Market Watch Issue #5: Hennepin County
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 our 2016 “Sold Out” report, Minnesota Housing Partnership launched a new research series tracking key trends in the unsubsidized multifamily rental markets across the Twin Cities.
This fifth report, published in October 2019, analyzes data for 117,800 unsubsidized rental units in properties with four or more units in Hennepin County from the CoStar database, including 65,770 units in suburban cities.
Highlights from Issue #5: Hennepin County
Cost burden affecting a growing number of renters around the county; households of color are disproportionately impacted
Hennepin County contains the second highest percentage — 38% — of renter households in Minnesota, coming up just behind Ramsey County. In 2017, there were an estimated 187,587 renter households in Hennepin County, marking a 22% increase since 2000. In particular, the cities of Western Hennepin have, and continue to see, a growing number of renter households. A number of cities in Hennepin County have seen dramatic increases in renter households, including Maple Grove (+210%), Eden Prairie (+52%), Golden Valley (+51%) and Plymouth (+51%).
From 2000 to 2017, median income for renter households declined by 4% while rents continue to rise — increasing by 11%. Of the 187,587 renters in Hennepin County, over half (52%) earn under 60% of AMI. Of the renter households earning under 60% of AMI, 78% are cost-burdened, with 44% paying more than half of their income on housing.
With stagnating or declining wages and growing rents, communities of color are disproportionately impacted. Like the
rest of the Twin Cities and the state, households of color are far more likely to be renters; while only 30% of white households
in Hennepin County are renters, 78% of Black and 66% of Latino households in the county are renters. In addition, wages for Black, Native, and Hispanic households have fallen since 2000, declining by 26%, 15%, and 5% respectively. Meanwhile, wages for Asian and White households have risen in the county, by 20% and 3%.
Average rent well over $1,000
From 2010 to 2018, average rent rose 20% in Hennepin County to $1,303. Rent in Hennepin is currently higher than that of the greater 7-County Metro area, which averaged at $1,245 in the same year, rising by 19% since 2010.
Significant rent increases seen in majority of cities
From 2010 to 2018, rent increased the most in Excelsior, with a 53% increase, followed by Golden Valley (33%), Minnetonka (28%) and Maple Grove (26%). Sixteen of the 24 cities in our analysis have seen rent increases of more than 15%. Champlin is the only city in the county that saw rent decline from 2010 to 2018.
Low vacancy rates mark an increasingly competitive market for cities with more naturally occurring affordable units
Vacancy rates are highest in cities that contain properties with higher average rent, including Excelsior (14.4%), Golden Valley (10.5%) and Edina (6.0%), all of which have seen increases in vacancy from 2017 to 2018. In contrast, the vacancy rate in Hopkins, Mound, Crystal, and Brooklyn Center is extremely low, remaining under 2.8%; these cities have seen a tightening of the market with a 58%-70% drop in their vacancy rates since just 2010. Currently, 75% of the 24 cities in Hennepin County have a vacancy rate below 5%, with 42% seeing vacancy rates plummet by 40% or more from 2010 to 2018.
Over 45,000 naturally occurring affordable units in Hennepin County
Thousands of households earning under 60% of the area median income (AMI) — for instance, a family of four earning under $56,580 annually — are able to call Hennepin County 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). By sheer number, Minneapolis, Bloomington, and Brooklyn Park contain the most units affordable to families earning less than 60% AMI in the county.
Property sales continue to spike in the county, nearly doubling since 2016
Property sales have continued to accelerate in Hennepin County since 2010, with over 1,000 buildings and 45,450 apartments collectively sold from 2010 to 2018. Sold properties reached an all time high in 2018, nearly doubling the number of properties in 2016. In 2018, approximately 8% of all market rate buildings in Hennepin County experienced a sale.
New units of affordability are not filling the gap
According to the Metropolitan Council, 4,709 new units of affordable rental housing were created across Hennepin County from 2010 to 2017, peaking with the highest rate of production in 2017, with 864 affordable units produced that year. Over this timeframe, just 2.8% of all affordable rental units were produced for rental households earning under 30% of AMI; the majority of units (2,807 or 60%) created were affordable at 60% of AMI, followed by affordable at 50% of AMI (22%) and then affordable at 80% of AMI (16%).
The findings include sobering trends in Hennepin County’s rental market. Vacancy rates are at their lowest in 10 years, wages are flat, and new construction is largely limited to high-end multifamily properties. These factors, combined with an increase in total renters in Hennepin County, have resulted in dramatic increases in average rent across the county. This means that renters experience more financial pressure than ever before with little to no options for new rental opportunities when they need to find a new home.
Data analysis, writing and mapping for this report was conducted by Gabriela Norton, Research Officer at Minnesota Housing Partnership, with design by Andy Birkey, MHP Director of Research and Communications. Questions about data? Contact gabriela.norton(at)mhponline.org. Media inquiries? Contact jenny.jones(at)mhponline.org.