Minnesota legislators have proposed a slew of bills looking to change residential construction regulations and provide relief to first-time homebuyers. They say current rules push prices up to levels unaffordable for the middle class in any of the state’s counties.
The package of legislation includes the wide-ranging, bipartisan Minnesota Starter Home Act, a bill to end aesthetic requirements, and a measure that would provide builders with a sales tax refund for homes sold to first-time buyers.
The bills face upcoming votes in the state House and Senate. If passed, the Starter Homes Act would take effect next year, and the end to aesthetic mandates would go into effect immediately.
Lawmakers say the state faces a housing shortage of 100,000 homes and 600,000 residents pay more than 30% of income on housing costs, an indicator of unaffordability.
More broadly, according to Starter Home Act supporters, no middle-class earner can afford to purchase a home in the state. The median salary is $87,556, while the median home value is $305,500 with a monthly owner cost of $1,890, according to U.S. Census Bureau data from 2023.
“In every county in the state, the median income is not enough to afford the median-priced home,” Democratic state Rep. Michael Howard said during a hearing Tuesday. “We have a generation of Minnesotans who can't afford to buy a home in the community where they grew up. That should concern all of us.”
The proposals mark a second round of recent efforts in Minnesota to bring sweeping changes to the housing market. Last year, lawmakers considered a plan to remove single-family zoning, but it failed to move forward. The concept of welcoming duplexes, triplexes and other multifamily housing on single-family lots is part of a larger trend seen across the country: Oregon, Maine, California and Washington have all ended single-family-only zoning.
Here's a breakdown of what's in Minnesota's housing bills:
Starter Home Act
The Starter Home Act allows single-family homes, duplexes, accessory dwelling units and townhouses in any residential zoning district. If passed, municipalities could also not limit aesthetic choices of materials, which ties into a separate bill, House File 2013.
Legislators are also looking to relieve buyers of rising homeowners association fees by not permitting municipalities to require or incentivize HOA membership. As home insurance rates have increased nationally along with costs for repairs, so have the HOA fees that go toward covering them.
The Starter Home Act also bans requirements for vehicle parking spots or garages, a provision that was revived from last year. Lawmakers argue parking requirements increase housing costs by requiring larger lots and using more square footage for cars rather than livable space.
In the Starter Home Act hearing Tuesday, municipal officials expressed concern with the lack of freedom to make decisions on future developments.
“This bill takes away a fundamental city authority, zoning, and land use, which impacts the ability of cities to plan and respond to local conditions,” said Jill Hutmacher, community development director for the city of Eagan, located 17 miles outside Minneapolis. “It also takes away the ability of our city to welcome engagement through robust community input.”
No aesthetic requirements
House File 2013 proposes the removal of all aesthetic requirements, meaning no localities could require specific materials to be used on the exterior of a house. For example, more expensive brick instead of low-cost vinyl siding. It also proposes the removal of minimum square footage requirements, permitting smaller homes to be built.
The argument against these limitations is that they increase housing costs by requiring larger homes and high-priced materials for no reason other than looks. The bill would not change construction code requirements that ensure the efficiency or structural integrity of a house.
Mark Foster, vice president of legislative and political affairs for residential construction trade group Housing First Minnesota, told the House on Tuesday that aesthetic requirements, by not allowing low-cost materials, price people out of certain municipalities.
“We have some growing suburbs here in Minnesota that require you to have a three-car garage," Foster said in an interview. That drives up house costs and "consumers aren’t asking for” these rules, he said.
Other states have passed laws to remove aesthetic requirements. Texas removed the specific materials requirement in 2019, as did Oklahoma in 2020 and North Carolina in 2015.
Tax credits proposed for builders
An additional proposal set forth includes House File 177, which would refund the sales tax paid on building materials for the construction of a home sold to a first-time buyer.
The tax exemption would be eligible for only up to $165,000, which accounts for roughly one-third of a $500,000 home. Bill sponsor Rep. Andrew Myers, a Republican, said homebuilders would file for tax refunds after selling the home. The tax incentive is seen as a way builders can lower their prices.
“I want to try to bring the companies, the private dollars, into the market to build homes, but I also want to give them an incentive to help market towards first-time homebuyers,” he said in an interview.
Myers said in the bill hearing that, based on speaking with builders, materials account for one-third of a home’s cost. The median price of a new home in Minnesota is $442,900, according to the National Association of Home Builders.
This could save buyers up to $11,000 with a state sales tax of 6.875%. Myers also authored a companion bill that offers the same exemption to multifamily developments.
“It’s an outside-of-the-box concept,” Foster said. “It would be a way for the state of Minnesota to show that they’re serious about trying to address our housing supply and affordability issues.”
Foster, who testified in support of the bill, and a homebuilder suggested that a first-time homebuyer would save between $9,000 and $10,000 on a 1,600-square-foot single-story home.
A National Association of Home Builders report this month indicated that every $1,000 increase in the price of a median-priced home puts more than 2,000 Minnesotan households out of the market. The report also said 71% of households in the state are unable to afford the median price of a new home.