Battle Lake Housing Study, 2021

West Central Initiative Battle Lake Housing Study

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Project Description In partnership with the Battle Lake EDA and Otter Tail County HRA, West Central Initiative compiled this report to provide an updated snapshot of the housing market in the area. Outlined throughout the report is a detailed analysis of three components: Population, Demographics, and Housing Stock. Each component is separated into further sections that assist in providing a look into future housing needs and demands in Battle Lake. Data used in this report examines the census tract the majority of Battle Lake resides within but covers the surrounding area including the nearby city of Underwood. In some cases, data was extrapolated to create an estimate for Battle Lake and to create projections for future growth within the city. Data sources include the Otter Tail County Assessors Office, MN Compass, U.S. Census, American Community Surveys, and interviews with local officials. The content within this report is prepared alongside a community survey done by UMN Extension and seeks to support future opportunities to promote housing efforts within Battle Lake and the surrounding region.

Prepared by Alexander Johnson, West Central Initiative Battle Lake EDA and Otter Tail County HRA 3/1/2021

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Executive Summary Population Summary Population estimates place Battle Lake’s population just under 1,000 residents with a 10-year average growth rate of 1.3%. A continuation of this rate will see 1,060 residents by 2030 or an additional 10 people living in the city per year. Battle Lake is growing faster than the area around it (including Otter Tail County and the West Central Region) but the growth is manageable at 1-2%. The median age of the population is 54 and much higher than county and state median ages. The city lacks residents aged 20-40, but population growth indicates a need of 4-5 additional units each year to meet current growth trends.

Demographic Summary Residents of Battle Lake and surrounding area are predominately white, but this appears to be slowly changing with a growing Hispanic population.

Wages for residents with a bachelor’s degree has grown 3 times as fast as those with a high school degree only. Area median income is approximately $63,400 and over the last 10 years the population has become wealthier with a decreasing portion of households earning below $20,000.

Housing Stock Summary In total there are 1,080 occupied units in the area that consists of 84% owner occupied and 16% renter occupied housing. Vacancy and abandonment rates are near zero and the vast majority of the population lives in a single family home. For renters, they are split evenly between single family homes, large apartment complexes, and small apartment complexes.

The age of the housing is increasing with a dramatic slowing of recent construction since 2014. Property sales are higher compared to similar sized cities in the region with a manageable debt to income ratio for new home owners.

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Table of Contents

Introduction

Data Description Methodology Population Analysis

Total Population

Age Distribution

Number of Households

Household Size

Geographic Mobility Demographic Analysis

Race and National Origin

Educational Attainment

Household Income

Commuting Characteristics

Employment and Workforce Housing Stock Analysis

Occupied Housing

Householder Age

Housing Type

Structure Age

Local Expertise

Permits Issued

Sale Data

Housing Cost Conclusion

5 6 7 8 9 10 10 10 11 12 13 14 15 16 17 18 18 19 19 20 21 22

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Introduction

Highlighting existing housing market conditions in the West

Central Minnesota region creates a foundation for continued

investment in our region’s communities. One such community is Battle Lake and it sits centrally within Otter Tail County, 20 miles east of the county’s largest city Fergus Falls. Housing availability plays an important role in the growth and vibrancy of all cities,

including Battle Lake. Cities can only grow if people have places to live and this study identifies a growing population and expanding housing needs within and near Battle Lake.

What follows this introduction is a methodological description of the data and analysis. Subsequently, the study highlights

population, demographics, and housing stock trends to provide a foundation for future housing efforts. Each of the three sections

are broken down by sub-topics that span a variety metrics. Tables,

graphs, and other visual aides are embedded throughout the study to provide more context for future housing efforts. The study ends with a nod towards a realistic future dedicated to building a vibrant and resilient community in Battle Lake.

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Data Description A variety of sources were used to compile data and present

compelling evidence of steady housing demand in Battle Lake.

This study explores the profile of current residents and the

housing available for prospective residents and relies primarily

on survey data collected by the U.S. Census and 5-year American Community Survey (ACS) Estimates.

U.S. Census The Decennial Census of Population and Housing is a count of

each county resident and where they live on April 1st, every ten years ending in zero. Census data for 2020 will be available on

April 1st, 2021. For this study, initially only 2010 data was available but during the writing of the study 2020 census data became

available for analysis. The American Community Survey (ACS) is

an ongoing survey that generates yearly data based on a smaller portion of a local population and a 3-5 year average. This survey is administered monthly and provides the most up-to-date

information but relies on a smaller sample than the Decennial Census.

MN Compass MN Compass is a database that compiles data from a variety of

sources about Minnesota. This database only collects the most

recent (2019) results and only for cities larger than 1,000 people.

In this study, MN Compass is used for 2019 profiles of regional, state, and county statistics.

Minnesota State Demographic Center The State Demographic Center (SDC) is a part of the Minnesota

Department of Administration and is charged with continuously

gathering and developing relevant demographic data to the state.

SDC data was used as a primary reference for population data and projections.

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Otter Tail County Assessor’s Office This office of the county is responsible for the assessed value and classification of property in Otter Tail County which is used to

calculate property tax information for residents. All of this data is publicly available and includes property sale information.

Local Officials Interviews and conversations were held with several local officials

and members of the EDA Board. Their local knowledge was utilized to ensure the analysis aligned with local perspectives. Some data

about zoning and building permits, land use, and multi-family units was also provided by Battle Lake officials.

Methodology This study uses basic statistical methods to analyze trends

between 2000 and 2019 in order to provide a useful study that examines recent trends and estimates future demand. Each

section and sub-section analyzes change between 2010 and 2019 and assumes, all things constant, that the direction of the change

will continue. Trend analysis creates an estimate for future growth and uses average change for the 19 year period to give a future estimate. So, if growth is 2% over a 19-year period, the trend

line assumes that through 2030 the population will also growth

by 2% each year. Creating an estimate for future growth is not a

guarantee, but can be used as a baseline to explore future options if current trends remain.

By analyzing population, demographics, and the housing stock, this study gives context for future decisions about housing in

Battle Lake. A growing population indicates a need for additional housing, resident demographic data shows the type of housing needed to meet current demands, and housing stock analysis

shows the current supply of housing. Together these sections combine to depict directions and options to meet current and future housing need.

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Population Analysis Total Population Population estimates for Battle Lake place the total at approximately 935 residents in 2019. Since

2000, the population has grown from 747 to 935 by an average rate of 1.3% per year. If this growth persists, by 2030 the city will have grown over 1,000 people to reach 1,060. The city can expect

growth to be within a range from 943 to 1,060 that is dependent on many factors, but the city is likely to experience some degree of population growth.

In comparison to the county and west central region, Battle Lake has a higher 20 year average growth rate at 1.3%. Otter Tail County has grown by 0.15% and the West Central Region has grown only

0.52% over the same period. Although the surrounding area is experiencing slow population growth, it is concentrated within towns like Battle Lake due in part to economy of scale benefits but also for a

variety of other compensating decisions residents make when determining a place to live. Population growth is determined by many things including the availability of housing, job opportunities, quality of life, and many other determinants. If the growth rate persists around 1.3%, that amounts to an

additional 2-3 new families each year who need adequate housing. A lack of housing will likely push

population growth towards the bottom of the range and the city will continue to sit just below 1,000 residents.

935 Residents 1.3% Average Growth Per Year 8

Age Distribution Examining the age distribution of the population provides insight about the housing needs of residents. In 2010 the median age was 51 and over 10 years increased to 54 which supports anecdotal evidence of an aging population. In Battle Lake, the majority of the population is between the ages of 45-75 and this remains true from 2010 to 2020. State and county

population age trends in a similar direction since 2010, but the median age is lower at 38 and 47 respectively.

Despite the older population, the number of children under the age of 5 has increased from

4.5% to 5%. The number of children (under 18) has remained around 20%, while those over the age of 70 increased to 23%. The area lacks people aged 20 to 44 which, in part, can be explained by college age adults moving away after high school and not returning. It may

indicate a lack of entry to mid-career job opportunities or a lack of adequate starter homes

that are affordable and meet the needs of young families that prevent those aged 20 - 44 from residing in Battle Lake. As the population continues to age, it is plausible that those 70 and

older may need or desire some type of transitional housing that requires less upkeep. Focusing on this type of housing may make some affordable single family homes available for younger

families while at the same time creating more manageable homes for aging adults who wish to remain in the Battle Lake community.

Population Pyramid (2019) 80 to 84

70 to 74

50 to 54 30 to 34

Under 5 10%

8%

6%

4%

2%

Male

0%

2%

Female

4%

6%

8%

10%

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Number of Households

418 Households

The number of households shows evidence of how families are organized and the number of dwellings available in the community.

The number of households in 2000 stood at 327 and has since grown to 418 or by almost 4 households per year. This does not indicate 89 new houses were built but instead shows an increasing number of available dwellings that could be anything from apartment units to single family homes. By 2030, a continuation of existing trends suggests that Battle Lake will need at least one additional unit each year to meet projected population growth, but it is more likely the community will need to average up to 5 additional units based on 10 year average growth.

Household Size

2.25 People Per Household

Since 2000, household size has remained around 2.25 persons per household while county and regional household size is 2.32.

In general, household size decreases as the population ages. This is due to a decreasing likelihood that older adults have children under than age of 18 living in their house. Household size can also indicate the most needed type housing based on how many people live in a single unit at any given time. At close to two people per household, housing needs are likely to be in the smaller home market and in units with 1-2 bedrooms.

Geographic Mobility

6% Same County 3.4% Different County 1% Outside of State

The final section of the population analysis examines the proportion of residents who have moved into the Battle Lake area.

In 2010, 11% of the entire population had moved into the area and the majority moving into the area from elsewhere in Otter Tail County. By 2019, only 10% of the population moved into the area: 6% from within Otter Tail County, 3.4% from a different county, and 1% from a different state. Of people that have moved into the area an increasing number of people are moving from outside of the county. This is an important trend because it is evidence that new residents are choosing the Battle Lake area over other parts of the state suggesting an attractive, competitive, and affordable market relative to other areas.

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Demographic Analysis Race and National Origin 98.8% of the population identified as white or Caucasian in 2010 with the remaining 1.2% split between residents who identify as Black or African, American Indian, or Vietnamese. By 2020, the

percentage of the population who identified as white dropped to 93.4%; while those who identified as more than one race increased to 3.1% and Black increased to 2.2% of the population. Although,

the city and surrounding area remained predominately white, it does appear to be trending towards a more racially diverse city. In a small city like Battle Lake, small percentage changes in minority

populations can make these minorities more visible to the wider community. The increasing number

of residents identifying as Hispanic is striking because 10 years ago no residents identified as Hispanic but now 40-60 people or 2% of the population ethnically identifies as Hispanic.

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Educational Attainment The portion of the population that graduated from high school

increased from 90% to 94.5% and from 24.6% to 32% for those

with a 4-year degree. Educational attainment is a good indicator of lifetime earnings and the likelihood an individual drops below

the poverty line. In 2010, the poverty rate for those with less than a high school degree and only a high school degree was between 8-9%, while those with a bachelor’s degree experienced poverty

only 0.6% of the time. Median income for those with a high school degree or less was around $27,000 but jumped to $37,000 for

individuals with a bachelor’s degree in 2010. By 2020, the poverty rate for all educational levels increased substantially. Those with less than a high school degree experience poverty 33% of the

94% High School Graduation Rate 32% 4-Year Degree Rate

time and even those with a bachelor’s degree have a poverty rate near 3%. The difference increased over the ten-year period for

those with less than high school earning only $17,000 and those with a bachelor’s earning a median income near $54,000. While

the number of individuals reaching higher educational attainment has increased, only the wages of those who earned a bachelor’s degree or higher has increased.

Another important note is the difference between educational

levels for men and women and the subsequent impact on earnings.

Although women have a graduation rate from high school and

college similar to men, women earn less and experience poverty at a higher rate. For women with less than a high school degree the

poverty rate reaches almost 60% and even women who achieve a bachelor’s degree experience poverty at 7x the rate of men with a bachelors. At every educational level, women make less than men with the same level of education and this was consistent

from 2010 to 2020 and the gap expanded. This is likely due to a

high prevalence of single mothers with kids, women’s increased

likelihood primary familial duties, and the career choices of women

With HS Degree: $17,000 4-year Degree: $54,000 Poverty Rate: 3%

who are more likely to work in essential but lower paying sectors like healthcare and education.

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Household Income Median household income increased from $45,650 to $63,400 or by 4.78% per year since 2010. Average household income

is greater than median income in both years and implies many

individuals earn large incomes relative to other residents in the

area. State and national data tend to suggest a flattening of the

income distribution, but Battle Lake appears to be increasing the

$63,400

Median Household Income

number of high income residents while decreasing the percentage

of low-income residents. This flattening income distribution refers to a statistical trend that shows increasing numbers of people

earning high and low incomes while at the same time a decreasing

number of people in the middle of the distribution. In 2010, 25.5% of the population earned less than $25,000 but by 2020 only

18.5% of the population earned less than the same amount. At the

other end of the income spectrum, the number of households with income greater than $100,000 increased from 12.2% to 23.3%.

Only around 3% of the population earns below the federal poverty line which is significantly below the national rate of near 13%. This

Over $100,000 12.2% to 23.3%

suggests an affordable area with adequate support systems in

place to meet individual needs in areas of work, health, and social factors.

Under $25,000 25.5% to 18.5%

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Commuting Characteristics The workforce relies heavily on single occupancy vehicles as their

primary mode of transportation to work but there is evidence this trend is shifting. Single occupancy vehicles were used by 84%

of workers in 2010 but this reliance dropped to 75% with almost

10% of people working from home instead of commuting to work in a vehicle. The pandemic likely exacerbated this trend as more people were forced to work from home as offices were closed

throughout the state, but it was a trend before offices were forced to close in 2020.

Beyond the type of transportation, most people also work within Minnesota and Otter Tail County which remained unchanged

from 2010 to 2020. Most people leave for work between 7:00 am and 7:30 am and travel an average of 21 minutes in 2010 and 27

minutes by 2020. This appears to indicate most people are working traditional 8 to 4 or 9 to 5 jobs and these jobs are located further from the Battle Lake area than they were in 2010.

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Employment and Workforce In total there are approximately 2,015 individuals over the age of 16 and a labor force participation rate (LFPR) of 56% and an employment rate of 54.5%. This leaves the area with an

unemployment rate between 1.5 and 2.5%. The “natural rate” of unemployment is around 5% and a lower rate suggests

employment saturation or that there are more available jobs than workers available to fill them. Another important consideration is an aging workforce which decreases the LFPR and further

contributes to workforce shortages. A reminder that the impact of COVID-19 is not reflected in this data, but the national

unemployment rate jumped from around 3% to near 10% in the latest employment data released by the Department of Labor.

The largest industry employers include Health Care, Educational Services, and Manufacturing. Key industries in the area include Information, Professional/Scientific/Technical Services,

Administrative Support, and Arts/Entertainment/Recreation.

These industries all employ more than average from other areas in the county suggesting that the Battle Lake area specializes in

attracting a workforce with the skillet for those unique industries.

Underutilized or declining industries include Manufacturing and Accommodation/Food Services, and area data suggests lower employment in both industries relative to Otter Tail County.

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Housing Stock Analysis

Occupied Housing In total there are 1,080 total occupied housing units in the area of which 912 (84%) are owner occupied and 168 (16%) are renter occupied. Since 2010, the number of occupied units has decreased for the

area, but inside of city limits the number of households has increased which suggests that housing is becoming increasingly concentrated within the city of Battle Lake. Vacancy and abandonment rates are both near 1% suggesting that housing availability is relatively scarce for prospective occupants

and that available housing units are quickly occupied when they become available. Anecdotal evidence suggest a similar trend of prospective buyers exceeding available units which is exasperated by a high proportion of lake homes only occupied from May to September.

1,080 Occupied Housing Units

168 Renters (16%) 912 Owners (84%)

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Householder Age Examining householder age provides insight into the housing

preferences for different age groups who are at different stages of their life. For all households, occupants are older in 2019

than 2010. Owner-occupied houses trends older with a higher

percentage of homes occupied by those older than 55, but overall there is little change between 2010 and 2019. Renter occupied

housing experienced the most change as the number of renters

under 44 decreased, those aged 45 to 74 rented at twice the rate in 2019, and renters over the age of 75 represented a smaller

portion of renters than in 2010. Older renters and owners matches the overall aging trend in the area but this aging population is

occupying the rental market much earlier in life. The expectation is that younger adults (under 35) tend to make up the largest portion of renters but in the Battle Lake area but since 2010 the portion

has decreased suggesting renters are staying in their units longer.

Adults older than 75 also represent a smaller portion of renters

even thought he population is getting older which highlights the need for rentals that respond to the needs of this age group.

All Households

Under 35 35 to 44 45 to 54 55 to 64 65 to 74 75 to 84 85 and Up

All Households

2010

Owner-Occupied

2019

Owner-Occupied

Renter Occupied

Renter Occupied

FIGURE 1 - AGE OF HOUSEHOLDERS

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Housing Type Single family homes dominate the housing market in the area. The majority of the population owns their home and lives in a single family home. Since 2019

the portion of owner-occupied single family homes has increased 5% to 95%

and owner-occupied alternatives like condos, duplexes, or other developments

make up only 5% of the market. Renter occupied housing is evenly split in thirds between single family homes, small apartment buildings (between 2-8 units),

and large apartment buildings (8+ units). Of the 16 apartment buildings listed in

Battle Lake 37% are 1 or 2 unit structures, 26% between 3 and 8 units, and 37% with greater than 8 units.

Structure Age Housing in the area is predominately at least 20 years old for both owner

occupied and rented units. Only 25% on all units have been built between 2000

and 2019 with 22% being built prior to 2014 with numbers for new construction after 2014 appearing to drop off marginally or remain unclear. Around 20%

of owner and renter occupied housing is built prior to 1940 and around 20%

throughout the following decades with a big decline after 2000. Rental units are predominately constructed between 1960 and 1980. In Battle Lake, the median age for single family homes is 56 years old.

35%

FIGURE 2 - AGE OF STRUCTURE All Households Owner Occupied Renter Occupied

20%

0%

1940

1960

1980

1990

2000

2013

2019

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Permits Issued A look at the both the number and average and median value of permits administered by the city shows a decline in construction between 2007 and 2011 after a peak in the years prior (20022006). Since 2012, the number of permits has slowly increased in conjunction with the value. In 2016 and 2017, the number of permits peaked around 26 with an average value of above $100,000. Through 2020 the value seems to have decreased as the average dropped to near $4,000 but the number of projects remained in the upper 20s. From 2000 to 2010 the average number of permits reached 24 with an average value of $91,000.00 and from 2011 to 2020 the city issued 21 permits with a value of $74,100.00 on average. Since 2000 both the number of permits issued and the value of projects has decreased on average over the 20 year period.

20 Year Average 22 permits $83,000.00 2000-2010 24 permits $91,000.00 2011-2020 20 permits $74,100.00

Local Expertise As a supplement to the data used in this report, local officials

highlighted three notable characteristics of the housing market

in the area. First, the number of prospective buyers for property in Battle Lake far exceeds the number available for purchase.

This leads to property that remains on the market for a very

short time and is driving increased sale values. Second, the city

is quickly running out of available lots for new homes. Exploring the purchase of surrounding farmland and adjusting lot sizes

downward could help alleviate short-term availability issues but

can be difficult or unpopular to manage. Lastly, officials confirmed that median income levels match mortgage values and rates for the area.

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Housing Sales and Value Examining home sale data from 2015 to 2020 in total Battle Lake sold 129 properties and averaged 16 sales per year. The total value for all sales reached $14,622,141 with an average sale of $123,916 and a median sale of $91,500. This data was acquired from the Otter Tail County Assessor’s Office and includes only properties sold from 2015 to 2020 designated as occupied single family homes. In comparison with nearby cities Henning and Ottertail, Battle Lake averaged two additional sales per year with comparable average and median values. For all three cities, average sale value exceeded median sale value indicating high value sales that pull the average upwards with the majority of sales below average and in the lower half of the distribution. The income to housing value ratio of the sale data is 1.95 and suggests a healthy debt to income ratio for new property owners in the area.

Using standard mortgage rate calculations, an income of $63,400 should qualify most households for a loan between $200,000 and $250,000. Over the last five years, Battle Lake home sales have been just below this threshold indicates home buyers’ relative ease in acquiring affordable homes and lower income households purchase cheaper than average housing when compared with State and National data.

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Housing Costs Household income for owners increased by 40% and renters by

36% but renters experienced a greater increase in costs for their

homes. Owner costs increased by 7% while renter monthly costs increased by 12%. Owners most often had an income between

$75,000 and $100,000 which is double the most common income

bracket from 2010. Renter income was most likely either between $10,000 and $15,000 or between $50,000 and $75,000. This

double peak indicates two distinct groups of the renter population;

one group can be considered low-income residents while the other group is 4-5x wealthier and indicates two different set of needs and preferences for housing.

Of all owner-occupied housing 527 units have an existing

mortgage while 385 units are without a mortgage. The median

value of homes with a mortgage is $237,500 and those without reaches a median value of $242,000. Household income for

mortgaged households is near $80,000 while those without have an income near $50,000. Monthly median monthly housing costs and property tax for each is $1,405 and $1,500 (with mortgage)

or $456 and $1,900 without a mortgage. Of all home owners 19% can be considered housing cost burdened (monthly costs more

than 30% of income) but 27% of those with a mortgage are cost burdened while only 11% of those with no mortgage are cost burdened.

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Conclusion Before drawing conclusions about the above data analysis, it is important to note the impact of the

pandemic on the housing landscape in communities across our State. There is not yet high-quality data

about the impact of the pandemic but some initial reports and anecdotal evidence suggests an impact on the supply costs of housing, decreasing income for poorer households, and changing migration patterns of people. What this means for Battle Lake is unclear, but the city can expect increased costs of new

construction, some degree of change in income and profits of households and businesses, and possibly an influx of younger families returning home or people seeking to move away from large cities where

pandemic realities hit harder. Data that verifies these trends is not yet available but early reports suggest some degree of change without being able to pinpoint the real affects forced onto communities because of pandemic related realities.

The data analysis of population, demographics, and housing stock highlights three major trends: 1. Shifting housing needs with age changes 2. An expanding population

3. Housing is becoming scarce Many different things can be extrapolated from the data in this report, but the above three appear to

carry the most weight for future housing decisions because they indicate existing and promising growth, needed change, and a direction for the change.

The city is growing, and while growth is not essential for a community to need housing and thrive, it

certainly helps drive the city into the future. Without population growth the argument for new housing

becomes more difficult, but the population isn’t just growing in Battle Lake, it is growing faster than the

region that surrounds it. A vital part of continued growth is adequate space for new residents to live and the housing analysis points towards a lack of supply rather than a lack of demand. People are already moving to the city and they will continue to come as long as there is space for them to live.

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Sale data over the past five years in Battle Lake appears to make the case for high demand even stronger.

Battle Lake reached a five-year average of 16 property sales per year that exceeded property sales of

nearby similar sized cities. Local officials spoke of increased demand and quick sale turnovers that match national data suggesting a booming housing market, but one with a healthy debt to income ratio including area median income to housing value ratios among new buyers in Battle Lake. To further highlight a dwindling supply of housing the study indicates a declining number of permits building permits issued, construction of new houses, and a lack of space for new buildings.

Amidst a decline in new housing availability, population growth has persisted since 2000 but the age of

the residents is growing too. An aging population suggests that residents have remained in the area for

long period of time and likely remain in the same housing that they started living in many years ago. Older adults are also more likely to have reached peak income and paid off their mortgage thus having reduced monthly housing costs. Our study also suggests that people near the median age of 54 are renting at

increasing rates rather than owning property which further takes affordable housing away from younger families with lower incomes.

From this comes a number of solutions. For one the city appears to have an adequate base level of demand for new housing and existing market conditions seem to suggest that if housing is built it will be

purchased quickly. Focusing new housing on smaller lots and increasing the housing mix also appear to

be achievable and effective solutions to housing supply issues and an aging populace. Aging adults tends to desire different housing that requires less maintenance and is easier to navigate and focusing on the construction of assisted living, senior housing, or even duplex and other-multifamily options appears

to be a solution with weight. This age group is more likely to prefer a smaller lot size and data indicates a

willingness to rent rather than buy. By focusing on providing housing alternatives aging adults may seek to downsize and subsequently make their current homes available to new residents while quickly expanding the housing stock.

This study intends to provide context and current data for the city to make decisions about the future of

their community. Some of the suggestions above seek to provide one possible solution but many others will be become apparent as the city spends more time on addressing community needs. Analyzing current trends helps make informed decisions that put communities on a path towards greater resiliency

and vibrant spaces. It is important that this study complements other surveys and data in ways that raise the city’s capacity to respond to a changing world.

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