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Home My WebLink About2020-01-29_07_00_AM-Advisory_GroupsAgenda Housing Strategy Task Force City of Edina, Minnesota City Hall Community Room Wednesday, January 29, 2020 7:00 AM I.Call To Order II.Attendance III.Approval Of Meeting Agenda IV.Approval Of Meeting Minutes a.Minutes: January 14, 2020 V.Discussion Items a.Max%eld Study VI.Adjournment The City of Edina wants all residents to be comfortable being part of the public process. If you need assistance in the way of hearing ampli%cation, an interpreter, large-print documents or something else, please call 952-927-8861 72 hours in advance of the meeting. Date: January 29, 2020 Agenda Item #: IV.a. To:Members Item Type: Minutes From:Danielle Boschee, Communications Specialist Item Activity: Subject:Minutes: January 14, 2020 Action CITY OF EDINA 4801 West 50th Street Edina, MN 55424 www.edinamn.gov ACTION REQUESTED: INTRODUCTION: ATTACHMENTS: Description Minutes: January 14 2020 Draft Minutes☐ Approved Minutes☐ Approved Date: Click here to enter a date. Minutes City Of Edina, Minnesota Community Room January 14, 2020 7:00 AM I. Call To Order The meeting commenced at 7:14 AM II. Roll Call Present: Co-Chairs Hornig, Members Brown, Burke, Kitui, and Koon; Staff Liaison Hawkinson; Staff Boschee Absent: Co-Chair Hunt and Member Siekman III. Approval Of Meeting Agenda (with additions) Kitui moved, seconded by Koon to approve the agenda; motion carried Discussion items a and b addressed; c and d were moved to a future February meeting IV. Approval Of Meeting Minutes Koon moved, seconded by Kitui to approve the minutes; motion carried V. Discussion Draft work plan key Issues 1. Finance/economics/City resources 2. Affordable housing 3. Community drivers 4. Housing stock VI. Adjournment The meeting adjourned at 8:46 AM. Date: January 29, 2020 Agenda Item #: V.a. To:Members Item Type: Report / Recommendation From:Stephanie Hawkinson, Affordable Housing Development Manager Item Activity: Subject:Maxfield Study Discussion CITY OF EDINA 4801 West 50th Street Edina, MN 55424 www.edinamn.gov ACTION REQUESTED: None. INTRODUCTION: Mary Bujold will present the Maxfield Study Findings. ATTACHMENTS: Description Presentation Housing Market Study Summary and Key Findings Presented to: Edina Housing Task Force Presented by: Mary Bujold | Maxfield Research & Consulting, LLC January 29, 2020 Maxfield Research & Consulting, LLC is a full-service real estate advisory company providing strategic value to our private and public sector clients’ real estate activities. Overview 35+ years experience Diverse client base Multi-Sector Capable residential commercial public + private entities Market driven strategies Recommending highest & best uses Provide actionable plans Maxfield Research & Consulting, LLC OBJECTIVE Provide an analysis of housing needs for the City of Edina APPROACH Collect and analyze demographic, economic and housing market data for Edina and adjacent communities to develop a framework for meeting housing needs in the City PROJECT DELIVERABLES •Short and long-term housing needs •Recommendations guiding future housing development •Comment on existing tools/policies to achieve goals KEY DATES •Data collection: 4th Quarter 2019 •Draft: January 2020 •Presentation: January 29, 2020 •Final Report: To be Delivered Project Scope 12% Growth Rate in Edina from 2010-2020 Highest growth rate among senior population… Young Baby Boomers (55 to 64 age cohort) largest adult demographic in Edina today (15%) Seniors 65 to 74 largest growth over next ten years (12.4%); 25 to 34 (11.7%) Household size increased, now decreasing: 2000: 2.26 |2010: 2.32 2020: 2.29 | 2030: 2.23 Living Alone largest group, but Married w/Child inc. Median HH Income 39% higher than Hennepin Co. Median Income (2019): •$107,757 –Edina •$77,509 –Hennepin County •$79,195 –Twin Cities Metro Area 2020 Median income •Non-seniors: $154,995 •Seniors: $71,096 Income disparity by tenure (2019) •$129,679 (owner) vs. $59,886 (renter)Projected increase by 2025: •10% to $118,770 (2% annually) Employment Roughly 45,000 jobs (covered employment) Key Industry Sector Jobs: •Education & Health Services: 24% •Professional & Business Services: 11% •Retail Trade: 10% Edina a job importer Avg. weekly/annual wage: •$1,252 | $65,104 (Edina) •$1,221 | $63,492 (Hennepin) •$1,244 | $64,688 (Metro) 92% of jobs in Edina are from commuters 26% of Edina residents commute to Minneapolis SF and Multifamily Avg/Yr Similar since 2010 From 2010 through Sep 2019, 837 new housing units were constructed •Avg. 87 total units/year New Construction Activity •Avg. 40 SF homes •Avg. 2 Townhomes •Avg. 45 Multifamily units Tear Downs Have Been Significant Tear Downs/Avg Values The number of tear downs rose from 21 in 2009 to 115 in 2015 and have decreased modestly in each year since then. The average value of homes before tear down has remained relatively consistent as have the values of the new homes. Nearly all new homes rebuilt have average values of more than $1M. Can we expect this trend to continue? How is housing affordability affected by this? Low Rental Housing Vacancies Overall 4,813 units | 57 properties 4% vacancy rate Market Rate 4,654 units | 55 properties 4.0% vacancy rate Avg. monthly rent $1,203 Avg. PSF rent: $1.31 Affordable/Subsidized 149 units | six properties 3% vacancy rate (excluding Nolan Mains) 5% Vacancy = Market Equilibrium Hazelton Onyx Development Pipeline 1,257 rental units in process 962 market rate/395 affordable 43 MR/3 AFF under construction 784 MR/202 AFF approved Rental Housing Cost Burden Rental: 42% of Edina renters are cost burdened •43% Metro Area/37% PMA Remainder 22% of Edina owners are cost burdened •20% Metro Area/17% of PMA Remainder Cost Burden: more than 30% of gross income allocated to housing Senior Housing Inventory Senior Inventory 2,311 units | 23 properties 5.8% Overall vacancy rate Avidor 7500 York Cooperative 5% -7% Vacancy = Market Equilibrium Home prices in Edina highest of its neighbors Edina’s median home value much higher than surrounding cities 2019 $465,000 = Edina $275,000 = Bloomington $399,000 = SW Mpls $350,000 = Eden Prairie $345,000 = Minnetonka $300,000 = St. Louis Park Low Inventory | Prices High Active Listings (2019) Listings: 258 active Median price: $799K for Resales/$1.46M New 93% of listings are for SF Avg. Price Per Sq. Ft. SF: $209/PSF MF: $168/PSF New: $301 SF/$686 MF New Construction Overall $1.4M SF $700K MF Teardowns: $1.3M+ New PSF cost: Edina $300 SF $686 MF Metro Area $175 SF $187 MF Pricing Most new construction –owned association-maintained properties Not considered affordable compared to Metro Area averages Targets upper-bracket buyers Naturally Occurring Affordable Housing (NOAH) 60% of existing rental units in Edina affordable at 80% AMI or less 22% of existing rental units in Edina affordable at 60% AMI or less Naturally Occurring Affordable Housing (NOAH) •The newest rental properties are are affordable to households with incomes at or above 80% AMI •Affordability increases somewhat with the age of the property as those built expanding down to a portion affordable at 60% AMI •The highest proportion of units with rents affordable to households with incomes at or less than 60% AMI were built prior to 1980 (1960s/1970s); however, proportion still remains small Demand Overview Household growth & tenure Turnover Income-qualified households Demand by product | Preferences Demand Driver Examples •Demographics •Economy & Job Growth •Consumer Choice | Preferences •Turnover/Mobility •Supply (i.e. Existing Hsg. Stock) •Replacement need (i.e. functionally /physically obsolete) •Financing Demand Assumptions/Methodology Household growth adjusted for local factors (i.e. building permits, land availability, areas zoned for higher density, etc.) Demand Summary Demand for 3,000 units to 2030 (for-sale and rental) Note: Demand subtracts projects in the pipeline and senior supply Demand for nearly 1,600 senior units by 2030 Note: Demand for senior hsg is cumulative Single-Family Housing Recommendations Single-Family Home Single-Family Home 68 homes (rebuilds in 2019) (Demand –47 homes) 2020-2025 Demand for new SF homes across all prices; however cannot build entry-level (land/labor costs, etc.) Lot supply highly constrained (replacement occurs through tear-downs) Demand for smaller lot single-family, but even on small lots, prices are exceptionally high 40 Twinhome/Detached Villas (Demand for 135 units) 2020-2025 Increasing demand for attached product Again, even upper-middle market pricing is a significant challenge Potential housing types: Twin homes/duplex Townhomes/row homes Detached townhomes/villas Condominiums making a comeback Multifamily For-Sale Recommendations Hawthorne Villa Homes 5120 France Demand for 300 units (2020-2025) •250 affordable •50 subsidized Demand for additional affordable rentals Recommend the following types: Affordable rental –apartment- style Incorporate portion of low-income Rental Housing Recommendations 71 France Ponds of Edina Senior Housing Recommendations Demand for 1,600 units over the next ten years (across all service levels) Recommend the following (five years): Senior coop./Owner (50 –80 units) AFF AA Rental (150 units) MR AA Rental (100 units) Independent Lvg (80 units) Assisted Living (40 units) Memory Care (30 units) Additional demand 2025-2030 Brookdale Edina Yorkshire of Edina •Growth picked-up last decade| HHs growing faster than population 2020+ •Growth in 25 to 44 cohorts; but 65+ population growing most rapidly •Living alone 32% of HHs| Married w/o children (29%); Married w/children has risen in Edina, atypical of other neighboring communities •Strong HH incomes| Median renter income is 38% higher than Metro Area •Low unemployment rate | Job inflow | Higher wages (Healthcare/Prof Services) •Older multifamily rental stock | recent MR construction | 1,260 units in pipeline •22% of market rate units “affordable” at 50%-60% AMI |60% @ 80% AMI or less •Senior housing performing well | New product will be needed in the future •For-sale market higher than neighbors| unaffordable to most entry level households | lack of supply •Fully-developed character and high median income have fueled a dramatic rise in Edina home prices •How to produce affordable housing? Need a mix of tools Summary •New ownership housing in Edina out of reach for most households •Lack of new affordable rentals (GO and Sr) •Tear-downs may decrease; how to renovate older housing and preserve its affordability •Encourage larger affordable rental properties •Consider targeting city owned sites or those w/city as all or a portion affordable •Need a balance mix of tools to create affordable housing •These may include: –Land write downs –Tax abatement or deferrals –Housing Trust Fund/Land Trust –Inclusionary Zoning –Accessory Dwelling –Land Use Housing Needs/Policies 2020 Outlook & Trends Economic Conditions Healthy, yet unknowns… •Longest economic expansion in U.S. (126 months as of Dec. 2019) •Consumer Confidence is strong | Stock market @ all-time high •Full employment –MN @ 3.3% vs. Metro Area 3..% (Dec 2019) •Labor shortages: lack of workers, not jobs (constraining growth) •Job openings in MN @ all-time high (esp. skilled labor) •Wages finally increasing at a rate above inflation in some industries •Inflation estimated @ 1.8% in 2019 & 2.0% in 2020 •2019 GDP: 3rdQ 2.1% | 2020 est. 1.7% •Housing: lack of supply/inventory is holding back economy •Peak of cycle…downturn in 2021 or 2022??? •Tariffs, trade war, global weakness…unknowns??? For-Sale Housing Market •Home prices continue to rise due to tight market although sales volume has decreased •Low supply of homes for-sale; especially entry-level (sub $250K) •Mortgage rates low…increasing affordability (sub 4%) •Buyers on sidelines or losing interest…back in market w/more supply •Home Prices appreciating faster than wages/income gains •First-time home buyer % remains low •Tax reform: negative on 2nd home buyer, higher-priced markets •Older adults & seniors holding real estate assets longer •Distressed properties: < 2% of market •New construction unable to keep up w/demand •Builders unable to deliver affordable new product (sub $300k-$400k) •Rising cost for new construction: lots, labor, materials, regulatory •Lot size compression •New single-family home sizes trending modestly lower •Expected rise in attached and other multifamily concepts •Significant price gap between existing homes & new construction •HH income gains lagging home pricing appreciation •Demand has historically moved out for affordability, but this is changing and younger households want to remain in closer in; will rent for a longer period or perhaps indefinitely New Construction Housing Rental Housing Market •Record setting apartment deliveries: 2019 (8k) & 2020 (11k) •Market peaking; construction expected to taper •New development continues to move out from the core •Low vacancies = pent-up demand •Rent growth expected to moderate with new supply •Barbell demand from Millennials & Baby Boomers •New product caters to smaller HH sizes & “lifestyle renters”, but is luxury and not generally affordable •Alternate rental products being considered (i.e. single-family rentals; condo rentals as investments; short-term rentals (Air BnB) •Challenges delivering new product @ reasonable price points Senior Housing Market •Record year in senior housing delivery past three years (2,000+ units) •Shift from non-profit developers to for-profit (85% in 2019) •Seniors continue to delay selling their homes…holding back supply •65+ population will triple in Metro Area by 2040 •Assisted living vacancies are soft in most developments •Middle market faces shortfall •Development costs continue to escalate, competition for land •Boomers (56 to 74) years away from services •Senior housing not an option for everyone Mary Bujold Maxfield Research & Consulting, LLC 612.904.7977 mbujold@maxfieldresearch.com www.maxfieldresearch.com http://twitter.com/realestatedev https://www.facebook.com/MaxfieldResearch/ https://www.linkedin.com/company/228591 Contact Information: Questions & Comments