Affordable housing crunch hits area communities

When first-time homebuyers Coltan Stein-Tronnier and Marianne Aras set off on their search for their house, they quickly realized that the $200,000 housing cost cap they had decided on wouldn’t work. So they upped their budget to $250,000.

“It was pretty stressful,” Aras said. “Originally we were planning to live in Washington state, but had trouble financially. We decided we wanted to move to Minnesota because Coltan is originally from here and his parents live in Byron.”

The couple moved in with Coltan’s parents and spent six months house shopping.

“Houses were selling like crazy because of the low interest rate,” Aras said. “It was hard. Any time we were interested in a house, our realtor would call and say it was gone. It was so disheartening.”

Eventually the couple settled on buying a house in Kasson, and they didn’t need to go over the asking price as a lot of new home buyers are forced to do. According to realtor reports, Kasson’s median sale price for a house in 2020 was $249,900 and a year later has increased to $270,000.

Stein-Tronnier and Aras wanted to stay within a short drive of Rochester. “That’s the hub that’s here,” Stein-Tronnier said. Both are now students at Rochester Community & Technical College and don’t mind the short drive from Kasson.

“We were looking at around $200,000 houses but then we had to up our budget to find a decent home because a lot of the houses for less were pretty run down and not very well kept,” Aras said. “It would’ve been a lot of money to fix the house.”

Once the couple increased their budget to $250,000 “we found decent homes,” she said. They found four houses they decided between, ultimately choosing a roomy 4-bedroom, 2 ½ bath house with 1,900 square feet.

The couple advises other newbie first time homebuyers to do your research, get a good realtor and figure out how far you’re willing to travel for work. Also decide how much you can spend, and save up 20 percent to put down, Aras said.

She said she found that by shopping in Kasson versus Rochester, she got double the space for the price and “Wow, it’s not that far away. It’s an easy drive on 14.”

The couple saw 50 homes during their search and put in bids on two others. Ultimately they fell in love with their house’s light, airy feel and open floor plan. “We have large windows and sunlight and it made us so much happier,” Aras said. “When we found this house we were like, ‘nope, this is it!’”

They closed on their home on Sept. 9, 2020, and moved in two days later. “I was so happy,” Aras said. “We actually had space. Our stuff was in storage for half a year so we couldn’t even have access to our belongings. We were in one bedroom.”

Mark Matuska, superintendent of Kasson-Mantorville High School, said he’s heard from school staff that families are moving out of the area in search of affordable housing. “Every community is having some issues,” he said, “especially with the way the market is. Finding affordable housing for lots of residents is tough.”

Realtor Bill Steinberg with Gwaltney Group of RE/MAX Results, said the severity of the affordable housing problem falls and rises based on home availability in general.

“When inventory is down, the buyer pool becomes much more competitive, causing prices to rise,” Steinberg said. “And affordable new construction is hampered by rising land and material costs.”

Eric Brownlow, Association Executive and Government Affairs Director for Southeast Minnesota REALTORS, said there’s a push for people to live in these smaller communities near Rochester for a basic reason: supply and demand.

“The demand has been high for several years now,” Brownlow said. “People are looking for value. If you can get a house for 5, 10, 15 percent less in a rural community people are making that choice.”

Affordable housing will “always be a problem,” Steinberg said. “Inventory shortages will continue to affect pricing.”

“What a lot of the market boils down to hasn’t changed in the last 100 years,” Brownlow added. “As our supply continues to dwindle, the demand never went away but it’s been fueled by historically low interest rates. That and the fact coupled with our new construction … the new supply of homes never caught up to pre-cases levels back in 2007 and 2008. We have not been keeping up with demand.”

“This isn’t something that just happened six months ago,” he said. “We’ve been on a  pretty good increase on home values for about a decade now. We have not peaked. The buyer demand is going to stay steady. I don’t see our inventory numbers increasing dramatically over the next six months.”

New home buyers need to assess how much of their income they are willing to allocate to their monthly mortgage, he said. “If more than 30 percent is going to housing, you are house burdened and don’t have money for other things.”

Matt Durand with Community and Economic Development Associates said rural areas are hardest hit with housing needs. Some 55+ people are empty nesters and want to downsize, but can’t afford to. It creates a log jam within the housing market.

He said another labor shortage and prices on building materials rising is creating the perfect storm affecting prices of affordable houses. “There’s no such thing as a starter home any more,” Durand said. “The starter home if you can get something now for $200,000 that would be incredible. But it’s hard to build new for that.”

Anne Mavity, with the Minnesota Housing Partnership, said “over the last 20 years or so, housing costs have risen dramatically more than income, which means that people are increasingly being priced out of housing. People have to pay more for their housing than they did 20 years ago. Home values have gone up 25 percent but incomes only increased by 8 percent. “That gap makes it difficult for families.”

Some area jobs are growth jobs, and economists predict there will be more of them in the future, Mavity said. But they don’t pay enough to secure a two-bedroom apartment in southeast Minnesota, Mavity said. “That’s the challenge,” she said.

Mavity said affordable housing is “absolutely a crisis. It’s a crisis and we’re not keeping up. We’re absolutely not keeping up. The data shows us that we have a shortage of housing. When it comes to our lowest income families, there’s a gap between what their incomes can purchase and what it costs to produce housing.”

Leah Hall, community development director with Three Rivers Cap, an area community action agency with offices in Rochester and Zumbrota, considers the affordable housing situation in southeast Minnesota to be a significant problem. She echoes Mavity in saying rents are going up while incomes just aren’t.

“A great example of this is Dodge County because that’s where rents have increased 14 percent over the last year, while income remained stagnant,” she said. “There was zero percent change (in income). This seems to hold true across our entire region. Rent increases but incomes do not keep pace.”

In Dodge County, Hall sees scores of families searching for affordable housing, and if they’re able to find one for less than $200,000 in decent condition “it’s extremely competitive. So if you come across a house you better step in and get that home.”

She said employers in Dodge County, Byron and Olmsted County are having problems attracting and retaining workers because the new hires can’t find housing.

“So it’s a deterrent,” Hall said. “It’s especially challenging now. How do you elevate a crisis into more of a crisis? Now is the time to act and how do we do that?”