In 2009, my wife and I were looking for a house. I had just finished law school. I had temporary work as a law clerk and wasn’t sure where (or if?) I’d find a permanent job—the legal job market had cratered along with the rest of the economy. So we looked for a place near transit that could get me quickly to downtown Minneapolis, where the most potential jobs were. The hope was we would avoid the need to own two cars.
We found a cute, small, well maintained, but vacant house in the Corcoran neighborhood, about a 10 minute walk from the Blue Line. For $127,000, we became its new owners. This was after looking at a handful of other properties around South Minneapolis, at about the same price, but in far worse condition. I didn’t think for two seconds how many bedrooms or housing units were in the buildings on my block, or the blocks around me. The place turned out to be right next to a four-—or six-? I never even bothered to find out—unit apartment building, behind a duplex, across from a fourplex, and who knows what else. Virtually every adjacent building, apart from the one directly across the street, was taller by more than one story. None of that ever mattered.
Over the years we borrowed to put another (roughly) $60,000 into it, plus sweat equity. I finished the basement—insulating, sheetrocking, painting, and even digging the hole for the egress window by hand to save money. We redid the failing roof, replaced the failing 1950s plumbing and got new windows. I paid much-needed attention to the landscaping.
Still, the kitchen countertop remained formica (an ~$87 carry-out purchase from Menards), and much of the flooring was still pinch-penny stick-on laminate squares. I didn’t redo the garage roof. The front steps and sidewalk are settling and will eventually need to be addressed. The “master bedroom” is in the basement. I do not think I could be reasonably be accused of over-improving the house.
By the time I sold it in 2017—I would have lived there longer but my life changed—my cost basis was about $190,000. I’m not an Evil Developer or a Greedy Flipper; this was my home. It sold for $235,000, and I turned down an offer for something like $260,000 because I wasn’t confident it would appraise for that much. In hindsight, it probably would have.
I was a gentrifying force in the neighborhood. But why was I there, and why did people willing to pay $260,000 come immediately after me? I’m not the one who pushed the house’s value way over $200,000 and, had I accepted the higher offer, rendered the house unaffordable even at 80% AMI. That was the market. The people who want to live where I lived, and the people willing to lend them money. The same market that made other Minneapolis neighborhoods unaffordable (yet with poorer transit because they are less dense) driving me, and then my bidders, to Corcoran in the first place.
The house is still a “starter home,” (another ill-defined term that we seem to toss around as if everyone agrees about what it means) but now a slightly updated, three bedroom one. Some people seem to argue that it would have been more socially beneficial to leave it in the condition I found it, but 8 years older, as a means of preserving its affordability. I can’t understand this. The plumbing and the roof were about to become serious problems, and finishing the basement is as American as apple pie. We want owners to invest in and improve their properties—its the primary reason “owner-occupied” is widely considered to be a virtue.
Homeowners need to recognize and accept that we are being handed massive public subsidies, both while we live in our homes (the mortgage interest tax deduction) and when we sell them (the capital gains tax exclusion), along with other advantages that benefit us at the expense of everyone else (having a disproportionate voice in local government and neighborhood organizations). And, if you’re lucky enough to already be a homeowner, you have a significant conflict of interest: the value of your asset only increases as market-priced housing becomes less affordable. (I can’t emphasize this enough, so here’s a second link to drive that point home: wanting home values to appreciate and wanting housing to remain affordable are conflicting goals.)
This conflict puts houses that are on the bubble of affordability in the crosshairs. Not the targets of Evil Developers or Greedy Flippers, but ordinary homeowners competing in the market to buy a home for themselves from a limited supply.
So make some room in your neighborhood and share a little of it with people who need access to the transportation, jobs, and recreation that you currently enjoy. Maybe then people like me, and the people who bid on my house in Corcoran, can have an alternative to bidding up and buying up the aging affordable housing.