The pandemic broke the housing market in the Twin Cities and Minnesota.

The same is true for the rest of the country, with many places much worse off.

Simply put, the supply of housing hasn't kept up with demand. The lack of inventory has pushed up home prices to record levels.

High prices are welcome for sellers. But record prices not only deter new buyers. They make it hard for homeowners looking to downsize or move to a different neighborhood. Rents are also rising at a rapid pace.

There are signs that the housing market is cooling off with mortgage rates nearly doubling since the beginning of the year. But the housing shortage — both owner and rental — took decades to develop and it will take years of initiatives by government, nonprofits and private enterprise to create an affordable and healthy housing market.

These efforts should take into account the demographics of an aging population.

To give an example of what I mean, I'd love to see homeowners by the hundreds of thousands in the Twin Cities and elsewhere in Minnesota transform their garages into small living spaces or build backyard guest cottages.

These accessory dwelling units (ADUs) allow aging family members to stay close to their adult children and grandchildren while maintaining privacy and independence. However, to achieve the potential promise of multi-generational backyard-living will take major changes in local regulations, building techniques, new financing options and other initiatives.

In the meantime, the unhospitable housing market complicates retirement planning when it comes to deciding where to live. To be sure, AARP surveys show that a majority want to age in their current home. It's an understandable but not always best choice.

"Home can become a prison when friends die or move away, or when you face mobility issues," writes Robert Kramer, founder of the think tank Nexus Insights. "Many residential locations can frustrate the desire to remain engaged and connected to others."

The key word here is "connected." You don't want to age lonely or socially isolated. The connection lens calls for exploring options that encourage engagement, such as ADUs, home sharing, co-housing, multi-generational homes and continuing care communities.

These options mostly lie on the tributaries of the retirement housing market, perhaps with multi-generational homes the recent exception. Neighborhoods are vital to the connection checklist. Are local businesses and community services easily accessible, or not?

Think engagement, connection and enjoyment when researching housing options.

Farrell is economics contributor to the Star Tribune, Minnesota Public Radio and American Public Media's "Marketplace."