Study finds city's housing strengths, weaknesses

More lots for

single-family housing needed

By KURT NESBITT

Journal Staff Writer

NEW ULM -- A recent study found some of the strengths and weaknesses in New Ulm's housing market.

New Ulm may have ample housing for seniors and people with disabilities, but market-rate rental housing is in greater demand as populations age. While the overall housing market has stayed stable, there are fewer houses being built and vacancy rates have increased, the study found.

The study, commissioned three months ago by the New Ulm Economic Development Authority and the New Ulm City Council, updates similar studies made by a Minneapolis real estate research firm in 1995 and 1998. The results were shared with city, council and school district officials and representatives of local businesses at City Hall on Thursday.

"It makes sense for the public do to this," said New Ulm Assistant City Manager Tom MacAulay, a member of NUEDA. "This will be something that developers will be interested in, along with major employers. This is a blue print for the rest of the decade."

The study recommended, among other things, that the city should have more lots for single-family housing, a subdivision for entry-level housing and more units of market-rate rental housing to satisfy the demand for new, contemporary rental units.

New Ulm's population -- as well as the number of households in the city -- has grown since the 1990s. More people and households are expected by 2010. The study identified aging baby boomers, particularly those in between 55 and 64 years old, as the age group that will see the largest population growth in the next 10 years.

That growth is expected to create more local demand for townhomes and condominiums in the New Ulm area, as baby boomers move out of their houses into places that require less maintenance, according to Jay Thompson of Maxfield Research Inc. of Minneapolis, which has conducted all three studies.

Even though the New Ulm area has a healthy vacancy rate of 5.8 percent, there is a shortage of newer, more contemporary housing units because those are fully occupied with waiting lists while older properties are sitting vacant. Vacancy rates among subsidized housing projects in the New Ulm area are even higher -- 6.7 percent -- than the rates for market-rate housing. Rising vacancies have also meant that some rental projects have been unable to raise rents. The study found that rent for one-bedroom and two-bedroom units has only risen by 3 percent since 1998.

The city of New Ulm added an average of 30 single-family homes each year during the 1990s. That rate slowed to 20 homes each year since 2000. The study found that a lack of available lots, instead of a lack of demand for housing, is the main reason for the decline in the construction.

Despite the shortage of market-rate rental housing, the study found that New Ulm has an ample supply of housing for people with disabilities. However, it also recommended that there should be more affordable, private homes for those people to move into. It also said that there could be a greater need for facilities that provide supervised housing for people with mental illnesses because Minnesota is currently decentralizing state hospital services. New Ulm has no need for a homeless shelter or a shelter for battered persons because local usage rates aren't high enough, Thompson said.

Among the other recommendations, the study advised the city to have a three- to five-year supply of lots for single-family housing. Thirty-five percent should be priced at an entry-level rate, 50-55 percent should be mid-level and 10-15 percent should be executive housing. Townhomes and condominiums should have only one level and 45 percent of them should have entry-level prices while the rest should be priced at the upper end, Thompson said.