While the Mankato area has made great strides in building up housing stock in single family homes and apartments, recent population growth suggests it won’t be enough.
A recent study of local housing shows the region that includes Mankato, Eagle Lake and Skyline grew by almost 300 households per year for the last 10 years. Community Partners Research Inc., the company that has done Mankato housing studies since 2008, estimates future growth could be 350 households per year. The research also shows housing stock has been keeping up with demand, but there is no surplus.
For rental units, including townhomes and apartments, vacancy rates are below average. A vacancy rate of 3-5% is usually considered healthy and allows renters to move to better apartments with a market that offers choices. But Greater Mankato’s vacancy rate for market rate apartments not targeted toward students is about 1.5 percent.
Affordable housing has a 3.6% vacancy rate and government subsidized housing has a 1% vacancy rate. Mankato has added about 200 affordable housing units since 2018, with 90 of those to be built this year.
Consultants also told the Mankato City Council recently there is strong demand for single family homes, but it’s difficult to build starter homes for less than $225,000. Rising costs of lumber and labor are driving higher prices.
So far, Mankato’s strategy has been to work with developers and support projects sometimes through tax increment financing to acquire desired federal tax credits for affordable apartment complexes. This past year, the Minnesota Housing Finance Agency approved two projects, one near Cub Foods West and another near Rosa Parks Elementary.
Developers will likely make another application this year to expand the project near Cub Foods.
Growth in population stretching housing may be a good problem to have, but the city and business should consider the importance of preventing housing stock from getting so low and so expensive that it stymies growth.
Mankato should explore creative alternatives like land trusts, which have worked in Rochester, where land costs are underwritten by housing authorities or governments thereby lowering homeowner costs. With interest rates at all-time lows, it seems an opportune time to invest in housing, especially when there is clear demand.