New Housing Coming to Sons of Norway Site

In February, the Minneapolis City Council voted to reject an appeal by the East Calhoun Community Organization (ECCO), allowing over 300 new homes to be built at the Sons of Norway site on Lake Street. The location is in the “Heart of Uptown”, one of the most transit-rich and walkable communities in Minnesota. There are multiple grocery stores nearby, as well as restaurants, bars, parks, the Chain of Lakes, Midtown Greenway, and other desirable amenities.

The appeal focused on issues that arise with nearly every multi-family housing proposal: concerns around traffic, parking, and height. The phrase “density bomb” may have been used. Many of the homeowners who testified expressed concern this project would make the neighborhood less affordable. Based on my personal impression of this neighborhood as an already expensive place to live, concerns that this plan would make things worse struck me as particularly misplaced. So I had to question my initial impression: is this well-to-do neighborhood at risk of gentrification from the construction of new housing?

Sons of Norway rendering

New housing slated for the Sons of Norway site

The estimated monthly rent for the smallest homes in this building will start at $1,200. That sounds like quite a bit of money, but perhaps not outside the range you’d expect for a prime location. To get a sense how affordable the neighborhood currently is, I started looking at ECCO’s housing options from the perspective of an aspiring new resident. The official neighborhood boundaries are Lake Street to the North and 36th Street to the South, as well as Hennepin Avenue to the East and Bde Maka Ska to the West.

Geographically, the neighborhood is zoned almost entirely for single-family homes and duplexes, with apartment buildings largely confined to Hennepin and Lake Street. But the zoning doesn’t perfectly match the built reality: there are a good number of legally non-conforming triplexes and apartment buildings within the neighborhood interior, built before the neighborhood was downzoned, which provide the neighborhood with some of its most inexpensive/affordable housing. The current low-density zoning means housing options are limited, but I’ve been able to find good deals in other sought-after neighborhoods, so how hard could it be?

Ownership Woes

I started by looking for homes for sale; I’ve heard in fables that the path to the American Dream is paved with mortgage interest tax deductions. After some searching on Zillow, the cheapest listing I found was for a 2BR condo unit on Hennepin Avenue, listed at $180,000. With just five percent down (that’s “just” $9,000) and assuming a four percent interest rate, my monthly payment would be a little over $1,400 including the $195/mo association fee. Not bad!

The problem: this listing had been on the market for a week, so when I looked into it further, the seller had already accepted an offer.

The next cheapest listing for sale was going for $449,000, and it’s another two-bedroom unit at that, so I could get a roommate to help with the cost. I excitedly called my loan agent but never heard back, so I ran the numbers myself. With a five percent down payment ($22,450 this time!), my monthly mortgage payment was going to be somewhere around $2,900. Add the association fee of $1,600/mo and we’re looking at a total monthly payment of $4,500. Yikes!

The cheapest single-family home I found in the neighborhood was asking for $495,000, and just a block from Lake Street. It looked pretty dumpy from the outside and there weren’t any pictures of the basement (a very minor red flag according to Real Estate Professionals), but with five percent down I’d be paying about $3,500 per month.

I’d still need a couple of roommates to help with that plus the heating bill and other utilities. A new roof or furnace would probably be a $10,000 setback, but I’d be close enough to Uptown to busk for a few hours a day to cover it.

I scoured a few blocks using Hennepin County’s property lookup tool, hoping to find some dilapidated gem, and was able to find just one home for under $300,000. Unfortunately, the owner has been living there since the Reagan Administration so is probably not too keen on selling. Median home prices on a few individual blocks I searched ran from $475,000 up to almost $600,000.

With my hopes of owning a single-family home in ECCO dashed, I decided that renting was probably the more affordable option, with no unexpected big-ticket repairs and a lower monthly payment. I used Padmapper, which puts rental listings from Craigslist and other places on a convenient map. I quickly found 11 options available for rent in ECCO, but the cheapest was $1,295/mo, about $100 per month more than the brand-new apartments proposed at the Sons of Norway site. Median rent for the neighborhood was estimated at $1,099 per month in 2016.

Padmapper map of rental properties in ECCO

Left: available homes for rent in ECCO. Right: available homes for rent in ECCO under $1,300

Housing Choice

If the Sons of Norway apartments were opened to new tenants tomorrow, they would be among the least expensive homes in this neighborhood.

The lack of housing choice is not unique to the ECCO neighborhood. Existing zoning laws actively work to restrict housing options. It should not require a half-million dollar mortgage or an out-of-reach monthly rent to live in a walkable, transit-friendly neighborhood.

When we talk about housing choice, we should also remember that many residents want to stay where they are. Single-family homes should not be the only options for those who want to live in this neighborhood; not only is it unaffordable for many, it’s impractical for existing single-family homeowners who’d like to downsize while remaining close to friends and amenities.

Building new homes in desirable neighborhoods is critical to creating new housing without displacing existing residents. Creating more housing choice allows more residents to actually live in amenity-rich places. Our city is better when we ensure that housing is abundant in these neighborhoods, rather than an increasingly more expensive and exclusive commodity.

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10 Responses to New Housing Coming to Sons of Norway Site

  1. Ryan Johnson
    Ryan March 5, 2018 at 11:36 am #

    I took a look at justicemap.org to see where there were any obvious gaps in income that would line up with what people were saying in public comments about how this would be unaffordable for area residents. Not one block in the area dips below $64k for income. This is not to say there aren’t outliers, but the situation of the neighborhood is that it is already doing well, and anyone making the average of the neighborhood would easily be able to afford the new apartments. This area also sits behind a former redlining boundary, and looking at justicemap, you can still see those boundaries play out in racial demographics around the neighborhoods in the immediate area.

    I also found some more demographic data at MNCompass, which is pretty interesting. ~72% of the neighborhood is making above 50k, according to this data, with the remaining ~27% making less than that: and there are apparently people in ECCO (15%) making less than 35k, and MNCompass identifies cost burdened renters, so there must be some really cheap apartments here that will crucially not be affected or removed by Sons of Norway.

    You have to wonder how the cost burdened people in the area afford it already, certainly there are a couple very cheap apartments (below mncompass’s average rent of $1099), and long-time homeowners who have paid off mortgages and have little expenses. Existing housing policies in this area (low-intensity residential zoning, Small Area Plans, etc), certainly contributed to this situation, or aren’t helping alleviate it. This is one of the few new residential properties in the area, and doubtlessly very few have been built in previous decades, putting us far behind keeping up with demand from people wanting to move to the area.

    Crucially anyone moving into the area now will be faced with Anton’s search here, anyone still in the area will not be affected by more than seeing a new building with people living where they couldn’t before, over empty surface lots.

    Map: http://www.justicemap.org/index.php?gsLayer=income_block&gfLon=-93.29923704&gfLat=44.94123966&giZoom=15&gsSize=tract&giAdvanced=1&

    ECCO Neighborhood demographics: http://www.mncompass.org/profiles/neighborhoods/minneapolis/ecco

    • Daniel Hartig
      kingledion March 7, 2018 at 10:54 am #

      When you are looking into neighborhoods and see people with low incomes in an area that doesn’t appear to have any low income people, there are two common explanations. The first is that the people are retired, and live there off their savings with little to no income, especially if they own their home outright (meaning, no mortgage).

      The second is that someone else is paying for the housing. This is obviously most applicable around colleges, but it can be surprisingly widespread. For one example, housing can be provided in a child support settlement; so a single parent with low income can appear to be under the poverty line, but with housing provided the situation isn’t so bad (financially, at least).

      So that can explain a lot of the apparent income gap; i.e. how can people making less than $35,000 afford to live in ECCO, or any other expensive neighborhood.

  2. RW March 5, 2018 at 3:50 pm #

    New apartments do make neighborhoods more expensive – from a home buyer’s perspective.

    They bring a lot of new people to an area who can afford a large monthly payment and hope to move out of their rental and buy a place as soon as they can.

    Before uptown added all the new apartments between Lagoon and Lake, the homes in ECCO were reasonably priced, considering the choice location. The $499K houses were available for $210K. There were even some homes on the lake that were $300K in 2002 that are selling for $1.3 M now. However, adding 1000 new residents with incomes that support $1500/m rentals, combined with property speculators… the nearby SFHs rapidly became unaffordable.

    This same phenomena has played out in lower density residential areas of Chicago, Brooklyn, and Los Angeles over the past 15 years. Put big rental buildings on the periphery of these areas and the cost of the SFHs in the same neighborhood skyrockets.

    • Joey Senkyr
      Joey Senkyr March 5, 2018 at 4:41 pm #

      Correlation does not equal causation. Single Family Home prices are skyrocketing in ECCO for the same reason apartments are being built – it’s a place people want to live!

      But regardless of the exact reason for SFH prices rising, I don’t really see a problem with that. Reserving 5,000 square feet of one of the most desirable neighborhoods in the state for the exclusive use of a single family is practically the definition of luxury. If people are willing to pay for that, that’s great, but there’s no reason to prevent all the people who can’t afford or don’t want that from being able to live in Uptown to make it easier for the people who do.

    • Paul Strebe March 5, 2018 at 6:44 pm #

      Wow, would love to see evidence that supports this. We’re talking about two groups of people who may be at very different life stages and not in competition. Provide some data that shows people move to neighborhoods and rent before buying. Anecdotally, I’ve heard of a few friends who’ve done this, but just as many who moved to completely different neighborhoods to buy.

      • RW March 5, 2018 at 8:58 pm #

        renting in a neighborhood before buying is a pretty normal thing to do. or at least it was at one point.

        pretty much everyone I know in uptown rented around here before buying. maybe that era is over.

        • Cobo R March 7, 2018 at 12:29 pm #

          Every one I know who bought has moved to other neighborhoods to buy, myself included.

    • Greg March 5, 2018 at 7:22 pm #

      There were no homes on the lake for 300k in 2002. We were looking then and found one house on Colfax (blocks from lake) for 250k and it needed a new Foundation at a minimum. So glad we passed on that dump. Do you have citiations for those crazy numbers?

    • Adam Miller
      Adam Miller March 6, 2018 at 10:40 am #

      I don’t think you have the causation right. There’s new apartments (and expensive ones) because people want to live in the area. That’s also why the houses are more expensive.

      It’s not like Uptown would have been a secret to those people, and thus they wouldn’t want to buy a house there, if there were no new apartments.

  3. NiMo March 6, 2018 at 3:03 pm #

    https://lauren-management.com/portfolio/3033-james-ave-s/

    the place i lived when I first moved to mpls in 2010 has a vacancy–1 BR for $950. For perspective, back then a roommate and I split a 2 BR in there for…$895? Pretty sure that’s what it was. Peter the property manager is great. For those with cars, there is a parking lot and you get a space that you may or may not use. My roommate and I were too lazy to look into subletting the parking space as neither of us had a car but in hindsight it would have probably been a good idea, especially because it was the recession and I was making very little money temping. But hey! Bars are close by!

    Although I read somewhere that uptown is dead now that Victoria’s secret closed or something. How can you LIVE somewhere that is DEAD? Makes you think.

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