10 Key Findings from Market Watch Minneapolis
Across the Twin Cities, the growing ranks of renter households are facing an increasingly challenging housing market with rising rents and declining vacancy rates. While developers are leveraging public and private resources to create new affordable units, current owners of unsubsidized rental properties have few tools to preserve and improve aging properties to maintain homes for current and future tenants.
Building on its 2016 “Sold Out” report, Minnesota Housing Partnership is launching a new research series tracking key trends in the unsubsidized multi-family rental markets across the Twin Cities.
This first report, published in March 2018, analyzes data for approximately 50,000 unsubsidized rental units in properties with four or more units in Minneapolis from the CoStar database. Read the full report — and download graphics from our research.
10 Key Findings
Minneapolis, like much of the Twin Cities region, has a wealth of older apartment buildings that provide affordable housing for thousands of families in the private market — without any public subsidy.
Rents are increasing faster than inflation — and far faster than largely stagnant incomes for families renting in Minneapolis. Even for households earning 60% of area median income, average rent is hundreds of dollars more than they can afford.
New supply in the Minneapolis rental market has been almost exclusively at the higher end so the market is not producing units that are affordable to the lower income families who must compete in the rental market without rental subsidies. More than 70% of the new unsubsidized apartment buildings in Minneapolis constructed since 2010 have average rents starting at nearly $1,400 for a studio.
There’s a sizable gap between rents in Class C and Class B properties, providing potential incentive for new developers to purchase and upscale. Average rent in Class C buildings is $937 — 49% below the average rent for Class B buildings and 37% below the overall city average.
From 2010 to 2017, 512 apartment properties — representing 12,350 units — were sold in Minneapolis. After a dip in sales in 2016, the pace continued to climb in 2017 with 124 properties (representing 4,005 units) sold, or 8% of all apartments in our dataset.
After buildings are sold the rent typically increases faster than in buildings that haven’t been sold. For instance, in Uptown average rent since 2007 has increased by 22% in buildings that have been sold compared to 16% percent in buildings that have not been sold. Citywide, rent increased by 16% in properties that were sold compared to just 2 percent on buildings that were not sold.
In many of the neighborhoods where there is the most multi-family rental housing, rents are increasing rapidly, with more than 20% rent growth (adjusted for inflation) from 2010-2017 in areas like Uptown and Downtown. Meanwhile, in some neighborhoods there are still significant numbers of affordable units, given minimal rent growth over the past seven years.
In all but three neighborhoods in Minneapolis, vacancy rates have declined since 2010, and in 60% of Minneapolis neighborhoods the vacancy rate was at or above 5% in 2010 but has now fallen below that mark.
In neighborhoods like Whittier, there are thousands of apartment homes with modest rents affordable to low income renter households. These are well positioned for current NOAH preservation efforts that partner with private investors and nonprofit developers. Now is the time to invest in these programs to ensure these units stay affordable.
Whether the upscaling trend continues or is just a moment in time, we are in a critical moment to preserve affordability. There are many neighborhoods in Minneapolis where factors like increasing rent, decreasing vacancy, older apartment buildings and distinctions between Class C and Class B rents are putting affordability at risk for thousands of households that are already struggling to make ends meet.