1. Affordable Housing Development Costs and Solutions
Senate Agriculture, Rural Development and Housing Policy Committee
March 8, 2018
Minnesota Housing | mnhousing.gov

2. Minnesota Housing | mnhousing.gov
Our Mission
Housing is the foundation for success, so we collaborate with individuals, communities and partners to create, preserve and finance affordable housing.
11/17/2018
Minnesota Housing | mnhousing.gov

3. Minnesota Housing | mnhousing.gov
Our Role
Demand for funding is far greater than amount of resources available
Allocating a scarce public resource requires a fair, transparent allocation process
Oversight, fiduciary responsibility to the public
Goal: a balance of projects addressing multiple public policy needs
11/17/2018
Minnesota Housing | mnhousing.gov

4. Understanding Cost Drivers
Hard construction costs for market rate and affordable are similar
Costs of labor and materials are volatile, which can cause costs to vary
Timeline of affordable housing development
Soft costs are the primary difference between market rate and affordable housing development
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Minnesota Housing | mnhousing.gov

5. Minnesota Housing | mnhousing.gov
Predictive Cost Model
Developed model that provides a benchmark for reasonable costs based on a building’s characteristics
Guides staff and board in making funding decisions
New construction of Housing Tax Credit properties in the metro tend to be the highest cost
Preservation in Greater Minnesota tends to be the lowest cost
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Minnesota Housing | mnhousing.gov

6. Minnesota Housing | mnhousing.gov
Cost Containment
Average Total Development Cost Per Unit – All Types of Development
Source: Minnesota Housing data, adjusted for inflation
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Minnesota Housing | mnhousing.gov

7. Minnesota Housing | mnhousing.gov
Cost Containment
Total Development Costs per unit 2003 – 2016 –
New construction Housing Tax Credit, Metro Area
Total Development Costs per unit 2003 – 2016 – new construction Housing Tax Credit, Greater Minnesota
Source: Minnesota Housing data, adjusted for inflation
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Minnesota Housing | mnhousing.gov

8. Policy Considerations
Public policy priorities:
Permanent Supportive Housing
Family Housing
Location
Balancing new construction vs. preservation
Durable, long-lasting materials
11/17/2018
Minnesota Housing | mnhousing.gov

9. Minnesota Housing | mnhousing.gov
Policy Trade-Offs
Large scale vs. small scale projects
High quality, durable materials vs. lower cost materials
Managing long-term public risk
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Minnesota Housing | mnhousing.gov

10. Minnesota Housing | mnhousing.gov
Best Practices
Assess costs using Predictive Cost Model
Added Cost Containment points to funding selection criteria
Address systemic cost drivers:
Process Improvements
Minnesota Cost Challenge
11/17/2018
Minnesota Housing | mnhousing.gov

11. Minnesota Housing | mnhousing.gov
Opportunities
Continue to focus on cost containment at all levels of government
Explore different construction models
Address other costs in collaboration with local government, investors and developers
Investor Requirements
11/17/2018
Minnesota Housing | mnhousing.gov

12. Commissioner Mary Tingerthal
Contact Information
Commissioner Mary Tingerthal
Ryan Baumtrog
Katie Topinka