I read recently that over 40% of people age 30-44 are renters. In the core cities of Minneapolis and Saint Paul, that number is much higher. Via Insight News, here’s the current picture about rents and rental vacancy in the Twin Cities metro:
As you can see, the rental market is tight. Here’s what the article, taken from a recent report of the Minnesota Housing Partnership, has to say:
With rising demand for rental units nationwide and in Minnesota, housing construction in the state is beginning to rebound, particularly for multi-family units. Through May of this year, 7,000 units were permitted statewide, the highest since 2006. Of these units, a record 39% were multi-family units, the report found.
What do you think? Should the Twin Cities be building a lot more apartments? If not, how else could we keep rents affordable?
I’ve been noticing a lot of the relatively new buildings have raised their rent by like $100-$200 dollars a month (for 1br) recently. I guess they filled up quickly enough that they thought they could squeeze more out of people.
They also have decided absurd things like non-refundable pet fee + pet deposit + pet rent are acceptable to charge people (yes, all of them combined, not just one or two). Even for cats. I find it a little off-putting to charge me what adds up to about a thousand dollars for a one-year lease for a nondestructive cat, especially when the price is identical for a huge dog that is far more likely to cause damage to the unit. It’s just an extra way to nickel-and-dime tenants that needs to go away.
Oh, and passing on *ALL* of the utility bills to the tenant. Water, sewer, trash–everything.
And then they cut back hours for building management where if you ever get a package they’ll never be there after you get home from a normal 8-5 job, so you pretty much have to take part of a day off of work to pick up your packages at was is supposed to be (and charges you like) an ‘upscale’ building.
Supply and Demand. Owners of rental property, many who are progressive and who likely author on this site, should raise rents with the market is tight. They too will face higher costs, real estate taxes, insurance, etc. Yes, a continued trend is passing on costs and add ons directly to the tenant, but this is no different than airlines, etc. What I believe we are seeing in mass is pricing out of A Minneapolis areas for some who have always got may have always lived there. There is no easy solution, but it is not the fault of the landlord. If people are unhappy with new less desired choices, save up money to buy a duplex, etc., potentially as FHA, move to a less desired neighborhood, or move out of the property you lease from if rent goes up without improvements. Here is an idea–instead of showing up in mass to turn down density,more shadowing, or less parking, show up and say thank you to the next developer offering small units without parking at no financial cost to you the taxpayer.
I think described a fallacy. Just because demand is high and there are people *now* shouldn’t alone be motivation to gouge residents. You *have* to raise rents when costs go up, but when there’s simply an opportunity to make more money and offer the same level of service, you’re actually making yourself less competitive when demand goes down. That’s because the price raise created a lower ROI on renters and they’ll leave for better deals as soon as they’re able.
And then following the rules of supply and demand, rents will fall again to the point the market can support it (which somehow doesn’t really seem to happen, but theoretically it should).
It’s not “gouging” if that’s what the market supports. Landlords (myself included) aren’t in the business of rental properties as a non-profit venture (usually). If I have a good product that people want, shouldn’t I be able to charge for it what they’re willing to pay? It would be silly not to, especially knowing that you should “make hay while the sun shines” (i.e. the rental market is good) so that you have some equity and savings for inevitable repairs and maintenance, even when the market is less favorable.
The rental market is a little unique in that it’s highly pressured by the real estate market and credit markets, which are both a lot less accessible to a variety of people.
When the rental market was tight before (I wish this chart went back farther, say 1998 or earlier) the housing market had a lot of loose credit floating around in it, and housing prices boomed in a way that made rents stagnate. Now the real estate credit market is a lot tighter, not always in ways that reflect the current market so much as the stupidity of the bubble.
I think the crux of the issue is what *kind* of apartments are being built. These mega-luxury apartments are not helping the issue. We need zoning that allows smaller apartments and duplexes within existing neighborhoods that will provide our communities with the kind of lower-rent apartments that still allow tenants to feel like part of the neighborhood community.
It’s probably been said a million times, but today’s ‘luxury’ apartments are tomorrow’s affordable ones. These new buildings are having little trouble filling up relatively quickly, so there’s obviously no shortage of people willing and able to pay their rents. The market is so tight that there’s still plenty of demand for these units and it will be a while before it peters out. The short term positive is you have a lot of people who can afford them that would have otherwise been occupying cheaper apartments, which are now available to people who cannot afford the ‘luxury’ ones.
New construction will rarely be ‘affordable’ without some kind of tax breaks, so the best you can hope for in most cases is to flood the market with enough supply to relax some of the upward price pressure.
allowing infill instead of just big apartment buildings would help a lot, though – there are a lot of duplexes that would make great triplexes, and places that used to be or could be two-house lots but there is only one house left standing on them (including a lot of tiny houses that were alleyway houses at one point behind bigger houses.
It could help to think of different levels of housing as having different markets. For instance, let’s say there is affordable housing, moderately priced housing, and luxury housing. If you are looking for moderately priced housing, it is unlikely you’ll lease luxury rentals or affordable housing (affordable meaning either subpar or income restricted). Demand for all of these levels of housing might be high, however, as long as there is enough demand for luxury apartments to fill up a new building, developers will continue to build luxury housing, because for the same amount of units or square footage, they can make significantly more money. Once either luxury rental demand falls or supply is expanded too much, prices should fall, but only for luxury rentals. At that point either some of the luxury buildings will become moderately-priced, or more likely in the short-term, those paying the most for moderately-priced housing will suddenly find themselves able to afford cheaper luxury apartments, reducing the demand for moderately priced apartments, and the cycle continues. In this theoretical framework, subsidizing new affordable housing construction (which generally will also be income restricted), will only lower rents for those who were already in the lowest tier of rentals, but not so much for anyone who already can afford decent housing.
Ease the building regulations. There’s a fight on Grand Ave over a proposed three story, nine unit condominium building. It faces the usual arguments against, height, lot coverage, setbacks, parking, traffic, etc. Neighbors argue the building’s 36 feet height is too much. As in, it’s six feet taller then it’s neighboring buildings. Come on.
I just get a sense some citizens want to limit supply to increase their own home values. They hide behind the usual response “we’re not anti-development, we just feel like…”. It’s BS.
Agreed. I grew up in a residential neighborhood near a 4-unit apartment. It didn’t destroy the sense of “neighborhood” or increase crime. In fact, I remember it being a great place for trick-or-treating.
But if you listen to some people round these parts they’ll say “oh one or two are fine, but if you relax the zoning the entire neighborhood will be overrun and my house will somehow decrease in value!”
Despite the fact that if it’s desirable enough to build a ton of apartments on some developer will probably want your house for a pretty good price too.
Sure? But people don’t generally like moving after they’ve already settled into their home. Money isn’t everything.
Just about everything has a price, but I’d imagine most people move into a house not with the hope of flipping if for a profit in a couple of years (and capital gains and moving expenses would eat up a huge chunk of those profits), but because they like the house and the neighborhood and want to make it their home. If you don’t plan on selling out, all this gets you is apartment balconies overlooking your back yard and increase property taxes.
You keep saying this about capital gains. It is not true. A married couple filing jointly can exclude up to $500,000 in gain on the sale of their primary home. Individuals can exclude $250,000. Except in rare circumstances with a really big gain, capital gains taxes are not relevant, and even then it’s only with tax on the part that exceeds the exemption.
I think you’re right that most people are overly emotional about and/or lacking in financial sophistication with respect to their home. For example, they view their growing wealth as just an increase in property taxes.
I guess I’m not a tax accountant then, and my house is certainly under $250,000. I recall my parents were concerned when they sold our house to us, but it wasn’t their primary residence at a time, and I heard thirdhand about people living in a mansion in Eden Prairie who said they had to buy a house that expensive because they moved from a house of comparable value, but much, much smaller in the Bay area.
Still, if not the homeowners it would then affect people making a living by renting properties, if they wanted to continue to be landlords for a living they’d have to pay the tax and go through the hassle of buying another one, but of course they wouldn’t have moving expenses or emotional attachment.
I’m not a tax accountant either, but I know how to internet search for things 😉
Which leads me to your thirdhand EP friends, which doesn’t sound right either. You don’t have to reinvest your gain in another house to avoid tax, at least not since the 1997 revisions to the relevant parts of the tax code.
Also, keep in mind that it’s not the value of the home, but the amount of that gain – the difference between your cost basis and the amount you sell it for. If you paid $180,000 for your house, you’d have to sell it for $430,000 before you’re get to any taxable gain.
Well, The Eden Prairie tale was before 1997 and was told be the house-sitter who invited us over to like, not party or anything, but respectfully have a afternoon tea. So who knows. Having bought the house in 1967 and renting it to use for more than 5 years, my parents got hit pretty hard with capital gains, which was a nasty surprise to them.
You can exclude up to the amounts Adam notes even on a second home if you can prove you lived there as a primary residence for at least 24 months out of the last 5 years. So if you own two properties and live in them jointly (say, a snow bird or someone with a cabin up north) and can prove primary residency that meets the above criteria, you’re good. And you can do this every 24 months.
Beyond that, there are other ways to reduce the minimum time spent in a home to still allow excluding capital gains: a job related move of >50 miles, health related reasons, married/widowed/divorced, unforeseeable events, etc.
It’s been this way since 1997 (previously you had to use the profits to buy a more expensive home or a one-time exemption if over 55 – basically retiring using your home as nest egg), so it’s not like things have changed super recently. It’s incredibly easy to make huge profits in short periods of time and never pay a dime in taxes. When you include the mortgage interest deduction, homestead tax reduction, and homeowner property tax credit (higher than renters for a wider range of incomes), I just don’t have sympathy for most non-retired people who experience a bump in property taxes
I think it’s unfortunate that all people see in new development is “apartment balconies overlooking your back yard and increase property taxes.” I mean, these are people. Neighbors. Potential friends, friends for your kids, folks to watch your dog or grab your mail when your gone for a weekend, etc. Maybe it’s a little harder to connect to people in a condo or apartment, but I see and chat with apartment dwellers from my neighborhood ont he sidewalk all the time. I meet them at neighborhood meetings or the park or through other interests (like streets.mn!). As my kid gets older I’m sure I’ll have other avenues.
Beyond that, there’s a tangible, if longer-term, benefit to having people live closer to you: the ability for a neighborhood to support public or private amenities. I’m a super-mooch: I live in a neighborhood with nearly 17,000 people per square mile, yet I live on an 1/8th acre, single family home with 2 adults and 1 kid. U have (for our region) pretty good transit access and quite a few restaurants/shops within walking distance that I’d never have if my neighborhood was built out with my home’s density. If a thousand more people in apartment units come into my neighborhood, another grocery store and maybe a couple restaurants will be viable. I’d love that. Maybe some people are happy with their situation and don’t need/want more amenities or better parks or whatever. But there *are* other people who would like to live with those amenities that do exist but currently can’t. If I lose some privacy, I’ll install better blinds.
Either way, it’s sad that we see these things in only the way that detracts from our way of life rather than at least a balance.
Maybe neighborhoods should work like that, but the people to the right of me I talked to twice in 10 years, once when they offered to jump start my car and once to complain about junk in my yard. The neighbors in the left I’d talk to maybe once or twice a summer for the entire 20 years they live there. They never were on my property and I was never on theirs.
When I was growing up, I played with all the neighborhood kids, but then started going to school in Minneapolis and then making friends from the other side of town; when we were young adults the area was predominantly old people, now that we’re middle aged and childless it’s mainly young families with kids.
Maybe once or twice a year will I leave my house when I’m not in my car. On the other hand, my former youth pastor in Chaska is really friends with all his neighbors, so there’s all types of neighbors and neighborhoods.
I guess the point of my comment was more that new neighbors are overly perceived as negatives (traffic, privacy violations, etc) rather than to say we should all live in some utopian communal society where everyone is besties with their neighbors.
and huge paper values on your house, that you can realize at some point.
Plus density, new neighbors, higher tax base for the schools, etc.
It’s not like your one-family neighbor next door can’t decide to remodel into a tall, sun-blocking, modernist house with a blank privacy fence all the way to the property line. Or cut down all the trees for easier laying of new sod for flipping. Both those things happened on our block.
The only time the value on my house is going to matter is when whatever charity we wind up leaving it to in our will sells it. Until then I’d like it as low as possible to keep property taxes down. The house next door was already leveled and rebuilt as a two story house with a balcony overlooking our yard, but a row of spruce trees has taken care of that over the past decade, and there’s already a privacy fence towards the one story house to the right, if they hadn’t built one we would have.
You could benefit from the appreciation of your house if you wanted to.
Still, there’s nothing in the single-family zoning to prevent your neighbors from doing something you dislike as much as apartments overlooking you, without any of the benefits (like the better tax base for the city)
Cutting down trees to facilitate sod should be considered a crime against humanity.
it opened up enough sun that now I have the creeping charlie I always wanted, though! (Also that big wind storm, which took out 3 of our trees.)
At least now that we own our house we can tell the next developer that wants to buy out our childhood house and knock it down and dig up our departed pets to go pound sand. Their maximum offer – capital gains taxes – closing costs – real estate agent fees -the cost of a new house – moving expenses might leave us enough for a trip to Florida. Fortunately we were rescued by NIMBYs who objected to being assessed for a new street.
ATTN renters: My current apartment has been on the market for over three weeks now and has not been filled, and so they keep showing it and it’s a nightmare.