includes actual materials used in construction
  process
  
• Wood, shingles, siding, etc.
• Construction hard costs account for roughly 50
  of final home price

Source National Association of Home Builders
9
Why is Housing so Expensive?

• Soft Costs Regulatory
• Land Development
• Restrictive zoning, approvals, etc.
• Home Building
• Building permits, impact fees, etc.
• Time Value
• Cost of delays in form of interest
• Altogether, regulatory costs add 10-20 to the
  final price of a home

Source National Association of Home Builders
10
Housing Affordability

• What measures can be taken to ensure that
  housing remains affordable?