How Many Homes Does Minneapolis Need?

Minneapolis is growing.

Minneapolis Population 1980 - 2016. Data from American Community Survey (US Census). Graphic courtesy of Nicole Salica.

Minneapolis Population 1980 – 2016

We’ve heard lots of talk about how Minneapolis is losing affordable housing faster than we can replace it. We say housing should be a human right (and it should!). We hear about rising rents and first-time buyers unable to find starter homes. Whether you want more public housing or you want the market to build homes, in order for everyone to have a home, there need to be enough to go around. In other words, we have to create more homes than we have people seeking them. It’s like a game of musical chairs. If there aren’t enough places for everyone to live, some people are pushed out.

So if we start from the premise that every person in our city and region should have a secure place to live, what does that look like? It requires a whole lot more homes. Today, I’m going to talk about how many we need in Minneapolis. Let’s set aside how we finance all of them (some mix of public subsidy, the market, and other creative ideas too) for another time.

How many homes do we need?

  • Enough for everyone who is currently here,
  • And the people who are coming,
  • And enough additional homes to create a vacancy cushion.

Why do we need that cushion? So that landlords and current homeowners have to compete for tenants and buyers, rather than tenants and buyers competing to outbid each other because there aren’t enough to go around. Using the math of writer Scott Shaffer, we can estimate that we need to build 20,000 homes in the next five years to create the type of housing stability that Minneapolis needs to have enough space for everyone.

A few assumptions

In the population graph above, you can see Minneapolis has added roughly 4,459 residents per year over the last 10 years. If this trend continues, and the current household size stays constant at 2.32 people per home, we will need almost 9,000 more homes five years from now just to keep pace with a growing population.

Unfortunately, we know from current conditions that “keeping pace” is not good enough. The vacancy rate in Minneapolis (that’s the percentage of homes that are available for sale or for rent) is around 2.5 percent right now (page 26). That means there are many well-qualified tenants and buyers for every vacant apartment and house for sale, and it means that landlords and sellers can and will ask for more money.

A higher vacancy rate would mean renters and new buyers would have more choices and less competition, and would get better deals. Experts consider a 5% vacancy rate to be balanced, and that a 6% or 7% vacancy rate favors people looking for a place to live.

Calculating enough for everyone who is here

The latest population estimate for Minneapolis is 413,645 and the number of total estimated homes is 182,891 (numbers are from the 2016 American Community Survey 1-year estimates). By multiplying the Minneapolis vacancy rate of 2.5% by the total number of homes in the city, we can calculate that there are roughly 4,572 homes currently available for rent or for sale.

If we’d like to turn the current seller’s market into a renter’s and buyer’s market, a seven percent vacancy rate would be ideal. We would need to build 8,850 homes overnight to get there with our current population and number of available homes.

For the math below, we’ll use some of the following variables:

Latest population estimate: 413,645
Latest housing unit estimate: 182,891
Latest average household size: 2.32 (homes divided by total population)
Latest estimate of homes for rent or sale: 4,572 (2.5% of 182,891 homes)
Additional homes required to get to 7% right now: 8,850

4572 + x = 0.07 * (182,891 + x)
x = 0.07 * 182891 + 0.07 * x – 4572
.93x = 0.07 * 182891- 4572
.93x = 8230
x = 8850

Calculating enough for the people who are coming

Homes aren’t built overnight, so let’s set aside that number for now and focus on the future. We’re growing as a city, and in five years, even more people will live in Minneapolis. Over the last 10 years, we’ve seen an average growth of 4,459 residents per year. If that rate continues, Minneapolis will add 22,295 residents over the next five years, and will soon have 444,861 residents.

Assuming household size stays the same (2.32 people per household), we will need 9,610 new homes just to maintain our current vacancy rate.

10-year annual average growth: 4,459 people per year
5 years of population growth: 22,295
Additional households (at 2.32 people/household): 9,610
Population in five years (in 2023, based on 2016 estimates + 7 years’ of growth): 444,861
Units needed to tread water (maintaining 2.5% vacancy rate): 9,610*  1.025 = 9,850

Calculating enough to create a vacancy cushion

Of course, a 2.5 percent vacancy rate leaves us exactly where we are today: it’s a landlord’s market, as evidenced by rapidly rising rents and few rental options. It’s a home seller’s market, as evidenced by scarce listings with numerous offers. If we want a city that works for renters and has affordable options for home ownership, we need a vacancy rate closer to seven percent.

How many homes would it take to get to that point in five years? Almost 20,000.

Additional Units needed to get to 7% in five years:

Latest population estimate (2016): 413,345
Add five years of the average growth: 4,459
Expected population 5 years after the latest estimate: 435,942
Units needed (at zero vacancy) to house that population with current household size: 187,906

If we create a 7% vacancy rate, that means that the 187,906 occupied units are 93% of the total units. 187,906/.93 = 202,049 total units. The difference between 202,049 and the latest housing estimate (182,891) is 19,158, or just under 4,000 units per year.

Can We Do It?

I promise I’ll be done with the math soon, but if we need almost 20,000 homes built over the next five years, that’s only 4,000 new homes per year. That sounds like an ambitious goal, and we’ve seen other comparable cities building more — now they’re seeing rapidly rising rents level off. The authors of the draft Minneapolis Comprehensive Plan know we need to do this, and their draft makes room for these homes. The plan shows that some will be in fourplexes, others will be ADUs, some might be in “innovative housing types” like co-ops or SROs. Some will be in missing middle and large apartment buildings. Add them all together, and 20,000 doesn’t sound so hard.

Unfortunately, it has been difficult to build this many homes, even over the past few years. This lack of new housing has directly contributed to the shortage we are in today (2017 permits do not include those issued in the 4th quarter, as data is not available):

Home permits 2013-2017 (3rd quarter). Data from Minneapolis CPED Data Trends Reports. Graphic courtesy of Nicole Salica.

Minneapolis housing permits 2013-2017

If this seems like an ambitious goal, remember during last year’s elections when candidates (and your neighbors) talked about how important it was for Minneapolis to be an affordable city for everyone. I and my neighbors clearly think housing should be a human right. And it’s time for us to put those ideals to work in the Comprehensive Plan. We must build enough homes to go around, we must welcome new neighbors on our own blocks.

If you want to see those homes built, let your city council member know you support the housing recommendations in the Minneapolis 2040 plan. Volunteer to lead or be part of a walk and talk with your council member organized through Neighbors for More Neighbors. Talk to your date about zoning.

Neighbors for More Neighbors

Anton Schieffer

About Anton Schieffer

Anton lives in Minneapolis and writes about information technology, government transparency, and local housing issues. He mostly wants to build enough housing so that everyone has a place to live.