There’s an ongoing and tedious debate about whether or not building new market-rate apartment housing helps or hurts affordability in US cities. The argument is tedious not because it’s an uninteresting question, but because nothing seems to change. “You can’t build your way out of a housing crisis,” on one hand; “we have a housing shortage and need new housing,” on the other. Meanwhile, each time a new apartment building goes up in a city, it becomes a target for people justifiably upset about the rising costs of housing. Meanwhile, the rich get richer and the poor get displaced.
The key problem is that rents keep going up, while incomes and wages stay flat. That’s been happening for decades in every city that has a growing economy. And always, thanks to gaping disparities stemming from generations of racist housing policies, the crisis is far worse for people at the bottom of the housing market. Anyone dependent on “naturally occurring affordable housing” (NOAH) is very vulnerable to market forces, such as house flippers, profit-seeking landlords, or even opportunistic buyers and sellers in a highly competitive housing market. No US city seems to have any real solutions that are lowering housing costs for people in desperate need. The housing debate seems stuck in a tragic impasse.
That’s why the latest data out of Minneapolis is a breath of fresh air. The short story is this: Minneapolis has built a lot of new apartments over the last five years, and now actual rents are finally going down, almost all across the board.
Here’s the key slide:
It’s probably tempting to look at these numbers and consider it an aberration. Surely something to do with COVID-19 or local economic variability or demographics or rising wages (?) or [insert theory here].
But that’s why the Twin Cities are an excellent example, because neighboring Saint Paul provides an ideal control group. The two cities provide as good a case study of how new market-rate construction affects housing affordability as you’re likely to find in this country. For all intents and purposes, the two neighboring cities are basically the same housing market. Most people buying houses in “the cities” look at both cities; it is the same with apartment shoppers. In general, St. Paul is around 10% more affordable.
Here is the rental data from Minneapolis (on the left) versus St. Paul (on the right). Note that rents are generally higher in Minneapolis:
St. Paul, population 308,000, added 4,600 new housing units during ten years of a booming economy; Minneapolis, population 425,000 built five times that amount.
Part of the difference is the hotter economy in Minneapolis, which is wealthier and has far more jobs near downtown and the University. But part of that is also differences in zoning and land use policies. Minneapolis has ended single-family zoning (though only recently), passed broad-scale upzoning, and has accelerated reducing and removing parking minimums. At the same time, they have instituted an inclusionary zoning policy (though only recently), passed renter’s rights protections, and instituted a higher living wage. Almost all of these changes were controversial at the time. In my opinion, doing both of those things simultaneously — reducing zoning restrictions while empowering renters — is the only way to effectively address the housing crisis that disproportionately harms people of color and the poor.
Over the next years, I’ll be watching these trends closely. It goes without saying, I hope, that Minneapolis has a lot of critical work to do around rethinking its police department. But when it comes to meaningfully increasing housing affordability — something that I don’t believe any American city has done — the data and the contrast with neighboring Saint Paul, shows that Minneapolis is on the right track.