Agenda - Council Work Session - 04/28/2020

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RECOMMENDATIONS AND CONCLUSIONS has returned while development has waned in part due to statutory laws. Due to the statu- tory home warranty changes initiated in 2010; builders and developers focused on less ad- verse real estate types due to regulatory effects. In addition to pre -sale requirements and owner -occupied minimums by lenders, condominium developers and contractors faced a wave of litigation over the past decade related to condo projects that were built prior to the recession, which deterred building. However, in 2017 the State Legislature revised the state law and requires homeowner's as- sociation to implement a preventative maintenance plan, go through mediation, and have the majority of the home owner's association members to vote on whether they will pro- ceed with a construction defect lawsuit. Although the law has been revised, developers are still skittish about constructing new condominiums; unless in high -dollar markets such as Wayzata, Edina, or Downtown Minneapolis. We find the COR neighborhood would be ex- cellent for condo product; but it's still too premature as too many developers are on the sidelines and pursuing rental housing due in part to favorable financing. General Occupancy Rental Housing Our competitive inventory identified that the vacancy rates for all types of general occupancy rental product is below market equilibrium (2.9% vacancy rate) indicating pent-up demand for rental housing. Vacancy rates are low for both affordable rental housing (2.0%) and market rate housing (3.1%). The rental housing stock is newer as most product has been constructed in the past five years in and near the COR neighborhood. As Table P-1 illustrated, there are three pending projects that could bring another 500 units on-line should they all move forward. Simi- lar across the Metro Area, market rate rental housing is the real estate product type experienc- ing the strongest demand and lenders favor this product type given the historic performance. However, the Metro Area is peaking and the overall market is expected to experience increased vacancies as over 8,000 units are finished in 2019. Should all the units proceed simultaneously in Ramsey, the rental market will likely experience some softening in rents and concessions could ensue as new units are absorbed. • Market Rate Rental — Demand for market rate housing was found for over 440 units through 2030. Currently, vacancies rates are below equilibrium suggesting the market has pent-up demand for new rental product. However, the two proposed projects would in- clude a total of 438 units that would accommodate the recommended rental housing de- mand over the next decade if they were to proceed. We recommend new market rate housing targeting both middle -market and upper -bracket renters. In addition, we recommend a townhome style product that would have separate entrances; a product type that is popular among a wide -range of target demographics (i.e. families, couples, single parents, etc.) MAXFIELD RESEARCH AND CONSULTING 148