The first two years of the 80s have been the worst two years in new housing production in this country since the depression of the 30s the late 70s, especially 1978 were some of the best years ever in New housing production had the level of production of the late 70s been maintained in 1981-82. And in the 83 the impact on Minnesota's economy jobs and personal income would have been enormous estimates using the Department of Revenue his model of the state's economy indicate the following washers to Minnesota's economy because of the major Decline and housing production in the last 2 years, Minnesota in 1981 lost 623 million dollars in residential investment this in turn resulted in the loss of 28000 jobs 458 million.Dollars and personal income and 21 million dollars in taxes Minnesota in 1982 lost almost 673 million dollars in residential investment this resulted in the loss of 24,000 jobs 427 million dollars in personal income and almost 19 million dollars in taxes. This analysis shows the impact housing production can have on jobs income and taxes today. I'll try to briefly describe why the 80s don't be like the 70s and what this means for public policies which affect the affordability and availability of housing.The 80s won't be the seventies because of inflation demographic changes Federal deregulation of financial institutions and reduced dollars for or in some cases the actual ending of important Federal housing production programs. Let's start with inflation house prices have dramatically increased both Nationwide and in Minnesota, the average sales price of a house in Minnesota nearly doubled from 1976 to 1981 increasing from $35,000 to $63,000 Nationwide the average price Rose from 44000 to over 77,000 by December of 1982. The average sales price for a home in this country was $77,400.Minnesota data shows that from the mid-70s to the early eighties substantial percentage increases in house prices occurred throughout the state. In fact, some of the biggest increases occur in the more rural areas of the state. These dramatic increases and house price along with the equally dramatic increase in interest rates have substantially reduce the ability of first-time home buyers to purchase a home 1980 renters Credit Data gives the income distribution of non elderly renters in Minnesota. This is a good proxy for first-time home buyers only 11% head incomes of over $20,000 almost half had incomes of less than $10,000. We've developed estimates of the percentage of first-time home buyers who could afford a median priced home in Minnesota from the years 1979 through 1982. Minnesota data shows and then in the Twin Cities area. This percentage has remained at about 10% But for the rest of the state, the percentage has declined from 25% to 18% In the seventies first time home buyers were an important element in the housing market. Demographic data, you've already seen shows the importance of the baby boom in the housing market of the 80s. There will be more potential first-time first-time home buyers in this decade than any other. In our history. These potential first time home buyers will be less able to afford homeownership than any similar group in our history another important piece of demographic data involves the impact of the change in family size assume the 1980 population in the 1960 family size had family size remained at 1960 levels. Minnesota would have needed 270,000 fewer housing units for its 1980 population. Inflation is one cause of the housing problems of the 80s demographic changes have added demand problems, but perhaps the most fundamental change in the 8th is the way in which capital or money will be made available for financing housing in 1980 and 82. Congress passed legislation which decontrol the ways in which lending institutions get money from all of us and intern lend it for a variety of uses including housing these changes mean that Savers will no longer Finance housing investors will finance housing. What happened to all the low interest passbook savings account as a source of affordable capital for housing inflation happened. Look at the ads in the paper for the new floating rate short-term deposits now offered by lenders these ads explained as effectively as anything else. We could say why the 80s will be different for housing lenders don't make long-term fixed-rate mortgages with short-term floating-rate deposits. The data shows that by 1980 only 20% of the deposits of thrift institutions were in Passbook savings accounts. This is down from 88% in 1966. So where will the lenders get dollars to use in making housing loans a good share of these dollars will come from the so-called contract thrifts those institutions with forced savings. The Pension funds in the insurance companies lenders who make loans won't hold the loan in their institutions portfolio because the lender no longer has access to savings that a protected rate that allows the holding of a long-term fixed-rate loan. This means local lenders will be sellers of mortgages to investors through the secondary Market institutions the secondary Market institutions, both public and private will have a major role to play in determining the type of mortgage instrument available for the purchase of a home. In the last few years the changes in mortgage types has been phenomenal most of you who purchased a home in the 60s and 70s used the 30-year fixed-rate mortgage last year one of the secondary Market institutions purchased over 100 different types of mortgages. These mortgage types weren't used or even heard of in the seven. One of the important housing issues for the eighties will be the determination of a half dozen or so standard mortgage types that are acceptable to investors work. Well in the secondary market and make home ownership affordable, the issue is important because it affects the way in which capital will be made available to housing. Estimates are that about 200 billion dollars a year will be needed for housing in the 80s. There are some very real questions about the ability of the economy to generate this amount of capital larger than any time in our history and do so at affordable rates. The final element of change recognizes that the middle 80s will not be a. We're Federal Housing Programs act as a stimulus or an incentive for the kinds of creative state local and private activity that took place in Minnesota in the 70s for 1983 federal assistance for the new production of housing is limited to 14,000 units of elderly housing for the entire nation. For at least the near-term federal Housing Programs as a source of new housing production simply don't exist. How then do we need to start to think about housing in the 80s? You've seen the demographic data more households with fewer people in each. This means less space is needed per household. money cost more and it's harder to obtain for housing and the protection housing once had and federal legislation is gone along with Federal programs, which stimulated production So while the situation is different than the 70s there are ways to adapt to the reality of the 80s. One of those ways is to adapt existing housing stock the most important Housing Resource of the 80s is likely to be there 30 million or so units produced in this nation in the 60s and 70s in 1980. Minnesota had just over 1 and 1/2 million housing units. This was a 25% increase over 1970 of the units available in Minnesota in 1980. 69% were single family detached home about 30% of the housing units were less than 20 years old. It's important to know however that almost one-third are at least 40 years old. This has significant implications for energy conservation Rehabilitation and reuse of existing homes and neighborhoods. It's much more cost-effective to save an existing home and finance the construction of a new one. A large part of the existing stock of single-family housing is underutilized in terms of the number of people living in the available space creative ways to more effectively use the housing space that already exist in Minnesota one type of housing that might be reused is the home for elderly families are individuals now lived there are large numbers of elderly homeowners in all areas of the state outside the Twin Cities. There is an especially high percentage of the elderly who own their own homes. We need to combine creative elderly housing ideas with new approaches to Health and Social Services and us free up existing housing units for new families. This is a major housing task for the gate it For rental housing a recent study done for the Housing Finance Agency concluded that there was significant potential to convert a large number of the existing single-family units in the state to duplex. And that's provide additional rental housing for a large number of families at Cost Savings of up to 60% of that for financing new rental units. Without Federal Housing Programs current interest rates mean that rents for a new one bedroom walk up in the Twin Cities would be somewhere between 500 and $600 a month the more Pimp C views of existing housing units for the current occupants may not need all the space available is a rental alternative that needs careful review. One of the most important conclusions about housing in the 80s is that it won't be possible to house everyone in a single family detached home with white pillars and black shutters in a two-car garage Condominiums quads townhouses and all the other responses of the late 70s will provide the majority of the new units produced in the 80s housing programs in the 80s will be complicated success will require the cooperation of state and local governments working with a private sector dollars public and private will need to be combined resources must be targeted to those families and individuals that most need assistance. No single piece of State legislation would be able to create a program that produces housing in the 80s tax policy development policy housing policy must all work together. Some actions are essential. We must make certain that investors are willing to provide capital for Housing in Minnesota, we must make certain we don't add unnecessary cost to an already expensive housing unit was state and local requirements designed to build communities for the sixties and seventies not the 80s in all areas of the state must be open to creative ways to provide affordable housing to people of all incomes. There must be opportunities for testing new approaches in affordability energy efficiency housing design in the ReUse of existing housing inflation Federal deregulation of lenders changes in the way in which we organize ourselves into household and the ending of federal housing production programs have all combined to fundamentally alter the affordability and availability of housing in the 80s. For housing the eighties which are now almost one-third over are already significantly different than the 74 housing the 80s or off to a bad start.