I’ve worked on housing affordability since 1997. That whole time, the Twin Cities has been losing ground, with homes becoming steadily less affordable. Rents have been rising — sometimes very rapidly. The portion of people paying more than 30 percent or even 50 percent of their income in rent (the definition of “housing cost burden”) is stubbornly high, especially for Black households. While we increase public funding for Affordable Housing — the subsidized kind — the number of unsheltered people grows.
The first step in turning that around is to stop losing the most common kind of affordable home, “Naturally Occurring Affordable Housing” (NOAH) apartments. The Twin Cities population grew by 314,000 more people between 2010 and 2020, and we haven’t built enough homes to shelter everyone. As a result, people looking for a place to live unknowingly bid up rents on the homes that exist. In Minneapolis, and across the Twin Cities, we’ve seen owners flipping NOAH properties, pushing out renters and jacking up rents.
But, recently, it seems like something has started to shift.
Each year, I revisit the rents in the fourplex I own. For a while, the rents in similar apartments were inevitably higher. A couple of years ago, I noticed they weren’t going up anymore. In fact, they were a little lower — and when I renewed leases, I dropped my rents (even though my property tax and insurance costs increased by thousands of dollars).
Then there was the story of my longtime neighbor. He mentioned to a couple of the other owner/managers on the block that he wanted to move. A few weeks ago he told me that he’d signed a lease just up the block for $300 less per month than what he’s paying next door.
Is something shifting or is it my own wishful thinking? Are we on track with Policy 1 in Minneapolis 2040: Access to Housing: Increase the supply of housing and its diversity of location and types? Has visible support for building homes and the tax base resulted in a net gain of homes? Have early 2040 zoning reforms made it more predictable to build the homes we need?
In 2018, streets.mn writer Anton Schieffer asked, “How many homes does Minneapolis need?” He showed we need to build roughly 4,000 homes per year. That makes up for Minneapolis’ shortage of homes and accommodates our growing population. Alex Schieferdecker tracks the number of homes approved by the Planning Commission. Last year he shared that Minneapolis leaped from 2,600 unit approvals in 2015 to 5,077 approvals in 2020. HUD data on construction permits pulled shows 14,960 units permitted between 2018 and 2021. That averages 3,740 per year. It is plausible that owners and managers are having to lower asking rents to find renters.
The best Minneapolis data on rent changes is HousingLink’s monthly Minneapolis Rental Housing Brief. Other sources are for the seven-county metro area or are self-reported rent paid for buildings with 20-plus units (per this MinnPost article). That misses many people’s experience, given that one in three renters in Minneapolis lives in one- to three-unit buildings, licensing data show.
HousingLink’s Rental Housing Brief uses advertised rents by apartment size. That is what renters see when looking for a new apartment, although we can’t know if owner/managers find renters willing to pay those prices. Each month is shown compared with one year prior. But smallish sample sizes and outliers skew the monthly data. What I really want to know is how things have changed over the past five years.
This spring, I pulled all the median advertised rent information from the Minneapolis Rental Housing Brief into a spreadsheet. I didn’t adjust it for inflation. I used three-month rolling averages to smooth out the monthly noise. Check out these results.
The actual advertised median rents for one- and two-bedroom apartments are lower — in actual dollars — in 2022 than they were in late 2018. Three-bedroom rents went up 2 percent over the four years, while inflation went up 11 percent over the same time. These shifts started more than a year before the pandemic. “Post” pandemic increases look big due to the atypical and extremely low rents during summer 2020. But trends show that Minneapolis rents have simply returned to pre-pandemic levels.
This is a notable shift, diverging from national trends that show spiking rents (shown in the graph above), and it’s promising for renters.
St. Paul Rents Trending Higher
We have a regional housing market, so I pulled the data for St. Paul, too. Until voters passed rent stabilization by a comfortable margin last November — the ordinance became effective earlier this month, on May 1 — new housing construction had been growing in St. Paul, with permits pulled for 6,369 units from 2018 through 2020. I hoped that the pattern would hold in both core cities.
Median advertised one-bedroom rents in St. Paul are flat. But two-bedroom rents are up a little, and three-bedroom rents increased twice as much as in Minneapolis. St. Paul rents are trending in the opposite direction from Minneapolis.
There’s always been a rent premium to live in Minneapolis or, put another way, a discount offered to people willing to rent in its smaller twin city. Has that changed over the past four years?
No matter the apartment size, while renters likely can save a bit by living in St. Paul, the median savings has shrunk from hundreds of dollars per month to $50. In a surprising shift, median advertised rents were actually lower in Minneapolis than St. Paul for one-bedroom and three-bedroom homes both in February and March 2022.
Affordable Housing Not Solved
These trends suggest that owners have less ability to flip more NOAH properties, increase rents and still find renters. Most NOAH owners will have to keep their rents flat, or maybe even drop them, to keep them filled. If we’ve staunched the loss of NOAH units, building new subsidized homes can help shrink the number of people who need a place that fits their budget. Unfortunately, tens of thousands of people currently need an affordable home.
But building affordable homes will never be enough. This problem has no single solution. We also need more tenant protections, like just-cause eviction and rent stabilization. We need to ensure that every person has the income to afford a home whether from increased wages, making housing subsidy an entitlement or social housing. Minneapolis minimum wage hasn’t yet reached $15 per hour, and $15 is a long way from the NLIHC-calculated $17.27 housing wage needed to afford just a studio apartment in the Twin Cities.
I’m left with more questions: Why are advertised Minneapolis rents dropping compared with St. Paul rents? Why are Minneapolis and St. Paul rents flat compared with national trends?
Median rent trends hide what’s happening for people in the toughest situations: people with very low incomes, those who are facing discrimination or who need accessible homes. There’s plenty we can’t see here.
- How do these median rent shifts compare to the experience of low-income renters?
- Are owner/managers able to find renters at the advertised prices?
- How often are owner/managers offering leasing bonuses, like free months for signing a lease, that mean these advertised rent numbers are higher than the actual rent they’re receiving?
What do you see in these data? What questions do you have?
Photo at top of story courtesy of MPR News