Market Watch Issue #6: Spotlight on NOAH in Greater MN and the 7-County Metro

Across the state, growing ranks of renter households are facing an increasingly challenging housing market with rising rents and declining vacancy rates. Current owners of unsubsidized rental properties have few tools to preserve and improve aging properties to maintain homes for current and future tenants. New construction of rental units has skewed towards higher-end homes, leaving production gaps for lower income rental housing. Because the market does not produce enough housing across the housing continuum, the preservation of existing housing is often the most cost-effective way to provide affordable housing. In this spotlight map series, Minnesota Housing Partnership further analyzes layers of affordability in the unsubsidized multi-family rental markets around the state.  

For this report and accompanying maps, we define naturally occurring affordable housing (NOAH) as unsubsidized, Class C properties that contain units renting at or below 60% of area median income (AMI) respective to unit size and expected number of persons per unit.

DATA SOURCE: Unless otherwise noted, data comes from CoStar, a commercial real estate database that tracks multifamily properties with four or more units. Data was accessed and downloaded January 2021 for statewide Greater MN maps and May 2021 for 7-County Metro regional maps.

CLASSES: CoStar defines building class in the following way. CLASS A buildings represent current trends and standards in design and/or are of a timeless, perhaps historic quality. They include high quality finishes such as hardwood floors, granite countertops, and/or stainless steel appliances, as well as on-site shared facilities like clubhouse/ party room, fitness center, business center, etc. CLASS B buildings are aesthetically average and contextually appropriate. They include average quality finishes and a few on-site shared facilities and spaces. CLASS C buildings are purely functional, often with below average finishes, small windows and likely no on-site facilities or shared spaces.

AREA MEDIAN INCOME (AMI). The midpoint in the income distribution within a specific geographic area. By definition, 50% of households, families, or individuals earn less than the median income, and 50% earn more. HUD calculates family AMI levels for different communities annually, with adjustments for family size. AMI is used to determine the eligibility of applicants for both federally and locally funded housing programs.  

NOAH in Greater Minnesota

Heat Maps for Naturally Occurring Affordable Housing and Property Sales in Greater Minnesota  

heat map indicates statistically significant clustering of an event, rather than total count of an event. 

This illustrates areas that contain a significant amount of multifamily, market rate buildings with units that rent at or under 60% of AMI. The Saint Cloud metro area (Stearns, Benton, Sherburne, and Wright counties) appears most vividly as a pronounced and dense market for NOAH multifamily buildings. Fargo-Moorhead, Duluth, Mankato, and Rochester also appear as areas containing substantial NOAH as well. 

This displays significant clustering of multifamily market property sales across the state, excluding the 7-county metro. The predominant hot spots appear in the St. Cloud regional area (Stearns, Benton, Sherburne, and Wright counties), the Rochester metro area, and the Moorhead-Fargo metro area. Meanwhile, other metro areas like Duluth and Mankato have a less vivid presence of property sales. Smaller cities like Owatonna, Faribault and Willmar have a higher-than-expected number of sales taking place, whereas the larger Grand Forks metro area does not appear as a hotspot for property sales. 

NOAH in the 7-County Metro

The following maps illustrate multifamily, market rate buildings with rent that is affordable at 30, 50, 60 and 80% of area median income. For low and moderate income renters, even slight increases in rent can be significant. Thousands of households earning under 60% of the area median income (AMI) — for instance, a family of four earning under $55,860 annually — are able to call Minnesota home by renting in unsubsidized apartments in the private market. Unsubsidized units that are affordable to these residents are often referred to as naturally occurring affordable housing (NOAH). 

Presented here are units that contain rents 5% below or above 60% AMI; these units could easily be lost due to slight rent increase to the 60% threshold. 



Download the 7-County Metro 2021 maps here.