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2. HRSR 09-04-2012 7(4) Elk REQUEST FOR ACTION River To ITEM NUMBER City Council&Housing and Redevelopment Authority 2. AGENDA SECTION MEETING DATE PREPARED BY September 4,2012 Clay Wilfahrt,Assistant Director of Economic Development ITEM DESCRIPTION REVIEWED By Presentation of Comprehensive Housing Needs Analysis by Annie Deckert,Director of Economic Maxfield Research Development REVIEWED BY Cal Portner, City Administrator ACTION REQUESTED None. BACKGROUND/DISCUSSION At their April 2,2012,meeting,the HRA authorized entering into an agreement with Maxfield Research to conduct a comprehensive housing study to assist in determining availability of different segments of housing in Elk River and in planning for the future of the housing market in the community. Vice President Man Mullins and Research Analyst Brian Smith of Maxfield Research will present the results of the Housing Study to the HRA and City Council. The last housing study was conducted in 2003. An executive summary of the analysis can be found on pages 6-9 of the report. Staff has invited several local developers,various civic organizations and community members to attend the event. Following the presentation,the complete report will be available on the city's website. ATTACHMENTS • City of Elk River Comprehensive Housing Market Study-July 2012 • Maxfield Research PowerPoint presentation Action Motion by Second by Vote Follow Up C@MERER 61 NATURE . 9 �1 • 1 r i •H a it� � 4) �, • W o o = v V cu s v Q. 71.111 o MIV ° D inigir 7S. 66-'GPI � ■ 3C simik ;,smoniZi r III W -. C O^' �' W , r 4�-) N f' > C on -el Q) no C u C .D N U N .� O C L OD .N 0 r D C 4— C N O O O O N a)E N N Q C On C I . N C `~ —) 4 -C .V7 I U L L O >+ fts ca.E _c v N o v o �' E N . . NO °� 47, C al 1:1) C x— N C L 0. O 4 4-- Dn a=+ N N "O a--' N O C L E 0_ V) U C O O —) Q a) O > C -0 N C Cif)di 'O rt3 0 0 0 Li N tan C L 17, N +v-+ • • • E N Q. 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P6 U p OD ' , -� O aJ o O O X •E j >ro • • • • • Q w O • • 0 IA taa V) cu 03 cu CD • • CU 0 D CU C6 0 c L au o 4- a u . +, c 0 _ >, N D Q c -0 c O v Q 0_ v 0 C a) E o 2 t�,, 0 = E v aA 0 z cu 2 7 _ E a 3 — E m CT > � D o° z coy 2 2 0 73 () Q) 1 CC • • • • $2•• C Q -� 7 .� • i.L • :.x 44741411) 4017. 0 CD }+ , o U C 0 ( l 0 O U v � U L Ca 4J N U a) s_ U a „, tr, E ri-rw +, L4_ CT)� a E E City of Elk River Comprehensive Housing Market Study July 2012 Eh Elk River\�. , w ami 0 e M I N N E S O T A + , P O * I B I D 6 Y ENATUPEI I r - Presented to: ' - City of Elk River Presented by: Maxfield Research, Inc. 612-338-0012 IfINj(� 1221 Nicollet Mall Suite 218 � t ( � t. Rr.rarrh hi.._ � Elk Minneapolis, MN 55403 River www.maxfieldresearch.com ' xfield 4__. . 1! . ♦ Research Inc. \ re 1 July 20, 2011 Mr. Clay Wilfhart Assistant Director of Economic Development City of Elk River 13065 Orono Parkway Elk River, MN55330 Attached is our study entitled "Comprehensive Housing Needs Analysis for the City of Elk River. The study projects housing demand over the next five years (through 2017) and provides recommendations on the amount and types of housing that could be constructed in Elk River in to satisfy demand. The study found potential demand for about 335 new housing units in Elk River from 2012 to 2017, which include a variety of housing products. Detailed information regarding recommended housing concepts can be found in the Conclusions and Recommendations section at the end of the report. We enjoyed completing this study and are available should you have any further questions or require additional information. Sincerely, MAXFIELD RESEARCH INC. iedt- -/edhe 1„...... ,„;,,„ Matt Mullins Brian Smith Vice President Research Analyst Attachment 612-338-0012 (fax)612-904-7979 1221 Nicollet Avenue,Suite 218,Minneapolis,MN55403 www.maxfieldresearch.com TABLE OF CONTENTS Page EXECUTIVE SUMMARY 1 DEMOGRAPHIC ANALYSIS 10 Introduction 10 Elk River Definition 10 Population and Household Growth Trends and Projections 11 Population Age Distribution Trends 12 Household Income 13 Tenure by Age of Householder 16 Household Type 19 Tenure by Income 21 Net Worth by Age of Householder 23 Other Land Issues EMPLOYMENT ANALYSIS 26 Employment Growth Trends 26 Major Employer Interviews 31 HOUSING CHARACTERISTICS 33 Introduction 33 Residential Construction Trends 2000 to Present 33 American Community Survey 34 Age of Housing Stock 35 Housing Units by Structure and Occupancy or (Housing Stock by Structure Type) 37 Housing Units by Occupancy Status and Tenure 39 Owner Occupied Housing Units by Mortgage Status 40 Owner-Occupied Housing Units by Value 40 Renter-Occupied Units by Contract Rent 42 Competitive Land in the Market Area RENTAL MARKET ANALYSIS 43 Introduction 43 General Occupancy Rental Projects 43 Pending Rental Developments in Elk River 50 Rental Market Interview Summary 50 SENIOR HOUSING ANALYSIS 52 Senior Housing Defined 52 Senior Housing in Elk River 53 TABLE OF CONTENTS (continued) Page FOR-SALE MARKET ANALYSIS 59 Introduction 59 Overview of For-Sale Housing Market Conditions 59 Home Resales by Price 62 Current Supply of Homes on the Market 64 Lot Inventory 68 Lot Absorption by Subdivision 70 Actively Marketing Subdivisions 71 Pending For-Sale Developments 71 Renter/Builder Interviews 73 HOUSING DEMAND ANALYSIS 75 Introduction 75 Demographic Profile and Housing Demand 75 Estimated Demand for For-Sale Housing 76 Estimated Demand for General Occupancy Rental Housing 77 Estimated Demand for Independent Adult Few Services Senior Housing 79 Estimated Demand for Affordable Independent Senior Housing 81 Estimated Demand for Subsidized Senior Housing 82 Estimated Demand for Congregate Senior Housing 84 Demand Estimate for Assisted Living Housing 85 Estimated Demand for Memory Care Housing 89 RECOMMENDATIONS AND CONCLUSIONS 91 Introduction/Overall Housing Recommendations 91 General Occupancy Rental Housing 93 Senior Housing 95 Challenges and Opportunities 98 APPENDIX 104 LIST OF TABLES Table Number and Title Page Dl. Population and Household Growth Trends and Projections, Elk River, 1990 to 2020. 12 D2. Population Age Distribution, Elk River, 1990, 2000 & 2010 13 D3. Household Income by Age of Householder, Elk River, 2012& 2017 16 D4. Tenure by Age of Householder, Elk River Study Area, 2000 and 2010 18 D5. Household Type Trends, Elk River, 2000 and 20010 20 D6. Tenure by Household Income, Elk River, 2000 and 2010 23 D7. Net Worth by Age of Householder, Elk River, 2012 24 El. Resident Employment, Sherburne County, 2000- 2012 28 E2. Covered Employment Trends, Elk River, 2000, 2005, 2010 - 2011 29 E3. Major Employers, City of Elk River, June 2012 32 HC1. Residential Construction, City of Elk River, Annual Building Permits Issued, 2000 to 2012 34 HC2. Age of Housing Stock, Elk River, 2010 36 HC3. Housing Stock by Units in Structure, Elk River, 2000 and 2010 38 HC4. Housing Stock by Occupancy Status and Tenure, Elk River, 2000 to 2017 39 HC5. Housing Units by Mortgage Status, Elk River, 2010 40 HC6. Units by Value, Elk River, 2010 41 HC7. Units by Contract Rent, Elk River, 2010 42 RM1.General Occupancy Rental Housing, City of Elk River, June 2012 45 RM2.Common Area Features/Amenities, City of Elk River, June 2012 47 SH1. Senior Housing, City of Elk River, July 2012 54 SH2. Unit Features/Building Amenities/Services, Existing Senior Housing, City of Elk River, July 2012 56 FS1. Home Resales, City of Elk River, 2000 to May 2012 60 FS2. Single Family and Multifamily Residential Sales, City of Elk River, 2000 through 2011 61 FS3. Home Resales by Price Point, City of Elk River, 2000 to May 2012 63 FS4. Homes Currently Listed For-Sale, City of Elk River,June 2012 65 FS5. Active Listings by Housing Type,June 2012 66 FS6. Active Listings by Housing Type, June 2012 67 FS7. Lot Inventory—Active Subdivisions, City of Elk River, July 2012 69 FS8. Building Permit Activity by Subdivision, City of Elk River, 2008 to June 2012 70 FS9. Actively Marketing Single Family Subdivisions, Elk River, June/July 2012 72 LIST OF TABLES (continued) Table Number and Title Page HD1. For-Sale Housing Demand, Elk River, 2012 to 2017 77 HD2. Rental Housing Demand, Elk River, 2012 to 2017 78 HD3. Market Rate Adult/Few Services Housing Demand, Elk River, 2012 & 2017 80 HD4. Affordable Independent Senior Housing Demand, Elk River, 2012 & 2017 82 HDS. Subsidized Independent Senior Housing Demand, Elk River, 2012 & 2017 83 HD6. Market Rate Congregate Housing Demand, Elk River, 2012 & 2017 84 HD7. Market Rate Assisted Living Demand, Elk River, 2012 & 2017 87 HD8. Memory Care Demand, Elk River, 2012 & 2017 90 HD9. CR1. Summary of Housing Demand, City of Elk River, July 2012 91 CR2. Recommended Multifamily Housing Development, Elk River, 2012 to 2017 93 EXECUTIVE SUMMARY Purpose and Scope of Study Maxfield Research Inc. was engaged by the City of Elk River to conduct a Comprehensive Housing Needs Analysis for the City of Elk River. The Housing Needs Analysis provides recommendations on the amount and types of housing that should be developed in order to meet the needs of current and future households who choose to reside in the City. The scope of this study includes: an analysis of the demographic and economic characteristics of the City; a review of the characteristics of the existing housing stock and building permit trends; an analysis of the market condition for a variety of rental and for-sale housing products; and an assessment of the need for housing by product type in the City. Recommendations on the number and types of housing products that should be considered in the City are also supplied. Demographic Analysis • The City of Elk River is forecast to add an additional 3,290 people and 1,280 households between 2010 and 2020. • The population in Elk River is aging and older age cohorts are accounting for a significant percentage of the total population. Over the next five years, the age 55 to 64 cohort will continue to have the highest growth numerically (826 people, or 38%), but significant growth is also forecast in the age 65 to 74 cohort (271 people, or 23%). Older adults and younger seniors (those between the ages of 55 and 74) in these high growth age cohorts are the target market for active adult housing products. • The overall median household income in 2012 in Elk River is estimated at about $82,000. • Between 2000 and 2010, homeownership rates increased from 78.3%to 80.2% in the City of Elk River • The County's unemployment rate of 7.6% in 2011 is higher than the State of Minnesota (6.0%) and lower than the Nation (8.2%). Until 2006, Sherburne County's unemployment rate has been on par both the State of Minnesota and is now just over a percentage point higher in 2011. Housing Characteristics • In total, Elk River is reported to have approximately 1,085 housing units, of which about 6,480 are owner-occupied, 1,600 are renter-occupied, and 460 are vacant as of 2010. • Owner-occupied housing units account for about 76% of the City's total housing stock. MAXFIELD RESEARCH INC. 6 EXECUTIVE SUMMARY • The City of Elk River issued permits for the construction of 2,420 new residential units during the last decade. That equates to 242 units annually. However, 90% of development occurred from 2001 to 2006. New residential construction has declined significantly since. • Approximately 82% of Elk River homeowners have a mortgage. About 29%of homeowners with mortgages also have a second mortgage or home equity loan. Comparatively, about 68% of homeowners in the United States have a mortgage. Rental Housing Market Analysis • In order to assess the current market conditions for rental housing in Elk River, Maxfield Research Inc. conducted an inventory of subsidized (i.e. housing that is income-restricted to households earning at or below 30% of the Area Median Income), affordable (i.e. housing that is income-restricted between 30% and 80% of the Area Median Income) and market rate (i.e. housing that is not income-restricted) projects located in the City. • In total, Maxfield Research inventoried 594 general occupancy market rate rental units in the City of Elk River spread across 12 multifamily developments (18 units and larger). At the time of the survey, there 16 vacant units. Of which 7 vacancies were located in Granite Shores that is currently in its initial occupancy phase after converting from for-sale condominiums. Excluding Granite Shores, the market rate vacancy rate totals 1.7%. Typically, a healthy rental market maintains a vacancy rate of roughly 5%, which promotes competitive rates, ensures adequate consumer choice, and allows for unit turnover. • Elk River has a total of 54 subsidized units within two buildings and 244 affordable units across five developments. The buildings feature a variety of unit types that cater to a wide- spectrum of household types. There were six units vacant at the time of the survey for a rate of 2.0%. A healthy income based rental market typically maintains roughly a 3.0% vacancy rate. • Low vacancy rates in all general occupancy rental products indicate pent-up demand for additional rental housing in Elk River. Senior Housing Market Analysis • There are eight senior housing facilities located in Elk River with a total of 353 units. Other than the vacant units at Guardian Angels which are in its initial lease-up phase for their new expansion, all units are occupied. This indicates a need for additional senior housing units. • Guardian Angels by the Lake are the only facility that offers senior housing with services. The development contains 60 assisted living units and 30 memory care units. A recent addition expanding the number of units at the development from 60 to 90 units should fulfill the demand for service enriched housing in Elk River over the decade. MAXFIELD RESEARCH INC. 7 EXECUTIVE SUMMARY For-Sale Housing Market Analysis • The average and median resale price of homes in Elk River was approximately $160,120 and $150,000 respectively as of May 2012. The median sales price over the last decade peaked in 2005. Since 2005, median sales prices have declined by over 36%. • An average of 412 homes has been sold annually in Elk River since 2000. Considering that Elk River has a supply of nearly 6,500 owned homes in 2010, this represents turnover of almost 6% of the owned homes annually. • The median list price of homes for sale in Elk River was about $181,900 in June 2011. Based on a median list price of$181,900, a household would need an income of about $49,790 in order to afford to make monthly housing payments of about $1,245 (assuming a 10% down payment, 3.75% 30-year fixed mortgage). A household with significantly more equity (in an existing home and/or savings) could put more than 10% down and afford a higher priced home. About 79.5% of Elk River households have annual incomes at or above $49,790. • As of July 2012, Elk River had a total of over 400 vacant lots within 28 subdivisions. All of the subdivisions were platted between 2000 and 2006. Nearly 40% of the lots were platted in 2002, and another 43% of the lots were platted between 2004 and 2005. • There are 14 subdivisions actively marketing lots at this time. Combined, there are about 150 lots available. Lot prices range from approximately $18,000 to $80,000 with an average lot cost is about $40,000. • The lot supply benchmark for growing communities is a three-to five-year lot supply. This supply of lots is appropriate as it provides adequate consumer choice but minimizes developers' carrying costs. Given the number of existing platted lots and the annual absorption of single-family lots over the past few years, we conclude that Elk River is currently oversupplied through the decade. Housing Needs Analysis • Based on our calculations, demand exists for the following general occupancy product types between 2012 and 2017: o Market rate rental 81 units o Affordable rental 40 units o Subsidized rental 9 units o For-sale single-family 16 units o For-sale multifamily 0 units • In addition, we find demand for multiple senior housing product types. By 2017, demand for senior housing is forecast for the following: MAXFIELD RESEARCH INC. 8 EXECUTIVE SUMMARY o Active adult ownership 0 units o Active adult market rate rental 40 units o Active adult affordable 12 units o Active adult subsidized 18 units o Congregate 53 units o Assisted living 12 units o Memory care 4 units Recommendations and Conclusions • Based on the finding of our analysis and demand calculations, the following chart provides a summary of the recommended development concepts by product type for the City of Elk River through 2017. Detailed findings are described in the Conclusions and Recommendations section of the report. RECOMMENDED MULTIFAMILY HOUSING DEVELOPMENT ELK RIVER 2012 to 2017 Purchase Price/ No.of Development Monthly Rent Range' Units Timing2 General Occupancy Rental Housing Market Rate Rental Housing Apartment $900/1BR-$1,150/2BR 50 -55 2012+ Townnhomes $1,100/2BR-$1,350/3BR 20 -25 2012+ Total 70 -80 Affordable Rental Housing Townnhomes Moderate Income3 25 -35 2012+ Senior Housing Adult Few Service Rental $900/1BR-$1,100/2BR 25 -30 2012+ Congregate $1,750/1BR-$1,950/2BR 40 -50 2012+ ' Pricing in 2012 dollars. Pricing can be adjusted to account for inflation. 2 The develompent of these products can occur at any time. 3 Affordablity subject to income guidelines per Minnesota Housing Finance Agency(MHFA). Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. 9 DEMOGRAPHIC ANALYSIS Introduction This section of the report examines factors related to the current and future demand for for- sale and renter-occupied housing in Elk River, Minnesota. It includes an analysis of population and household growth trends and projections, employment data, projected age distribution, household income data and household tenure data for Elk River. A review of these characteristics provides insight into the demand for various types of housing in Elk River. Elk River Study Area Definition The draw area for determining current and future housing demand in the City of Elk River is based on traffic pattern orientation, proximity to other communities, interviews with local officials and community stakeholders, natural and manmade geographic barriers, and our knowledge of the draw areas for housing. The Study Area is defined as Elk River proper. y.;_, I In I I i nurse I man t 6ethel g_.,I-.I ?aint F land S p,5 Ell. River Giq L;.1•. - - Cedar M'ONTICELLO -1 RAI•AtiEY • Albertville n t i4NOOVE SAINT MICHAEL.. 11u •. Rogern ` 4. CHAMPLIN � ' CI CI ! Gals Park Hanover ti.. COON „ r'A1iQk iv osse�- Bi iiie AiPji.ot.t MtAPtE GROVE MAXFIELD RESEARCH INC. 10 DEMOGRAPHIC ANALYSIS Population and Household Growth Trends and Projections The following graphs show population and household growth trends for the City of Elk River and Sherburne and Wright County's from 1990 to 2020. Table D-1 presents data from 1990 to 2010 from the U.S. Census with projections to 2020 adjusted by Maxfield Research Inc. based on data from local building permit data, ESRI (a nationally recognized demographics provider), and the Minnesota Department of Administration/Office of Geographic and Demographic Analysis. Key findings are: • According to the U.S. Census Bureau, the City of Elk River contained 22,974 persons and 8,080 households in 2010. Over the last decade, the Elk River's population increased significantly. Through 2010, the population increased by over 6,500 persons (40%), while its household base grew by over 2,400 households (43%). Elk River Population Trends 1990-2020 30,000 - ❑1990 25,000 - ❑2000 _ 0 20,000 - •2010 26,265 a 15,000 - •2020 22,974 o _ 10,000 16,447 5,000 11,143 0 Elk River • Based on our review of growth trend projections for Elk River, current economic trends and building permit history, we project that Elk River will continue to see growth through 2020, but at a much lesser rate than the past two decades. Between 2010 and 2020, the City of Elk River is projected to add nearly 3,300 persons (14%) and 1,300 households (16%). Elk River Study Area Household Trends 1990-2020 10,000 - ❑1990 9,000 8,000 ❑2000 7,000 - ❑2010 9,360 -O 0 6,000 - ❑2020 8,080 La, 5,000 o 4,000 5,664 3,000 - 2,000 3,732 1,000 0 Elk River MAXFIELD RESEARCH INC. 1 1 DEMOGRAPHIC ANALYSIS Household growth trends are a more accurate indicator of housing needs than population growth since a household is, by definition, an occupied housing unit. Mentioned previously, a comparison of historic and projected population and household growth rates shows that household growth is projected to continue to outpace population growth in Elk River, due in large part, to the aging of the baby boom population into their empty-nester years. TABLE D-1 POPULATION AND HOUSEHOLD GROWTH TRENDS AND PROJECTIONS ELK RIVER 1990 to 2020 Change U.S.Census Projected 1990 to 2000 I I 2000 to 2010 I I 2010 to 2020 1990 2000 2010 2020 No. Km No. Elm No. NM Population Elk River 11,143 16,447 22,974 26,265 5,304 47.6 6,527 39.7 3,291 14.3 Sherburne County 41,945 64,417 88,499 109,250 22,472 53.6 24,082 37.4 20,751 23.4 Wright County 68,710 89,986 124,700 153,680 21,276 31.0 34,714 38.6 28,980 23.2 Households Elk River 3,732 5,664 8,080 9,360 1,932 51.8 2,416 42.7 1,280 15.8 Sherburne County 13,643 21,581 30,212 37,750 7,938 58.2 8,631 40.0 7,538 25.0 Wright County 23,013 31,465 44,473 55,750 8,452 36.7 13,008 41.3 11,277 25.4 Sources: U.S.Census;Minnesota Planning;ESRI,Inc;Maxfield Research Inc. Population Age Distribution Trends The following graphs show the age distribution of the City of Elk River population in 2000 and 2010, as well as projections for 2017. Data provided in Table D-2 for the 2000 and 2010 distributions are from the U.S. Census. Maxfield Research Inc. calculated the 2017 projections based off of data obtained from ESRI Inc., and the Minnesota Department of Administration. The following are key trends in Elk River's age distribution: • The majority of age groups in Elk River experienced strong growth in population from 2000 to 2010. The baby boomers ages 55 to 64 experienced the largest rate of growth increasing by 109% (1,143 people) followed by the 45 to 54 age group increased by 80% (1,572 people, the largest numerical growth). • Over the next seven years, all age groups are projected to continue to grow in all age cohorts albeit a much lower rate than during the last decade. The younger age groups below age 44 are projected to have slight increases as these groups consist mostly of the baby bust generation. • The 55 to 64 age cohort is projected to increase by nearly 826 people (38%), while the 45 to 54 age group is projected to increase by 213 people (6%). These older adults and seniors may be considering downsizing into low-maintenance or independent living housing. MAXFIELD RESEARCH INC. 12 DEMOGRAPHIC ANALYSIS Adult Population Age Distribution Elk River 2000 to 2017 8,000 7,000 -1 ❑2000 u c 6,000 ^ 0 to •2010 r. 5,000 co `O n El 2017 cu in a 4,000 u; '^ d 3,000 z 2,000 y o 00 n n N 1,000 - m n m m N Mf rj N MI N 0 - .4. - F - -1- -- 18-24 25-44 45-64 65+ Age Cohort ' TABLE D-2 POPULATION AGE DISTRIBUTION ELK RIVER 2000,2010&2017 Number of Persons Change 2000 2010 2017 2000-2010 2010-2017 No. No. No. No. Pct. No. Pct. 17& under 5,146 6,555 6,917 1,409 27.4 362 5.5 18-24 1,395 1,757 1,886 362 25.9 129 7.4 25-34 2,461 3,204 3,396 743 30.2 192 6.0 35-44 3,117 3,584 3,660 467 15.0 76 2.1 45-54 1,963 3,535 3,748 1,572 80.1 213 6.0 55-64 1,049 2,192 3,018 1,143 109.0 826 37.7 65-74 663 1,188 1,459 525 79.2 271 22.8 75+ 653 959 1,069 306 46.9 110 11.5 Total 16,447 22,974 25,153 6,527 39.7 2,179 9.5 Sources: U.S. Census Bureau; ESRI, Inc.; Maxfield Research Inc. Household Income The estimated distribution of household incomes in Elk River for 2012 and 2017 is shown in the following graphs. The data in Tables D-3 and D-4 was estimated by ESRI, Inc. and adjusted by Maxfield Research based on local area building permits and growth projections by the Minnesota Department of Administration. The data helps in ascertaining the demand for different housing products based on the size of the market at specific cost levels. The Department of Housing and Urban Development defines affordable housing costs for families as 30% of a household's adjusted gross income. Maxfield Research Inc. uses a figure of 25% to 30%for younger households and 40% or more for seniors, since seniors generally have MAXFIELD RESEARCH INC. 13 DEMOGRAPHIC ANALYSIS lower living expenses and can often sell their homes and use the proceeds toward rent payments. A generally accepted standard for affordable owner-occupied housing is that a typical household can afford to pay 3.0 to 3.5 times their annual income on a single-family home. Thus, a $50,000 income would translate to an affordable single-family home of$150,000 to $175,000. The higher end of this range assumes that the person has adequate funds for down payment and closing costs, but does not have savings or equity in an existing home which would allow them to purchase a higher priced home. The following are key points: • The median household income in Elk River in 2012 was estimated to be about $82,040. Overall, incomes are expected to increase by about 22% between 2012 and 2017, or about 4.5% annually. This will result in the median income in the Elk River Elk River increasing from $80,043 in 2012 to about $100,430 in 2017. • Between 2012 and 2017, the number of households will increase in all but two age groups in Elk River. The largest numerical gain will be in the 55 to 64 age group, with a projected increase of 277 households. Non-Senior Households • In 2012, roughly 2% of the non-senior households in Elk River had incomes under $15,000 (128 households). All of these households would be eligible for subsidized rental housing. Another 5% of Elk River's non-senior households had incomes between $15,000 and $25,000 (279 households). Many of these households would qualify for subsidized housing, but many could also afford "affordable" or older market-rate rentals. If housing costs absorb 30% of income, households with incomes of$15,000 to $25,000 could afford to pay $375 to $625 per month. Average monthly rents for one-bedroom units in Elk River are about $743 (shown in Table R-1 in the Rental Housing Analysis section). • Median incomes for households in Elk River peak at $102,432 for the 45 to 54 age group in 2012. Households in this age group are in their peak earning years. The majority of households (87%) in this age group are homeowners. By 2017, the median income for the 45 to 54 age group is projected to increase to $107,653, a 5% increase. • The median resale price of homes in Elk River was roughly $150,000 through May 2012 (see Table FS-1). The income required to afford a home at this price would be about $42,875 to $50,000, based on the standard of 3.0 to 3.5 times the median income (and assuming these households do not have a high level of debt). In 2012, 71% (5,765 households) of Elk River's non-senior households had incomes greater than $42,875. MAXFIELD RESEARCH INC. 14 DEMOGRAPHIC ANALYSIS Growth and Income Trends by Age of Householder Elk River 2012 to 2017 2,500 -r — $120,000 2012 $102,432 =2017 102,143 2,000 - —*-2012 Income - $100,000 — W5,969 - $80,000 0 ✓ 1,500 — $67,3 c ' °o c 3 49,329 — $60,000 m 1,000 —$60,444 .-i N o d rn — -- $40,000 0 _ $22,879 500 — 00 - $20,000 fg N 0 N $0 15-24 25-34 35-44 45-54 55-64 65-74 75+ Age of Householder Senior Households • The oldest householders were likely to have lower incomes in 2012. In Elk River, 8% of households ages 65 to 74 had incomes below $15,000, compared to 26% of households age 75 and over. Many of these low-income older senior households rely solely on Social Security benefits. Typically, younger seniors have higher incomes because they are still able to work or are married couples with two pensions or higher Social Security benefits. • Generally, senior households with incomes greater than $30,000 can afford market-rate senior housing. Based on a 40% allocation of income for housing, this translates to monthly rents of at least $1,000. About 200 senior households (75+) in Elk River (39% of senior households) had incomes above $30,000 in 2012. Seniors will often move from rural areas to cities such as Elk River that provide more medical and other services. • Seniors who are able and willing to pay 80% or more of their income on assisted living housing would need an annual income of $35,000 to afford monthly rents of$2,300, which is about the beginning monthly rent for assisted living in rural Minnesota. In Elk River, there were only an estimated 167 older senior (ages 75 and over) households with incomes greater than $35,000 in 2012. Seniors age 75 and over are the primary market for assisted living housing. MAXFIELD RESEARCH INC. 15 DEMOGRAPHIC ANALYSIS „ •„ TABLE D-3 HOUSEHOLD INCOME BY AGE OF HOUSEHOLDER ELK RIVER (Number of Households) 2012 and 2017 2012 Total <25 25-34 35-44 45-54 55-64 65-74 75+ Less than$15,000 370 15 40 26 47 60 51 132 $15,000 to$24,999 551 30 106 78 64 20 110 142 $25,000 to$34,999 434 53 98 85 48 36 42 72 $35,000 to$49,999 770 28 223 164 99 120 104 32 $50,000 to$74,999 1,388 61 450 292 330 127 106 22 $75,000 to$99,999 1,509 49 393 463 299 232 21 52 $100,000 or more 3,078 79 325 682 1,099 665 173 55 Total 8,100 314 1,635 1,790 1,986 1,260 608 507 <$25,000 921 45 146 104 111 79 161 273 $35,000+ 6,746 217 1,391 1,600 1,827 1,144 405 161 Median Income $82,043 $60,444 $67,342 $85,969 $102,432 $102,143 $49,329 $22,879 2017 Total <25 25-34 35-44 45-54 55-64 65-74 75+ Less than$15,000 320 11 38 21 33 39 54 125 $15,000 to$24,999 431 16 93 63 43 14 95 108 $25,000 to$34,999 292 36 71 48 25 21 31 60 $35,000 to$49,999 526 20 159 101 46 75 100 24 $50,000 to$74,999 1,349 60 502 245 235 117 158 33 $75,000 to$99,999 1,417 47 432 393 212 224 39 70 $100,000 or more 4,446 107 616 929 1,302 1,047 337 108 Total 8,780 298 1,910 1,800 1,895 1,537 813 528 <$25,000 751 27 130 84 75 52 149 233 $35,000+ 7,737 235 1,709 1,668 1,795 1,463 633 235 Median Income $100,432 $77,290 $78,859 $100,902 $107,653 $113,340 $68,530 $29,459 Change Total <25 25-34 35-44 45-54 55-64 65-74 75+ Less than$15,000 -50 -4 -2 -5 -14 -21 3 -7 $15,000 to$24,999 -120 -14 -14 -15 -22 -6 -16 -33 $25,000 to$34,999 -142 -17 -27 -37 -23 -15 -11 -12 $35,000 to$49,999 -245 -8 -63 -64 -52 -45 -5 -8 $50,000 to$74,999 -39 -1 51 -46 -95 -10 51 10 $75,000 to$99,999 -93 -1 39 -69 -87 -8 17 18 $100,000 or more 1,368 28 290 247 202 382 164 54 Total 680 -17 274 11 -91 277 204 21 <$25,000 -170 -18 -16 -20 -36 -27 -12 -40 $35,000+ 991 18 317 68 -32 319 228 74 Median Income $18,389 $16,846 $11,518 $14,932 $5,222 $11,197 $19,202 $6,580 Sources: ESRI,Inc.;Maxfield Research Inc. Tenure by Age of Householder The following graphs show the number of owner and renter households in Elk River by age group as of 2000 and 2010. The data in Table D-4 shows the propensity of households to own or rent their housing based on their age. Key points derived from the data are: • In 2010, 80%of the households in Elk River owned their housing. This is up from 78% in 2000. Homeownership rates have slightly declined for those ages 25 to 64 in Elk River due to the declining housing market and the poor economic climate. Due to the lack of renter units built over the decade we can assume that many of the single-family homes have been converted to rental properties. MAXFIELD RESEARCH INC. 16 DEMOGRAPHIC ANALYSIS Elk River Homeowners by Age of Householder-2010 1,800 — — 100% 1,600 84.6% '8t% 87.3% 83.6% - 90% 1,400 72.2% - 80% :: ai 62.7% _ 70% of0e 1,200 200 1,544 a// 1.696 1,029 1,079 60% a = 800 50% 3 — 40% p 600 40.6% 619 — 30% 1 =No.of Homeowners Z 400 — 20% = Homeownership Rate 405 200 — 106 10% L 1 -I I 11 1 0% 1StotiA 15CO3A A,6tOph As N..0 SS N.0 65CO� -1-1$*5 Age of Householder J • The proportion of renter households decreases as households age and rises again in the senior years when rental housing is a more viable option than homeownership. In 2010, 60% of Elk River's households between the ages of 15 and 24 rented their housing, compared to householders ages 35 to 64 who were overwhelmingly homeowners, with no more than 15% of the householders in each 10-year age cohort renting their housing. Elk River Renters by Age of Householder-2010 450 100% 400 I 90% 350 80% ■No.of Renters 300 59.4% t Pct.Renters � 60% °«: 250 c cc 50% 5 200 il•iI.I 157 121 40% f'i Z 150 30% a 100 51 20% 50 ELIA 10% 15 to 1e 25 to V' 35 to AR AStOsN S5to6A 6Sto0A ict Age of Householder J • Although the propensity for households ages 15 to 24 to rent their housing is higher, the 25 to 44 age groups had, by far, the largest number of renters with the 25 to 34 age group having 396 renters and the 35 to 44 age group with 281 renters. These two age groups account for slightly over 40% of all renter households. • Between 2000 and 2010, the number of renter households increased in most age cohorts. Over the decade, the number of renters increased at a growth rate 30%. With a limited number of rental units developed through 2010, it's clear that the number of single-family rental homes has also increased due to the economy and decline in homeownership rate. MAXFIELD RESEARCH INC. 17 N 00 C O N ~ a) lD N 00 co l0 N. 3 v v H c o LC ct - " M c a a) N N n I� N W � V O O 0 .4. C N O V1 C Q1 W n 3 1 c-1 O en MEM c In tc a) O M M Y a0 Di cn C � 00 00 w N 3 p o O ex w CC - O• } O _c v cr N rV l!1 - 7 z W Y Q O C C 0 0 O o "r< o L1.1 1— 0 4 � h O N c0 N N m w M 4- a Cr) O 0 O l 00 0 to co • N CO 13)a V D: W i-1 GN GC l) O co N Cr) C l0 In v •• o M } l0 N C m N M en off° O N O N M N• C 01 n n 3 0 � ii O oo U M 0 II ON O t0 rn l0 N V l0 o 2 U C Q w CL v v u > >Q u)s X 0 (.9 W w ■Ji u 0 O >- °va v LLJ g DEMOGRAPHIC ANALYSIS Household Type The following graph shows the breakdown of the type of households in Elk River in 2000 and 2010. Table D-5 illustrates the data which is useful in assessing housing demand since the household composition often dictates the type of housing needed and preferred. • From 2000 to 2010, Elk River observed the largest numerical increase in the number of families that are married without children (830 households, or 52%). The increase in households married without children can be attributed to couples waiting longer to have children, and the baby boomers aging into empty nester years. • Persons Living Alone experienced the second highest numerical increase of 608 households (highest growth rate of 62.5%) in Elk River during the 2000s. This could indicate an aging senior population. As the frailty level of these seniors increases, they typically move out of their homes in pursuit of housing with services. However, the recession has affected many seniors, and their fears of the market can be affecting their decisions to move out of the homes and into age-restricted housing. • Elk River also had significant increases in single-parent households (a gain of 378 households, or 51%). With only one income, these families are most likely to need affordable or modest housing, both rental and for-sale. • Roommate households had the second highest rate of growth in Elk River during the 2000s. The number of roommates grew by a 55%, or 160 households. This, however, was the lowest numerical increase of all groups. This reflects the trend in society of couples living together before marriage and delaying having children until later in life, as well as other non-family households "rooming up" and sharing housing costs during the Great Recession. Household Type Elk River 2000 and 2010 3,000 - 2,500 - ui •2000 L 2,000 - 7 N 0 2010 cu N u+ O = 1,500 - �. a0 c 1,000 - Z ,a M 500 M ~ CO N Ql Married with Married w/o Other family Living alone Roommates child child Household Type MAXFIELD RESEARCH INC. 1 9 0 N col 0 Lf) 00 M C O .1 co u ,y co 0 LL d 'CD Q1 Y C o M 0 C) 00 O N ZI • O LU 0 0 al -4 E v _ N t\j U1 U. ` U c9 " 8 ° q o 0 rn 3 N � ZI o0 i i• CI 0 4 .O O Uti es m d N t U ul 3 00 0 ° zI N \j Z v I _ to I v. K 0 ■r CCC7• N 4 In lfl W O[ 0 _c E QLu N a.. W H 2 C O OO 0 O D -.I p Y T �' N N ZI .� O w °o C l= O u. O n CO U 0 � Ql U N 0 Z it O N c- al co = C O < tn >_ CO QU C d ., 00 Im N O 00 J INa, � Zl � N u LHC UJ O I a Lf1 O- Z t■ to 2 _ iii N 0 O {n yl — c O 0 N J O S N u CJ Q t v� 0 to Z Q _ _ U = g a cc c i a d ° 0 CO O N 0 o L 0 Li w Q H_ �_ to w O: l7 O J C0 w Li G X u, a O 2 DEMOGRAPHIC ANALYSIS Tenure by Income The following graph shows the number of renter households in Elk River by income cohort as of 2000 and 2010 (5-year American Community Survey estimates). The data provided in Table D-6 is useful in that shows the housing options and preferences for households based on affordability. The Department of Housing and Urban Development determines affordable housing as not exceeding 30% of the household's income. It is important to note however, that the higher the income, the lower percentage a household typically allocates to housing. Many lower income households, as well as many young and senior households, spend more than 30% of their income, while middle-aged households in their prime earning years typically allocate 20% to 25%of their income. Key points derived from the data are: • As income increases, so does the rate of homeownership. The 2010 estimates for Elk River indicates that 91% of those households earning $50,000 or more owned homes compared to 79% for households with incomes between $35,000 and $49,999, 58%with incomes of $25,000 to $34,999, and 57% of households with incomes of$24,999 or less owned their housing. Many of these lower-income homeowners are seniors who live on fixed incomes but have paid off of their mortgage. • Although, many of the lower-income households rent their housing, the largest number of renters (331 households or nearly 25% of all renters) have incomes between $50,000 and $74,999. Should these households allocate 25% of their income on housing, they could afford monthly rents of roughly $1,050 to $1,550 per month, significantly higher than the rents at most market-rate apartment units in Elk River. • Typically, renter households with incomes of$20,000 or less qualify for government- subsidized housing, where rents are often based on sliding scale (30%of income). Based on a 30% allocation of income, these households could afford monthly rents of no more than $500. As of 2010, there were 444 households in Elk River with incomes of$20,000 or less renting their housing. • Renter households with incomes of between $20,000 and $35,000 are usually the market for "affordable" rental projects with a shallow subsidy (housing with income restrictions and rents slightly below market rents, such as those financed through Minnesota Housing Finance Agency's Section 42/Low-Income Housing Tax Credit program). These households can typically afford housing costs of from $500 to $875 per month. As of 2010, there are an estimated 345 renter households in Elk River with incomes between $20,000 and $35,000. MAXFIELD RESEARCH INC. 21 Cl O o\° o o\° o\° o\° o\° o\° o\° o\° O O O 0 0 0 0 0 0 0 o\° .-i Q1 co N l0 I V M N .--I 0 1 1 1 1 1 1 1 1 1 1 '- Y i..i O t0 en if) in- a) Y Y O rl 0 .Tr K in I { _ 01 01 al IA. l0 u1 N. d' N Y 01 Q Q M Q) } 0 Ld Lf 0r, in. 0 A u1 H N C N N C. — O G) Y > I CL Fe a\° W 117. r. if) t.,a.,..:„„ M O o 0. Ql to in in v) in- J Q Z Z — — Q Y 2 o o z N V Q I M Lu a VI Q I 1 1 1 1 I I s OC o 0 0 0 0 0 0 o 0 0 1 in o n 0 in O Ln 0 M M N N .--I .--1 lil spioyasnoH x 0 / a DEMOGRAPHIC ANALYSIS • It is important to note that seniors are often able and willing, to allocate a larger share of their income on rental housing that meets their needs since they no longer have to save for retirement, their children's education or major purchases (home, car, etc.). This is particularly true in "senior" rental projects where support services and personal care assistance are available. In fact, research has shown that, in assisted living projects, up to 50% of residents not only allocated all of their income but spent-down assets in order to afford monthly housing and service costs. TABLE D-6 TENURE BY HOUSEHOLD INCOME ELK RIVER 2000 and 2010* 2000 2010* Own Rent Own Rent No. Pct. No. Pct. No. Pct. No. Pct. Less than $5,000 46 59.7 31 40.3 37 62.7 22 37.3 $5,000 to$9,999 33 25.6 96 74.4 37 41.1 53 58.9 $10,000 to$14,999 73 23.3 240 76.7 162 63.5 93 36.5 $15,000 to$19,999 100 45.2 121 54.8 205 63.3 119 36.7 $20,000 to$24,999 159 58.2 114 41.8 110 45.3 133 54.7 $25,000 to$34,999 301 53.1 266 46.9 248 57.9 180 42.1 $35,000 to$49,999 651 83.1 132 16.9 762 78.7 206 21.3 $50,000 to$74,999 1,300 88.1 175 11.9 1,395 80.8 331 19.2 $75,000 to$99,999 1,059 95.6 49 4.4 1,338 95.1 69 4.9 $100,000 to$149,999 545 98.4 9 1.6 1,686 97.7 39 2.3 $150,000 or more 164 100.0 0 0.0 673 91.7 61 8.3 Total 4,431 78.2 1,233 21.8 6,653 83.6 1,306 16.4 * Data for 2010 is from US Census,American Community Survey(5-Year Estimate) Source: US Census Bureau;Maxfield Research Inc. Net Worth by Age of Householder Table D-7 presents data on the net worth of households by age in Elk River as of 2010. Information in the table is sourced from ESRI with adjustments for the estimated household base as calculated by Maxfield Research Inc. The following are key points from Table D-7: • Data in the table is calculated as the total value of a household's wealth less any debts (unsecured or secured by assets). Overall, the median net worth of a household in Elk River is about $159,712 and the average is $433,477. MAXFIELD RESEARCH INC. 23 DEMOGRAPHIC ANALYSIS • There is a strong correlation between household age and net worth. Households under the age of 25 have substantially less net worth (median of$11,445) compared to households between the ages of 55 and 64 (median of$402,094). Net worth declines as adults age into their senior's years, which is likely due to these households spending down assets to support their living costs following retirement? TABLE D-7 NET WORTH BY AGE OF HOUSEHOLDER ELK RIVER (Number of Households) 2012 IAge of Householder Total Under 25 25-34 35-44 45-54 55-64 65-74 75+ 2012 Less than$15,000 1,311 206 412 232 153 85 75 147 $15,000 to$34,999 463 44 151 88 44 50 30 56 $35,000 to$49,999 257 15 98 63 36 27 6 12 $50,000 to$99,999 1,018 37 391 218 153 69 94 57 $100,000 to$149,999 847 12 269 236 157 90 38 44 $150,000 to$249,999 1,103 1 96 527 254 88 71 66 $250,000 to$499,999 1,491 0 149 275 660 302 70 34 $500,000+ 1,610 0 69 149 528 549 224 91 Total 8,100 314 1,635 1,790 1,986 1,260 608 507 Median Net Worth $159,712 $11,445 $63,390 $155,991 $291,475 $402,094 $230,626 $78,842 Average Net Worth $433,477 $24,519 $145,818 $261,985 $636,002 $1,056,643 $914,400 $383,747 Data Note: Net Worth is total household wealth minus debt,secured and unsecured.Net worth includes home equity,equity in pension plans,net equity in vehicles,IRAs and Keogh accounts,business equity,interest-earning assets and mutual fund shares,stocks,etc.Examples of secured debt include home mortgages and vehicle loans;examples of unsecured debt include credit card debt,certain bank loans,and other outstanding bills.Forecasts of net worth are based on the Survey of Consumer Finances,Federal Reserve Board.Detail may not sum to totals due to rounding. Sources: ESRI;Maxfield Research Inc. • With significant residual net worth in later life (median of$78,842 among age 75+ households), many seniors will have sufficient funds to cover the costs of living in senior housing alternatives. The segment of age 75+ seniors with little or no net worth will rely on public subsidies in order to receive housing and services that meet their needs. • Households often delay purchasing homes and instead choose to rent until they acquire sufficient net worth to cover the costs of a down payment and closing costs associated with home ownership. This will be especially true in the short-term as tightening lending requirements make mortgages with little or no down payments more difficult to obtain. MAXFIELD RESEARCH INC. 24 DEMOGRAPHIC ANALYSIS Median Net Worth by Age of Householder Elk River-2012 75+ $78,842 65-74 $230,626 55-64 $402,094 Q 45-54 $291,475 35-44 $155,991 25-34 $63,390 Under 25 $11,445 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 Net Worth MAXFIELD RESEARCH INC. 25 EMPLOYMENT ANALYSIS Employment Growth Trends Since employment growth generally fuels household growth, employment trends are a reliable indicator of housing demand. Typically, households prefer to live near work for convenience. However, housing is often less expensive in smaller towns, making longer commutes attractive for households concerned about housing affordability. The graphs on the following page depict recent employment growth trends for Sherburne County and are shown in Tables E-1 and E-2. Table E-1 presents resident employment data for Sherburne County from 2000 through April 2012. Resident employment data is calculated as an annual average and reveals the work force and number of employed persons living in the County. It is important to note that not all of these individuals necessarily work in the County. Table E-2 presents covered employment in Elk River from 2000 through 2011. Covered employment data is calculated as an annual average and reveals the number of jobs in the County, which are covered by unemployment insurance. Most farm jobs, self-employed persons, and some other types of jobs are not covered by unemployment insurance and are not included in the table. The data in both tables is from the Minnesota Department of Employment and Economic Development. The following are key trends derived from the employment data: Labor Force/Resident Employment • Between 2000 and 2011, Sherburne County experienced an increase in both its labor force and the number of employed residents. Between 2000 and 2011, the County's labor force increased by 11,520 persons (30%), while the number of employed residents increased by 8,476 persons (23%). • Since the peak year of 2008 however, both the labor force and employed residents have declined. The labor force has experienced a slight decline of 425 people (less than 1%) while the number of employed persons has experienced a greater drop with 1,560 people (- 3%) from 2008 to 2010. • The unemployment rate in Sherburne County reached a low of 3.0% in 2000 and increased to 4.8% in 2003. Over 2003 to 2006, the unemployment rate fell again from 4.9% to 4.4%. Up until 2006, the unemployment rate in Sherburne County has been on par with that of the State of Minnesota but has been roughly a full percentage point higher since 2006. Both the County and the State unemployment rates are below the national average. • Since 2006, the unemployment rate in Sherburne County has increased rapidly to a high of 9.4% (2009) and was higher than both the State and the Nation from 2007 through 2009. As of April 2012, the unemployment rate has fallen to 7.6%, below the nation which is at 9.6%, yet remains nearly two full percentage points higher than the State of Minnesota. MAXFIELD RESEARCH INC. 26 EMPLOYMENT ANALYSIS LABOR FORCE AND EMPLOYED RESIDENTS SHERBURNE COUNTY 2000 to 2012* 52,500 - 49,780 50,000 - • 47,459 47,500 - N o 43,995 ° EA• 45,000 - 46,735 a 45,392 46,02., 0 42,500 0 z 41,833 40,000 - -Total Labor Force 37,835 37,500 --M—Total Employed 36,699 35,000 , I I I i I I I I I I I , -Loop 1001 1002 x,003 tioa°' _1005 1006 2091 1002 1,009 1010 2011 101,L* Year UNEMPLOYMENT RATE SHERBURNE COUNTY 2000 to 2012* 10.0% - —.—Sherburne ^ 9.0% —II—Minnesota 8.0% U.S. 1% Y (= 7.0% - 7.6 Y a 6.1% E 6.0% - o 5.896 4.9% ` 6.0" m • 4.0% - 4.8% maw�.�.. 3.1% �s ' 4.0% 3.0% - / 2.0% I I I r I 1 I I T 1 I I I 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* Year MAXFIELD RESEARCH INC. 27 EMPLOYMENT ANALYSIS TABLE E-1 RESIDENT EMPLOYMENT(ANNUAL AVERAGE) SHERBURNE COUNTY 2000 to 2012* Total Minnesota U.S. Labor Total Total Unemployment Unemployment Unemployment Year Force Employed Unemployed Rate Rate Rate 2000 37,835 36,699 1,136 3.0% 3.1% 4.0% 2001 39,758 38,240 1,518 3.8% 3.8% 4.7% 2002 41,986 40,017 1,969 4.7% 4.5% 5.8% 2003 43,995 41,833 2,162 4.9% 4.8% 6.0% 2004 45,571 43,343 2,228 4.9% 4.6% 5.6% 2005 47,114 45,058 2,056 4.4% 4.1% 5.1% 2006 47,459 45,392 2,067 4.4% 4.0% 4.6% 2007 48,807 46,331 2,476 5.1% 4.6% 4.6% 2008 49,780 46,735 3,045 6.1% 5.4% 5.8% 2009 49,468 44,802 4,666 9.4% 8.1% 9.3% 2010 49,355 45,175 4,180 8.5% 7.3% 9.6% 2011 49,286 45,696 3,590 7.3% 6.4% 8.9% 2012 49,812 46,025 3,787 7.6% 6.0% 8.2% Change 2000-11 11,520 8,476 3,044 5.5% 4.2% 5.6% • 2012 data is the average from January through April. Sources: Minnesota Workforce Center; Maxfield Research Inc. Covered Employment by Industry • Overall, the number of covered jobs in Elk River increased by 22%, or 1,971 jobs since 2000. Covered jobs have remained relatively stable with few small declines mid-decade and during the economic recession. The City of Elk River is currently at its highest point since 2000 with 11,216 jobs in 2011. • Nearly all of the growth has occurred in the Education and Health Services sector (75%). Without the substantial growth in this industry, the City would still have experienced a gain in covered employment, however at a much lesser rate over the decade. • The Education and Health Services sector has overtaken the Trade, Transportation, and Utilities sectors for the largest portion (28%, or 3,119 jobs) of the jobs in Elk River as of 2011. The Trade, Transportation, and Utilities sector accounted for 24% (2,725 jobs) of covered jobs in the City. • The Education and Health Services industry has more than doubled in jobs over the period, adding 1,752 jobs (128%). There were six other sectors that experienced growth which include by numerical growth: Public Administration which added 284 jobs (50%), Trade, Transportation, and Utilities which added 255 jobs (10%), Other Services which added 136 jobs (36%), and Manufacturing which added 102 jobs (8.5%). Natural Resources/Mining and MAXFIELD RESEARCH INC. 28 EMPLOYMENT ANALYSIS Financial Services both increased as well but by only 23 jobs (36%) and 18 jobs (5%), respectively. • Of the 11 industry sectors in Elk River, five of those experienced a loss in covered jobs over the decade. The Construction industry lost the most jobs during the decade, declining by 113 jobs (-21%), followed by the Information sector with a loss 55 jobs (-51%), and the Leisure and Hospitality sector losing 36 jobs (-4%). Covered Employment Trends Elk River 2000 through 2011 12,000 - 11,000 11,216 a v 10,769 10,679 10,000 - 0,421 w Z 9,000 - 8,867 8,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year TABLE E-2 COVERED EMPLOYMENT TRENDS ELK RIVER 2000,2005,2010-2011 North American Industrial Classification System(NAICS) Change jl Average Number of Employees 2000-2011 %of total Industry 2000 2005 2010 2011 No. Pct. 2000 2005 2010 2011 Natural Resources&Mining 64 139 91 87 23 35.9 0.7% 1.3% 0.8% 0.8% Construction 544 754 389 431 -113 -20.8 6.1% 7.3% 3.6% 3.8% Manufacturing 1,202 1,073 1,243 1,304 102 8.5 13.6% 10.4% 11.4% 11.6% Trade,Transportation,and Utilities 2,470 3,004 2,602 2,725 255 10.3 27.9% 29.2% 23.8% 24.3% Information 108 63 55 53 -55 -50.9 1.2% 0.6% 0.5% 0.5% Financial Services 373 476 394 391 18 4.8 4.2% 4.6% 3.6% 3.5% Professional and Business Services 900 735 881 883 -17 -1.9 10.1% 7.1% 8.0% 7.9% Education and Health Services 1,367 1,802 3,031 3,119 1,752 128.2 15.4% 17.5% 27.7% 27.8% Leisure and Hospitality 889 1,102 842 853 -36 -4.0 10.0% 10.7% 7.7% 7.6% Other Services 380 424 543 516 136 35.8 4.3% 4.1% 5.0% 4.6% Public Administration 570 726 875 854 284 49.8 6.4% 7.0% 8.0% 7.6% Totals 8,867 10,298 10,946 11,216 2,349 26.5 ' 100% 100% 100% 100% Source: Minnesota Workforce Center MAXFIELD RESEARCH INC. 29 cr, VS8• 9ZL OLS o ✓A � ✓f °o o 915 c o o o 17 Zb ❑ ❑ ❑ o 0 9. 8£ 9 .9 •7 '1 sb £S8 d s ZOt`i O 688 o 611'E `6 ti Z08`i -o o L9£`i s3 N s ea £88 `r SEL d o ti i 006 '^y v a.) J % N _ c 0 16E J' nA J LA 9L17 c -oo C s .s - .-I ELE `6 o L - Y - a ' a , > N ES J� i/1 al . o [ c% a• o o W c E9 c o� N a 801 ° "- o c E b W SZL`Z o a b00'E a a OLb'Z d U • VOE'i 9 ELO'i % ZOZ`i c 0 J. A 4 lEb ''o ,n VSL o 'N."- o° ' bb5 aJ 'om r r L8 r o N 6£i Q °o °o °o °o °o °o °o ° w F- Ln o un o u) o 1.11 ^y Q Z M M N N .--1 ■-i `� W W O W cc >- d 0 O N J J W sqo f pa�ano��o oN 2 / Q • • W 2 EMPLOYMENT ANALYSIS Major Employer Interviews Maxfield Research Inc. interviewed representatives of large employers in Elk River in July 2012. The interviews covered topics such as recent trends in job growth, projected job growth,job types, and average hourly wages or annual salaries. Representatives were also asked about housing needs of their employees. Interviews with the area's largest employers not only provide data regarding commercial job growth, but also reveal employer attitudes and perceptions regarding housing demand in any given area. Table E-3 on the following page shows the top employers located in Elk River. The following are key points from the interviews with major employers: • Employers said that housing is not a typical concern for the employees that they hire. There may be isolated issues, but overall housing is not an issue. Most production, manufacturing, and retail employees are hired from the surrounding area and do not need to find housing. These employees typically commute roughly 20 to 30 minutes to Elk River and do not relocate to Elk River. • Although a lack of transitional rental housing exists due to very low vacancy rates. Any employee looking to relocate will typically commute while looking for a home to purchase. • None of the companies interviewed had a relocation program in place. Due to the current economic climate there is not really any need to attract potential employees with this program. In addition, employees' living choices range from the northwest Twin Cities Metro Area to St. Cloud. • Although the majority of manufacturing/processing jobs are filled with area residents, most professional and education jobs are filled by people from throughout Minnesota. The community perception of Elk River is fairly good. People are attracted to the strong school district and level of service and retail that the area provides. Most often, housing is not a deciding factor. • The largest employer in Elk River is the ISD-728, which employs about 1,600 people. ISD- 728 employment has remained relatively stable through the recession with a small number of cuts three to four years ago. With declining enrollment over the last year, there may be some need to cut back. Overall, housing has not been an issue and there has not been much relocation of employees to Elk River. • The majority of employers interviewed noted stable employment over the past three years. When asked about growth over the next three years, many indicated that they should remain stable with some slight increases from five to 15 employees over the next few years. MAXFIELD RESEARCH INC. 31 EMPLOYMENT ANALYSIS • Typical wages for those working at local retail businesses range from $7.50 to $12.00 per hour. These positions are prime candidates for rental housing. These jobs are employed by residents currently living in the surrounding area of Elk River and commute from their current place of residence if hired new. • Based on our interviews, professional service jobs typically start over$30,000 to $40,000 annually. Households with an income of$35,000 could afford monthly housing costs of $875, based on spending on 30 percent of their gross income on housing. • Considering a household with an annual income of$35,000, and using the industry standard that a household can afford to pay a mortgage that is 30% of their household income for owner-occupied housing (assuming they have limited debt and not including equity), a household with this income could afford a home priced at $87,500 to $105,000. Many households in Elk River have two incomes, however. Using the same affordability standard, a household with two persons each earning $35,000 annually could afford a home priced from $175,000 to $210,000. TABLE E-3 MAJOR EMPLOYERS CITY OF ELK RIVER June 2012 Employer Products/Services Employee Count* ISD#728 Education 1,600 Sherburne County Government 595 Wal-Mart Retail Store 394 Guardian Angels of Elk River,Inc Nrsing/Housing 317 Great River Energy Electric Utility 236 Tescom Corporation Pressure Control Devices 187 City of Elk River Government 159 Menards Retail Store 150 Cornerstone Auto Resource Automobile Sales 147 Coborn's Grocery Store 122 Sportech,Inc Plastics Thermoforming 112 Cub Foods Grocery Store 132 Metal Craft Machine&Engineering Precision Machining 105 Cretex Companies,Inc. Precast Concrete Products 100 Crystal Distribution,Inc Custom Curb Adaptors 100 The Home Depot Retail Store 100 Morrell Companies Professional Trucking Transport 100 The Bank of Elk River Financial Institution 99 E&0 Tool and Plastics,Inc Injection Molding 98 Fairibault Foods,Inc Pouch Packaging 79 First National Financial Services Financial Institution 43 Quality Label,Inc Label Printing 42 Total 5,017 * Employment figures are estimated. Sources: City of Elk River; Maxfield Research Inc. MAXFIELD RESEARCH INC. 32 HOUSING CHARACTERISTICS Introduction The variety and condition of the housing stock in a community provides the basis for an attractive living environment. Housing functions as a building block for neighborhoods and goods and services. We examined the housing market in Elk River by reviewing data on the age of the existing housing supply; examining residential building trends since 2000; and reviewing housing data from the American Community Survey that relates to Elk River. Residential Construction Trends 2000 to Present Maxfield Research obtained data from the City of Elk River on the number of building permits issued for new housing units in Elk River over the past decade and through July 2012. Table HC- 1 displays permits issued for single-family homes, townhomes/twin homes, and multifamily dwellings of three or more units. Multifamily units include both for-sale (condominium, twinhomes, and townhomes) and rental projects. The following are key points about housing development since 2000. • The City of Elk River issued permits for the construction of 2,662 new residential units from 2000 to 2011. That equates to about 221 units annually since 2000. • Through 2006, the City of Elk River issued 93% of the overall permitted units for the period. Over this period, residential construction averaged over 354 units per year. However, beginning in 2007, which was the start of the Great Recession, building permits started declining rapidly, and from 2007 to 2010 the City has averaged only 37 units per year. Over 90% of the units (171) since 2007 have been single-family homes with the remaining (16 units) being rowhomes/townhomes. Residential New Construction(Total Units) Elk River 2000-2012* 350 300 300 285 •Single-Family •Town/Twi nhomes 250 228 235 ■Multi-family 3+Units . 194 195 ar 200 72 162 150 2 S. 145 N 150 98104 = 100 - 86 76 50 32 25 • 18 i . [I, 2 1225 4 15 11 14 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* Year (*2012 Data through July) MAXFIELD RESEARCH INC. 33 HOUSING CHARACTERISTICS • Through July 2012, the City of Elk River has only issued eight residential permits (single- family). By the end of 2012 an estimated 13 single family permits will have been issued continuing the trend over the past four years a low household growth. Given the large number of available residential lots in the City, there is potential for growth if the economy and housing market continues to improve. TABLE HC-1 RESIDENTIAL CONSTRUCTION CITY OF ELK RIVER ANNUAL BUILDING PERMITS ISSUED 2000 to 2012* Permits Issued Single-Family Townhome/ Multifamily Total Housing Homes Twinhome 3+Units Units 2000 172 26 86 284 2001 162 18 76 256 2002 194 18 32 244 2003 285 37 228 550 2004 300 12 235 547 2005 195 4 145 344 2006 150 2 98 250 2007 104 0 12 116 2008 25 0 0 25 2009 16 0 4 20 2010 15 0 53 68 2011 11 0 0 11 2012* 14 0 0 14 Total 1,643 117 969 2,729 * Data through June. Sources: City of Elk River;Maxfield Research Inc. American Community Survey The American Community Survey ("ACS") is an ongoing statistical survey administered by the U.S. Census Bureau that is sent to approximately 3 million addresses annually. The survey gathers data previously contained only in the long form of the decennial census. As a result, the survey is ongoing and provides a more "up-to-date" portrait of demographic, economic, social, and household characteristics every year, not just every ten years. The most recent ACS highlights data collected between 2006 and 2010. Tables HC-2 to HC-7 show key data for Elk River Elk River. MAXFIELD RESEARCH INC. 34 HOUSING CHARACTERISTICS Age of Housing Stock The following graph shows the age distribution of the housing stock in 2000 based on data from the U.S. Census Bureau and 2010 from the American Community Survey (5-Year). Table HC-2 includes the number of housing units built in Elk River, prior to 1940 and during each decade since. The following are key points derived from Table HC-2. • In total, Elk River is estimated to have nearly 8,000 housing units, of which roughly 6,650 are owner-occupied and just over 1,300 are renter-occupied. In total, owner-occupied housing units account for about 83.5% of Elk River's total housing stock. • The highest number of homes was built during the period from 2000 to 2004. Overall, roughly 31% of housing units were built during this period. Less than 15% of Elk River housing stock was built before 1970. Some of these housing units may be dilapidated and in need of replacement or repair. AGE OF HOUSING STOCK Elk River 2010* 2,500 Ei , M 2,250 v 2,000 `" 1,750 cn 1,500 N CO 5 1,250 4; d 1,000 z 750 CO i^ o en 500 r1 00 `'' n tp N 250 ` -i coo to Before 1940s 1950s 1960s 1970s 1980s 1990s 2000- After 1940 2004 2005 Decade Constructed MAXFIELD RESEARCH INC. 35 l GO .1- Q1 r✓W Ql o M Ln + O o N IN M 0 A z CO N i .--I N 1 Ql O M V 01 a; N O N N O N 00 C) I lD N M up 1 c N� i N. N Z .--1 .-I ,;I M v 0 u m .-+ M tl N N N 0 O 01 O 01 .0-1 z OO N 1 i ..1 •O. M�G.; N N tn 0 : 001 Q, c-i O 3 O . CO 1 Z N m LO y .-i .-■ 4 I °° L° 00 Y {n C Ol u'1 O ri r4 U , N fa 01 *7 c ° V~f >- z U ON CO N C7 0: . _' Z w L1.1 � O ,,"I ll'1 Q1 O1 L J D NY .--1 to ca_ 4 O 4 Y Q a J N 0 E CO L F. LL W „ G N O N . v O Z I N M W in Cll W L K co Q Y u1 ul N 41 -0 U .--1 •--1 M > 71, LA fa- O '-1 1 O Ln T +4 cri.-■ m co M N i _„° O� .-i N 3 N n T yI V O 0 O 0 +i Ni O N : y 4 01 I N O N E 7 O Z .O-N U E E C O ,t CO 10 U U O +Z Lr1 O 4 N c ro V E U CD ° l0 .-.1 N\ < Z I u'1 .-1 to vi _ m M 7 Q v til a, CC ate+ y O CO 01 to LLI U I-. F = .-i r U Z— U E a = Q O L U te w o Cr ° w I -o o In cu U v _' ° W 0 '0 O v o N Z u v O` m -J w O O Y a, U- V) 9 p C 0 a 3 v = = o cc 1^ * o HOUSING CHARACTERISTICS Housing Units by Structure and Occupancy or (Housing Stock by Structure Type) Table HC-3 shows the housing stock in Elk River by type of structure and tenure as of 2000 and 2010. Data for 2000 is from the U.S. Census and 2010 data is from American Community Survey. • The dominant housing type in Elk River is the single-family detached home, representing about 71% of all housing units as estimated in 2010. • There are only about an estimated 764 total housing units located in buildings of more than 10 units, or about 10% of the housing stock. • According to the data, an estimated 2% of the Elk River's housing stock was vacant as of 2000. As shown in Table HC-4 on Page 39, vacant units has increased to 5% in 2010. ACS data for units in structure does not account for vacant units. • It is important to note, however, that the Census' definition of vacant housing units includes: units that have been rented or sold, but not yet occupied, seasonal housing (vacation or second homes), housing for migrant workers, and even boarded-up housing. Thus, the U.S. Census vacancy figures are not always a true indicator of adequate housing available for new households wishing to move into the area. Housing Stock By Units In Structure Elk River 2010* 400 - ❑Owner Occupied 350 - SI Renter Occupied 296 •Vacant 300 - Y 242 247 o 250 - — — 200 - 160 3 134 — 150 - 126 x _ — 100 - 88 45 50 33 15 13 0 -detached at�°hed tO 4 U^,ts 5-W9-9\e -W 9-9\e to to 19 Un`ts2p to 49°n\ts 50 k ts\\Aob\e h°me J MAXFIELD RESEARCH INC. 37 HOUSING CHARACTERISTICS TABLE HC-3 HOUSING STOCK BY UNITS IN STRUCTURE ELK RIVER 2000 and 2010 2000 2010* No Pct. No Pct. Owner occupied: 4,431 100.0 6,653 100.0 1,detached 4,043 91.2 5,445 81.8 1,attached 319 7.2 1,115 16.8 2 to 4 units 40 0.9 45 0.7 5-to 9-plex 7 0.2 0 0.0 10 to 19 units 0 0.0 0 0.0 20 to 49 units 0 0.0 0 0.0 50+units 0 0.0 33 0.5 Mobile home 22 0.5 15 0.2 Renter occupied: 1,233 100.0 1,306 100.0 1,detached 115 9.3 242 18.5 1, attached 67 5.4 126 9.6 2 to 4 units 57 4.6 88 6.7 5-to 9-plex 70 5.7 134 10.3 10 to 19 units 298 24.2 247 18.9 20 to 49 units 365 29.6 296 22.7 50+units 252 20.4 160 12.3 Mobile home 9 0.7 13 1.0 Total occupied: 5,664 100.0 7,959 100.0 1,detached 4,158 73.4 5,687 71.5 1,attached 386 6.8 1,241 15.6 2 to 4 units 97 1.7 133 1.7 5-to 9-plex 77 1.4 134 1.7 10 to 19 units 298 5.3 247 3.1 20 to 49 units 365 6.4 296 3.7 50+units 252 4.4 193 2.4 Mobile home 31 0.5 28 0.4 Vacant/Vac. Rate: 118 2.0 -- -- 1,detached 58 1.4 -- -- 1, attached 46 10.6 -- -- 2 to 4 units 0 0.0 -- -- 5-to 9-plex 3 3.8 -- -- 10 to 19 units 0 0.0 -- -- 20 to 49 units 11 2.9 -- -- 50+units 0 0.0 -- -- Mobile home 0 0.0 -- ' Data for 2010 is from US Census,American Community Survey(5-Year Estimate) Sources: US Census Bureau, Maxfield Research Inc. MAXFIELD RESEARCH INC. 38 HOUSING CHARACTERISTICS Housing Units by Occupancy Status & Tenure Tenure is a key variable that analyzes the propensity for householders to rent or own their housing unit. Tenure is an integral statistic used by numerous governmental agencies and private sector industries to assess neighborhood stability. Table HC-4 shows historic tenure trends for 2000 and 2010 (5-year American Community Survey) with projections for 2017 (ESRI, with adjustment by Maxfield Research). Key findings follow. • Even though both owner- and renter-occupied housing units increased substantially over the decade, their percentage of total housing units decreased slightly due to an increased number of vacant units. Owner-occupied units decreased from 77% in 2000 to 76% in 2010 and renter-occupied units from 21% to 19%. Consequently, the number of vacant occupied units was only 2% in 2000 while increasing to 5% in 2010. Projections through 2017 indicate a continued trend of decreased owner-occupied housing and increasing vacant units. TABLE HC-4 HOUSING UNITS BY OCCUPANCY STATUS&TENURE ELK RIVER 2000 to 2017 Elk River Year/Occupancy No. Pct. 2000 Owner Occupied 4,431 76.6 Renter Occupied 1,233 21.3 Vacant 118 2.0 Total 5,782 100.0 2010 Owner Occupied 6,478 75.8 Renter Occupied 1,602 18.8 Vacant 462 5.4 Total 8,542 100.0 2017 Owner Occupied 6,761 74.7 Renter Occupied 1,756 19.4 Vacant 539 6.0 Total 9,056 100.0 Sources: U.S.Census Bureau; ESRI; Maxfield Research Inc. The percentages in Table HC-4 compared to Table D-6 on Page 23 are due to the additional of vacant unit totals. Table D-6 does not account for vacant units and thus percentages are slightly different. In addition, 2010 totals are also different as Table D-6 data for 2010 is from the American Community Survey and Table HC-4 2010 data is from the U.S. Census. MAXFIELD RESEARCH INC. 39 HOUSING CHARACTERISTICS Owner-Occupied Housing Units by Mortgage Status Table HC-5 shows mortgage status and average values from the American Community Survey for 2010 (5-Year). Mortgage status provides information on the cost of homeownership when analyzed in conjunction with mortgage payment data. A mortgage refers to all forms of debt where the property is pledged as security for repayment of debt. A first mortgage has priority claim over any other mortgage or if it's the only mortgage. A second (and sometimes third) mortgage is called a "junior mortgage," a home equity line of credit (HELOC) would also fall into this category. Finally, a housing unit without a mortgage is owned free and clear and is debt free. The following key points summarize findings from Table HC-5. • Approximately 82% of Elk River homeowners have a mortgage. About 28%of homeowners with mortgages also have a second mortgage and/or home equity loan. Comparatively, about 68% of homeowners in the United States have a mortgage. • The average home value of a home with a mortgage from Elk River homeowners is approximately $260,531. By comparison, the same value in the U.S. is about $286,350, or 10% higher than Elk River. TABLE HC-5 HOUSING UNITS BY MORTGAGE STATUS ELK RIVER 2010(5-Year Estimate) Mortgage Status Pct. Pct. Housing units without a mortgage 1,186 17.8 Housing units with a mortgage/debt 5,467 82.2 Second mortgage only 532 8.0 Home equity loan only 1,316 19.8 Both second mortgage and equity loan 46 0.7 No second mortgage or equity loan 3,573 53.7 Total 6,653 100.0 Average Value by Mortgage Status Housing units with a mortgage $260,531 Housing units without a mortgage $254,724 Sources: U.S.Census Bureau-2010 ACS; Maxfield Research Inc. Owner-Occupied Housing Units by Value Table HC-6 presents data on housing values summarized by nine price ranges. Housing value refers to the estimated price point the property would sell if the property were for sale. For single-family and townhome properties, value includes both the land and the structure. For condominium units, value refers to only the unit. Key points from Table HC-6 follow. MAXFIELD RESEARCH INC. 40 HOUSING CHARACTERISTICS • Over one-third of the owner-occupied housing stock in Elk River is estimated to be valued between $200,000 and $299,999 (35.5%). • The median and average owner-occupied home in Elk River is $233,000 and $259,496, respectively. Consequently, these figures could be lower in 2012 due to the Great Recession and real estate market bust. • Only 12% of the Elk River's home values are valued under $150,000. However, based on recent home sale activity, this percentage has likely increased. TABLE HC-6 UNITS BY VALUE ELK RIVER 2010(5-Year Estimate) Home Value Pct. Pct. Less than $50,000 76 1.1 $50,000-$99,999 161 2.4 $100,000-$149,999 585 8.8 $150,000-$199,999 1,514 22.8 $200,000-$299,999 2,364 35.5 $3000,000-$499,999 1,743 26.2 Greater than $500,000 210 3.2 Total 6,653 100.0 Median Home Value $233,200 Average Home Value $259,496 Sources: U.S.Census Bureau-2010 ACS; Maxfield Research Inc. Owner-Occupied Units by Value Elk River-2010 ACS(5-Year) 2,500 2,000 2,364 c 1,500 1,743 1,514 1,000 500 161 585 210 76 0 Less than $50k to $100k to $150k to $200k to $250k to $300k+ $50k $99.9k $149.9k $199.9k $249.9k $299.9k Home Value MAXFIELD RESEARCH INC. 41 HOUSING CHARACTERISTICS Renter-Occupied Units by Contract Rent Contract rent (also known as asking rent) provides information on the monthly housing costs for renters. Contract rent is the monthly rent agreed to regardless of any utilities, furnishings, fees, or services that may be included. Key findings from Table HC-7 follow. • The median and average contract rents in Elk River were $760 and $819, respectively. Based on a 30% allocation of income to housing, a household would need an income of about $30,400 to afford an average monthly rent of$760. • Approximately 33.5% of Elk River renters have monthly rents ranging from $500 to $749. Over 22% of renters have monthly rents of$1,000 or greater. Due to the limited number of units with rents over $1,000, we can assume the majority of these renters are renting single-family homes. • Housing units without payment of rent ("no cash rent") make up only 2% of Elk River renters. Typically units may be owned by a relative or friend who lives elsewhere whom allow occupancy without charge. Other sources may include caretakers or ministers who may occupy a residence without charge. TABLE HC-7 UNITS BY CONTRACT RENT ELK RIVER 2010(5-Year Estimate) Contract Rent Pct. Pct. No Cash Rent 28 2.1 Cash Rent 1,278 97.9 $0 to$249 70 5.4 $250-$499 102 7.8 $500-$749 438 33.5 $750-$999 375 28.7 $1,000+ 293 22.4 Total 1,306 100.0 Median Contract Rent $760 Average Contract Rent $819 Sources: U.S.Census Bureau-2010 ACS; Maxfield Research Inc. MAXFIELD RESEARCH INC. 42 RENTAL MARKET ANALYSIS Introduction Maxfield Research Inc. identified and surveyed larger rental properties of 18 or more units in the Elk River. In addition, interviews were conducted with real estate agents, developers, rental housing management firms, and others in the community familiar with Elk River's rental housing stock. For purposes of our analysis, we have classified rental projects into two groups, general occupancy and senior (age restricted). All senior projects are included in the Senior Rental Analysis section of this report. The general occupancy rental projects are divided into three groups, market rate (those without income restrictions), affordable, (those receiving tax credits in order to keep rents affordable), and subsidized (those with income restrictions based on 30% allocation of income to housing). General-Occupancy Rental Projects Our research of Elk River's general occupancy rental market included a survey of 19 apartment properties (18 units and larger) in July 2012. These projects represent a combined total of 892 units, including 594 market rate units and 298 affordable/subsidized units. At the time of our survey, 16 market rate units and six affordable/subsidized units were vacant, resulting in an overall vacancy rates of 2.7% for market rate units and 2.0%for affordable/subsidized. We were unable to gather complete information on the following properties of Elk Park Estates, Elk Ridge Estates, and Tara Hills Estates. The overall market rate vacancy rate of 2.7% is lower than the industry standard of 5%vacancy for a stabilized rental market, which promotes competitive rates, ensures adequate choice, and allows for unit turnover. Nearly half of the 16 vacant units in Elk River are located at Granite Shores (7 vacant units) which is in the process of converting from condominiums to rental units. Granite Shores has been leasing for roughly three months and is in its initial lease-up phase. Subtracting this property recalculates the market rate vacancy rate down further to 1.7%, well below the market equilibrium. The pent-up market indicates a possible need of additional rental housing for all major sectors of the rental market: low-income, moderate-income, and market rate. Table RMA-1 summarizes information on general occupancy projects surveyed. The following are key points from our survey of these developments. Market Rate • Granite Shores, converted to rental in 2012, is the newest market rate general occupancy building built in nearly 20 years. Granite Shores contains a total of 67 units and was originally built as a for-sale condominium in 2006, but struggled to sell units and went into MAXFIELD RESEARCH INC. 43 RENTAL MARKET ANALYSIS foreclosure. It wasn't until recently that the conversion from a for-sale condominium to a luxury rental building occurred. Granite Shores has the highest rents in Elk River, at $940 to $1,599 per month for one-bedroom units, $1,021 to $1,399 per month for one-bedroom plus Den units, and $1,206 to $1,426 per month for two-bedroom units. The development has been marketing for roughly three months and has absorbed 35 of the remaining 42 units (25 of the 67 units were being leased before the complete conversion). The monthly rents are about 40%to 50% higher than the other older market rate properties. • One-bedroom monthly rents ranged from $450 to $1,599 with rents per square foot from $0.80 to $1.28. Two-bedroom monthly rents ranged from $650 to $1,426 with rents per square foot from $0.76 to $1.25. There are no market rate three-bedroom units. • A common laundry room with coin-operated washers and dryers is available in all market rate properties surveyed. Granite Shores has in-unit laundry and Tara Hills Estates has in- unit hook-up for laundry. All of the properties surveyed have underground, attached, or detached garages either included in the monthly rent or are available for an extra fee. • In addition to the above market rate rental building Elk River has 72 rental units in smaller buildings (12-units or less). Although these buildings would have some overlap with any new developments they would most likely not be competitive, and thus we have not surveyed these properties. Affordable/Subsidized • We identified five affordable projects (244 units) which are financed through the Low Income Housing Tax Credit (LIHTC) program, otherwise known as the Section 42 program. The maximum income limit for residency at these projects is at 60% of the area median income. Income limits are represented for both programs in Figures 1 and 2 on page 40. • We also identified two subsidized projects (54 units). Both are Rural Development developments requiring rent of 30% of a resident's adjusted gross income (AGI). • There have been two affordable developments built within the past five years. Jackson Place which was built in 2007 in Downtown Elk River contains 32 units and The Depot at Elk River Station built in 2011 near the commuter rail station has 53 units. The majority of the subsidized and Tax-Credit properties were built 15 or more years ago. • All subsidized units were occupied and there were six vacant units in the affordable properties as of July 2012 for a total vacancy rate of 2%. Dove Terrace Apartments has five of the six vacant units. Typically, subsidized and affordable rental properties should be able to maintain vacancy rates of 3% or less in most housing markets. The low vacancy rates in the market indicate pent-up demand for affordable and subsidized units and also are an indication of the current economic climate in the area. MAXFIELD RESEARCH INC. 44 o ;a X oo `7 C T o L 03 m a Cl 2 N x a a c 0 CO Q L of i, 7 O C `^ Y CO w L a) �; 3 c '',Y � CO c 7 C c -c >••yN 0 X a -C al 7-E - a 0 ra E E = a _0 .O no v Q 7 7 a) -0 C 0 ra a) a N 3 j o N o 7 Cn c aC) ._ ro 7 a -0 0 a) o C -o v o aa)) a) `—' E CO C) CO .c ` > ra 0 E .T• JO CO it a a a E c c —a' N O. 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L ? ` tp cu o 3 E o -° o > a 0 0 o ° ,, Q N § co, v 0 � a, ^ v o v C 0 —° co a) E v, v — 7 Q N 0 N O '� N j 0 v o o 0 o - L L 2 3 a1 a1 L e L u 3 ra LL O H i RENTAL MARKET ANALYSIS TABLE RMA-2 COMMON AREA FEATURES/AMENITIES EXISTING GENERAL OCCUPANCY RENTAL PROJECTS CITY OF ELK RIVER June/July 2012 .111111111111121212111.111.11. 11.11.11213333:22111M. L I I E 3 t V '0 .0 a, C > y 3 m = r s = � o - ; m ha u o Y c m E u m 2 v s y Y c ' = v E c A o m Ti 3 Projects Q O o_ 3 u LL a a° w z w 3 F- U a a Market Rate Rental Granite Shores Cent. Q PI Y I I lU I I Y I I Y I I Y I I N I I N I I Y I I 11 11 1 1 1 1 1 I UG Included Evans Meadows W El I Y I I Y I I C 11 N II Y I I V II Y 11 V I I V I I I I=f I 11 I 11 I AG Included Lions Park CA pi S I I S I I C mu N J J N II Y I I N I I N I ==./1 I I I I UG Indluded Ridgewood Manor W I Y I I S I I YII C I©I N I I N I I N I I NII N I I I I D O I I I I I DG Included Tara Hills Estates W 1Y I Y I I N I m ©I N I I N T H 11 N I I Y I I 1=0 01 I DG Included Elk Park Estates ---Not Available--- ---Not Available--- Elk Ridge Estates ---Not Available--- ---Not Available--- Balmoral Apartments W I Y 11 S j I Y IN ©I N I I N I Y 11 N 1 N I I I D o I I I I I DG Included Elk Crossings/School Street W I Y in Elm N I Y I N INI NI N 1 I I( I O I I I n DG Inculded River Garden W I V 1 S 1111 C 11 N II N II N U I N II N I I II II 1 II 11= DG $50 Pineview W I S M S I I C I I N I©I N ©I N I I N I I I( 11 I I IIIIIII= DG $50 Lake Orono Estates W/S I N I( S I I N II C I I N 1E11 N I N II N I I Y I I 11 11 I I I I , DG $35 Affordable/Subsidized Rental The Depot of Elk River CA I Y I I Y I I Y I m 0 Y I y I Y I I N I Y I I I—I IIIIIIE IQ n UG Included Jackson Place CA IQ © IQ I IU IIQ Y I N I NII N I N I 11-11 I 1=1 I UG Included Dove Tree W ©I y Iaz I C I I N I y I N 1013 N I I n O O n A/DG $45/$55 Lanesboro Heights W I N I ID ©I HU I I N I N N I Y II NI N I I I I II I II I DG $30 Dove Terrace W I Y 11 S I IQ IQ © VI N ©I Y I N I I I 10 0 CI DG $45 Auburn Place W I Y I© ©I C I I N I N i N I V I I N I N I I L 0 pi 1 DG $40 Elk Ridge Manor CA I N I© © Q I N I NI N I V I I N I N I In O O n DG Included Note: Y=Available,N=Not Available;1=Included CA=Central Air;W=Wall unit air;S=Some units;DG=Detached Garage;UG=Underground;AG=Attached Garage;0=0ffstreet;IU=In-unit;HU=Hook-ups; C=Common Source:Maxfield Research Inc. • The affordable apartments contain one-, two-, and three-bedroom units. Over half of the units are two-bedrooms followed by three-bedrooms. Tenants include a variety of families, couples, roommates, and single-parents. • Along with income limits for residents, the projects have maximum rents that are based on a percentage of median income — usually 60% of median income. Rents at the affordable projects range from $640 to $843 for one-bedroom units, from $730 to $815 for two- bedroom units, and from $835 to $998 for three-bedroom units. These rents are similar to many of the market rate projects, and there is likely some market overlap. MAXFIELD RESEARCH INC. 47 RENTAL MARKET ANALYSIS Elk River General Occupancy Rental Housing Locations • e NN/ 7.• 18� Ro.al ,alley N n Parl Paint -6. 16. • 3.•.. spew • .r..w Bach 15. 17.• 19. Meadow Park 3 • ra 12. Elk (6,S. 01,. i r =• 100 r(1,,W' 11. S 1 rat Brool, „.. 14.•. Man,St F.arari PM. 181st Ave NW Hill • 13. lMa 1 1 4v-NW'nal Maxfield Research Inc. Key: 60+Units 40-59 Units Market Rate Affordable 21-39 Units 1. Granite Shores 13. The Depot at Elk River Station 2. Evans Meadows 14. Jackson Place Less than 20 Units 3. Lion's Park 15. Dove Tree Apartments 4. Ridgewood Manor 16. Dove Terrace Apartments 5. Tara Hills Estates 17. Elk Ridge Manor 6. Elk Park Estates 7. Elk Ridge Estates Section 8 8. Balmoral Apartments 18. Lanesboro Heights Townhomes 9. Elk Crossings/School Street 19. Auburn Place 10. River Garden Apartments 11. Pineview Estates 12. Lake Orono Estates MAXFIELD RESEARCH INC. 48 RENTAL MARKET ANALYSIS Because the two newer Tax Credit properties were built in the last 5 years, the properties offer more amenities than the other older affordable and subsidized properties amenities include in- unit washer and dryers, dishwashers, central a/c units, and heated underground garages. Unit and common area amenities are minimal at the older affordable and subsidized projects. All projects feature attached or detached garages renting from $30 to $55 per month. FIGURE 1 2012 MHFA/HUD Income Limits Sherburne County Income Limits by Household Size 1 phh I I 2 phh I I 3 phh I I 4 phh I 5phh 6phh 7phh 8phh 30%of median $17,640 $20,160 $22,680 $25,200 $27,240 $29,250 $31,260 $33,270 50%of median $29,400 $33,600 $37,800 $42,000 $45,400 $48,750 $52,100 $55,450 60%of median $35,280 $40,320 $45,360 $50,400 $54,480 $58,500 $62,520 $66,540 Maximum Gross Rents by Bedroom Size 0 BR I I 1BR I I 2BR I I 3BR I 30%of median $441 $472 $567 $655 50%of median $735 $787 $945 $1,092 60%of median $882 $945 $1,134 $1,311 Sources: MHFA; Maxfield Research Inc. Figure 1 above shows the maximum allowable incomes by household size to qualify for affordable housing and maximum gross rents that can be charged by bedroom size in Sherburne County. Comparing the maximum rents with the market rate rents in Table RMA-1 we can see that all rental buildings except for The Depot at Elk River Station offer rents below 60% of the AMI and most units are below 50% of the AMI. The majority of the properties with rents below 50% of AMI are 20 years and older. The quick absorption occurring at Granite Shores, which offers the highest rents in the market and is the newest rental development, indicates the market is willing and able to afford higher market rents when buildings with updated amenities are offered. Subsidized Housing Assistance Program In addition to subsidized apartments, Elk River also has a "tenant-based" subsidy called Housing Choice Vouchers to help lower income households find affordable housing. The tenant-based subsidy is funded by the Department of Housing and Urban Development's (HUD), and is managed by the St. Cloud Housing and Redevelopment Authority (HRA). Under the Housing Choice Voucher program (formerly Section 8 Certificates and Vouchers) qualified households are issued a voucher that the household can take to an apartment that has rent levels allowable under HUD guidelines. The household then pays 30% of their adjusted gross income for rent and utilities, and the Federal government pays the remainder of the rent to the landlord. MAXFIELD RESEARCH INC. 49 RENTAL MARKET ANALYSIS Applicants in Elk River may be eligible for the program if their income is below the current limits shown in Figure 2, which are set by HUD on an annual basis. Currently, the HRA is maxed out on the 873 vouchers they issue. Because the majority of these households have very low incomes, very few could afford rental housing in Elk River without the assistance of the voucher program. Demand for the program is high, as there is at least a four year waiting list and currently stands at 3,600 households. The funding for the program is very low so the HRA cannot issue any more vouchers and the waiting list is currently closed. The St. Cloud HRA manages their vouchers throughout St. Cloud, Benton, Sherburne, and Wright Counties. The HRA could not provide the amount being used specifically in Elk River. FIGURE 2 Income Limits Sherburne County Housing Choice Voucher Program Fmaily Very Size Low-Income 1-Person $29,350 2-Persons $33,550 3-Persons $37,750 4-Persons $41,950 5-Persons $45,300 6-Persons $48,650 7-Persons $52,000 8-Persons $55,350 Source: St.Cloud HRA Pending Rental Developments in Elk River Elk River Maxfield Research Inc. interviewed City staff in Elk River to determine pending and planned rental developments. As of July 2012, the City identified one pending rental development planned within Elk River. Duffy Development Company has been approved to build a general occupancy apartment building on the vacant parcel adjacent to Pullman Place and The Depot at Elk River Station off of Twin Lakes Road. Duffy Development is planning to pursue a 53-unit Low-Income Housing Tax Credit (LIHTC) building similar to The Depot at Elk River which they built back in 2010/2011. The Depot at Elk River Station was fully leased before occupancy. Although approvals have been granted, there is no financing in place at this time. Dependent on the next round of MHFA financing approvals in January 2013, Duffy Development would like move forward on construction at an earliest of spring of 2014. MAXFIELD RESEARCH INC. 50 RENTAL MARKET ANALYSIS Rental Market Interview Summary Interviews with area rental property managers, real estate agents, developers, and other persons familiar with the rental market in Elk River were conducted to solicit their impressions of the rental housing market in the community. The following are some key points from these interviews: • The majority of property managers stated that in the past few years they have been fully occupied and have never had any issues renting their units. Although they are usually fully occupied, most market rate properties do not maintain a waiting list, and if they do the list is relatively small. Most of the affordable and subsidized properties maintain lengthy waiting lists due to the economy and demand for low-income rental units. The subsidized properties in particular have very long lists with Lanesboro Heights stating a five-year wait. • If an apartment is not available in Elk River, the potential tenant will search in the surrounding communities such as Rogers, Monticello, Albertville, Otsego, and Big Lake. • The renter profile did not have one outstanding majority, managers at each property stated they had a wide mix of tenants. Most of the managers indicated that the majority of tenants work locally. • Most managers indicated that very few, if any renters utilized the commuter rail for work purposes. • Many of Elk River's rental housing buildings are composed of larger-sized (30 to 60 units) structures targeted at the low-to moderate-income market. The majority of these buildings were built at least 20 year ago and do not feature a variety of contemporary amenities. MAXFIELD RESEARCH INC. 51 SENIOR HOUSING ANALYSIS Senior Housing Defined The term "senior housing" refers to any housing development that is restricted to people age 55 or older. Today, senior housing includes an entire spectrum of housing alternatives, which occasionally overlap, thus making the differences somewhat ambiguous. However, the level of support services offered best distinguishes them. Maxfield Research Inc. classifies senior housing projects into five categories based on the level of support services offered: Adult/Few Services; where few, if any, support services are provided, and rents tend to be modest as a result; Congregate/Optional-Services; where support services such as meals and light housekeeping are available for an additional fee; Congregate/Service-Intensive; where support services such as meals and light housekeeping are included in the monthly rents; Assisted Living; where two or three daily meals as well as basic support services such as transportation, housekeeping and/or linen changes are included in the fees. Personal care services such as assistance with bathing, grooming and dressing is included in the fees or is available either for an additional fee or included in the rents. Memory Care; where more rigorous and service-intensive personal care is required for people with dementia and Alzheimer's disease. Typically, support services and meal plans are similar to those found at assisted living facilities, but the heightened levels of personalized care demand more staffing and higher rental fees. These five senior housing products tend to share several characteristics. First, they usually offer individual living apartments with living areas, bathrooms, and kitchens or kitchenettes. Second, they generally have an emergency response system with pull-cords or pendants to promote security. Third, they often have a community room and other common space to encourage socialization. Finally, they are age-restricted and offer conveniences desired by seniors, although assisted living projects sometimes serve non-elderly people with special health considerations. The five senior housing products offered today form a continuum of care (see Figure 2 on the following page), from a low level to a fairly intensive one; often the service offerings at one type overlap with those at another. In general, however, adult/few services projects tend to attract younger, more independent seniors, while assisted living and memory care projects tend to attract older, frailer seniors. 52 MAXFIELD RESEARCH INC. SENIOR HOUSING ANALYSIS CONTINUUM OF HOUSING AND SERVICES FOR SENIORS Single-Family Townhome or Congregate Apartments w/ Nursing Assisted Living Home Apartment Optional Services Facilities Age-Restricted Independent Apartments, Congregate Apartments Memory Care Townhomes,Condominiums,or w/Intensive Services Units Cooperatives Fully Independent Fully or Highly Lifestyle Dependent on Care Senior Housing Products Source:Maxfield Research Inc. Senior Housing in Elk River As of July 2012, Maxfield Research identified nine senior housing developments in Elk River. These projects contain a total of 353 units. Three of the projects are subsidized, while the remaining six are market rate. Guardian Angels owns and manages seven of the nine properties. Table SH-1 provides information on both the market rate and subsidized projects. Information in the table includes year built, number of units, unit mix, number of vacant units, rents, and general comments about each project. The following are key points from our survey of the senior housing supply. Market Rate Senior Projects • We identified four existing adult/few service senior project in Elk River with a total of 177 units. Two of the developments are ownership (117 units) and the other two are rental (60 units) buildings. Pullman Place is the newest market rate development built in 2005 and is a cooperative ownership product with 65 units. The remaining products are 10 years and older. • Pullman Place is a limited equity cooperative. Cooperative products involve purchasing a unit (or share) and then paying monthly fees which includes all utilities, of property and commons areas, and future building maintenance. Pullman Place sold out fairly quickly when it opened at the height of the real estate market. However current residents who purchased the during the peak have lost value in their units. Many larger units have a difficult time of selling and have been on the market for over two years. MAXFIELD RESEARCH INC. 53 w E cu v ai cu' m Y O u U J 0 vi N C r a O ate. = C O n • a C o L a O In ro Z N a j W L n'E O � 3 v> L N 21 N u C a L 0 p = a N a O a y °E - ! v i a, Y a a V >,L v E ° = • C y o - To v a E v a c e v a u `m a E `�^ N w a o v m a co 2 E O v, T O N U O} o N < 3 w `o a 0 N L>0 M a >•• • O > m � t\ U N •O a+ o y u v a a n v _ 7 w H a Q E. I C _Q a a c ILL E a '" 'C < a c c 2 U Q To 3 a> j c q n v ,a c !' O m a -o c e a a o a pN C - Q a .0 j o ou 'a .T. C O a u c o E Y o z o o ° ,a, CIL v_ C > .L. 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VI a a co o Qa > 3 p 0.0 C D c C z w CC CC w a. c C a y o la W t0 1D vi N — O J Y v N '6 '6 Co K C O y _ > X Z U cO Y j ? ° C Y 7 0 0 II o CQ N Q C d W _w 1' Q Q W 0 < 0 0 > V°7 C SENIOR HOUSING ANALYSIS Elk River Senior Housing Locations Ikw 1' Maxfield Research Inc. Key: 60+Units 40-59 Units Adult/Few-Services Ownership 1. Pullman Place 21-39 Units 2. Elk Run Village Less than 20 Units Adult/Few-Services Rental Market Rate 3. Elk Terrace 4. Evans Park 5. Riverview Apartments Subsidized 5. Riverview Apartments 6. Angel Ridge 7. Guardian Oaks Assisted Living 8. Guardian Angels by the Lake Memory Care 8. Guardian Angels by the Lake MAXFIELD RESEARCH INC. 57 SENIOR HOUSING ANALYSIS • Elk Run Village is a for sale age-restricted townhome development for active adults. There are a total of 52 homes along with a clubhouse. All of the units are one-level, two- bedrooms with attached garages. • Monthly rent for the rental buildings ranges $477 for efficiency units at Riverview Apartments to $1,035 for a two-bedroom unit at Evans Park. Unit sizes range from 320 square feet for an efficiency to 826 for a two-bedroom unit. Both of the market rate buildings are about 30 years and older. Subsidized Senior Housing Projects • There are a total of 138 units in two subsidized senior projects. As of July 2012, all of the subsidized units were occupied indicating pent-up demand for subsidized senior rental units. • Overall, the unit sizes at the subsidized senior projects are considerably smaller than many of the previously mentioned general-occupancy rental projects. One-bedrooms range from 540 to 688 square feet and two-bedrooms range from 734 to 800 square feet. • Typically subsidized senior housing offers limited to no amenities. However Guardian Angels has developed Angel Ridge and Guardian Oaks with common area amenities such as a grocery store, gift shop, beauty salon, dining room, community room, extra storage space, and coffee shop. Personal care services are also available at an extra cost along with scheduled activities. Subsidized senior housing offers affordable rents to qualified lower income seniors and handicapped/disabled persons. Typically, rents are tied to residents' incomes and based on 30 percent of adjusted gross income (AGI), or a rent that is below the fair market rent. For those households meeting the age and income qualifications, subsidized senior housing is usually the most affordable rental option available. Senior Housing with Services • There is one facility in Elk River that offers assisted living and memory care services. Guardian Angels by the Lake is a 90 unit development opened in 1998 and recently expanded in 2012. A new 30 unit memory care wing was added in 2012 and the former 13 unit memory care wing in the original building, have been converted to assisted living. • Personal care services are provided a-la-carte for both assisted living and memory care. The base fee included weekly housekeeping and linens. Assisted living included two meals per day and memory care includes three meals per day. MAXFIELD RESEARCH INC. 58 FOR-SALE MARKET ANALYSIS Introduction Maxfield Research Inc. analyzed the for-sale housing market in Elk River by analyzing data on single-family and multifamily home sales and active listings; identifying pending for-sale developments; and conducting interviews with local real estate professionals, developers and planning officials. Overview of For-Sale Housing Market Conditions Table FS-1 presents home resale data on single-family and multifamily housing in Elk River from 2000 through May 2012. The data was obtained from the Regional Multiple Listing Services of Minnesota and shows annual number of sales, median and average pricing, average days of market, cumulative days on market, and percentage of sales that are lender-mediated (i.e. short-sale or foreclosure). It should be noted that lender-mediated sales were not categorized until July 2008 and the cumulative days on market were not calculated until 2006. Table FS-2 breaks down resale activity from Table FS-1 into single-family and multifamily resales. The following are key points observed from our analysis of this data. • Like across the Twin Cities Metro Area and the nation, pricing peaked in 2005 & 2006 at the height of the real estate boom. The average and median sales price plateaued at roughly $254,000 and $234,900 respectively. • Between 2000 and 2006, the median sales price increased annually from $159,000 to $234,900, a gain of+48%. However, from 2006 to 2011 the median sales price declined to $132,000 (-44%). • Sales prices increased between 2009 and 2010, mostly a result of the first-time homebuyer tax credit that was available in the second half of 2009 through September 2010. The tax credit also spurred transaction activity, resulting in nearly 400 sales in 2009 (+17.4% over 2008 sales). • Since 2000, the average and median sales price have decreased by 15.6% and 17% respectively. The average number of resales has averaged about 410 sales annually during this time. • The number of lender-mediated properties has accounted for over one-half of all home transactions since 2009. Through May 2012, 57% of all resales have been lender-mediated. The high number of foreclosures and short sales will continue to keep pricing down. MAXFIELD RESEARCH INC. 59 FOR-SALE MARKET ANALYSIS Elk River For-Sale Resales - 2000 to 2011 $300,000 700 Resales Median Sold Price Average Sold Price $250,000 600 611 $200,000 518 500 cu U a ..../.'/?.<1*-:,- 435 66 439 382 400 v, LP, 398 v m $150,000 f6 cn '^ 353 360 339 300 cc 324 313 $100,000 200 $50,000 100 $0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year TABLE FS-1 HOME RESALES CITY OF ELK RIVER 2000 to May 2012 No. Avg.Sales Avg.% Med.Sales Median% Days on Market Cumul.DOM' %Lender Year Sold Price Change Price Change Avg. Median Avg. Median Mediated' 2000 353 $172,769 - $159,000 - 49 25 - - - 2001 324 $187,299 8.4% $172,900 8.7% 56 36 - - - 2002 435 $210,268 12.3% $186,000 7.6% 61 38 - - - 2003 466 $227,956 8.4% $208,149 11.9% 61 39 - - - 2004 611 $238,559 4.7% $224,350 7.8% 57 39 - - - 2005 518 $254,038 6.5% $234,900 4.7% 88 61 - - - 2006 439 $248,640 -2.1% $230,000 -2.1% 83 58 169 111 - 2007 360 $233,069 -6.3% $210,450 -8.5% 85 66 206 178 - 2008 339 $201,085 -13.7% $190,000 -9.7% 82 61 180 152 19.8% 2009 398 $166,010 -17.4% $156,500 -17.6% 75 55 163 101 49.5% 2010 313 $173,153 4.3% $160,000 2.2% 70 49 134 77 51.8% 2011 382 $145,781 -15.8% $132,000 -17.5% 88 59 149 106 55.5% 2012* 148 $160,118 9.8% $150,000 13.6% 89 60 121 76 56.8% Total 00'-11' 5,086 Summary 00'to 11' Change -15.6% -17.0% Average 412 $204,886 $188,687 73 52 160 109 *January through May 31st,2012 'Cumulative Days on Market initiated in 2006. Cumulative days equals the number of days on market over the course of the past year(i.e.covers number of days if the property was relisted) 2 Lender Mediated Properties include foreclosures and short sales. ML5 data for this property type began in July 2008. Sources:Regional Multiple Listing Service of Minnesota,Maxfield Research Inc. MAXFIELD RESEARCH INC. 60 FOR-SALE MARKET ANALYSIS • Single-family housing types accounted for about 79% of all resales since 2000. Multifamily resales were highest in 2007 when they accounted for 30% of total sales. • During the real estate boom, multifamily housing priced closely to single-family housing and sold for about 12% less than a single-family home. However, during the later-half of the last decade multifamily pricing decreased substantially and was priced about 44% lower in 2011. TABLE FS-2 SINGLE-FAMILY AND MULTIFAMILY RESIDENTIAL SALES CITY OF ELK RIVER 2000 through 2011 Median Average Number Selling % Selling % Year of Sales Price Chg. Price Chg. Single-Family 2000 318 $162,400 -- $175,779 -- 2001 288 $174,700 7.6% $191,433 8.9% 2002 358 $199,925 14.4% $219,401 14.6% 2003 360 $222,000 11.0% $244,366 11.4% 2004 470 $239,250 7.8% $256,351 4.9% 2005 410 $251,900 5.3% $272,383 6.3% 2006 325 $251,500 -0.2% $273,785 0.5% 2007 252 $249,230 -0.9% $260,260 -4.9% 2008 261 $205,950 -17.4% $220,158 -15.4% 2009 309 $192,900 -6.3% $183,002 -16.9% 2010 235 $181,000 -6.2% $193,931 6.0% 2011 273 $160,000 -11.6% $166,918 -13.9% Pct.Change 00'-11' -14.2% -1.5% -5.0% Multifamily* 2000 35 $142,580 -- $145,163 -- 2001 36 $146,400 2.7% $154,227 6.2% 2002 77 $152,197 4.0% $167,803 8.8% 2003 106 $162,200 6.6% $172,222 2.6% 2004 141 $167,123 3.0% $179,253 4.1% 2005 108 $172,775 3.4% $184,227 2.8% 2006 114 $167,025 -3.3% $176,956 -3.9% 2007 108 $164,995 -1.2% $169,623 -4.1% 2008 78 $132,500 -19.7% $137,021 -19.2% 2009 89 $100,000 -24.5% $107,015 -21.9% 2010 78 $107,442 7.4% $110,555 3.3% 2011 109 $90,000 -16.2% $92,842 -16.0% Pct.Change 00'-11' 211.4% -36.9% -36.0% * Multifamily includes twinhomes,townhomes,and condominiums(cooperatives are typically not listed in the MLS) Source: Regional Multiple Listing Service of MN; Maxfield Research Inc. MAXFIELD RESEARCH INC. 61 ANALYSIS FOR-SALE MARKET p sin Elk River: 2000 to 2011 Median Resale vue al $251,900 $251,500 $249,230 $275,000 $239,250 .-t-.-Single-family 5.X5,950 milt $222,000 $192,900 $2500,p0 ,.� Multrfa $ $181,000 160,000 $225,000 $199,92 $200,000 $1j4 70' $ 775$367,025$164,9 y 172, 7 $162400 $167,123 C $175,0p0 $162,200 $132,5�� -a y $152,197 $3p7 442 000 $150, 5146 400 $100,000 $g0,0p0 5142,580 2010 2011 $125,000 2009 $ 000 2005 2006 2007 2008 100, $75,000 2000 2001 2002 2003 20p4 Year between 2000 es from resales Price ht price rang data. Home Resales I%Y ion of sales within evg visually displays the sales p00 accounted for shows the distribution on the following page ales es priced 3 sh es priced over$ 011,homes Table May 2012• The graph from 2009 to 2 and 2003 to 20061,homes boom years l the period. Ho of total resales • the peak during er for 3%to 9% between Wing ° of resales•• ° to 24%of total resales than 2/° 17/° have accounted for less priced under above rse threshold accou �n or less were p p05 under$1p0,000 of sales and 2 priced and one-third between 2000 nearly betty ore ConVernedl 2,homes However, nually have become m increased annually 2000 a housing prices housing p ter on the chart,the collapsed. Since 2006' market collap household's mon' As illustrated 2012,a househ old be ` before the real estate ma of May ce,and taxed w° annually• Elk River as about h$41,050 e affordable of$150000 in insurance,median price principal/interest, ould be assuming the the u ing 10`)/0 r down and prin a home at this price ino land households) Of Based on afford d ° 5,92 hOU5eh thre • t ass g a their adjusted gross /°l 4 that payment l income required 30%of th In 2012, 050 meaning home in t $1,025' The a home utilizing uityl' riced hom purchasing f debt or existing equity). greater than$a m on porch afford median-priced level O olds had incomes not have a high n households olds in Elk River can on-senior households River s n of non-5en1Or quarters _'WC. cf-) N lO o a Ln M N .-1 m O M M M N - •.a-i o 0 a o 0 o e o 0 a o M m N .-+ o v N o o Z N vi N o Lc o r`i .i o 0 ~ N N N .-1 .4 0 N N - N m to m O o N N O O N o m m co �' a o -I 0 0 0 0 L 0 m Z m .-1 m ,..1 1 a CO a 0 l0 O 0 O o 0 O CO m a In N O O O O 0 M N .-' .1 O N N .-1 - Lr1 CO a N a m a M a m N M M .-r 0 \ 0 0 0 0 0 0 0 O Z M 0 O. a M LO CO (N Lel N m 0 0 o o a m en .-■ N a .y .+ O O o .-� M N .-1 .ti 0 N N .-1 -•O N CO O rn C/1 to M .m-1 N N m o 0 0 0 0 0 0 0 0 m Z m .r m an d CO .-1 m CO CO M CO an O 0 o N Oi V1 V1 n m .-i O o O 0 . 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CV m N N a M N N O O 0 O N CO O ( u1 m N 0 O 0 M N 0 N IN N Z a W .Ni a m N V1 .-1 M .1 '-' N e-1 .�\-i O lO N V1 M O 0 0 a .-1 Ol M M 01 N .-1 0 0 O 0 .-i en .-a O N N .-1 - y (n O N a m o N L^ '" .a .: 0 0 0 0 0 0 0 0 0 O l0 a M N m M 0 ^T J 0 Z y ti M 0 a N 01 C CO D CO D 0 0 6 Q o 0 M M .1 O N ry 0 Q Z W I Y c u CC 5 < m m m m m m ` CA m m m m m m m m m m m Ol m m m m m N p W C m m m m Cr, m 01 Oi ai Oi Cl O m m m m Cr. m Cl 01 O O O O W oa amain 0aamam S a LU 0 ."1 N N M M 0 .-.1 a N N M M .p J o vt an v>•an.n an o +n.n.n an.n.n $ v■ Q G1 O y0 y0 YO y0 O O 01 0 0 0 0 0 0 0 N `p c C o + m n J N m an 000000000000 ( . 0000000 m Z W 1 an 0 0 0 0 0 0 0 .- -LL K 0 0 0 0 0 0 0 K 0 0 0 0 0 0 0 Ce W W O O O O O O 0 Y u w O O C7 0 0 0 0 j.' .N-I u x O O 0 ✓t co ut O ,_ o 0 O vl O vl O • C .--1 N N m M a 0 C .-I N N M M a O O C LL O. 2 in an to V1 an N In 1-� d 2 in in N to N an an F- ..N en C FOR-SALE MARKET ANALYSIS Elk River Home Resales by Price & Year 1090.0%0.0°i° . . . . . . . . . . . I . . . . . . . . . . . 80.0% 70.0 ° ' ■ I I III U U 111 U I I I I . . I $300k+ 60.0% I ti ::: IIII $250k to$299.9k , I I I I ■$200k to$249.9k 0 IIIII ■ •$150k to$199.9k 3 II UIUI ■ ■ 111 111 ■Under$100k ■ 10.0% 1 ■ ■ 0.0% N N N N N N N N N N N N O O O O O O O O O O CO O O O O O O O O O O O N H O 1-+ N W A In CT) J CO LID O 1-■ Year Current Supply of Homes on the Market To more closely examine the current market for available owner-occupied housing in Elk River, we reviewed the current supply of homes on the market (listed for sale). Table FS-4 homes shows currently listed for sale in Elk River distributed into 12 price ranges. The data was provided by the Regional Multiple Listing Services of Minnesota and is based on active listings in June 2012. MLS listings generally account for the vast majority of all residential sale listings in a given area. Table FS-5 shows the number of listings by property type (i.e. single-family, townhome/twinhome, or condominium) while Table FS-6 shows listings by home style. The following points are key findings from our assessment of the active single-family and multifamily homes listed in Elk River. • About 130 homes were listed for sale in Elk River as of June 2012. • The median list price in Elk River was $181,900 ($196,073 for single-family homes and $107,500 for multifamily homes). The median sale price is generally a more accurate indicator of housing values in a community than the average sale price. Average sale prices can be easily skewed by a few very high-priced or low-priced home sales in any given year, MAXFIELD RESEARCH INC. 64 FOR-SALE MARKET ANALYSIS whereas the median sale price better represents the pricing of a majority of homes in a given market. • Based on a median list price of$181,900, a household would need an income of about $49,790 in order to afford to make monthly housing payments of about $1,245 (assuming a 10% down payment, 3.75% 30-year fixed mortgage). A household with significantly more equity (in an existing home and/or savings) could put more than 10% down and afford a higher priced home. About 79.5% of Elk River households have annual incomes at or above $49,790. • About 40% of listings in Elk River are priced under $175,000 and 36% of those listings are priced under$100,000. • Single-family homes accounted for 82% of all active listings. The remaining listings are either townhomes (14.5%) or condominiums (4%). TABLE FS-4 HOMES CURRENTLY LISTED FOR-SALE CITY OF ELK RIVER June 2012 Single-Family Multifamily) Price Range No. Pct. No. Pct. <$99,999 8 7.5% 11 45.8% $100,000 to$124,999 7 6.5% 6 25.0% $125,000 to$149,999 5 4.7% 3 12.5% $150,000 to$174,999 15 14.0% 1 4.2% $175,000 to$199,999 23 21.5% 2 8.3% $200,000 to$249,999 22 20.6% 1 4.2% $250,000 to$299,999 15 14.0% 0 0.0% $300,000 to$349,999 7 6.5% 0 0.0% $350,000 to$399,999 2 1.9% 0 0.0% $400,000 to$449,999 1 0.9% 0 0.0% $450,000 to$499,999 0 0.0% 0 0.0% $500,000 and Over 2 1.9% 0 0.0% 107 100% 24 100% Minimum $59,900 $37,000 Maximum $599,900 $229,900 Median $196,073 $107,500 Average $212,108 $108,532 Includes townhomes,twinhomes,and condominiums Sources: Regional Multiple Listing Service of MN Maxfield Research Inc. MAXFIELD RESEARCH INC. 65 FOR-SALE MARKET ANALYSIS • Over 70% of multifamily listings are priced under $125,000. However, only 14% of single- family listings are under $125,000. For single-family listings, 36% are priced between $150,000 and $199,999 and 35% are priced between $200,000 and $299,999. • All of the current townhome listings are all side-by-sides. There are no twinhomes, quads, or detached townhomes for-sale at this time. • Single-family listings are rather evenly distributed among various housing types. Two- story's and larger made up the highest percentage (34%) of active listings. Elk River Active Listings - June 2011 40 a Single-Family 35 •Multifamily 30 ao 25 c -J 20 a 15 5 4H11 Under$100k $100k to $150k to $200k to $250k to $300k to $400k+ $149.9k $199.9k $249.9k $299.9k $399.9k List Price TABLE FS-5 ACTIVE LISTINGS BY HOUSING TYPE June 2012 Property Type Listings Pct. Single-family 107 81.7% Townhome/Twinhome 19 14.5% Condominium 5 3.8% Total 131 100.0% Sources: Regional Multiple Listing Service of MN; Maxfield Research Inc. MAXFIELD RESEARCH INC. 66 FOR-SALE MARKET ANALYSIS TABLE FS-6 ACTIVE LISTINGS BY HOUSING TYPE June 2012 Avg.List Avg.List Price Avg.Age Property Type Listings Pct. Price Per Sq.Ft. of Home Single-Family One story 27 25.2% $207,513 $90 1991 1.5-story 1 0.9% $69,900 $39 1896 2-story 24 22.4% $279,111 $99 2001 Modifed 2-story 10 9.3% $196,000 $98 2000 More than 2-story 2 1.9% $514,900 $131 1990 Split entry/Bi-level 20 18.7% $158,719 $95 1999 3-level split 3 2.8% $163,233 $107 1998 4 or more split-level 18 16.8% $179,801 $92 1996 Other 2 1.9% $216,900 $99 2008 Total 107 100.0% $212,108 $95 1996 Townhomes/Twinhomes Side-by-side 19 100.0% $126,009 $72 2003 Total 19 100.0% $126,009 $74 2003 Condominiums/Cooperatives Condominium 5 100.0% $42,120 $44 2004 Total 5 100.0% $42,120 $44 2004 Source: Regional Multiple Listing Service of MN;Maxfield Research Inc. Listings by Housing Type Other • 1.9% 3-level split+ 19.6% o, 2-level split 18.7% I— _ oio s 2 story+ 3 6% 1.5-story 10.9% One story 25.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Pct. MAXFIELD RESEARCH INC. 67 FOR-SALE MARKET ANALYSIS Lot Inventory Table FS-7 shows an inventory of lots within platted subdivisions in Elk River. The table includes information on the year the subdivision was platted, the total number of lots platted, number of lots developed, lots available, and type of lot. The following are key points from Table FS-7. • As of July 2012, Elk River had a total of over 400 vacant lots within 28 subdivisions. • All of the subdivisions were platted between 2000 and 2006. Nearly 40% of the lots were platted in 2002, and another 43% of the lots were platted between 2004 and 2005. • About 25% of the available lots are within four subdivisions that have both single-family and townhome lots platted. Consequently, nearly all the demand for new construction today is for single-family lots as townhome product has suffered the most during the housing downturn. • Approximately two-thirds of the available lots were platted between 2004 and 2006, the peak years of the real estate boom. MAXFIELD RESEARCH INC. 68 FOR-SALE MARKET ANALYSIS TABLE FS-7 LOT INVENTORY-ACTIVE SUBDIVISIONS CITY OF ELK RIVER July 2012 Year No.of Developed Vacant/ Lot Type Subdivision Platted Lots Lots Avail.Lots SF TH Belmont Estates 2004 32 12 20 X Eagles Marsh Second Addition 2006 19 5 14 X Hillside Estates 10th Addition 2003 21 8 13 X Kingdom Estates 2003 6 3 3 X Kingdom Estates Second Addition 2005 14 4 10 X Kingdom Estates Third Addition 2006 3 2 1 X Kliever Lakes Fields 2001 59 55 4 X Kliever Lakes Field Second Addition 2002 33 18 15 X Kliever Lakes Field Third Addition 2005 83 42 41 X Kliever Lakes Field East 2002 43 10 33 X Meadows of Elk River 2006 6 1 5 X Mississippi Oaks Third Addition 2002 49 28 21 X Nordic Hills 2001 50 46 4 X Park Pointe 2002 96 92 4 X Prestigious Woodland Hills 2004 29 15 14 X River Park 2005 47 23 24 X Trott Brook Crossings TH 2002 28 23 5 X Trott Brook Farms South SF 2002 30 27 3 X Twin Lakes Estates 2002 80 61 19 X Twin Lakes Estates Second Addition 2005 65 35 30 X VanDenBerg Addition 2005 10 2 8 X West Oaks Second Addition 2004 46 22 24 X X West Oaks Third Addition 2004 40 0 40 X Windsor Meadows 2004 33 13 20 X Windsor Oaks of Elk River 2002 33 28 5 X The Woods at Hillside Second Addition 2004 14 12 2 X The Woods at Hillside Third Addition 2004 16 12 4 X The Woods at Hillside Fourth Addition 2000 17 1 16 X Total available and developed lots 1,002 600 402 Sources: City of Elk River Sherburne County GIS Maxfield Research Inc. MAXFIELD RESEARCH INC. 69 FOR-SALE MARKET ANALYSIS Lot Absorption by Subdivision Table FS-8 depicts lot absorption by subdivision based on building permit activity. The data was obtained from the City of Elk River Building Department for all new single-family construction between 2008 and June 2012. It should be noted the average values do not include land. Key findings follow. • The number of permits decreased annually between 2008 and 2011, however, through the first half of 2012, new construction activity has increased 60% (10 permits in 2011 compared to 16 permits in 2012). • The River Park, Twin Lakes 2nd Addition, and Windsor Meadow subdivisions accounted for 38% of all new construction activity over the past four years. • Among the 25 subdivisions that had building activity over the past four plus years, 40% of the subdivisions only had one home constructed. TABLE FS-8 BUILDING PERMIT ACTIVITY BY SUBDIVISION CITY OF ELK RIVER 2008 to June 2012 Building Permits by Year' Summary Subdivison 2008 2009 2010 2011 20122 Permits Avg.Value' A&R Addition 1 0 0 0 1 2 5159,645 Belmont Estates 2 1 1 1 0 5 $148,778 Best Point on Lake Orno 2 0 0 0 0 2 $153,678 Froehlich's Happy Corner 1 0 0 0 0 1 $294,625 Greenhead Acres 0 1 0 0 0 1 $140,703 Hillside Estates Tenth Addition 1 2 0 0 3 6 $208,593 Kingdom Estates Second Addition 2 0 1 0 0 3 $209,760 Kliever Lake Fields 1 0 0 1 0 2 $169,744 Kliever Lake Fields Second Addition 3 2 1 0 0 6 $175,928 Meadows of Elk River 0 1 0 0 0 1 $155,031 Mississippi Oaks Third Addition 0 1 0 0 0 1 $226,663 Nordic Hills 0 3 2 0 0 5 $172,135 Park Pointe 0 0 1 0 0 1 $236,475 Preserve Estates 0 1 0 0 0 1 $86,873 Prestigious Woodland Hills 0 1 0 0 0 1 $86,873 River Park 4 2 0 1 4 11 $148,439 The Woods at Hillside Third Addition 0 0 0 0 2 2 $190,723 Trott Brook Farms Seventh Addition 1 0 0 0 0 1 $198,348 Trott Brook Farms South 1 0 0 0 0 1 $206,455 Trott Brooks Farm Twelfth Addition 2 1 0 0 1 4 $271,575 Twin Lakes Estates 1 0 0 1 0 2 $178,967 Twin Lakes Estates Second Addition 1 0 3 5 3 12 $141,984 West Oaks Second Addition 0 3 0 0 1 4 $214,307 Windsor Meadows 1 1 6 1 1 10 $237,902 Windsor Park 1 0 0 0 0 1 _ $118,114 Total 25 20 15 10 16 86 $182,045 'Note: All developed lots where a building permit was pulled for new construction 2 Through June 2012 3 Average value per building permit record between 2008 and 2012 Sources: City of Elk River Building Department,Maxfield Research Inc. MAXFIELD RESEARCH INC. 70 FOR-SALE MARKET ANALYSIS Actively Marketing Subdivisions Maxfield Research Inc. interviewed developers/builders of single-family subdivisions and for- sale multi-family developments that are either currently being marketed or are planned to come online in Elk River. Table FS-9 inventories those developments that are actively marketing as of June/July 2012. Key points from the table follow. • There are 14 subdivisions actively marketing lots at this time. Combined, there are about 150 lots available. • Although there are a variety of lot sizes available, most lots range from about one-third to one-half an acre. The majority of homes marketed today are constructed on walk-out lots, typically a premium lot in the subdivision. • Lot prices range from approximately $18,000 to $80,000. However, the average lot cost is about $40,000. According to Realtor interviews, lot demand is strongest when priced under $25,000/lot. There are very few lots priced under this price point in Elk River at this time. Many builders purchased land during the peak and are trying to recoup some of the depreciated land costs. • New home construction pricing has come down considerably since the peak of the real estate boom. In part, pricing has decreased due to the excess supply of land and builders' ability to pass land savings along to the consumer. New construction ranges from about $155,000 to $335,000. A number of subdivisions are marketing product under $200,000. • Split levels are the housing type that caters to first-time home buyers as they are priced from about $155,000 to $200,000. Most two-story designs target move-up buyers and are priced from about $250,000 or more. • The price per square foot (including land) varies considerably based on design, amenities, square footage, type of lot, etc. New construction is priced from approximately $80 to $170 per square foot; averaging $127 among all single-family types. • Every single-family home marketing has a three stall garage. Actively marketing detached townhomes are the only products with a two-car garage. Pending For-Sale Developments According to the City of Elk River, there are no pending for-sale housing developments in the planning process at this time. MAXFIELD RESEARCH INC. 71 Cl N O O1 O O Ql O 01 0 O N N 0 N N N vi- N C O a) 'i O a a) CO N ul Co a) O co 0 fa O U m O O U e-1 m N CO L) 0 O 0 U 5, O C VT Ql C C in- VT LT VT C 01 O 01 •fl. 4) LD N ■ UI VI 'Vt i ■ i i 'Vf LD '-I 01 • ^ an V) U) H L,., 0 0 LO E '"i a) M ."i 0) a) O N o LD a) N Co N 0 L? 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V1 U 00 Cl, V) C _0 c `n `n 0 O " N C v J C !' 'r✓ 'a-, `) - Q .o U U U - co N v C U U Z c O • U Q Q Q a) E a) c ` U U L - a) rC CO Y N fl N CO — _ a) 111 4 Q O c CO a) a) a) C > O U U a) - 2 u O O Y U U U i m K cc j N CC 4 ut C ci a U 3 .� ti 0 W N N ilw n O 2 2 2 CU N co Q L-1 U O X V) CO -C Vf o W W `D CO - a) f0 f0 'a O N 00 f0 n) CO W ra Y 0 _ Y N O u1 Vf N O c cc m 2 0 J w Lo w Q o v m 2 0 0 0 o - 0 Q C a) J O .a m La c 9 O O O O C v C N - VI E v '7 > c ,� ., c o ' ' a U x O00 = a) a) u, y0 C C C a) a) a) .. co N 7 Q u. _ m w 2 �c 2 H f3 > s s H H H m a UI 0 FOR-SALE HOUSING ANALYSIS Realtor/Builder Interviews Maxfield Research Inc. interviewed real estate agents, home builders, and other professionals familiar with Elk River's owner-occupied market to solicit their impressions of the for-sale housing market in the community. Key points are summarized by topic as follows. Market Overview • Real estate activity has picked-up in Elk River this year. Although pricing has yet to rebound, sales transaction activity is increasing and days on market has been declining. A number of Realtors commented on the declining days of market, in many cases appropriately priced homes are selling in 60 days or less. • Elk River has a good reputation and is a sought after community. People are attracted to Elk River for its excellent schools and good transportation options via the Northstar, Highway 169, and Highway 10. • Inventory is significantly low and is at a 12-year low in Elk River. Many sellers continue to restrain from selling their home due to declining values. As a result, some buyers are unable to find housing based on their preferences and price point. Activity could be higher if the supply were balanced. • Single-family housing is the preferred housing type in Elk River. Although Elk River has townhome supply, most townhome sales are bank-owned transactions priced under $100,000. Many investors are seeking out this product for rental property conversions. • Today's record low interest rates have brought some buyers off the fence and into the marketplace. However, there are still many buyers waiting to purchase and desiring to rent in the short term. • The housing market in Elk River, Zimmerman, and Big Lake is improving slowly. However, the real estate market in Otsego, Rogers, and St. Michael has been more active in 2012. • The quality of housing in Elk River has been maintained during the housing downturn, even with the increase of foreclosed properties. • Elk River has a perception of higher property taxes than neighboring communities; this has been a deterrent for some buyers. • The typical home buyer is a family that is seeking a home priced between $200,000 and $250,000. Many seniors looking to downsize have delayed their sale due to decreased values. • The supply of homes priced under $200,000 is low. If those homes are in good condition when entering the market they typically sell quickly. MAXFIELD RESEARCH INC. 73 FOR-SALE HOUSING ANALYSIS Land/Lots • Interviews all indicated there is an excess supply of lots in Elk River. Most stated there has been little activity in the land market. • Lots that are selling today are typically priced from $15,000 to $25,000. These same lots were priced from $80,000 to $100,000 during the real estate boom. Lots priced around $40,000 were selling for over $125,000 back in 2005. Generally, lots that have been selling are about 70% lower than during the peak. • Bank-owned lots that have been heavily discounted have sold well. Many builders have been buying up increments of three to five lots from banks. • National builders have been able to take advantage of the discounted land more so than smaller, local builders. The majority of the lots have been sold in surrounding communities such as Otsego, Rogers, and other 1-94 communities. Smaller builders continue to face stringent financing guidelines from lenders. • The smaller builders cannot compete against the national builders on lot prices. Many local builders still have lots purchased at the peak of the market and are still trying to recoup some of the land costs. • Because of discounted land pricing, buyers are obtaining more house for their dollar than during the boom. Many lots account for only about 10% of the home's final purchase price. New Construction • There are no national builders left in Elk River; all left after the housing market crashed. All the builders in Elk River today are smaller, local contractors who are build-to-suit. Most of these builders avoid carrying many lots and have minimal lot inventory. • The national builders (such as Centex, Ryland, Lennar, and DR Horton) have been most active in the 1-94 and HWY 10 Twin Cities northwest corridor. Because national builders are able to offer concessions, financing, and seller paid closing costs, many smaller builders find it difficult to compete. • Many of the national builders have been ramping up in communities such as Otsego, Rogers, and St. Michael. Many are starting to build spec homes again as the market improves. • Interviewees commented that Elk River is not seeing new construction activity like other neighboring communities. • Even after the downturn, most purchasers of new construction tend to be move-up buyers versus first-time buyers. • Many local builders shifted their business model due the economic downturn. For those builders who weathered the housing downturn, most focused on remodeling jobs versus new construction. MAXFIELD RESEARCH INC. 74 HOUSING DEMAND ANALYSIS Introduction Previous sections of this study analyzed the existing housing supply and the growth and demographic characteristics of the population and household base in Elk River. This section of the report presents our estimates of housing demand in Elk River from 2012 through 2017. Demographic Profile and Housing Demand The demographic profile of a community affects housing demand and the types of housing that are needed. The housing life-cycle stages are: 1. Entry-level householders • Often prefer to rent basic, inexpensive apartments • Usually singles or couples in their early 20's without children • Will often "double-up" with roommates in apartment setting 2. First-time homebuyers and move-up renters • Often prefer to purchase modestly-priced single-family homes or rent more upscale apartments • Usually married or cohabiting couples, in their mid-20's or 30's, some with children, but most are without children 3. Move-up homebuyers • Typically prefer to purchase newer, larger, and therefore more expensive single-family homes • Typically families with children where householders are in their late 30's to 40's 4. Empty-nesters (persons whose children have grown and left home) and never-nesters (persons who never have children) • Prefer owning but will consider renting their housing • Some will move to alternative lower-maintenance housing products • Generally couples in their 50's or 60's 5. Younger independent seniors • Prefer owning but will consider renting their housing • Will often move (at least part of the year) to retirement havens in the Sunbelt and desire to reduce their responsibilities for upkeep and maintenance • Generally in their late 60's or 70's MAXFIELD RESEARCH INC. 75 HOUSING DEMAND ANALYSIS 6. Older seniors • May need to move out of their single-family home due to physical and/or health constraints or a desire to reduce their responsibilities for upkeep and maintenance • Generally single females (widows) in their mid-70's or older Smaller, outstate communities and rural areas tend to have higher proportions of younger households that own their housing than in the larger growth centers or metropolitan areas. In addition, senior households tend to move to alternative housing at an older age. These conditions are a result of housing market dynamics, which typically provide more affordable single-family housing for young households and a scarcity of senior housing alternatives for older households. Therefore, the age categories for housing life cycles will be somewhat different in Elk River than in communities located in the Twin Cities Metro Area. The baby boom generation will have the biggest effect on the housing market in Elk River as their life cycle continues. Baby boomers are currently ages 47 to 65, and as they age over this decade, they will increase the population in the age groups 45 to 54 and 55 to 64. The 45 to 54 and 55 to 64 age groups in Elk River will see increases of 213 and 826 people, respectively, over the next five years. Some of these baby boomers will prefer more expensive single-family homes, while others who become empty nesters may prefer to downsize or desire maintenance-free alternatives. With the baby busters following in the baby boomers' wake, the age group 35 to 44 will decline, somewhat decreasing the overall demand for move-up housing. Estimated Demand for For-Sale Housing Table HD-1 presents our demand calculations for general occupancy for-sale housing in Elk River between 2012 and 2017. Between 2012 and 2017, Elk River is projected to add 680 new households. Based on our analysis of household growth forecast in specific age cohorts, we estimate that 67% of these households will support demand for general occupancy housing products (i.e. vs. senior housing), generating total demand for 456 general occupancy housing units between 2012 and 2017. Demand for housing is apportioned between ownership and rental housing products. According to historic U.S. Census data, approximately 81% of households under age 65 owned their housing in 2010 in Elk River. Applying this percentage to the total demand for general occupancy units yields demand for 369 for-sale units between 2012 and 2017. Based on land available, building trends, and demographic shifts (increasing older adult population), we project 85% of the for-sale owners will prefer traditional single-family product MAXFIELD RESEARCH INC. 76 HOUSING DEMAND ANALYSIS types while the remaining 15% will prefer a maintenance-free multi-family product (i.e. twin homes, townhomes, or condominiums). We then subtract the current identified platted lots that are under construction or approved. After subtracting the current lot supply we find total demand through 2017 results in only 16 single-family units and roughly no multifamily units. This is the result of an expansive supply of already platted lots in Elk River. TABLE HD-1 FOR-SALE HOUSING DEMAND ELK RIVER 2012 to 2017 Demand from Projected Household Growth Projected household growth in the Elk River Study Area 2012 to 2017' 680 (times)Pct.of HH growth for general occupancy housing2 x 67% (equals)Projected demand for general occupancy units = 456 (times)Propensity to Own3 x 81% (equals)Total demand potential for ownership housing(2012 to 2017) = 369 Single Family Multi-family' (times)Percent desiring for-sale single-famiy vs.multifamily' x 85% 15% (equals) Total demand potential for new single-family&multifamily for-sale housing = 314 55 (minus)Units under construction or approved platted lots(undeveloped and developed lots)for development' - 298 102 (equals)Excess demand for new general occupancy for-sale housing = 16 0 1 Estimated household growth based on data from the Minnesota Demographic Center,ESRI,Elk River Building Permits,and Maxfield Research Inc. Pct.of household growth age 65 and younger(U.S.Census-2010,ESRI,Maxfield Research Inc.). 'Pct.Owner households age 65and younger(2010) °Based on household turnover and mobility data(American Community Survey U.S.Census-2010). 'Based on preference for housing type and land availability 6 Approved platted lot data does not account for the scattered lot supply which includes individual lots and lots in older non marketing subdivisions. Multi-family demand includes demand for townhomes,twinhomes,and condominium units. Source: Maxfield Research Inc. Estimated Demand for General-Occupancy Rental Housing Table HD-2 presents our calculation of general occupancy rental housing demand for Elk River. This analysis identifies potential demand for rental housing that is generated from both new households and turnover households. We first calculate potential demand from new household growth by age group based on the propensity of households to rent their housing. Secondly, we calculate demand from existing renter households in Elk River that would turn over. Younger households tend to be more highly mobile than older households, but generally the youngest are unable to afford rents at the top of the market unless they receive assistance from parents or desire a roommate. Next we calculate the proportion of these households that would seek new general occupancy multifamily housing versus renting at older properties and apply these proportions to the income-qualified household market turning over. MAXFIELD RESEARCH INC. 77 Ln o m Ln a-o o Ln -C - 00 N 'y LA .-I W O ll1 N CO N W N .-I Ln O N Lri - C ozi Ln Co W no Q LO a O Ln o Co o N "'L W N .--I N V ~ �' a Co N M M l/1 W O co p .-I CO V Ln V W an Q N C ti g N Co o V c •--■ M L a 1-, ^ H Q N N W C Co N N N .' -1 O O - O x Ln r M O ai no W Q ° O O O a 0 m Ln a E al N Z C o'LO Ln o rn o Co Ln "' N CO N Ln co O co .ti C N V • M , .-1 M r--: CO O N Co to N a) Co Q 0 z Q co e. O N o'LO a° 01 0 N 0 WI n u) LLn Q1 in cr. O O1 K N N 6 (7 W O 2 Z > N W Lu L K p - C m Y Q O W N ~ N Q 0 F- II X X I I CCII o Z v W ce W C W 4+ la m gC a) 5 a1 O 0 E. E on 0.0 1p E c c o 0 p •N L W p O 0 ti C n 0 t 0 _0 oO 1g O C CC L La L L 'BUD N j 0 C) 8O W H In .,71 = a, ._ Z. 2' 0 N .--I p C ` 'to 0 +-. 'o > u 2 j NN W 00 'N ^'� C to > Co C Q 10 C W CO N - X Y Q. O. t is L C W • 0 C 0 O' F- O a 'O ,� u u0 -o• 0 N Co 0 a) aN = 0 m Co - o p E Q o (/� >, ' 2 � � m t -c - o c is 0 — a — _o v A N 0`) L aa, W 3 C O_ a, W y (.1 c Cr,N W o >- L L CU CC W C v O O o O` 2 d O 0) u v N J CO CO z N 3 3 x (, y 00 - 0 o as o c c 3 Q v Z o ° .N x Z c o v f0 aa) c a > > •u Q (7 L W p W W CO uYi L K E C O u - •C H C W a C p "▪ C) 2 c v W `- W 3 w - w ` 0 A N 0 '5 Z L o E E m L„ t, .� E O - ° o - . N ° O ro Q W 2 Y W c o o OCO 0 0 2 c c c u a o -' E S Ln c Lit 0 L o .� o LL E 0 a) E E c o v U C c v •= Ln O E W c ` OC G 2 L 2 V W v N w a) c LL Q O �O ', 'O ( > E tea) a Q LJJ E p (5 W E C is — io c „, N of O c o 0 N tW/1 0 0 0. .o O v E ° E 0 E La u o C u N y o a, K Z C in C v — H 0 . — In — o 0 o m .. 0 N C) N U) C) C) N j W 3 !o 3 N 7 C 7 N N v u W y 'o E Q y E Cr E Cr v E c o rp 0 ,0 W -' LL 0 D a ▪ w O Z v �. av' H I V a; E m m m m Cl_ Ln o Q HOUSING DEMAND ANALYSIS Combining demand from household growth plus turnover results in total demand in Elk River for 178 units over the next five years. We then estimate the number of rental units each product type could capture in Elk River. This capture rate is estimated based on the current products and product pricing within in Elk River along with household incomes for current renters. We find that there is demand for nine subsidized housing units, 89 affordable rental units, and 80 market rate units. From the total demand for general occupancy units, we subtract any development under construction or proposed at market equilibrium (95% occupancy) to find the remaining excess demand in Elk River. At the time of this study there is only one planned development with a proposed 53 affordable competitive units and thus, excess demand remains for nine subsidized units, decreases to 40 affordable units, and remains at 81 market rate units. Estimated Demand for Independent Adult/Few Service Senior Housing Table HD-3 presents our demand calculations for market rate independent senior housing in Elk River in 2017 and 2017. In order to determine demand for independent senior housing, the potential market is reduced to those households that are both age and income qualified. The age-qualified market is defined as seniors age 55 and older, although independent living projects will primarily attract seniors age 65 and older. We calculate that the minimum income needed to afford monthly rents is $30,000, since seniors with this income could afford a monthly rent of$1,000 based on spending 40% of their income, which is slightly higher than the $825 to $890 starting rent for a two-bedroom apartment at the independent senior project in the area. In addition, we add households with incomes between $20,000 and $29,999 who would be able to supplement their incomes with the proceeds from a home sale. We estimate the number of age/income-qualified senior households in Elk River in 2012 to be 1,947 households. Adjusting to include appropriate long-term capture rates for each age cohort (0.5% of households age 55 to 64, about 6.0%of households age 65 to 74, and 16.5% of households age 75 and over) results in a market rate demand potential for 73 independent senior rental units in 2012. Some additional demand will come from outside Elk River. We estimate that 40% of the long- term demand for independent senior housing will be generated by seniors currently residing outside Elk River. This demand will consist primarily of parents of adult children living in Elk River, individuals who live just outside of Elk River and have an orientation to the area, as well as former residents who desire to return. Together, the demand from Elk River seniors and demand from seniors who would relocate to Elk River results in a total long-term demand for 122 active adult units in 2012. MAXFIELD RESEARCH INC. 79 HOUSING DEMAND ANALYSIS Independent demand in Elk River is split into housing that offers ownership housing and rental housing. Based on the current product available in Elk River, we project that 30% of Elk River's demand will be for adult ownership housing (37 units) and 70%will be for rental housing (85 units). TABLE HD-3 MARKET RATE ADULT/FEW SERVICES HOUSING DEMAND ELK RIVER 2012&2017 2012 2017 Age of Householder Age of Householder 55-64 65-74 75+ 55-64 65-74 75+ #of Households w/Incomes of>$30,000' 1,162 426 197 1,463 633 235 #of Households w/Incomes of$20,000 to$29,9991 + 78 73 52 + 21 31 60 (times)Homeownership Rate x 87% 84% 63% x 87% 84% 63% (equals)Total Potential Market Base = 1,230 487 230 = 1,481 659 273 (times)Potential Capture Rate x 0.5% 6.0% 16.5% x 0.5% 6.0% 16.5% (equals)Demand Potential = 6 29 38 = 7 40 45 Potential Demand from Market Area Residents = 73 = 92 (plus Demand from Outside Market Area(40%) + 49 + 61 (equals)Total Demand Potential = 122 = 153 Owner- Renter- Owner- Renter- Occupied Occupied Occupied Occupied (times)%by Product Type x 30% x 70% x 30% x 70% (equals)Demand Potential by Product Type = 37 = 85 = 46 = 107 (minus)Existing and Pending MR Active Adult Units2 - 111 - 57 - 111 - 57 (equals)Excess Demand for MR Active Adult Units = 0 = 28 = 0 = 50 (times)Percent capturable by a Site in Elk River x 80% x 80% x 80% x 80% (equals)#of units supportable by a Site in Elk River = 0 = 23 = 0 = 40 2017 calculations define income-qualified households as all households with incomes greater than$35,000 and homeowner households with incomes between$25,000 and$34,999. 2 Based on project manager interviews and historical trends. We estimate that roughly 40%of demand will come from outside the markt area. 3 Existing and pending are deducted at market equilibrium(95%occupancy). Source: Maxfield Research Inc. Next, we subtract existing competitive market rate units (minus a vacancy factor of 5%to allow for sufficient consumer choice and turnover) from the owner and rental demand. Subtracting the existing competitive market rate units results in total demand potential for zero adult owner-occupied units and 28 adult rental units in 2012. No one community, including Elk River, would be able to capture 100% of the demand. Since Elk River is the primary service center, containing health care and shopping in addition to other services, we believe that it can capture 80% of the demand for ownership projects and rental projects. This results in total demand for zero adult owner-occupied units and 23 adult rental units in Elk River in 2012. MAXFIELD RESEARCH INC. 80 HOUSING DEMAND ANALYSIS Adjusting for inflation, we have estimated that households with incomes of$35,000 or more and homeowners with incomes of$25,000 to $34,999 would income qualify for market rate independent senior housing in 2015. Considering the growth in the older adult base, the income distribution of the older adult population in 2017, the methodology projected that there will be no demand for adult owner-occupied units and remain at 40 adult rental units in the City of Elk River by 2017. Estimated Demand for Affordable Independent Senior Housing Table HD-4 presents our demand calculations for affordable senior housing for households with incomes qualifying at or below 50% and 80% of AMI in Elk River in 2012 and 2017. In order to arrive at the potential age and income-qualified base for low-income and affordable housing, we include all senior (65+) households that qualify for the income guidelines for one- and two-person households in 2012 at or below 50% and 80% of AMI ($29,400 and $53,700). Adjusting to include appropriate long-term capture rates for each age cohort (1.5%of households age 55 to 64, about 10.0% of households age 65 to 74, and 20.0% of households age 75 and over) results in a market rate demand potential for 12 independent senior rental units in 2012. We then estimate that seniors currently residing outside of Elk River would generate 40% of the demand for affordable senior housing. This demand includes seniors who reside outside of Elk River that would move to the city, as well as those who would relocate from other places of residence (i.e. rural areas, other areas of the state and out-of-state). Together, demand from Elk River seniors and demand from seniors who would locate to Elk River total an estimated 20 affordable units in 2012. There are no affordable senior rental properties in Elk River and thus, the total potential demand remains at 20 units in 2012. No single site can capture all of the excess demand in Elk River. We estimate that a site in Elk River could capture 80% of the Elk River demand, resulting in demand for 16 affordable independent senior units in 2012. Adjusting for inflation, we estimate that households with incomes between $26,000 and $56,500 would qualify for affordable housing in 2017. Although growth in senior households is projected, the age-income qualified base for affordable housing is shown to decline in Elk River through 2017. Following the same methodology, we project that excess demand capturable by a site is calculated to decrease slightly to 12 affordable independent senior housing units by 2017. MAXFIELD RESEARCH INC. 81 HOUSING DEMAND ANALYSIS TABLE HD-4 AFFORDABLE INDEPENDENT SENIOR HOUSING DEMAND ELK RIVER 2012&2017 2010 2015 Age of Householder Age of Householder 55-64 65-74 75+ 55-64 65-74 75+ #of Households w/Incomes of$24,000 to$53,700 177 173 122 125 168 87 (times) Percent Renter Households x 13% 16% 37% x 13% 16% 37% (equals)Total Potential Market Base = 23 28 45 16 27 32 (times)Potential Capture Rate x 1.5% 10.0% 20.0% x 1.5% 10.0% 20.0% (equals)Demand Potential = 0 3 9 = 0 3 6 Total Market Rate Demand Potential = 12 4 = 9 4 (plus) Demand from Outside Market Area (40%) + 8 + 6 (equals)Total Demand Potential = 20 = 16 (minus)Existing and Pending Independent Units' - 0 - 0 (equals)Total Demand Potential in Market Area = 20 = 16 (times) Estimated Percent Capturable by a Site in Elk River x 80% x 80% (equals)Excess Demand Capturable by a Site in Elk River = 16 = 12 Includes existing and pending units at 95%occupancy,or market equilibrium. No additional units are planned through 2017. Source: Maxfield Research Inc. Estimated Demand for Subsidized Senior Housing Table HD-6 presents our demand calculations for subsidized senior housing in Elk River in 2012 and 2017. The 2012 income qualifications for very-low income housing in Sherburne County are $17,640 for a one-person household and $20,160 for a two-person household. Seniors with incomes meeting these guidelines are designated as having low incomes and are in need of subsidized housing; households with incomes above these guidelines but below those necessary to obtain market rate housing would be candidates for affordable housing. Seniors living at a Section 202 building pay their rent according to their monthly income (30%of monthly income). Households with incomes slightly above 50% of MFI are primarily a target for affordable housing, with rents usually set at 30%to 80% of MFI, and would not qualify for deeply- subsidized housing. It should be noted that many senior households in low and very low income categories own their homes and therefore have untapped equity which, upon the sales of their homes, can be used toward market rate housing. Maxfield Research Inc. calculated demand for subsidized senior housing as displayed in Table HD-4. We assume that all households over the age of 65 with incomes of$20,000 or less in Elk River are income-qualified and would be candidates for subsidized senior housing. In 2012, we MAXFIELD RESEARCH INC. 82 HOUSING DEMAND ANALYSIS find a total of an estimated 309 households over the age of 65 in Elk River meeting these age- and income-qualifications. We estimate that approximately 30% of the total age/income-qualified market would both need and desire subsidized senior housing. The remaining households would either remain in their homes until in need of housing with services or obtain affordable/market rate housing with assistance from family members or through the sale of a home or other assets. Applying a 30% capture rate, results in an estimated potential demand for 93 subsidized senior housing units in Elk River in 2012 and 96 units in 2017. TABLE HD-5 SUBSIDIZED INDEPENDENT SENIOR HOUSING DEMAND ELK RIVER 2012&2017 2012 2017 Age 65+Households w/Incomes<$20,000* 309 321 (times)Percent of Income Qualified Seniors Needing/Desiring Subsidized Senior Housing x 25% 25% (equals)Demand Potenital from Market Area residents = 77 80 (plus)Demand From Ouside the Market Area(40%) + 52 54 (equals)Total Demand Potential for Subsidized Senior Housing in Market Area 129 134 (minus)Existing&Pending Subsidized Senior Units in Market Area** - 111 111 (equals)Total Market Area Subsidized Senior Housing Demand Potential = 18 23 Percent Capturable on a Site in Elk River x 80% 80% Total number of units supportable on a Site in Elk River = 14 18 *Adjusted to$22,000 for inflation in 2015 **Competitive subsidized units,minus a 7%vacancy rate. Source: Maxfield Research Inc. We anticipate that at least 40% of the demand for subsidized senior housing in Elk River will come from seniors currently residing in surrounding communities who would move to the Elk River to be near their family or for other reasons. Including demand from outside of Elk River increases total demand potential to 155 units in 2012 and 161 units in 2017. From this potential demand, we subtract the existing number of competitive housing units in Elk River. Currently, there are only two identified subsidized senior buildings in the Market Area with a total of 115 units and are both fully occupied with waiting lists. Subtracting these units, minus a 3%vacancy factor, results in excess demand from local seniors for about 44 units in 2012, increasing to 50 in 2017. No single building or location can capture all of the Elk River demand. We estimate that a building on a site in Elk River could capture 80% of the excess demand, or 35 units in 2012 and about 40 units in 2017. MAXFIELD RESEARCH INC. 83 HOUSING DEMAND ANALYSIS Estimated Demand for Congregate Senior Housing Table HD-6 presents our demand calculations for congregate housing in Elk River in 2012 and 2017. The potential age- and income-qualified base for congregate senior housing includes all senior (65+) households with incomes of$30,000 as well as homeowner households with incomes between $20,000 and $30,000 who would qualify with the proceeds from the sales of their homes. The proportion of eligible homeowners is based on the homeownership rates of areas seniors, as identified in the demographics section of this study. The number of age, income, and asset-qualified households in Elk River is estimated to be 517 households in 2012. TABLE HD-6 MARKET RATE CONGREGATE HOUSING DEMAND ELK RIVER 2012&2017 2012 2017 Age of Age of Householder Householder 65-74 75+ 65-74 75+ #of Households w/Incomes of>$30,0001 426 197 633 235 #of Households w/Incomes of$20,000 to$29,999' + 73 52 + 31 60 (times) Homeownership Rate x 84% 63% x 84% 63% (equals)Potential Market = 61 33 = 26 38 (equals)Total Potential Market Base = 487 230 = 659 273 (times) Potential Capture Rate2 x 1.5% 11.0% x 1.5% 11.0% (equals)Demand Potential = 7 + 25 = 10 + 30 Potential Demand from Market Area Residents = 33 = 40 (plus) Demand from Outside Market Area (40%)3 + 22 + 27 (equals)Total Demand Potential = 54 = 66 (minus) Existing and Pending Congregate Units4 - 0 - 0 (equals)Excess Demand for Congregate Units = 54 = 66 (times) Percent capturable by a Site in Elk River 80% 80% (equals)#of units supportable by a Site in Elk River I 43 I I 53 '2017 calculations define income-qualified households as all households with incomes greater than$35,000 and homeowner households with incomes between$25,000 and$34,999. 'The potential capture rate is derived from data from the Summary Health Statistics for the U.S.Population:National Health Interview Survey,2007 by the U.S.Department of Health and Human Services. The capture rate used is the percentage of seniors needing assistance with IADLs,but not ADLs(seniors needing assistance with ADLs typcially need assistance with multiple IADLs and are primary candidates for assisted living.). °Existing and pending are deducted at market equilibrium(95% Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. 84 HOUSING DEMAND ANALYSIS Adjusting to include appropriate capture rates for each age cohort (1.5%of households age 65 to 74 and 11.0% of households age 75 and older) results in a local demand potential for 33 congregate units in 2012. We estimate that seniors currently residing outside of Elk River will generate 40% of the demand for congregate senior housing. This demand will consist primarily of parents of adult children living in Elk River, individuals who live just outside Elk River and have an orientation to the area, and former residents who desire to return upon retirement. Together, the demand from Elk River seniors and demand from seniors who are willing to locate to Elk River totals 54 units of congregate senior housing in 2012. Since there are no existing congregate units in Elk River, we do not reduce the demand potential by any competitive units. No single location can capture all of the demand in a market area. We estimate that 80% of total demand in Elk River can be captured on a site in Elk River. Demand is calculated for 43 congregate units in Elk River in 2012. Adjusting for inflation, we estimate that households with incomes of$35,000 or more and senior homeowners with incomes between $25,000 and $35,000 would qualify for congregate housing in 2017. Following the same methodology, demand is calculated to increase to 53 units through 2017. Demand Estimate for Assisted Living Housing Table HD-7 presents our demand calculations for assisted living senior housing in Elk River in 2012 and 2017. This analysis focuses on the potential private pay/market rate demand for assisted living units. The availability of more intensive support services such as meals, housekeeping and personal care at assisted living facilities usually attracts older, frailer seniors. According to the 2009 Overview of Assisted Living (which is a collaborative research project by the American Association of Homes and Services for the Aging, the American Seniors Housing Association, National Center for Assisted Living, and National Investment Center for the Seniors Housing and Care Industry), the average age of residents in freestanding assisted living facilities was 87 years in 2008. Hence, the age-qualified market for assisted living is defined as seniors ages 75 and over, as we estimate that of the half of demand from seniors under age 87, almost all would be from seniors over age 75. In 2012, there were 980 seniors age 75 and older in Elk River. Demand for assisted living housing is need-driven, which reduces the qualified market to only the portion of seniors who need assistance. According to a study completed by the U.S. Census Bureau (1999 panels of the Survey of Income and Program Participation (SIPP) files), 30% of seniors needed assistance with everyday activities (from 22.5% of 75-to-79-year-olds, to 33.6% of 80-to-84-year-olds and 51.6% of 85+ year olds). Applying these percentages to the senior population yields a potential assisted living market of 353 seniors in Elk River. MAXFIELD RESEARCH INC. 85 HOUSING DEMAND ANALYSIS Due to the supportive nature of assisted living housing, most daily essentials are included in monthly rental fees, which allow seniors to spend a higher proportion of their incomes on housing with basic services. Therefore, the second step in determining the potential demand for assisted living housing in Elk River is to identify the income-qualified market based on a senior's ability to pay the monthly rent. We consider seniors in households with incomes of $40,000 or greater to be income-qualified for assisted living senior housing in Elk River. Households with incomes of$40,000 could afford monthly assisted living fees of$3,000 by allocating 90% of their income toward the fees. According to the 2009 Overview of Assisted Living, the average arrival income of assisted living residents in 2008 was $27,260, while the average annual assisted living fee was $37,281 ($3,107/month). This data highlights that seniors are spending down assets to live in assisted living and avoid institutional care. Thus, in addition to households with incomes of$30,000 or greater, there is a substantial base of senior households with lower incomes who income- qualify based on assets—their homes, in particular. Sixty three percent of the age 75+ households in Elk River are homeowners, and the 2012 median resale price through May of homes in Elk River was $150,000. Seniors selling their homes for the median resale price would generate about $139,500 in proceeds after selling costs. With an average monthly fee of $3,500, these proceeds would last just over three years in an assisted living facility, which is slightly longer than the average length of stay in assisted living (27 months according to the 2009 Overview of Assisted Living). For each age group in Table HD-7, we estimate the income-qualified percentage to be all seniors in households with incomes above $40,000 (who could afford monthly rents of$3,500+ per month) plus 40% of the estimated seniors in homeowner households with incomes below $40,000 (who will spend down assets, including home-equity, in order to live in assisted living housing). This results in a total potential market of 150 units from Elk River in 2012. Because the vast majority of assisted living residents are single (88% according to the 2009 Overview of Assisted Living), our demand methodology multiplies the total potential market by the percentage of seniors age 75+ in Elk River living alone. Based on 2000 Census data, 53% of age 75+ households in Elk River lived alone. Applying this percentage results in a total base of 79 age/income-qualified singles. The 2009 Overview of Assisted Living found that 12% of residents in assisted living were couples. There are a total of 90 age/income-qualified seniors needing assistance in Elk River including both couples and singles. We estimate that roughly 60% of the qualified market needing significant assistance with Activities of Daily Living ("ADLs") would either remain in their homes or less service-intensive senior housing with the assistance of a family member or home health care, or would need greater care provided in a skilled care facility. The remaining 40% could be served by assisted living housing. Applying this potential market penetration rate of 40% results in demand for 36 assisted living units in 2012. MAXFIELD RESEARCH INC. 86 E lf1 M m 01 N N ll1 N E C (a to V co N N M Q7 .--1 O O N N Ln N O N 7 C 7 N .--1 uY r-I V W Z d X H + II X II + II II X X c v 6 a) E a-' 000 • E, �0`a H ra O� V V a E & v 1 c VD 0 C C o a co C N - .-1 .1 M Z Z Q .(1 C C C o 0 0 u ) lID LID a/ aJ - V1 M .-1 a Z N M to Q aJ O pO N <O p M y 7 N M • a O N CU a Q -° = L!1 O V O O \ D1 .--1 O o <O V O N o 2 Ou .� a V LD L^ H )-,) N .--1 01 o M N LD u1 M O0 N W Z C 7 0 (.7 X II 4- II X II + II II X II C Q/ , n J c e ' E _ N 0 0. 0 0 W 0 v 0 .a) V V V S W > N a C C H m 7 J N n O H Q W N 0 I- N N C C Q rl -0 - +a' Lc, O N to z o E a m .-I .-I M I- N 7 al - c Z Z Q 00 cQ O c c o 0 0 U 'L3 Y 1A LD 'AD- 0 al C Vl M .--1 a Z 'N N M Ln Q _v V a co 00 V 0 C p N Ot 0 CO CO a, CO N CO 71 , Li- V .N N C C CO a) al to L al C C �Y y CO a1 ` to N C a) la 0 C M a) w C .--1 C ` O = _ W N a Q m m K C aJ a C no (/) N y y J > W aJ co J y� 7 E Y Q J 'E V7 00 Q v o v a v ° c Q v o 7 c c m Q > a o c Z Li ai w �c Q a s ai v c a - A ai s — Z 0 -0 w —" c — ro a ,� c 2 Q ° 3 E E E ro -. a c v .n a c ra U v C v 1O $ c E o a C a OC — E o v a E rco -o E a a) a w L i CI ' .> c v a— ° E o u •� o -a to rz .3 is 'ad, - ro 0 C -o — °C° HO C C t v cc ui W cu O ;-a al N `O C u v c c a a, aJ Q 0 O a E X W a) . a, 2 Oa a ai w a m w_ N d _ ,� 0 Ln o`n °N' — a m ro m —ro C Ti ^ m u LL v v v ti X O ai + ro - E Q 7 6 E c 7 Q c c E c- p 7 Q = 4 co coo 1- 1- 'Y v o v v v a v E ar _ v z r°n HOUSING DEMAND ANALYSIS 1 The percentage of seniors unable to perform or having difficulting with ADLs, based on the publication Health, United States, 1999 Health and Aging Chartbook,conducted by the Centers for Disease Control and Prevention and the National Center for Health Statistics. 2 Includes households with incomes$40,000 and above(who could afford monthly rents of$3,000+per month) plus 40%of the estimated owner households with incomes below$40,000(who will spend down assets, including home-equity, in order to live in assisted living housing). 3 The 2009 Overview of Assisted Living(a collaborative project of AAHSA,ASHA,ALFA, NCAL& NIC)found that 12%of assisted living residents are couples. 4 We estimate that 60%of the qualified market needing assistance with ADLs could either remain in their homes or reside at less advanced senior housing with the assistance of a family member or home health care,or would need greater care provided in a skilled care facility. 5 Existing assisted living units less units occupied by public pay residents and a 7%vacancy rate. We estimate that a portion of demand for assisted living units in Elk River (40%) will come from outside of Elk River. Applying this figure results in total potential demand for 60 market rate assisted living units in Elk River. There is one assisted living facility located in Elk River with a total of 60 units. After deducting these competitive units (minus a 95% occupancy rate) from the total demand potential, we calculate the excess demand for assisted living at three units. We preliminarily estimate that a site in Elk River could capture approximately 80% of Elk River's excess demand for a total of two assisted living units in 2012. The same calculations are applied to the age/income-qualified base in 2017. Due to slight projected decline in growth in the senior population, total potential demand for assisted living housing is expected to increase to 12 units through 2017. Additional demand could come from seniors that will need to receive supplemental income in order to afford assisted living or memory care housing. While some of these seniors will receive income from the sales of their homes, others will need to rely on other sources of public aid. The Elderly Waiver program in Minnesota has provided public funding for seniors who wish to receive "alternative" care that allows them to stay in the community as opposed to receiving similar care at a nursing home. Most assisted living developments require residents to have lived in their facility for a certain amount of time before they can use a waiver, and many try to limit the amount of waivers accepted within the community to around roughly 10%to 15%.Some facilities accept higher amounts of residents on waivers and many newer facilities do not accept any waivers. MAXFIELD RESEARCH INC. 88 HOUSING DEMAND ANALYSIS Estimated Demand for Memory Care Housing Table HD-8 presents our demand calculations for market rate memory care senior housing in Elk River in 2012 and 2017. Demand is calculated by starting with the estimated Elk River senior (age 65+) population in 2012 and multiplying by the incidence rate of Alzheimer's/dementia among this population's age cohorts. According to the Alzheimer's Association (Alzheimer's Disease Facts and Figures, 2007), 2% of seniors ages 65 to 74, 19% of seniors ages 75 to 84, and 42% of seniors ages 85+ are inflicted with Alzheimer's Disease. This yields a potential market of 276 seniors in Elk River. Because of the staff-intensive nature of dementia care, typical monthly fees for this type of housing are at least $4,000 and range upwards of$5,000 when including service packages. Based on our review of senior household incomes in Elk River, homeownership rates and home sale data, we estimate that 30%of seniors in Elk River would have incomes and/or assets to sufficiently cover the costs of memory care housing. This figure takes into account married couple households where one spouse may have memory care needs and allows for a sufficient income for the other spouse to live independently. Multiplying the number of seniors with Alzheimer's/dementia (276 seniors) by the income-qualified percentage results in a total of 83 age/income-qualified seniors in the Elk River in 2012. According to data from the National Institute of Aging, about 25% of all individuals with memory care impairments comprise the market for memory care housing units. This figure considers that seniors in the early stages of dementia will be able to live independently with the care of a spouse or other family member, while those in the later stages of dementia will require intensive medical care that would only be available in skilled care facilities. Applying this figure to the estimated population with memory impairments yields a potential market of about 20 seniors in Elk River. We estimate that 40% of the overall demand for memory care housing in the Elk River would come from outside of Elk River. Demand from both inside and outside of Elk River totals 35 memory care units in 2012. We reduce the demand potential by the 30 competitive units (less a 93% occupancy rate). Subtracting these competitive units decreases the excess memory care demand to six units. No single location can capture all of the demand in a market area. We estimate that 80% of total demand in Elk River can be captured on a site in Elk River. Demand is calculated for five memory care units in the City of Elk River in 2012. Following the same methodology, demand is calculated to remain steady at four memory care units through 2017. MAXFIELD RESEARCH INC. 89 HOUSING DEMAND ANALYSIS TABLE HD-8 MEMORY CARE DEMAND ELK RIVER 2012&2017 2012 2017 65 to 74 Population 1,016 1,483 (times) Dementia Incidence Rate' x 2% x 2% (equals) Estimated Age 65 to 74 Pop.with Dementia = 20 = 30 75 to 84 Population 676 627 (times) Dementia Incidence Rate' x 19% x 19% (equals) Estimated Age 75 to 84 Pop.with Dementia = 128 = 119 85+Population 304 264 (times) Dementia Incidence Rate' x 42% x 42% (equals) Estimated Age 85+Pop.with Dementia = 128 = 111 (equals)Total Senior Population with Dementia = 276 = 260 (times) Percent Income/Asset-Qualified2 x 30% x 30% (equals)Total Income-Qualified Market Base = 83 = 78 (times) Percent Needing Specialized Memory Care Assistance x 25% x 25% (equals)Total Need for Dementia Care = 21 = 19 (plus) Demand from Outside Market Area(40%) + 14 + 13 Total Demand Potential = 35 32 (minus) Existing and Pending Memory Care Units' - 28 - 28 (equals)Excess Demand for Memory Care Units = 7 = 4 (times)Percent capturable by a Site in Elk River x 80% x 80% (equals)#of units supportable by a Site in Elk River = 5 = 4 Alzheimer's Association:Alzheimer's Disease Facts&Figures(2007) 'Income-qualified households consider 3/4 of those with incomes greater than$60,000 in 2010 plus 15%of homeowners with incomes below this threshold. 'Existing memory care units less units occupied by public pay residents and a 7%vacancy rate. Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. 90 RECOMMENDATIONS AND CONCLUSIONS Introduction/Overall Housing Recommendations This section summarizes demand calculated for specific housing products in Elk River and recommends development concepts to meet the housing needs forecast for the City. All recommendations are based on findings of the Comprehensive Housing Needs Assessment. The following table and charts illustrate calculated demand by product type. It is important to recognize that housing demand is highly contingent on projected household growth; household growth could be higher should increased job growth ensue and the overall economy improves. TABLE CR-1 SUMMARY OF HOUSING DEMAND CITY OF ELK RIVER JULY 2012 Type of Use 2012-2017 General-Occupancy Rental Units- Market Rate 81 Rental Units-Affordable 40 Rental Units-Subsidized 9 For-Sale Units-Single-family 16 For-Sale Units-Multifamily 0 Total General Occupancy Supportable 146 2012 2017 Age-Restricted(Senior) Market Rate Adult Few Services(Active Adult) 23 40 Ownership 0 0 Rental 23 40 Congregate 43 53 Assisted Living 2 12 Memory Care 5 4 Total Market Rate Senior Supportable 73 109 Affordable/Subsidized Active Adult-Subsidized 14 18 Active Adult-Affordable 16 12 Total Affordable Senior Supportable 30 30 Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. 91 RECOMMENDATIONS AND CONCLUSIONS General-Occupancy Demand by Type 2012 to 2017 i For-Sale Units - Multifamily For-Sale Units - Single-family 16 Rental Units - Subsidized Rental Units - Affordable 90 Rental Units -Market Rate . I I I I - 0 10 20 30 40 50 60 70 80 90 100 Units Senior Housing Demand by Type 2012&2017 Adult-Owner ■2012 -Adult-Rental 23 •2017 J 40 Congregate Assisted Living dmori ail Memory Care Affordable militel pr Subsidized 0 10 20 30 40 50 60 Units 1 MAXFIELD RESEARCH INC. 92 RECOMMENDATIONS AND CONCLUSIONS Based on the finding of our analysis and demand calculations, Table CR-1 provides a summary of the recommended development concepts by product type for the City of Elk River. It is important to note that these proposed concepts are intended to act as a development guide to most effectively meet the housing needs of existing and future households in Elk River. According the City of Elk River, there are 600 developed lots and over 400 undeveloped lots in Elk River. The lot supply benchmark for growing communities is a three-to five-year lot supply. Given the number of existing platted lots in Elk River, the existing for-sale market, and the lack of new construction over the past few years, we do not recommend platting any additional lots in the short-term. TABLE CR-2 RECOMMENDED MULTIFAMILY HOUSING DEVELOPMENT ELK RIVER 2012 to 2017 Purchase Price/ No. of Development Monthly Rent Range' Units Timing2 General Occupancy Rental Housing Market Rate Rental Housing Apartment $900/1BR-$1,150/2BR 50 -55 2012+ Townnhomes $1,100/2BR-$1,350/3BR 20 -25 2012+ Total 70 -80 Affordable Rental Housing Townnhomes Moderate Income3 25 -35 2012+ Senior Housing Adult Few Service Rental $900/1BR-$1,100/2BR 25 -30 2012+ Congregate $1,750/1BR-$1,950/2BR 40 -50 2012+ ' Pricing in 2012 dollars. Pricing can be adjusted to account for inflation. 2 The develompent of these products can occur at any time. Affordablity subject to income guidelines per Minnesota Housing Finance Agency(MHFA). Source: Maxfield Research Inc. General Occupancy Rental Housing Our competitive inventory identified that the vacancy rates for all types of general occupancy rental product is below market equilibrium indicating pent-up demand for rental housing. The few newer products that have entered the market in the past few years have all performed well. Granite Shores which began marketing in May of 2012 has absorbed units rapidly. Due to the age and positioning of the remaining existing rental supply, a significant portion of units are priced at or below guidelines for affordable housing, which indirectly satisfies demand from households that income-qualify for financially assisted housing. However, the growing renter MAXFIELD RESEARCH INC. 93 RECOMMENDATIONS AND CONCLUSIONS base is seeking newer rental properties with additional and updated amenities that are not offered in older developments. Although ownership housing in Elk River is very affordable for first-time home buyers, some are choosing to rent due to fears of past housing market performance. Maxfield Research Inc. calculated demand for 81 market rate and 40 affordable rental housing units in Elk River through 2017. Based on our analysis, Elk River can accommodate 70 to 80 new market rate rental housing units and up to 40 affordable units through 2017. New general-occupancy rental housing can be developed immediately and will continue to be in demand throughout this decade. • Market Rate Rental—The existing market rate rental supply in Elk River has a mix of ages and household types represented. A new rental project will also have a diverse resident profile, including young to mid-age professionals as well as singles and couples across the age span. We recommend a new middle-market rental project with roughly 50 to 55 units that will continue to attract a diverse resident profile; including young to mid-age professionals as well as singles and couples across all ages. To appeal to wide target market, we suggest a market rate apartment project with a unit mix consisting of one-bedroom units, one- bedroom plus den units, two-bedroom units. Monthly rents (in 2012 dollars) should range from $900 for a one-bedroom unit to $1,150 for a two-bedroom unit. Average rents in Elk River total $0.95 per square foot, thus we recommend that monthly rents at a new development should charge on average $1.15 per square foot to be financially feasible. Monthly rents can be trended up by 2.0%annually prior to occupancy to account for inflation depending on overall market conditions. Because of construction and development costs, it may be difficult for a market rate apartment to be financially feasible with rents lower than the suggested per square foot price.Thus, for this type of project to become a reality, there may need to be a public— private partnership to reduce development costs and bring down the rents or the developer will need to provide smaller unit sizes. New market rate rental units should be designed with contemporary amenities that include open floor plans, higher ceilings, in-unit washer and dryer, full appliance package, central air-conditioning, and garage parking. • Market Rate General Occupancy Rental Townhomes— In addition to the recommended apartment project, we find that demand exists for some larger townhome units for families — including those who are new to the community and want to rent until they find a home for purchase. An additional 20 to 25 rental townhome units could be supported in Elk River over the next five years. We recommend a project with rents of approximately $1,100 for two-bedroom units to $1,350 for three-bedroom units. Units should feature an attached two car garage and in-unit washer/dryers. MAXFIELD RESEARCH INC. 94 RECOMMENDATIONS AND CONCLUSIONS • Affordable Rental—There has been two affordable developments built in the last five years in Elk River. These developments have been extremely successful and have maintained nearly 100% occupancy since opening. Unlike the market rate supply, existing affordable properties are typically dominated by families with children who find it more difficult to afford ownership property and market rate rents. The proposed moderate income affordable rental project by Duffy Development near the Elk River Station (53 units) will satisfy the majority total demand calculated for affordable general occupancy (90 units). This project will attract additional family households to the Elk River Station Planned Unit Development area. The new affordable building that Duffy Development is proposing will likely be similar to their adjacent development (The Depot at Elk River Station) which includes such contemporary amenities as in-unit washer and dryers, full appliance package, central air- conditioning, and underground/garage parking. • Affordable General Occupancy Rental Townhomes—We find that demand exists for25 to 35 moderate-income affordable rental townhomes in Elk River over the next five years. Affordable rental townhomes have been found to be very popular throughout other markets similar to Elk River. There is currently only one income based townhome development in the City (Lanesboro Heights—Section 8) that is full with a long waiting list. We recommend a project with two- and three-bedroom units. Units should feature an attached one/two garage and in-unit washer/dryers. Such development could assist in drawing more families to the community that cannot find affordable housing options through ownership or market rate rental in the surrounding area. We believe the addition of the rental developments suggested above will further provide sufficient housing choices in the City and will continue to serve the needs of households that live and/or currently work in Elk River. Senior Housing As illustrated in Table CR-1, demand exists for adult few service and congregate senior housing product types in the City of Elk River. Development of additional senior housing is recommended in order to provide housing opportunity to these aging residents in their stages of later life. The development of additional senior housing serves a two-fold purpose in meeting the housing needs in Elk River: older adult and senior residents are able to relocate to new age-restricted housing in Elk River, and existing homes and rental units that were occupied by seniors become available to other new households. Hence, development of additional senior housing does not mean the housing needs of younger households are neglected; it simply means that a greater percentage of housing need is satisfied by housing unit turnover. MAXFIELD RESEARCH INC. 95 RECOMMENDATIONS AND CONCLUSIONS The types of housing products needed to accommodate the aging population base are discussed individually in the following section. • Active Adult Rental— Demand was projected for about 40 market rate active adult rental units in Elk River through 2017. Currently, there are three market rate active adult rental projects in the City. The newest was built in 1992, while the other two are over 30 years old. There may be seniors who currently residing in general-occupancy housing that would consider a newer active adult product. Development of this product could be in separate stand-alone facilities or in a mixed- income project. We believe a mixed-income building would be an ideal development concept to create the most dynamic, inclusive community for active seniors and to temper stigmas and potential neighborhood opposition of affordable housing development. Across the U.S., many markets have experienced delays in realizing demand for market rate active adult housing. These delays are the result of seniors who choose not to sell their homes or find they are unable to sell their homes along with the fact that active adult rental housing is not need-based. Because many seniors are wary to sell their home in the current home sale market due to depressed home values, the development of an active adult rental property should be delayed until housing values show stability and potential growth. • Subsidized and Affordable Rental—Although demand was calculated for up to 18 and 12 units of subsidized and affordable senior rental housing, respectively. A new development of this size would likely not be feasible due to economies of scale. It may however be beneficial to absorb some of this demand into a mixed-income active adult rental building. • Congregate—There are no designated congregate units (meals and limited support service) in Elk River, however, Guardian Angels provides meals and services at Evans Park at an extra charge. Demand was calculated for up to 53 congregate units over the next five years. Based on this demand, we recommend 40 to 50 congregate units with a mix of one- bedroom, one-bedroom plus den, and two-bedroom units. Monthly rents should range from $1,750 for one-bedroom units to $1,950 for two-bedroom units. The monthly fees should include all utilities (except telephone and basic cable/satellite television) and the following services: • I'm OK program; • Daily noon meal; • Regularly scheduled van transportation; • Social, health, wellness and educational programs; • 24-hour emergency call system; and • Complimentary use of laundry facilities. MAXFIELD RESEARCH INC. 96 RECOMMENDATIONS AND CONCLUSIONS In addition, meals and other support and personal care services will be available to congregate residents on a fee-for-service basis, such as laundry, housekeeping, etc. When their care needs increase, residents also have the option of receiving assisted living packages in their existing units. Challenges and Opportunities Table CR-2 identified and recommended housing types that would satisfy the housing needs in Elk River over the next five years. The following were identified as the greatest challenges and opportunities for developing the recommended housing types (in no particular order). • Affordability. Based on current home prices, the majority of Elk River householders could afford to purchase an entry-level home given today's pricing (see table below). Likewise, most householders can also afford the average market rate rent of Elk River rental developments. Because of this condition, some householders who would not consider purchasing may do so earlier since the cost to own an entry-level home is on-par with rental housing costs. Furthermore, investors may purchase single-family homes at depressed prices and convert the properties to single-family rentals that could compete with traditional apartment units. The following chart compares the costs of homeownership to rentals given today's housing costs based on a 30% allocation of income to housing. We do note, however, that not all householders will have the credit scores and down payment that would qualify them to purchase for-sale housing. ELK RIVER HOUSING AFFORDABILITY-BASED ON HOUSEHOLD INCOME For-Sale Single-Family Townhome Entry-Level Move-Up Executive Entry-Level Move-Up Exec/Det. Price of House $125,000 $175,000 $250,000 $85,000 $130,000 $175,000 Pct.Down Payment 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Total Down Payment Amt. $12,500 $17,500 $25,000 $8,500 $13,000 $17,500 Cost of Loan $112,500 $157,500 $225,000 $76,500 $117,000 $157,500 Interest Rate 3.750% 3.750% 3.750% 3.750% 3.750% 3.750% Number of Pmts. 360 360 360 360 360 360 Monthly Payment(P&I) -$521 -$729 -$1,042 -$354 -$542 -$729 (plus)Prop.Tax -$188 -$263 -$375 -$128 -$195 -$263 (plus)Homeowner's Ins./Assoc.Fee forTH -$42 -$58 -$83 -$125 -$125 -$125 (plus)PMI/MIP(less than 20%) -$49 -$68 -$98 -$33 -$51 -$68 Subtotal monthly costs -$799 -$1,118 -$1,598 -$640 -$913 -$1,185 Housing Costs as%of Income 30% 30% 30% 30% 30% 30% Minimum Income Required $31,957 $44,740 $63,914 $25,597 $36,502 $47,406 Pct.of Elk River Housholds 84.9% 76.6% 64.2% 88.4% 81.9% 75.7% Rental Existing Rental New Rental Studio 1BR 2BR 1BR 2BR 3BR Monthly Rent $500 $825 $875 $900 $1,200 $1,350 Annual Rent $6,000 $9,900 $10,500 $10,800 $14,400 $16,200 Housing Costs as%of Income 30% 30% 30% 30% 30% 30% Minimum Income Required $20,000 $33,000 $35,000 $36,000 $48,000 $54,000 Pct.of Elk River Housholds 92.0% 84.4% 83.3% 82.6% 75.0% 71.0% MAXFIELD RESEARCH INC. 97 RECOMMENDATIONS AND CONCLUSIONS • Multifamily Development Costs. It may be difficult to construct new multifamily product given achievable rents and development costs. Maxfield Research tracks development and construction costs for new rental housing across Minnesota. In the Twin Cities core the average costs per unit ranges on average from about $150,000 to $250,000; whereas in out- state Minnesota, many market rate rental projects average over $110,000 per unit. Based on these costs, it may be difficult to develop stand-alone multifamily housing structures by the private sector based on achievable rents. As a result, a private-public partnership or other financing programs may be required to spur development. • Shadow Rental Inventory. Shadow rentals are generally considered nontraditional rentals that were previously owner-occupied single-family homes, townhomes, or condominiums. The shadow market has been particularly fueled by homeowners who lost their home to foreclosure who opt to not rent in a traditional rental complex. Typically, short sales and foreclosures have resulted in substantial price reductions which have allowed buyers or investors to charge rents below market while still maintaining a profit. Although the shadow market rentals tend to be more affordable, renters run the risk of evictions if the owner does not pay the mortgage. According to our research, there have been some housing units that recently have been converted from owner-occupied into renter-occupied housing stock. These units have increased the overall rental housing supply, however it is unclear how many properties are indirectly providing rental housing. The City should further gauge the housing stock by reviewing homesteaded vs. non-homesteaded properties and utility billing records. • Shadow Foreclosure Market. The shadow foreclosure market refers to homes that are either in foreclosure or the owners are behind on their mortgage payments, signaling that additional homes could eventually join the existing supply of lender-owned properties. Recently there has been concern that many banks have been delaying foreclosures and holding onto a large number of homes after foreclosure and not bringing the homes to the market. Consequently, the shadow foreclosure market is difficult to gauge. The preferred method to track future foreclosures is to calculate the number of homes in which the owner is at least 30 days delinquent on the mortgage. However, most lenders do not readily share this information. As a result, the sheriff sale is the best way to track these properties. In Minnesota, the property owner of a house in foreclosure has six months after the sheriff sale to "redeem" the property. Therefore, the owner still has full use of the home during this time. In many cases, the home becomes damaged during the redemption period, thereby decreasing the home's value. In most cases, the homeowner does not redeem the property. According to Realtors and industry experts, it is believed some banks are holding onto already foreclosed homes. We recommend that city staff work with the county in obtaining MAXFIELD RESEARCH INC. 98 RECOMMENDATIONS AND CONCLUSIONS sheriff sale information for properties in Elk River. This effort will help assist the City gain a better understanding of the shadow market inventory. • Lender-mediated Properties. As illustrated in Table FS-1, lender-mediated properties have accounted for over 50% of for-sale resale activity since 2009. Comparatively, lender- mediated properties in the Twin Cities Metro Area comprise 35% of all sales activity (28% foreclosures and 9% short sales). The prolonged high market share of lender-mediated properties will continue to bring down pricing in Elk River until this supply has been absorbed. As a result, it will be difficult for new construction to be able to compete with this inventory in the short-term. • Code Enforcement. Most local governments have housing codes to ensure safe and habitable housing within their community. Code enforcement is important as it protects the safety and welfare of residents, maintains/increases property values, reduced vandalism, and overall increases the attractiveness of the community which should result in continued reinvestment and development in the community. Most residents support code compliance as a means to protect their home investment and their property value. Per the City of Elk River staff's direction, Maxfield Research reviewed some properties that were thought to have ordinance violations. Based on our assessment of these properties, the homes are candidates for ordinance violations and should be followed-up by City staff to be compliant with the local ordinance. Based on our windshield survey of Elk River's housing stock, there are a few substandard housing units scattered throughout various neighborhoods. Although the vast majority of homes in Elk River are well taken care for, some blocks have a few homes that have deferred maintenance issues. Examples of exterior deferred maintenance may include peeling paint, broken windows, damaged siding or chimneys, poor foundation, or other signs of negligence. Interior conditions may include plumbing and heating problems, electrical issues, damaged walls or flooring, unsanitary conditions, among others. In addition to deferred maintenance issues, nuisance concerns include tall grass and weeds, rubbish and garbage,junk cars, or other items not suitable for outdoor use. We recommend the City of Elk River review current code enforcement ordinances and modify if necessary. The city should proactively review neighborhoods annually to ensure all homes are being property maintained. Action should be taken those properties where there are clear violations. The city may also want to consider property acquisition within redevelopment areas in the city where dilapidated housing units exist. Many cities acquire abandoned, tax delinquent, and vacant problem properties and make them available to not-for-profit and for profit developers. Through this effort properties are returned to tax producing properties while improving neighborhood aesthetics and assisting in community economic development efforts. MAXFIELD RESEARCH INC. 99 RECOMMENDATIONS AND CONCLUSIONS • Job Growth/Employment. Historically, low unemployment rates have driven both existing home purchased and new-home purchases. Although Elk River and Sherburne County have historically maintained a lower unemployment that the rest of the U.S. during the Great Recession, the unemployment rate at 7.6% is above equilibrium, and new job growth has been slow. Lack of job growth leads to slow or diminishing household growth, which in- turn relates to reduced housing demand. Further job creation in Elk River will result in household growth that could exceed projections as outlined in Table D-1. • Land Supply. Tables FS-7 and FS-8 inventoried active subdivisions with available lots. Based on our research there are over 400 vacant lots, not included scattered lots throughout the city. Based on this lot supply and the recent construction activity over the past five years, there is a large excess supply of platted lots in the community. Because of this, it is very unlikely that developers will plat lots in the short-term, especially given development costs and today's price points for lot sales. • Property Taxes. Realtors commonly indicated that Elk River has higher property taxes than surrounding communities along the northwest corridor. Because of this, some buyers have chosen to look for homes in neighboring communities. The following table summarizes home resale trends and property tax ratios in Elk River compared to the surrounding communities. Based on the comparison, Elk River has the highest ratio among the seven peer cities. The perception of a "higher tax" community could dampen the housing market recovering in Elk River. Property Tax Comparison NW Corridor Communities Resale Properties 2012 2012 Average 2012 Average Taxes/Pct. City Sale Price Tax Value Value Elk River $159,594 $3,020 1.89% Albertville $151,550 $2,397 1.58% Big Lake $128,625 $2,171 1.69% Monticello $142,713 $2,013 1.41% Otsego $130,492 $1,827 1.40% Rogers $206,122 $3,268 1.59% St. Michael $173,836 $2,557 1.47% Zimmerman $130,429 $2,126 1.63% 1 January 1st, 2012 through June 30th, 2012 Note: Includes sale of only previously occupied homes. New construction homes were excluded. Sources: NorthStar MLS, Maxfield Research Inc. MAXFIELD RESEARCH INC. 100 RECOMMENDATIONS AND CONCLUSIONS • Land Banking. Land Banking is a program of acquiring land with the purpose of developing at a later date. After a holding period, the land can be sold to a developer (often at a price lower than market) with the purpose of developing housing. The city should consider establishing a land bank to which private land may be donated and public property may be held for future affordable housing development. With depressed land prices, today is an excellent time to consider purchasing land for future development. • Elk River Station/Transit Oriented Development (TOD). Based on the 2011 ridership figures for the Elk River Station (averaging about 300 daily riders) and the residence location of these users, the transit station alone will not create enough demand to sustain new housing development. Good economic conditions and a healthy real estate market are essential for successful TOD development as transit alone cannot provide enough of a magnet to attract development. Transit access can strengthen the market for real estate products, but the market must be viable without the transit component. Undoubtedly the Elk River Station provides numerous opportunities for the creation of a unique, mixed-use concept surrounding the station. This development has already occurred near the station with The Depot at Elk River Station (affordable general occupancy rental), Pullman Place (senior cooperative), and a for-sale townhome development. The construction of the proposed Duffy Development project and of one or more of the additional recommended rental projects mentioned previously on sites located along Twin Lakes Road will enhance prior development. In addition, such development may potentially gain some momentum and activity for future development near the station. We do acknowledge however, that the transit station will enhance demand and increase the marketability of any new development. • Renovation of Existing Housing Stock (both owner and rental). Numerous home improvement programs are initiated by local HRAs across the country to preserve the existing housing stock while promoting energy efficiency improvements. The City of Elk River should explore various programs that would aid the improvement of the City's housing stock. A variety of programs are available, the following is a list of potential programs. o Loan for financing improvements (typically low-interest) • Energy efficiency programs • Minnesota Housing Finance Agency—fix-up loan and rehabilitation loans, both low-interest and no-interest http://www.mnhousing.gov/consumers/home- owners/HomelmprovementLoans/index.aspx • Deferred loan programs • Affordable multi-family rental program loans o Remodeling Advisor— Partner with local architects and/or builders to provide ideas and general cost estimates for property owners MAXFIELD RESEARCH INC. 101 RECOMMENDATIONS AND CONCLUSIONS o Construction Management Services—Assist homeowners regarding local building codes, reviewing contractor bids, etc. o Historic Preservation— Encourage residents to preserve historic housing stock in neighborhoods with homes with character through restoring and preserving architectural and building characteristics. Typically funded with low interest rates on loans for preservation construction costs. • First-time Home Buyer Programs. There are a number of organizations and financial tools that can aid the City of Elk River with assisting first-time home buyer programs in Elk River. The following summarizes a list of key organizations and programs that the City of Elk River can pursue. o Entry-Cost Assistance Program —The City of Elk River may consider the distribution of city-assisted funds to income-qualified homeowners. Funds may be used for the down payment or closings costs and may be used in conjunction with other financial assistance programs. Many cities have programs where the home buyer receives assistance (from $3,000 to $20,000 in different communities). The homebuyer assistance program is essentially a soft second loan that is interest free (0% interest rate) and deferred upon the sale of the house or when the borrower no longer owns the home. Alternatively, some cities require the purchaser to occupy the principal residence for at least five years. After that time, the cost assistance becomes a grant and is not repayable. Household incomes are commonly subject to current MHFA income guidelines by household size. o Homeownership Education and Counseling—The City of Elk River establish pre- and post- education and counseling to assist households in owning and maintain their home. Programs may be provided by the City or in partnership with other organizations, such as the Minnesota Home Ownership Center (see below). o Minnesota Home Ownership Center— Provides a number of resources for buyers and existing home owners retain their home. The organization focuses on serving low-to moderate-income households to achieve homeownership and assist homebuyers and homeowners with a variety of issues such as foreclosure prevention, rehabilitation programs, home repair, credit counseling, etc. http://www.hocmn.org/en/index.cfm MAXFIELD RESEARCH INC. 102 RECOMMENDATIONS AND CONCLUSIONS o Minnesota Housing Finance Agency—The Minnesota Housing Finance Agency ("MHFA") is the state agency that finances and assists affordable housing development across Minnesota. The MHFA has four strategic priorities: • Finance new affordable housing opportunities • Preserve existing affordable housing • Prevent and end long-term homelessness • Mitigate foreclosure through prevention and remediation One of the key programs the MHFA initiates is the first-time homebuyer program. To qualify for a first-time homebuyer loan, buyers must meet eligibility incomes as established by MHFA based on county and household size. http://www.mnhousing.gov/consumers/home-buyers/index.aspx o Greater Minnesota Housing Fund—The Greater Minnesota Housing Fund ("GMHF") includes 80 counties outside of the Twin Cities Metro Area that addresses the need for various types of affordable housing in Greater Minnesota. GMHF funds are allocated to a variety of programs, including: financing the purchase of new home, rehabilitation or new construction of owner-occupied and renter occupied housing, assistance to communities, and providing training and counseling to first-time homebuyers through local community organizations. The GMHF also implements the Building Better Neighborhoods program that assists cities develop new neighborhoods that are built affordable and attractively. http://www.gmhf.com/default.html http://www.gmhf.com/downloads/publications-research-reports/BBN book.pdf MAXFIELD RESEARCH INC. 103 APPENDIX -- :i / ' �/ — I fir- tr- t-:,,„ t ...,,e,;„, . '''''h, Iti /17 , , ,- _i____,,,:___2______, iKi- --1 '-) _.__ , ,, , H _LZ'7t . Gail `r /'I .- Cyr n l/x` I, 4.p:li iNar.171ir-A,,..\,,,, — .r, ( 2— 416t, . N--..ISLE . 1 E- 1 ( City of Elk River 1 'ilb,------r1 Housing Units By Market Value ��' �`J {�-�y} .= 1 a V%. ., 075 as 'was Housing Uni151Maa4el Value) Road ClasoduallOn d rd.t Ra.c I I,>...,,„ \ \.: 00000•av R% 1.1 lied COO lee., LStH Reluae Read . 4)50 000•Rig 91)9 -o aC49W MSSb MOM.Ng 949 -- wnty Rasa arse ROrt i1. i .I 'ex++W RaM \\\\1. rt MAXFIELD RESEARCH INC. 105 APPENDIX ,...., . : . I 1 I t .--1• • 1 , , I I / . 1.111 7 s " Ipr- •C ''- I -- /-.- ---1 I .) ') '#- - ) ' ,\ 4 A,.. 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I >---- 1.-- FM)I -IS - I ! :^-L L EL4--/- _ A r, ' --- Fir---A. - - ,(....: ‘,.,\ \\ .., City of Elk River Residential(Single Family) ' \'. -----i(1 S■11"------■PA \ , I soul Use Classthcateon Road Classeftutoon ,..,,,„ t i MAXFIELD RESEARCH INC. 106 APPENDIX ' __ - -_ y , `+ ) -,� l � -_� "__` \ ' .� _~~_ . - , Y-11 >\, / , / -r? . zt,:/,,,-. , / ?-' / F 7 ___L-------? i -- _,---...__.L. , h / i,,.--.) -V it— b„ , ) .----, N -)....)., FL-r----jfr--,''i''7r .7.- , City of Elk River Residennal(Mulo Family)-Number of Units \l'. \ ., \ Muhl Family-Malabar of Units Road Classification \ .1 =.0%,..1” 'i''''2,\il MAXFIELD RESEARCH INC. 107 APPENDIX Livonia Township , . . ,....-,----.... . 1 , . .r' 1 .... II ........ /--- 7--- „2 1.---.------ I / , ! r!-----.. , , ! , r - \ , --"r--/ 11-- r: ---- __,„._____ \s,L — - , I _,____4_,„\. ,'/I.\,! rt • -1 -----i i I-- ----- .- -- ---- 1! . 's l -'- .1 / ' .._, • s......i ,/f i - I) \ __//), / • : r,.. ‘ — 1 T d-L,,-- - , L \ 1 u, , '-n,- i --•.,- , .'_ ;:-.\ )2'-tr-i-,-- --,- I --------/--- - / City of Elk River Housing Units By Year Built ■ \ \ r \ . , \ \ Nkr„, N'N Houerng i theta By Year ewe Road Clasarlocatron \.., N rare —Rawoaft i\\"\:,,N 4,4.'400 I,.Ira. —swe oararwei ''''.'".- L...J,--- 1.0 1019 tOIV 1909 11. — SO4 09,Re. \9,...„ \ 19•0 1.9 „. MOO 2009 MS. '''' --'—'''.------,,‘ , — ■ 1.0•19. IIM A.2010 9..R999 1.0 19. T.9999.099 1 MAXFIELD RESEARCH INC. 108 APPENDIX `.,.~. ,~~., \ .\:::.: .1 , ) / . \<__. _ /' )"---A1 / . r_l_.' ; \ / � _. 4. v} _ __` / . _ ..., . ^ _J , — L, -1. ' ' --------- ---- f- \ / ,,_<-c., \ -/-'_ _LI ;ie._ / / | } N - .--1 \ ‘, C-._,, _v._ City of Elk River Vacant Lot Locations _ \ Parcels Road Class...Ion ', ,,,\\\\41....9..,.... _~~ ~~ ~— ~* ,c„,,,,~~ Pm~^~ ='''_ ,ownefty Ra. MAXFIELD RESEARCH INC. 109