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Tent encampments in parks and under bridges aren't the only signs of a housing problem in the Twin Cities.

In Minneapolis and St. Paul, rent control measures are on the November ballot for the first time in both cities, a reaction to skyrocketing prices. House prices are at record highs, rents are on the rise and, among large metros, the Twin Cities has the lowest housing vacancy rate in the nation, according to new census data.

An in-depth analysis of building permits by the Met Council helps explain why. Over the past decade the seven-county metro needed 44,570 affordable houses and apartments, but only a little more than a third of them got built. The vast majority were rental apartments, but shockingly few were affordable to the lowest income renters in the Twin Cities.

The extent of the gulf between what was needed and what got built surprised even the researchers.

"Anecdotally I knew this, but it blew my mind," saidTara Beard, who manages Livable Cities grant programs for the Met Council. "This is the biggest issue we need to address in affordable housing."

The report adds to the debate about how to develop more affordable housingat a time when rising construction costs and a shortage of labor and land have made it all but impossible for the private sector to do the job.

But even the nonprofits that specialize in developing such housing say that while there are sites to build and plans at the ready, there's not enough funding to make them happen. That's especially true for housing that serves the lowest income renters, a market failure that threatens the prosperity of the entire region.

"The outcomes of housing unaffordability and instability are predictable and evident all around us," Beard said. "People sheltering on transit, growing encampments, an underemployed workforce despite a desperate need for workers, increased social service needs and costs, and poor school performance in unstably housed kids."

The Met Council analysis sheds new light on how well the region is meeting the current and future needs of households at various income levels. The most alarming finding, researchers say, is that the deficit of new housing for households earning less than 30% of the area median income — $103,400 for a family of four — is far greater than it is for households at higher levels of affordability.

These extremely low-income individuals and families have faced a persistent deficit of new units for decades.

For those who earn less than 30% of area median income (AMI), the Met Council estimates that nearly 1,900 new units are needed each year from now until 2030. Yet over the past five years, an average of just 165 units were built annually, leaving a dwindling number of options for minimum-wage workers and those on fixed incomes.

"These are folks who are most likely to experience housing instability," said LisaBeth Barajas, the Met Council's community development director. "The cost to the public to support people who are experiencing homelessness is far more expensive than people realize."

In the Twin Cities metro, where housing costs are increasing far faster than wages, keeping lower income people housed is increasingly difficult. Last week, Zillow said that average rents in the metro during August were 4.5% higher than last year, causing an increase in the number of renters who are burdened by housing costs.

The Met Council said that for a four-person household that earns$31,000 (or 30% of AMI) a one-bedroom apartment that rents for $582 per month is considered "affordable," according to federal guidelines. This summer, the median monthly rent for a one-bedroom apartment in the Twin Cities was twice that, at $1,180.

The situation is no better for buyers and renters with slightly more income. A family of four with household earnings of $78,500 (80% of AMI), a single-family home is considered affordable at $293,500. Even at that price, there are few options.

In July the median price of an existing home in the Twin Cities was$343,000; a new single-family home was $100,000 more, according to the Met Council.

Barajas says her organization and other funding entities might need to reconsider how best to allocate funding for affordable housing. She saysthat to build more housing that's within reach of the lowest income families, developers might need to focus more funding on deeply affordable housing. Shifting resources could mean that fewer total income-restricted units get built, however.

Lee Blons, chief executive at Beacon Interfaith Housing Collaborative, which focuses on developing housing for those most at risk of becoming homeless, said financing those projects is always a struggle. They often require housing vouchers to bridge the gap between available funding and construction costs. Yet, only one of four people whose income is low enough to qualify for a voucher actually gets one, she said.

"Capital alone doesn't get you affordable housing," Blons said.

Her organization's Bring It Home, MN campaign aims to create a statewide rent subsidy program that would allow all low-income renters the ability to pay only 30% of their income toward rent.

"One of the challenges in the system is that the scale of the solution is not matching the scale of the problem," she said. "We need to think about what it would take and believe that everyone could have an affordable home."

One of Beacon'ssupportive rental projects, Prairie Pointe in Shakopee, is a case in point. The organization hopes to build the project on a parking lot next to a Knights of Columbus building. The project, which would be the first housing of its kind in Scott County, would serve renters at 30% of AMI. It has local support but isn't viable without rental vouchers.

Beaconhas asked the Met Council to provide 40 project-based housing vouchers, which cover the gap between what a family can afford and what a landlord is charging, but has yet to get a commitment. Without vouchers, the project isn't economically feasible, Blons said.

"They're [the Council] the ones who put out those goals and measure how we're doing toward meeting those goals but they haven't led the effort to find out how it's going to happen," Blons said. "We're hoping they'll provide leadership and resources."

Blons and other housing advocatessay cities need to make firm policy commitments that prioritize funding to house the poorest residents and better reflect the need, because the private sector is no longer in a position to fill the gap.

Construction costs are at record highs and developers can easily spend more than $200,000 to build a single apartment in a multi-unit building. At the same time, investors are paying record prices for apartment buildings. Often, after the acquisition of a building, the new owner invests in improvements and then increases the rent.

Last month, an out-of-state investor paid $305,000 per unit for a building in St. Louis Park, believed to be the highest price for a suburban building.

The private market can't make the numbers work without some kind of government assistance, said Anne Mavity, executive director of the Minnesota Housing Partnership. Like Blons, Mavity is an advocate of expanding universal rental assistance, including vouchers that help low-income renters avoid paying more than 30% of their earnings on housing.

"That would stimulate more market housing if there was a way to pay for it," Mavity said. "And it's to prevent long-term harm to our lowest income renters and ensure that property owners, the majority of which are small-property owners, get the rental income they need to make sure they can maintain quality housing."

Mavity said there's already a deep pipeline ofshovel-ready projects that are ready to be built, but are waiting for funding. She supports removing regulatory barriers that can make construction more expensive and marshaling one-time funding opportunities, including pandemic-related federal emergency relief funds, to build or preserve affordable housing.

Olmsted County commissioners took that route in August, approving a plan to spend about half of its $31 million in federal American Rescue Plan Act funding on affordable housing. The goal is to build and maintain 1,100 low-income housing units in the Rochester area and create a program to make homeownership more affordable.

"Housing is so foundational to everything we do," Mavity said. "Some people have said we can't build ourselves out of our way [of] this problem, but we've never tried. There's an enormous cost not to do it."