How regulation drives up housing costs in Minnesota

“Outside coastal states like New York and California, the Twin Cities was No. 1 in housing costs among the nation’s 20 largest metro areas, according to 2014 U.S. Census data. And they have remained at or near the top of other cost-comparison surveys since then. Statewide, Twin Citians pay an average of 26 percent more than neighboring states. That price gap explodes when compared with southern states like Texas.” And regulation, broadly defined — from hyper-detailed building codes with energy efficiency mandates, to methods of land use planning and fee exaction, to the complexity of permit processes — is central to why [Bob Shaw and Tad Vezner, St. Paul Pioneer Press] As Anthony Sanders points out, some of the regulation advocates quoted in the piece seem almost proud that Minnesota laws make things more expensive compared with neighboring states. “Only thing I would have added is Milton Friedman’s adage that licensing tries making everything a Cadillac, when most can only afford a Buick.”

7 Comments

  • Very interesting article, but I wonder what comparison is being made across the 20 largest metropolitan areas to determine that the Twin Cities are among the most expensive. I’m currently looking at homes in the Morristown, NJ, area, and homes in that area compared to similar homes in the Twin Cities are nearly twice as expensive. Property taxes in NJ are similarly 2x to 3x more than a comparable home in the Twin Cities area. I know. I’ve owned three properties in the Twin Cities over the years (one condo, one townhouse, and one single family home). You can get a lot more for your money in the Twin Cities as compared to the area around Morristown, NJ. If only the winters weren’t so bad in Minnesota; I’d move back in a heartbeat.

  • As the quoted sentence indicates, they excluded coastal states like New Jersey in making the comparison.

  • I looked at the chart in the article again. You are quite correct; the entire coastal area is greyed out. I should have looked more closely.

    However, the chart does say “median new-home price.” I still wonder if that’s an apples-apples comparison. Same size? Is it comparing single family homes, townhouses, condos? Is regulation truly the only differential?

    Still a very well written article. I agree wholeheartedly that too much regulating without doing appropriate cost-benefit analyses is not a good thing.

  • Interesting perspective. My issue is this: if there are fewer regulations, how do you know you are not buying a pig in a poke? With the regulations, and their strict enforcement, at least you know what you are getting. On the other hand, the prices are going up.

    On the whole, if you are raising a family, would you rather do it in Minnesota, which has more benefits (such as universities and a lot of lakes) or in North Dakota, which has fewer? I would say that, when Fargo gets to be the economic juggernaut that the Twin Cities are, we might be able to make a fair comparison. But, for now, this seems to be what the people want.

    • “My issue is this: if there are fewer regulations, how do you know you are not buying a pig in a poke?”

      I feel like there’s already a solution to that problem when it comes to homes. Aren’t housing inspectors the norm when buying a house? (Even if the buyer didn’t feel like getting an inspection before buying for some reason, the mortgage issuer would want to make sure of the value of the home before accepting it as collateral, wouldn’t they?)

  • A family member bought a home in a Twin Cities suburb some years ago. The second owner, but the house was still relatively new. Minnesota requires builders of new homes to provide a 10-year warranty on new homes. The warranty stays with the house, not the owner (one of those MN statutes that makes homes there more expensive).

    Long story short, the family member discovered what was thought to be a minor issue that turned into over $150,000 in repairs because the house was built wrong. Windows were installed wrong and the house wrap was installed wrong, allowing slow but persistent water intrusion into all the exterior walls. MN also requires periodic inspections of homes as they’re being built precisely to catch these errors (would’ve cost just a couple thousand to fix if found at that stage). Unfortunately, these inspectors are absolutely immune from liability for any claim, but their job is required, so they make a lot of money. They are also persistently accused of doing drive-by inspections and pencil-whipping their inspection reports. The builder’s insurance company paid up, but only after costly litigation.

    So much for inspectors. Always demand a warranty when buying a house, especially a new house or a remodel (flip), and make sure it’s a good one. Severe problems with structure and other expensive items like plumbing, HVAC, electrical, etc., are easily hidden behind a veneer of granite countertops and fancy tile. Watch a few seasons of “Holmes on Homes” and you’ll be afraid to ever buy a house again.

  • A tough State warranty requirement (insurance) can substitute for many detailed construction codes. As for insurance companies not paying up, Massachusetts made that problem go away several decades ago by making them liable for the plaintiff’s legal costs plus various other penalties.