2024 should be a good year for affordable housing, and a challenging one for housing affordability, in Minnesota.

I'm not just playing with words. I'm talking about two different things that people often think are the same.

Affordable housing is a common expression, and most people think it means housing that's affordable — to them.

In the world of real estate, finance, advocacy and government, however, the term "affordable housing" has a technical meaning. It describes housing for low- and moderate-income families, usually those making 60% or less of a region's median income.

When political or business leaders speak (or journalists write) about housing, it's sometimes difficult to tell whether they're talking about housing affordability in broad terms or about the pursuit of affordable housing more narrowly.

In that confusion, it's easy to lose track of the bigger goal: We need more homes of any kind.

For about two decades in the Twin Cities, there was not enough home construction to preserve the region's reputation for housing affordability broadly — nor to meet demand for homes that would be affordable to lower-income residents.

The Itasca Group, Metropolitan Council and others at the start of this decade set targets in the Twin Cities region — 18,000 new housing units overall annually and about 2,100 units of affordable housing. The Minneapolis Fed has an online scoreboard to track progress.

The progress was good from 2019 through 2022, but it turned downward last year. A count of new construction permits in the metro area by Housing First Minnesota showed a 36% drop.

The builders group's count doesn't reflect all permits — St. Paul stopped providing data last year, for instance — but it shows the overall direction. The latest data from the Met Council, reflected on the Minneapolis Fed scoreboard, is expected later this year.

The decline is no surprise. It's a result of the jump in interest rates undertaken by the Federal Reserve to snuff out inflation. That made it more expensive to finance new construction.

Cecil Smith, chief executive of the Minnesota Multi Housing Association, a property owners' group, said he thinks new construction will fall another 25% or so this year, even though Fed policymakers may soon start to lower rates. There's a lag between the time a change in rate direction happens and the time it shows up in construction starts and completions.

"If we start to see interest rate declines, then these deals start to pencil out again," Smith told me earlier this month. "But that's looking out into deliveries in 2026."

With fewer new homes coming into the market in 2024, prices for homes in the metro will likely continue to rise. That upward pressure may be offset by the possibility that — when the Fed starts to cut rates — our current stalled-out home market could be turned loose.

Minnesota is known for being an affordable place to live, and the Twin Cities often scores well against similarly sized metro areas on affordability measures. That's a competitive advantage in attracting people here, helping to offset the weakness of long winters. And housing is a big factor on the region's overall affordability.

It will become a problem if construction stays depressed for too long, allowing the price of housing to become a barrier to growth.

"Hopefully it's not a long pause for construction because we really need more housing," Smith said. He added, "There's lots of evidence that just adding any unit of housing, in any part of the market, improves affordability overall."

More of the construction action this year will be in the realm of affordable housing.

Last spring, the Legislature and Gov. Tim Walz approved $1 billion in spending on affordable housing during the two years of the government's budget cycle. Walz last month announced the first $350 million of that spending, which will preserve and build 4,700 affordable housing units statewide.

That round alone should handily surpass the Met Council's target for affordable housing construction in the metro region.

The surge in state spending also gives owners of affordable housing properties room to focus on shoring up their finances as they grapple with unintended consequences of the eviction moratorium from early 2020 to mid-2022.

Those include higher costs for fixing up apartments and for catching up with deferred maintenance. Many property owners are also facing higher security costs.

Eric Anthony Johnson, director of Aeon, one of the largest operators of affordable housing in the Twin Cities, said organizations like it are trying to stabilize their finances and operations. "I don't know if production on the affordable side is going to be what people expect," he said.

In my next column, I'll discuss with Johnson the two years he just spent in Dallas, where he worked on several ideas that he said could help create more affordable housing here.