A new report released shows the decline of homeownership in Minnesota, analyzing the housing shortage and high cost of construction in the state—both significant contributing factors to the declining homeownership rate.

The report, published by Housing Affordability Institute, highlights insights from Elliot Eisenberg, Ph.D., a housing economist whose experience includes previously serving as the senior economist for the National Association of Home Builders.

The paper investigates Minnesota’s homeownership rate, a metric in which it was once a regional leader. The Institute found a severe shortage in new home construction at the root of the problem, which has led to some of the highest construction costs in the region. This imbalance of supply and demand cascades into the existing home market and the rental market, driving up prices for all renters and potential homeowners. “This report highlights the consequences of not addressing the housing crisis,” said Peter Coyle, board chair of Housing Affordability Institute.

In 2024, the homeownership rate in Minnesota was 71%, down 300 base points and the first time since 2008 the state has not been the regional leader in homeownership. The path to owning a home is becoming increasingly out of reach. The median price of an existing home in the state is $342,625, while the median price of a new home has climbed to $526,644. These prices mean 56% of Minnesota households cannot afford an existing home, and 75% cannot afford a new home.

Since 2021, metro-area permits are down 43%, and the state’s total housing permits are down 35%. If Minnesota continues this trend, the 98,000-home shortage will grow exponentially. That shortage doesn’t just mean higher home prices—the Institute estimates a $9 billion loss in statewide economic activity and almost 63,000 jobs not created.

At the center of the paper is a self-reinforcing cycle of declining homeownership. High new construction costs lead to insufficient new construction, which pushes new home demand to existing homes and leads first-time buyers to rent instead. This leads to higher rent costs, reduced savings for first-time buyers, and ultimately, a generation of Minnesotans delaying homeownership.

The paper also highlights the key issues of senior housing, the minority homeownership gap, and the changing demographics of first-time buyers. As Minnesota’s population ages, it is crucial to ensure older residents have viable options if they choose to downsize, so they are not left locked into large, single-family homes that younger families desire.

Minority populations consistently have lower homeownership rates than non-Hispanic whites. To close this gap in Minnesota, where 77.5% of white households own their home compared to just 30.5% of Black households, efforts should be focused on assisting minority groups in achieving homeownership.

First-time buyers are older than ever before, reaching an all-time high of 40 years old. This indicates a broader trend of younger households entering the housing market much later in life than previous generations.

“Minnesota’s growing housing deficit and high new housing costs are a cautionary tale,” said Eisenberg. “Without action, limited supply and high prices will erode the state’s economic foundation. A responsive housing market—one that encourages new construction and reduces barriers to affordability—is essential to sustaining Minnesota’s growth, competitiveness, and ability to attract the next generation of Minnesotans.”

The paper concludes that Minnesota must encourage new construction and remove barriers to homeownership to sustain its growth and remain competitive as a state, appealing to future generations.