Housing Boomers, Millennials

Luverne’s latest housing market study is complete, and the results aren’t surprising: our population is aging, and the need for more senior housing is greater than ever before.
The project identifies potential demand for nearly 360 new housing units over the next 10 years, and about 65 percent of that is for senior housing.
Matt Mullins of Maxfield Research, Twin Cities, presented these findings at Monday morning’s meeting of the Luverne Economic Development Authority.
He said demand is strongest for market rate (as opposed to subsidized) senior housing, which would represent 165 of the 390 new housing units recommended.
Based on the research, there is a growing demand for maintenance-free housing and age-restricted housing.
The study recommends single-level, maintenance-free products, such as townhomes or twin homes to fill the need for owner-occupied for-sale housing.
While demand for this type of housing is highest among seniors, the results suggest that it would also meet a need among younger homebuyers looking for upscale, maintenance-free housing.
The research also recommends expanding senior housing options in Luverne, such as congregate, assisted living and memory care units.
There are currently 119 senior housing units (including 38 in congregate care and 72 in assisted living), but the study shows there’s demand for 254 more senior housing units in the next 10 years.
Mayor Pat Baustian said there are long waiting lists for seniors to move into Poplar Creek and The Oaks apartments of the Good Samaritan Society.
“Some of these folks are in their 80s and 90s before they move in, but a lot of them said they would have moved 10 years earlier had there been an opening,” Baustian said.
LEDA member Esther Frakes pointed out that seniors are living in the types of homes that are in high demand among young families and first-time buyers.
“The middle-income housing stock would loosen up if we could offer more assisted living options,” Frakes said.
 
Rental market
Monday’s discussion also focused on rental housing needs in Luverne and capturing millennial residents.
The Maxfield information showed that local unemployment rate is at less than 2 percent, which reflects a strong economy, but employers say it’s difficult to hire new people when the housing market is so tight.
The vacancy rate is about 6 percent among Luverne’s 246 rental units. Of those, 126 are subsidized units in five projects. Twenty-four are categorized as affordable in one project. These both have vacancy rates at 8 percent.
There are 96 market-rate units in seven locations in Luverne, and the vacancy rate among those is 2.1 percent.
Compounding the issue is the fact that these units are old — 25 to 30 years old — and don’t offer the amenities that young people are looking for, according to LEDA director Holly Sammons.
“Millennials are expecting pretty posh amenities,” she said, adding that many college students rent modern apartments. “It’s very unlikely that they would downgrade from that standard.”
She said if the city is serious about attracting and retaining young people, catering to their housing needs should be a priority.
In-unit laundry, high ceilings, open floor plans, extra bathrooms and covered parking (garages) are all musts for young renters, and they’re willing to pay for them.
“We have nothing like this in Luverne,” Sammons said.
Part of the problem is that the modest apartments bring modest rents, making it difficult for developers to break into the rental market.
A single bedroom apartment locally ranges from $365 to $605, which means the estimated price per square foot is about 70 cents.
Construction costs for a new apartment building would require rents at more than $1 per square foot — 30 percent higher than current rents.
“It would be very hard for a developer to come in and expect $1.15 per square foot when people are now paying 70 cents,” Mullins said. “It would be a risk they’re not willing to take.”
This same problem exists in the entry-level housing market.
Luverne’s median income is $50,000 per year, so the average local homebuyer can afford a home that costs $150,000.
But in Luverne, entry-level homes in this category can be purchased for much less than that, which is good for buyers, but bad for housing development.
For a contractor to build a home in this range, it wouldn’t pay, because construction costs are so much higher than what people are used to paying.
According to the study, the current lot supply is sufficient to meet short-term demand of for-sale housing.
After accounting for vacant lots, there is demand for 31 single-family homes and 24 multi-family homes.
 
Filling the gap between market rate and market need
At Monday’s meeting, LEDA officials discussed the need to provide government incentives to meet housing demands.
Mullins said the city’s lot incentive program has worked well in spurring development.
“Lot price is a major component in home building, so this has been an effective tool,” he said.
The program essentially sells city-owned lots to new homebuilders at greatly reduced prices to encourage development in its new residential neighborhoods.
The city has 46 of these vacant city lots available, but even after these are sold, the study shows there would still be demand for an additional 31 single-family units.
At Monday’s meeting, the EDA board discussed the need for more housing incentives.
“This town would not be where we are today without government involvement,” Baustian said. “We needed this study to tell us where we are and where we need to be.”
Mullins agreed.
“No one wants to take a risk unless there’s government incentive,” he said. “If you don’t, no one else will, and no one will come to town.”
Luverne’s last housing plan was completed in 2008, and many of the initiatives at that time have been implemented.
The new research, which cost $14,000, reflects new demographics and needs, and Sammons said she’s grateful for the guidance.
“The study gives us a snapshot of the demand for housing in the coming years,” Sammons said.
“This information will blend right in with our comprehensive plan that we’re working on for the next 10 years.”
She said she will share the Maxfield work with Good Samaritan officials, developers, bankers, lenders and anyone else who can use the data to meet housing needs.
The full study results are available on the city’s website, cityofluverne.org. It can also be viewed on the Star Herald’s website, star-herald.com, by linking on this story.