Builders Blog: February 2026

By: Pat Sexton, Executive Director, Rochester Area Builders

 

As the Minnesota legislative session begins later this month, housing supply deserves focused attention. In Rochester and across the state, affordability challenges are not the result of a single policy or market segment - they stem from constrained supply throughout the housing market.

Effective housing policy starts with a clear understanding of how housing actually works.

Housing Functions as a Continuum

Housing demand does not exist in silos. A healthy market includes:

• Rental housing for entry-level and workforce households
• Starter homes that allow first-time buyers to build equity
• Move-up homes for growing families
• Senior housing that allows aging residents to downsize

Each segment supports the next. When one category falls behind, demand shifts elsewhere, often increasing prices and limiting options for households with the fewest resources.

The Cost of Imbalance

Rochester’s housing challenges reflect what happens when supply does not keep pace with demand:

• Limited rental availability makes it difficult for households to save
• A shortage of starter homes delays first-time homeownership
• The average age of first-time buyers has risen from the late 20s to nearly 40
• Demand pressure moves downward, raising costs across the entire market

Even residents who may never purchase a high-priced home feel the impact when higher-end housing is not built. Supply constraints at the top increase competition and prices at every level below.

Why This Matters During the Legislative Session

State policy plays a significant role in shaping housing outcomes. Decisions related to taxation, environmental regulation, infrastructure funding, and local government authority all affect:

• The cost of building new housing
• The feasibility of entry-level and workforce homes
• The ability of communities like Rochester to meet long-term demand

Policies that increase costs or reduce flexibility can limit housing production and worsen affordability. For example, state policymakers were considering changes to the Minnesota energy code that would have raised construction costs by more than $13,000 on a two-story home, until a coalition of builders groups and advocates provided common-sense testimony that saw the most costly proposals dropped. However, the Mitchell Provision that was passed in 2024 is still forcing the state to adopt the new IECC model code starting in 2026 – a costly endeavor that will inevitably make it harder for Minnesotans to purchase homes.

A Clear Opportunity

As lawmakers debate priorities this session, housing should be viewed as essential infrastructure. Any decision related to the fundamental areas impacting the cost of housing – energy codes, zoning and land use, taxes, workplace mandates, etc. – should be made with housing affordability and accessibility in mind. Supporting housing at all price points is not about favoring one group over another; it is about ensuring the entire market functions properly.