Separating Myth from Reality: Northspan Studies Duluth Workforce Housing Construction Costs
Challenge: Lake Superior Area Realtors, other stakeholders seek to understand perception of high housing construction costs in Duluth.
Northspan’s Role: Completed a comparative study of Duluth with other markets that identified numerous factors that drive up prices.
Results: Numerous recommendations brought into city policy discussions; Northspan-facilitated series to bridge divide between city and developers and streamline the construction process.
In this research project, the Lake Superior Association of Realtors, in coordination with the Arrowhead Builders Association and City of Duluth, contracted with Northspan to conduct a study of the perceived high costs of single-family housing construction in Duluth. This report built off previous Maxfield housing studies commissioned by the city that identified the need for different types of units in Duluth and aimed to explore the root causes of the city’s inability to meet some of those goals. The report concluded with over a dozen policy and programming recommendations that could help alleviate the factors driving construction costs that were within the control of stakeholders in the city.
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Just how much does it cost to build a new home in Duluth? Over a year-long project that concluded in spring 2018, Northspan has worked in conjunction with the Lake Superior Area Realtors and the Arrowhead Builders Association to assess the city’s single-family home construction market, with an emphasis on workforce housing. Past studies have indicated an unmet need for new housing construction in Duluth, and while anecdotes have long run rampant over the high cost of home construction in the area, to date there had been no systematic study. This new report therefore aims to explore if these costs really do exist, what drives them, and what can be done to alleviate them.
The data suggest that new homes are indeed usually more expensive in Duluth than in a number of peer cities in the Upper Midwest. A large part of this imbalance stems from a lack of demand for construction at a large scale, which allows for considerable cost savings. Even custom-built homes, however, trend high in Duluth due to a series of factors. The largest is the cost of building on slopes and bedrock that is common on many Duluth lots, though permitting fees and labor costs in certain trades also trended higher in Duluth. The report ultimately revealed a complex picture of building costs, showing how many factors feed in to raise costs with no single, obvious culprit.
Some of those factors, such as topography and trends in the national housing market, are largely beyond the control of local stakeholders. The report, however, did lay out numerous recommendations that begin to address Duluth’s high costs. Potential policy tools at the city’s disposal include an affordable housing trust fund, incentives for infill, a smoother permitting process, and greater regional cooperation to meet housing needs. Renovation of existing housing stock to remain affordable and in good condition is also a potential option in Duluth, and other cities have launched successful programs that incentive renovation and serve as examples.
Since the report’s release, Northspan has sought to encourage conversation around the report’s findings so that it can lead to concrete steps to solve some of the issues it identifies. As a consulting firm rooted in the communities it serves, Northspan can continue to guide these efforts long after its studies are complete. For Northspan, the study is only the beginning: we are committed to developing meaningful results for our communities.
Download the Housing Study Here.
Reference: Maranda DeSanto, Lake Superior Area Realtors, Inc. CEO, maranda@LSARealtors.com, 218.722.6044
Contact Karl Schuettler at kschuettler@northspan.org for more information.