5. Be responsive and flexible as market demands and national trends evolve.
As cities prepare plans for development sites it is critically important to work with developers and be responsive and flexible as market demands and national trends evolve over time. A number of market forces are at work shaping our region, most notably the type of housing and neighborhoods preferred by different generations, the impact of housing costs on our residents, the mismatch between housing and jobs, the growing shortage of a trained workforce, industry trends and technology.
Type of housing and neighborhood
The rapid aging of our population will result in a profound increase in our household occupied by older folks. Meanwhile, households occupied by those under 65 will remain relatively flat. According to the Metropolitan Council, about 85%of household growth in the next 15 years will be in one and two person households occupied by those 65 or older. This is a stark turnaround from household growth in the past and may mean that our current supply of single family detached homes is adequate to serve the region’s needs for the next 20 plus years.
Most millennials see themselves as suburbanites and small town folk; however, they seem to be looking for more urban amenities within the suburbs and small towns that they call home.
Further, in a survey conducted by Greater MSP, recent young transplants to the region were asked what they looked for in choosing a community to live – overwhelmingly the number one attribute was the availability and affordability of housing.
Impact of housing costs on residents
According to a survey of housing attitudes released at the beginning of June 2015 by the MacArthur Foundation). While Millennials are personally hopeful about their future prospects, the overwhelming majority of Americans today think it is harder for young people to achieve a secure middle-class lifestyle than it used to be. They believe it will be harder for young people to save for retirement (81%), own a home (76%), secure a stable decent-paying job (71%), or have a stable affordable housing situation (71%) than it was a generation ago.
The number of cost burdened households (those paying more than 30% of income toward housing) has grown to comprise almost one half of all households in the metro area, many of whom are living below the poverty level. Most are working – about 69%of households living in poverty have one or more working members.
Mismatch between housing and jobs
Minnesota and the MSP region have fared better than many other parts of the country in rebounding from the Great Recession; however, a large portion of the job growth in the region has been at wages that struggle to meet housing needs in the areas where these jobs are located. As a result, there is a growing mismatch between where lower wage workers are employed and where they can find housing they can afford. About 50%of the jobs in Greater MSP pay less than needed to afford most two bedroom apartments.
Shortage of trained workforce
Over the next few years, regional businesses may struggle to find talented and qualified employees. This workforce shortage could become one of the most important factors in business expansion and business location decisions.
And according to Greater MSP, our region remains challenging to recruit for, ranking 19th among the top 25 US metros in attracting. The good news is we rank first in our ability to retain people once they are here.
Retail and Commercial industry trends
On the Commercial/Industrial front, E-commerce has changed the face of retailing not just for Minnesota but nationwide where it accounts for almost $1.2 trillion of the total retail market and is growing by an average of 15% annually since the Great Recession. By contrast, the construction of new physical retail space dropped precipitously during and after the recession and has not recovered to pre-recession levels. Many consider the US to be “over-stored,” meaning that many retailers have more stores than they need and can sustainably support. This means that those retail centers that are succeeding are covering a larger trade area than they have in the past.
E-commerce is certainly a big part of this, but it is not the only story. Many major retail closings you may have heard about–Macy’s, JCPenney, and Sears for example–are as much or more due to changing consumer preferences and the challenge of staying fresh. Where new brick and mortar is being built, it’s generally in rapidly growing and affluent areas near urban centers in the form of so-called “lifestyle centers” that feature a mix of uses.
Technology trends
Technology is enabling new kinds of services that are challenging existing business models, and how people spend their money is changing as a result. The speed with which technology makes it possible for people to get what they want means that “access” is becoming more important than outright ownership. Cities will be constantly challenged to play catchup from a regulatory standpoint.
Some technologies will affect cities more than others. Autonomous vehicles could dramatically shift how people get around, how many cars they own if any, and street and parking design for cities. Whether you believe that driverless cars will be here in five years or in 25 years, infrastructure decisions being made by cities today have a life span that’s greater than even the most pessimistic forecast for a transformation of our fleet. 3D printing has the potential to lower building production costs, making it cheaper and faster to address housing challenges. Drone delivery–including through ”ground drones”–could further accelerate e-commerce’s challenge to existing, traditional retail.
We are also at the beginning of the “Internet of Things” – a state of widespread connectivity between people, structures and gadgets. Monitors and trackers of all kinds are getting smaller and cheaper, and we are beginning to put them on everything– heating and cooling systems, energy and water use and using them to measure everything from energy consumption to structural integrity to building occupancy.