Rent in San Francisco is $4,314; in Minneapolis, it’s $1,615

I recently reviewed a commercial real estate report from the first half of this year. Takeaway: Vacancy is steady at around 7 to 8 percent.

The report got me thinking about home prices and rental rates across the country and what the humble dollar gets you in different cities.

Check out all the Zillow data used in this piece on a Google Sheet.

Zillow has a whole data section of its website and publishes a Zillow Home Value Index (ZHVI), which is similar to the popular Case-Shiller index, a “smoothed, seasonally adjusted measure of the median estimated home value across a given region and housing type.” Zillow also publishes a Zillow Rent Index (ZRI), which is a “smoothed measure of the median estimated market rate rent across a given region and housing type.” One point to note: The Zillow Home Value Index is available for homes with different numbers of bedrooms, while the Zillow Rent Index is available only as an index of the entire rental market in an area, broken down by single-family, condo, co-op and the like.

Zillow Rent Index For Select Cities August 2019

Rent right now in San Francisco is 2.67 times that of Minneapolis.

Zillow Home Value Index For One Bedrooms For Select Cities 1996 2019

The home value of a one-bedroom in San Francisco is about 4.92 times that of one in Minneapolis.

One key takeaway from all these data: The factor difference between rents in San Francisco and rents in Minneapolis is 2.67 times, but the difference in home values for one-bedroom homes (the ones that are easy to rent out) is 4.92 times.

Crunching the numbers another way, the revenue return on assets (not profits) for San Francisco rentals is about 5.94 percent, compared with about 10.94 percent in Minneapolis.

If you run a sovereign wealth fund looking to fund the construction of new apartments in the United States, the smart money will go to markets that look more like Minneapolis and less like San Francisco, even though San Francisco has a huge affordability crisis.

As you read about rent control proposals, property tax levies and the rising costs of construction, it all comes back to where investment will go. And it looks like San Francisco is simply too expensive to build in right now, or the rents are too low (what?) to justify new construction.

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18 thoughts on “Rent in San Francisco is $4,314; in Minneapolis, it’s $1,615

  1. sheldon mains

    It appears that these are home sale prices, not construction costs–that isn’t the same thing

  2. James Schoettler

    Interesting, but we really don’t compete much with San Francisco. Hope you can do a similar comparison with the communities that are typically compared with the Twin Cities, such as the Peer Regions used by

    1. Walker AngellWalker Angell

      Perhaps it depends on what segment of the economy you are in. When I was hiring developers, QA folks and others we were constantly competing with San Francisco / San Jose. Either trying to convince people who lived there to move here, trying to convince local people to stay here instead of move to the valley or trying to convince people from elsewhere to choose here over CA or WA.

      1. James Schoettler

        OK, so it is; but let’s compare ourselves to the others in that list: Atlanta, Austin, Boston, Charlotte, Chicago, Dallas-Fort Worth, Denver, Pittsburgh, Portland, Seattle; not just San Francisco. San Francisco is the most expensive for just about everything. I don’t think it helps to compare ourselves to what everyone knows is one of the most expensive places in the universe. How do we stack up against the real competition?

  3. Walker AngellWalker Angell

    Good article Conrad. Have you looked at any of this in terms of earning power? E.G., job for job, how much more house/flat some someone afford here vs there?

    One advantage in SF with many of the tech companies moving in to town rather than being out in the valley is that the costs of transportation are lower for people who can now walk or bike to work. We’re getting there in Minneapolis w/ development in the North Loop and elsewhere?

    It’s also interesting to look at US vs EU house prices. Houses in most US suburbs loose value and over time these suburbs decline until gentrification comes along. That’s not so much the case with most communities in Europe where houses largely retain their relative value.

    1. Cobo R

      What suburbs have consistent declining values over time?
      I think that’s way too broad of a statement. There are swings, fluctuations, and volatility in every real estate market. Granted prices are more stable in Europe right now but only for a relatively short time frame…

      Homes were cheap in San Francisco and New York City in the 1970’s, they are super expensive now, but in 2050? who knows?

      My MN suburban home has more or less been steadily been gaining value since it was built in 1948, is that aberration? Will that trend continue? Who knows..

  4. Andrew Evans

    Looking at a map, that area is pretty dense and condensed. Very roughly on Google Maps, SF looks to be a little over 5 miles long and wide. Minneapolis, alone is roughly 5 miles wide and over 10 miles long. The whole metro area here is roughly 40 to 50 miles by 40 to 50 miles square. SF, across the bay, and down to San Jose is about the same 40 to 50 miles long, but really only 20 miles across including the bay.

    On Google it has our metro area at around 3.28 million, where over in SF, in a smaller area it’s 4.7 million.

    When the Twin Cities (as a whole, not limited to any one city limit) grows it can expand out in all directions. It seems the SF bay area is pretty defined geographically and can only grow more dense (up). This is the same, at least at a glance looking at a map, that other extremely large cities are faced with, especially if residents wish to try and have a under an hour commute.

    So although we may compete job wise with some of those cities, it’s not a straight comparison to what we may encounter as an area.

    1. Tim

      Yep. No mountains and no significant bodies of water mean we can keep growing in every direction (and are) until people aren’t willing to travel any further. We just don’t have the physical characteristics that drive density the way they do elsewhere.

        1. Tim

          I’m not saying it’s a good thing. Just that cities tend to sprawl until they can’t, and that geography and distance play larger roles than policy.

          1. Adam MillerAdam Miller

            Oh, I don’t think that’s true. Geography and distance can substitute for policy, but not building roads and sewers any farther out is both policy and geography.

            1. Brian

              How do you propose to house an increasing population in the same land area without tearing down perfectly good housing to build apartment buildings?

              We don’t have the transit to just put apartments on every parking lot. (We’ll probably never have transit in many parts of the metro.)

              1. Adam MillerAdam Miller

                Why is your first sentence a goal? And is low density housing near transit actually “perfectly good?”

                As you say, we will not get housing that isn’t car-dependent in most of the Metro. We can’t settled for the status quo where we can do otherwise.

                1. Brian

                  Various estimates put population growth in the metro area at up to one million additional people. How do you propose to house 30% more people without more roads or sewers? Tearing down perfectly good housing to build new housing isn’t a good thing for the environment.

                  There is still some undeveloped land within the MUSA area, but you can’t really develop that land without extending roads and sewers onto that land. I don’t see anyone buying or renting housing that has no roads for emergency services, deliveries, and the like.

                  1. Andrew Evans

                    Well and Brian,

                    Our job centers aren’t strictly the downtown areas. So as we grow, other cities will start to throw their hands into some of these new corporate buildings or bid on more corporate projects. It’s not like, as I feel some people on this site think, that Mpls and St. Paul proper will be shouldering all of this growth or burden.

                    Or they think it’s like SimCity and a person can go in, clear, and rezone land and then watch buildings spring up.

            2. Tim

              Policy is limited by what voters will accept. If limiting sprawl is too politically unpopular, the policy won’t happen (and Democrats perpetuate it just as much as Republicans; there is a definite split between the urban DFL and the suburban/rural DFL on this issue).

              Mountains, water, and distance don’t care about what voters want.

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