Housing affordability legislation review completed

Talk of comprehensive housing policy reform at the state Capitol has gained the interest of the Minnesota Department of Labor and Industry (DLI). In September 2021, DLI formed a Technical Advisory Group (TAG) to review several pieces of legislation expected to be part of the 2022 legislative session.

In the final two months of 2021, the TAG reviewed changes to the annual construction and development fee report, adult-size changing table requirements, energy code provisions and residential building permit fees. The state’s Construction Codes Advisory Council (CCAC) accepted the TAG reports at its January 2022 meeting.

Construction and development fee report

A bill from Sen. Mark Koran (R-North Branch) seeks to provide DLI with more direction on the construction and development report that municipalities are required by law to complete each year. Many of the recommended changes were already made by the department when it revised the most recent annual report format. However, one aspect does require legislative action: increasing the threshold beyond which the report is required for a municipality from $5,000 in permit activity to $7,000.

The TAG report was supportive of raising the threshold. In 2020, the most recent reporting year, 20% of municipalities did not meet the existing threshold of $5,000, and Koran’s bill would further reduce the number of municipalities required to complete the report. DLI pledged to work with stakeholders to address the remaining concerns over the report.

During the meeting, State Building Official Scott McLellan reported that DLI is working to increase transparency surrounding the report. Currently, reports are available on an individual basis and raw data must be requested by the public. DLI is working on a new interface that will allow the public to access multiple reports concurrently.

Adult changing tables

The Building Code TAG also reviewed a proposal from the 2021 session regarding adult-sized changing tables. Due to the requirements of these devices, there are structural design specifications that would be affected by this legislation. There are model code requirements surrounding this topic that are likely to be included in the 2024 International Building Code.

During the TAG review, the narrow focus of this provision, the pending model code language and significant impact on structural design specifications were noted. The TAG recommended proceeding with the model code language during the next code series update.

Code adoption and Energy Code payback

In 2020, the Senate Select Committee on Homeownership Affordability and Availability released legislation that would have kept the 2020 Minnesota Building Code in place until 2026, and called for state law to establish a payback period on the residential energy code for future energy code updates.

This proposal is similar to a concept included in drafts of Rep. Steve Elkins’ (DFL Bloomington) upcoming comprehensive housing reform bill. The TAG was unable to reach consensus on this proposal.

Square footage building permit fees

Both Elkins and Sen. Rich Draheim (R-Madison Lake) are proposing legislation that would calculate new-home building permit fees based on square footage as opposed to the current practice of valuation. Similar legislation has been introduced in other states.

According to Nick Erickson, director of research and regulatory affairs at Housing First Minnesota and a TAG appointee, there is no consistency when the valuation methodology is used. “Valuation is only ‘sticks, bricks and labor,’ and land is not included,” Erickson said. “When a builder is building the same home in Blaine, Prior Lake, Lake Elmo or Farmington, the valuation should be the same. Yet we see variances that are more than 50% of a home’s value.”

In the report accepted by CCAC, DLI would be supportive of a measure that would “adopt rules to establish a uniform statewide valuation based on a square foot construction cost for new one- and two-family dwellings and townhouses.” Sample legislative language was included in the TAG report for legislators to consider.

Next steps

The TAG review of these issues was completed to inform legislators and to help provide feedback from technical experts. “While addressing these issues is important and we commend DLI for its engagement, a piecemeal approach to affordability is inadequate,” said David Siegel, executive director of Housing First Minnesota. “Fixing housing in Minnesota is simply not possible without reimagining our state’s housing policies and our development approval processes,” stated Siegel in a letter to CCAC.

Siegel noted that a comprehensive approach to addressing the housing crisis was a recommendation of the 2018 State Task Force on Housing formed by former Gov. Mark Dayton. “Across the nation, state legislatures, including our own, are looking at ways to increase housing access and affordability by breaking down the barriers to desperately needed new housing construction,” Siegel wrote.

Charlie Vander Aarde, a TAG member with the Association of Metropolitan Municipalities, addressed CCAC and raised concerns over the proposed legislation. Local governments, the primary permitting entity for all new housing, have opposed similar housing affordability legislation over the past few years. Elkins, whose legislation was a central part of the TAG, said he was looking forward to integrating the report into his broader package that will “legalize affordable homes.” Elkins noted that his bill seeks to remove the financial incentives for local governments when they “over-zone for large executive homes,” an approach known as fiscal zoning.