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Rents Dropping in Minneapolis: Behind the Story with Janne Flisrand

Episode Summary

00:00 | Intro
00:44 | The Data
29:07 | City Policies
40:43 | House Flipping
50:24 | Outro

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Janne: [00:00:00] Rents have always been higher in Minneapolis than Saint Paul. I don’t know why, but that’s been true.

Ian: [00:00:05] It’s because you have to pay the Hill tax, right? [laughter] Any time that you want to ride to Saint Paul.

[00:00:10] [music]

Ian: [00:00:16] Welcome to the Streets.mn Podcast, the show where we shape transportation and land use to make our world a better place. Coming to you from beautiful Frogtown Saint Paul, Minnesota. I’m your host, Ian R. Buck. In today’s episode, we’re getting a look behind the article “Minneapolis Rents Drop Bucking National Trends” by Janne Flisrand. Find the show notes and a transcript of the episode at streets.mn.

Janne: [00:00:44] I’m Janne Flisrand and I have owner occupied a four-plex just north of Uptown for about 25 years. I have worked in the subsidized affordable housing world on affordable housing programming since 2001. And I also am one of the co-founders of Neighbors For More Neighbors. We stand up for abundant homes for everyone in the Twin Cities, because if we don’t have enough homes for everyone, there going to be some people who don’t have homes.

Ian: [00:01:19] So yeah, you have a much more well-rounded view of this whole like the landscape, I think then certainly I do. I love that we’re jumping off in the streets.mn podcast, which is all about transportation and land use with like a subset of that that I am least familiar with. Me personally. Ian Buck.

Janne: [00:01:44] I’m excited. I can be here and have this conversation with you. So hopefully at the end of this conversation you won’t be able to say that anymore.

Ian: [00:01:50] Right? Yeah. I’ll learn something. The audience will learn something. We’re here to chat about to get kind of some behind the scenes look at the the article that you published earlier in May about rents dropping in in Minneapolis. I believe that the title that you used was “Bucking National Trends”, which I’m a fan of bucking trends. [laughter] You talked a little bit in the in the article about like like how you first noticed this kind of happening. Right? You were noticing that some of your neighbors who also own rental properties were having to drop their own rents. Right? And that’s what sparked you to like kind of look into the data and see, was this citywide, right?

Janne: [00:02:40] Yeah. I mean, there are two pieces to it. One is that I obsess about rental data because I know that when rents rise that people struggle to pay their rent. And I also know that lower vacancy rates and higher rents are the number one predictor of homelessness. So I track rents a little bit obsessively anyway, but also because I have a four-plex every year, I tend to not raise my rents. I maybe do a nominal rent increase every year so so as to not get too far behind if people stay for eight or ten years, if some of my tenants have done and before I do that, I wrote a blog post several years ago now about how I set my rents. And what I do is I go to Craigslist and and look for similar apartments in similar neighborhoods. And so what that means is a walk up 110 year old building that doesn’t quite have enough outlets and maybe doesn’t have great insulation but isn’t too crappy. And that’s between the Lakes and and probably Pillsbury (Ave) or Blaisdell (Ave) and between I-94 and 36th (St), if it’s not in that zone that I don’t look. So when I was comparing my rents to those rents, I was noticing that the rents in those other buildings were starting to drop. And I thought both, “Huh, that’s new. That hasn’t happened in many, many, many, many years, maybe not in memory.” And I thought “that’s really good because rents had been increasing in Minneapolis way too fast for people to be able to afford their homes.” So that did prompt me to drop my rents. But that’s how I first noticed this.

Ian: [00:04:26] Yeah. And to clarify, like when you talk about looking at other rents, you’re talking about like looking around at what what is being offered to folks who are in the market for a new rental place. Right?

Janne: [00:04:41] Yeah. And this you know, it’s really hard to get data about what people are charging in rent.

Ian: [00:04:46] Right.

Janne: [00:04:47] The places that publish that mostly publish reports on big buildings that have 20 or more units and they mostly publish what the owners and managers of those buildings report back to them. They’re getting in. And, you know, that makes a lot of sense. It covers the vast majority of units in the in the market. However, it bears no resemblance to my building. Right. My building is a four-plex then, and it’s just a very different setting and it’s not useful. But that data is also proprietary. And frankly, I’m a I’m a pretty cheap landlord in the sense of I don’t want to pay for a lot of stuff. I don’t have enough. Like I’m not doing this for profit. I don’t have cash flow to pay for proprietary data to set my rents. And so what my tenants would be doing, right, I want to keep my rents competitive because I want my tenants to stay. It is really a lot of work and time and money to turn over a unit. So what I’m going to do is look. What my tenants would do. I look at what is available on the market, available rents to see if they are similar or lower than my rents or higher than my rents, and then make a decision based on how mine compared to the other choices that they would have if they decided that they didn’t want to pay what I was asking.

Ian: [00:06:03] Right. That is the the opportunity cost that you have to keep in mind. Hey, I remember something from econ in high school. You know, it occurred to me that like one of the one of the side effects of implementing, you know, a rent stabilization ordinance may be that the city is going to have data on like, you know, real time, like what rents are being charged of of tenants, you know, not just like what’s being offered out on the market, but like year to year. How is somebody’s rent changing? Right. Because in order to, like, enforce any any of the, you know, whatever percent increase Minneapolis settles on, you know, in Saint Paul, we’ve got the 3% increase every year. Like the city’s going to have to know year to year what the what each unit is going for. Right.

Janne: [00:06:52] You have identified something that is very important that I don’t think the only other people I’ve heard talk about that are people who are involved in trying to figure out how to how to implement a policy or people at Housing Link, I used to work at Housing Link, people at Housing Link who are thinking about are there resources that we have that could help Minneapolis and Saint Paul enforce it? You’re right, there is absolutely no information that includes the whole market. There is no mechanism for enforcing or tracking what rents have been. And it sure would be handy to have a rental registry in Minneapolis, in Saint Paul, where on an annual basis I am required to tell the city what it is that I am charging in rents.

Ian: [00:07:35] Mm hmm. And now? Yeah, now I’m like, now I’m inclined to go and look and see. Is that something that Saint Paul is has set up now that our rent stabilization is in place? Hmm.

Janne: [00:07:49] I don’t think they have yet.

Ian: [00:07:51] Okay. So so, yeah. So the data that you were playing with and, and showing in the article itself was from Housing Link. Um, and that was based on a similar, similar data set to what you were talking about with, uh, what’s being offered out on the market each month and constrained within the city limits. And you mentioned that that was like one of the primary reasons that that’s the data set that you wanted to use, right? Because most other data sets are like region wide.

Janne: [00:08:24] Yeah, there are several reasons why I like the housing data set and I want to just highlight how important Housing Link is. This kind of data exists nowhere else in the country. Nowhere are there collections of what people are advertising for rents. There’s really only that other kind. So I was playing with the housing link data, both because they have a rental housing review for the cities of Minneapolis and Saint Paul. And while the housing market covers the entire Twin Cities, I want to know what’s happening in my community, in my neighborhood. And 440,000 people live in Minneapolis. That’s a quarter of the people, roughly, in Hennepin County. It’s 7% of the people roughly in the state of Minnesota. When you add in Saint Paul, then we get to 13% of the people in the state of Minnesota. So it’s a lot of people who live in those two submarkets. And it’s really there’s always differences from different places. There has always been a rent premium to live in Minneapolis rather than Saint Paul or a rent discount to live in Saint Paul than Minneapolis. Just rents have always been higher in Minneapolis and Saint Paul. I don’t know why, but that’s been true.

Ian: [00:09:39] It’s because you have to pay the Hill tax, right? [laughter] Any time that you want to ride to Saint Paul.

Janne: [00:09:47] Well, so I wanted to know what’s going on at the smaller, more local level. Right. And that was how they presented the data. Right? The other thing is that the data that housing link presents that is free and accessible happens to be Minneapolis and Saint Paul data. So it is a little bit that I wanted to know about this and it was also a little bit about that was the data that I could see and that was available and that was dis-aggregated at a level that to me was really interesting.

Ian: [00:10:13] Yeah. And it also allows us to evaluate like what city wide policies are going to have an effect and especially like comparing Saint Paul in Minneapolis, like we do have diverging policies in like I think housing is one of the areas where where our our city wide policies diverge the most. Mm hmm. Um, so so. Yeah, that’s. That’s like the bulk of the analysis in the article itself. But we’re not here to like rehash the article exactly where to go, to go deeper and, you know, take a look at what what what conversations has been sparked by the article and and dig into some of the background as well. So.

Janne: [00:11:05] Yeah. I mean, I do think it’s important for people who maybe haven’t read it yet. And this is a teaser that where I started was doing a very simple, not statistically valid chart of the median advertised rent in Minneapolis. And I used quarter — I used monthly data from late 2018 through March of 2022, and I tried to even out the spikes and the peaks and the valleys by using a three month rolling average because the dataset is not huge. So that was good to give you a sense of trends that didn’t get thrown off by a couple of really low data or outlier high rent apartments.

Ian: [00:11:53] Yeah.

Janne: [00:11:54] And then I broke it up by one and two and three bedroom apartments.

Ian: [00:11:58] Yeah. Which was really useful for me to look at, especially as somebody who has been thinking about moving and thinking about like what? What built space arrangement would be better for my household than the one that we’re currently in. Yeah.

Janne: [00:12:18] And, and what it shows in Minneapolis. And I also put on a super duper stupid trend line, right? I did this in Google Sheets and, and I just said do a trend line. So it just gives a general sense of the direction of the change.

Ian: [00:12:34] Yeah.

Janne: [00:12:35] And and in Minneapolis, one bedroom apartments looking at the trend line of drop by roughly $75 a month over that time without any inflation adjustment. And if you just want to look at the very first and the very last point, they’ve dropped by probably 20 bucks, two bedrooms. There’s a weird spike that I don’t understand in late 2018. So the trend line suggests it’s closer to $200 drop. But if you go before that spike, it’s still $100 drop a month. In rents, again of advertised rents, and three bedrooms in Minneapolis are up by trend line is 50 bucks and the absolute dollar amount is $100. So that doesn’t keep up with inflation.

Ian: [00:13:20] Right.

Janne: [00:13:20] That’s a good sign. 

Ian: [00:13:21] Yeah.

Janne: [00:13:21] That means we don’t have hugely increasing rents in Minneapolis now, as we seem to have had historically in, throughout most of the teens. So…

Ian: [00:13:34] Yeah, and especially comparing it to national trends like…

Janne: [00:13:39] Right. 

Ian: [00:13:39] …We are sitting real pretty.

Janne: [00:13:41] Right. And and I want to be really clear that this data does not suggest in any way, shape or form that we’ve solved our problems. Housing is not affordable in Minneapolis for a whole lot of people. What this says is something else. But it is an important thing for us to notice, and it does suggest that we’ve broken with the trend of massively increasing rents.

Ian: [00:14:03] Yeah, yeah. It’s a good, we’re at a good starting point, uh, to achieving our housing goals. You mentioned the, the sample size being a little bit small. And it is interesting to note that the data that’s being collected is based on what units are available on the market at any given moment. That the sample size also is a little bit of an indicator of vacancy rates. Right, which is like another aspect of the conversation. Right? You know, taking a look at vacancy rates in a metro area is one of the indicators of like the health of of the housing market and how much choice and control renters have over where they’re going to live and how much they’re going to pay. And so it’s you know, it is a happy coincidence, I think, that, like, if we if we had a larger sample size, then that also means that vacancy rates would be higher, you know, which would be good for both, both for our data and also just like the general situation.

Janne: [00:15:17] So one of the things I played with a little bit as I was putting this together is that the rental housing briefs also include a number of what people call NOAH postings for one and two and three bedroom units. So NOAH is Naturally Occurring Affordable Housing and it’s it’s housing that happens to be affordable without any subsidy. Maybe because it’s rundown or because of the neighborhood it’s in or because of a quirk of the landlord who knows why. But it happens to be a rent that is 60% of area median income or below, which is a lot of gobbledygook people don’t need to understand, but it’s a pretty standard benchmark in subsidized, affordable housing speak that may or may not be affordable to people. And that is an important metric for, “do we have available affordable housing in the in the community?” And I noticed that over time and in the rental housing briefs that the NOAH units have increased, they’ve I think it’s roughly doubled, but the data set is much, much shorter than the rent data set. And so I couldn’t figure out how to do anything meaningful with it because the trend line just wasn’t long enough to be meaningful. And I couldn’t graph it against rents because I just didn’t have enough data. So that I think is is interesting and I look forward to checking that out in the future as we have more data over time, I think it’s useful to think about how many buildings might be in these data sets. So in Minneapolis, we have ballpark 100,000 rental units. That’s based on the number of rental licenses that we have. A healthy rental vacancy market has 5% vacancies, so that would be 5000 units. And of course, not every unit is available all at the same time. And this is monthly data.

Ian: [00:17:12] Ideally not.

Janne: [00:17:13] So it would be 1/12 of 5000 if people listed at the same rates in the winter and the summer, which they don’t. So we know that there are more listings in April through October roughly than in the winter months. But, you know, that’s like, what, 400 units a month to get us there.

Ian: [00:17:34] Okay.

Janne: [00:17:35] Roughly 5000. But that’s you know, that’s we’ve built thousands of thousands of rental units over this period of time. So there are lots of moving pieces in there. We don’t always have that same rental, healthy rental market. I don’t think we’re there yet. So that’s probably the upper end of how many apartments are included in these numbers on a monthly basis and why it can get really noisy to have monthly data.

Ian: [00:18:03] Yeah. And actually something you mentioned there I think is important to note that like with with new constructions coming on the market, right? Any time that a new building is built, every single unit in that building gets offered. And so they’re all going to be part of the data set. Whereas like naturally occurring affordable housing are older buildings, right? So, so probably not all of the units in each of those buildings is going to like go up all at the same time. I do wonder like how much of this this data set that we’re playing with are new constructions, like over-represented in the data? Because we’re kind of using this as a proxy for like thinking about the actual rents that people are paying in their lives.

Janne: [00:18:56] I think you are right that the new units that are coming online, especially in Minneapolis, are going to be over-represented in this data set. And I say that with some confidence after conversations with Dan Hilton, he’s the the guy who does all the research at Housing Link and and I was semi-constantly peppering him with questions about, “there’s this thing in this dataset what’s going on Dan?” And and and yes, he agreed that the new units coming on line in Minneapolis are probably over-represented in this. I mean, that does mean that these numbers are unlikely to represent older NOAH buildings. So I have not had a unit turnover in my building in three years since before the pandemic. So and my rents are are NOAH-ish. So that means that my units aren’t anywhere in this or most of my units aren’t in this dataset. One of my units hasn’t turned over in eight years. So those places where people are staying put, they’re not represented here. And we don’t know what that means. Right? And an advertised rent might also be over-representative of the rent levels, because I was talking to one of my friends who was looking to rent in one of those new buildings, and he was being offered a two month free rent for signing a year long lease. And so the number that is going to be in this chart is going to be the advertised rent, not what he’s thinking about, which is, oh, hey, ten months divided by 12, that’s that’s less than I that it feels like, right? So.. 

Ian: [00:20:35] I mean, that also feels like an advertising gimmick to me because like ideally if you stay in your place for a long time, then like those two. Months matter less and less and less over time.

Janne: [00:20:46] Yeah. He was also already thinking before having signed the lease. Am I going to move again in a year?

Ian: [00:20:51] [laughing]

Janne: [00:20:51] So he was with you on this. This is clearly a gimmick, but I want to take advantage of it. But what that means is these numbers are likely higher in some ways. And it’s just important to think about what we don’t know when we look at these numbers, because there’s a lot we don’t know. Were people able to actually get renters to pay the rents they advertised? Maybe. Maybe not. I know that when I look, I often see the same apartment listed twice and the newer listing has a rent that’s lower than the older listing. And so one of the things that happens is you you advertise an apartment, and if people aren’t willing to pay that much money, you have to drop the rent or it will be empty and you get to choose, do I want to hold out for a higher rent or do I want somebody in my unit?

Ian: [00:21:40] Right.

Janne: [00:21:40] And different people have different strategies. So there’s a lot we don’t know about what’s going on in here.

Ian: [00:21:44] This this is an aspect of like the rental market that I have very, very little insight into. But like, do renters ever see their actual month to month rent drop or do we most do we only see numbers drop in in terms of like what’s offered to new renters?

Janne: [00:22:03] So it’s hard to know. I can talk about my renters because I know what I do and I can’t talk about other folks. I will say that landlords are a very diverse set of people and we have widely varying interests and motivations. So the way I landlord is very different from a real estate investment corporation that owns 140,000 units across the entire United States. They have so many units that they think about everything in very different ways than I do. I happen to owner-occupy a four-plex because that was how I could afford to live in a transit friendly, amenity rich neighborhood when I bought my house in 1996. And so for me, I need the help paying my mortgage, but I’m not living off the money. I don’t actually have cash flow that comes out of the house ever. It goes to pay for the new roof, or the summer paint job, and new security doors.

Ian: [00:23:07] Yeah. 

Janne: [00:23:07] So that’s those are very different strategies. So for me, I highly prioritize keeping my tenants. So I did drop my rents, not by a lot, but by a bit. Each of the last two years when I saw that my rents were higher than the other options my tenants would have if they were thinking about and and willing to move. I don’t know if that is happening with large owners. I don’t know what that means in terms of subsidized, affordable owners. There are federal regulations that guide what they do with their rents and what they can do. But they, of course, have cash flow pressures of some sort because they have mortgages to pay as well. I do think that the dropping line on that two bedroom on my Minneapolis advertised rent graph suggests that we have built a lot of two bedroom units in Minneapolis that are new. And to fill those units, because those units are over-represented in this chart, probably, it is likely that to fill those units up, they are having to have more competitive rents. That’s probably representing that line. But I’m using probably many, many, many times and annoying the listeners with all my probably because I don’t actually know I just can’t think of a way that that wouldn’t be the case. When I look at that line.

Ian: [00:24:30] How dare you have like a nuanced look at the data? Come on, Janne.

Janne: [00:24:35] It’s really bad for writing blogs. I tell you, they get really long and then you have to cut out all the nuance, or people don’t read them.

Ian: [00:24:42] Yeah, but it’s okay because this is a podcast and it can be as long as we want. Ugh. Okay. So the whole point of this, like looking at this data set was to kind of analyze the policies that have led us here. Right. Well, I don’t know if that’s the whole point, but like that felt like the meat of the discussion to me, especially outside of the the article itself, you know, the comments on the article, a lot of policy discussion. You had an amazing Twitter thread about like what what has gotten us here. And it seems like most of the conversation has been around like like policies that have allowed for more housing to be built.

Janne: [00:25:29] I do also think it’s an important fact check. There’s a lot of conversation about what’s happening with rents in Minneapolis. And it it tends to be very anecdotal because it is so hard to get that information and I did this blog post also because I desperately wanted to see. I was hopeful that rents were dropping, and it felt like rents were dropping, and I am an optimist. And so I have a real tendency to see what I hope is happening in data. And I needed a fact check. I also did it because I wanted a fact check for myself, but I wanted to have something that other people who don’t have access to the data could look at and and get something based in something real, not based in a story from their friend, like my neighbor, who rented an apartment up the block for $300 less than the other apartment that he formerly had on my block. That’s a really great story, but also, my graph would show you that rents are not dropping by $300 for a one bedroom unit. And I wanted to know the reality and I want other people to know that reality. So as we have conversations around policy, we can use something actual that’s, that’s based on what’s happening in our communities, not the stories of our friends or our gut feelings.

Ian: [00:26:47] Right. Right. Oh, yeah. And that is another thing about like the data set is that it’s all going off of like median numbers for rental opportunities and doesn’t 100% give us an insight into like, okay, what does it look like out on the tail end of like, you know, folks who are very, very price sensitive, you know, who like if the cheap rent that they currently have changes drastically is going to be a major, major issue in their life. Like what? What is the landscape looking like for their sector of the market? It’s it’s and it’s really hard to like piece those out to.

Janne: [00:27:32] So it’s true that those folks are not there. There is absolutely a floor to how low rents can go because of operating costs. And so that makes that very low end of the market much more difficult to navigate, especially if you’re very low income. It also doesn’t tell you what’s happening for people who are paying four or five, six, $7,000 a month in rent or, I don’t know, $12,000 a month in rent because they want some super-duper luxury place.

Ian: [00:27:58] Right.

Janne: [00:27:59] That may or may not be available going forward in Saint Paul, because the way the rent control ordinance is structured essentially makes those kinds of units illegal to offer. And if you want to go there, we could go there. But in Minneapolis, absolutely. This dampens the noise on that end. And that is certainly the part of the market, not necessarily quite that extreme, but the upper end of the market is where developers tend to build because the profits are bigger,and if your vacancy rate is low enough, you don’t have to fight for tenants. And so you can just cream the wealthiest folks off the top. And again, that’s what you might show up here. So so the median kind of masks both of those ends of the market, but we don’t know exactly how the very low rents, and the median, compare.

Ian: [00:28:48] The ideal in a data set is that like those two extreme ends, like kind of cancel each other out in terms of their effect on the like where the trend line is going for the median. But yeah. 

[00:29:00] [music]

Ian: [00:29:07] Policies, building policies, especially. In your Twitter thread, you call out a few of them specifically that have been implemented over the years in in Minneapolis, like building ADUs citywide or making it legal to build ADUs citywide. Eliminating parking minimums. The 2040 Comprehensive Plan like superseding whatever zoning exists currently in places. And a significant part of the conversation I think that has been sparked by this article was that folks are overemphasizing the like elimination of single family home zoning in Minneapolis. So let’s dig into that a little bit.

Janne: [00:29:55] Yeah. Boy, there sure is a lot in there. I think one thing that maybe people forget about is that in Minneapolis, we had this very long, very noisy conversation around what we as a collection, as a group, as 440,000 people, what do we want? And that conversation very clearly said, we want everyone to have a home. We want enough homes so that our city can grow. That is a good thing. And that conversation sent a loud signal to the people who build homes that we need more homes and we want more homes, and we will welcome people building more homes in our city. And that signal was heard. There’s a Twitter thread by Alex Schieferdecker, where he shows the number of new units approved by the planning commissions in both Minneapolis and Saint Paul. And there is a bump after the Great Recession ends when money is available again. But then in Minneapolis there is a really significant bump as well the year after 2040 past. That is not because of any policy change. That is because people who build homes heard, “Homes are good. We need homes for people. People don’t have homes. If we don’t build homes, please build homes in our city.” And they responded to that by saying, “Oh, you want homes? Here are a bunch of proposals.” And so the number of units approved in the city of Minneapolis by the Planning Commission jumped from, I think it was like roughly 2600 in 2015 to more than 5000 in 2019.

Ian: [00:31:41] Yeah.

Janne: [00:31:41] That’s a really big bump, right? And then they’ve stayed essentially at that upper level roughly ever since. So there’s some quirks in in 2021, 2020, rather, but they’ve generally stayed pretty high in Minneapolis. So that is an important thing. That is not a policy, but the conversation and how we talk about it and what we say matters that builds on top of earlier conversations around ADUs and more flexible parking policies. And that started the conversation to to say to folks, “Yes, we want more homes. We’re looking for ways to make that possible.” So the ADUs in terms of units are pretty negligible. But it is important to have conveyed, “We want this, if you want to do this, we’re going to make it possible for you to do this.” And since 2040 was passed, we have added two more changes to the ADU policy that make it easier to build ADUs. The parking along transit corridors, I think is probably the the biggest shift in letting us build more homes. And in 2015, Lisa Bender really led this work that reduced parking requirements along high frequency transit corridors and, in some cases, it allowed for zero parking buildings along high, high frequency transit corridors. That gave builders a lot of flexibility, and we saw very different kinds of things being built in Minneapolis after that happened a couple of years after it happens, because building takes years. It is very, very lengthy and multiyear process to get the approvals, get the money and then be able to actually build the thing. But what we saw was buildings that had much lower parking ratios. And so we have also since then totally eliminated minimum parking requirements and we continue to see the number of parking spaces built per unit drop. And that’s not because we don’t want parking, or developers don’t want to build parking, it’s because parking is very, very expensive to build. A single underground space can cost $30,000 to $50000 per car. When you think about mandating a $30,000 to $50,000 amenity for every unit or every bedroom in an apartment in Minneapolis and Saint Paul, that is mandating expensive homes. That is not what we want to do if we want affordable homes in our in our cities. And so allowing for lower parking buildings allows for less expensive new homes. It also allows Minneapolis to build a kind of housing that there is demand for and that we haven’t built for decades. So there is pent up demand for zero parking housing in the city of Minneapolis, especially if you can get it for less money.

Ian: [00:34:29] Yeah.

Janne: [00:34:30] Roughly 20% of the people in Minneapolis don’t have a car or 20% of households don’t have a car they don’t want to pay for parking. And so when you have people building apartments with less parking, and that’s partly because some people might be willing to have the inconvenience of parking on the street. There is lots and lots of available on-street parking in both Minneapolis and St Paul. But it’s also that there are people like me who really are happy to not pay for parking because we don’t have a car and it’s expensive to pay for parking. So all of those things mean that our parking ratios are dropping to, I think Jason Wittenberg tweets said, roughly 0.55 per unit.

Ian: [00:35:13] Okay.

Janne: [00:35:13] And again, those apartments when they are new are being rented for less than the ones that have parking included in the zoning code reform that reduced or eliminated parking requirements, it also gave bonuses to people who are doing things to, to builders, who are creating buildings that have amenities, and encourage people not to drive.

Ian: [00:35:35] Yeah.

Janne: [00:35:35] But I think that that’s also great because if you have a 1 to 1 parking ratio, you are going to include your parking and your rent. Well, actually, you are going to include a parking space in your lease. The parking fees never cover the cost of parking, so anybody who doesn’t have a parking space is still paying for parking in their rent.

Ian: [00:35:54] Right.

Janne: [00:35:54] They just don’t notice that it’s hidden like the property taxes that renters pay. And if you have fewer parking spaces than you have units, there is an incentive to owners to un-bundle the parking so that they can move it around to whoever wants it and also charge more for it.

Ian: [00:36:12] Yeah.

Janne: [00:36:13] All of those things I think are good, and all of those things cumulatively help us as a community, wean ourselves from so much car ownership. And that’s probably… That’s for sure, good for all of us over time in a host of different ways.

Ian: [00:36:28] So I think I wonder if one of the one of the reasons that like the concept of eliminating single family zoning has been, you know, such like that’s a thing that catches people’s attention partially, I think, because, like, it’s just such a pithy, like easy to understand sentence, but also, like, I feel like people don’t really understand the sentence. Like when I’ve thought about it, I, I think about like the, the apartment buildings that I’ve seen getting approved and built in Minneapolis that are like 16, 23 units and are on a formerly single family home zoned lot. But like but that’s not what has been legalized throughout the city, right? It’s just like duplexes and triplexes that are now allowed on any single family zoned lot. So like what? Like what has allowed these, like, dope, small apartment buildings that have like 20 units? Is that because they’re near high frequency transit corridors?

Janne: [00:37:35] So if you look at the zoning map in Minneapolis, there are, I think it’s fair to say, dozens of different zoning categories.

Ian: [00:37:43] Great.

Janne: [00:37:45] And part of what Minneapolis 2040 does is, is reduce that to be fewer simpler categories. But zoning doesn’t say what you get. So there are lots and lots of single family homes located in places that allow for much more development today. And there have been for decades and for all sorts of reasons, be it financial or the owner doesn’t want to or doesn’t care or who knows what, they have remained single family homes, even though the zoning allowed for something different. So part of what I think you’re seeing is that the, the financials, and the tight rental market allow people, now, to do something different than they could do before. If the rents really are going up really dramatically year-on-year, and if you eliminate parking minimums, parking is a huge constraint. You kind of can’t do anything with parking minimums on a one lot building that lets you have those small missing-middle things that I think we love so much in our neighborhoods. Like I live in Lowry Hill. My neighborhood is chock full of four-plex’s and 12-unit buildings. Those are possible on lots that are similarly sized single-family home lots because they don’t have parking requirements because they were built before those things existed. They feel really good in the neighborhood. When you walk by them, they feel natural and like they belong. That change around parking minimums lets us build those same kind of buildings that we used to build that have been made impossible in the meantime.So I think that’s probably mostly what you’re seeing there. There are a few places where the 2040 map takes precedence over the zoning code. And so there are a few places, especially along transit corridors or in more central neighborhoods, where it was already more likely to be zoned higher, that somebody might say, “Oh, this is a place I can get relatively cheap land and 2040 allows it. I can get a zoning change relatively easily, at least in theory, because state law says that the city has to give me that that. Zoning change.” And so some of those might be in that category as well. That has certainly also helped with building more homes after 2040 was passed, not the probably 12 and 14 unit buildings you’re talking about, but in many transit corridors and other places, if there is a T-10 zoning in 2040, but it’s not that high in the current zoning code, that’s a place where people are building larger buildings as well…

Ian: [00:40:20] Right. Right. 

Janne: [00:40:21] …So they’re just a few units coming online in the last few months or this this year that were the first through the gate after 2040 passed and took advantage of changes in 2040. That’s the delay is a three year delay to build it. 

[00:40:35] [music]

Ian: [00:40:43] So one of the mechanisms that you talked about in the article, something that that increases rents in a city, is house flipping, right. Taking existing, naturally occurring affordable housing units and, you know,  somebody buying them up, renovating them, fixing them up, making them nicer, and then turning around and selling them for a higher price than before. Right? Which like when I, when I think about flipping, I usually think about that in terms of the like single family home ownership market rather than the rental market. So is this something that happens a lot with like, with multifamily housing buildings?

Janne: [00:41:28] I love how you frame that question because I’ve never thought of so so the affordable housing world that I tend to travel in never talks about single family homes as NOAH. Because NOAH housing is generally like single family homes are generally not affordable to the people who qualify for NOAH homes. So single family flipping is the thing I’ve thought about and watched as everybody does on TV and we see it all the time. But I’ve never thought about that as losing NOAH, which it, it is, when you frame it that way. It is absolutely something that we see with older, lower-value apartments in. And it’s been very common in Minneapolis as there’s been a lot of press about these kinds of projects. So there was a very large one that had hundreds of units, and the name of the project escapes me, in Richfield, and it was a property that accepted Section-8, and had a lot of very low income tenants, and had had for decades. It was purchased by a new owner who then was essentially evicting all of those low income tenants and rehabbing all the units and raising the rents. And that is possible only when there’s a very tight rental market and people with money can’t find places to live. And then they bid up the cost of those those units, and if you make the units nice, then you can make it much, much more expensive. And so Inquilinxs Unidxs por Justicia, Renters United for Justice, also helped highlight some instances of that. There was a particular building in the Whittier neighborhood where the rent increase notices were up to, I think it was 50% increases in rent, and again a massive increase in rent. It may actually be a mechanism for forcing a tenant out in order to flip a building, but also it’s a way of just getting more profit off of a building. When the market has much more flexibility. So, I think about a new building that’s a couple of blocks away from my building, at 2320 Colfax, and I can’t compete with 2320 Colfax for tenants. The people who want to live there, the people who want to live in my house are probably really different people. But also I do have a studio apartment and I tend to have a lot of people who are roommates living together for cheap places to live, and if they can find a studio elsewhere that is nicer or cheaper, or has, I don’t know, USB plugs integrated into every outlet in the apartment and lots of outlets, or no roommates, they’re totally going to take that instead of mine.And so what I am competing with is could they find three studio apartments that together are more than my three bedroom apartment, but worth it to not have to live with roommates, or worth it because the insulation is new and there are no drafts anywhere, or worth it because you like the modern aesthetic? Who knows? So I’m not able to compete with those rents. And so when they moved in, that shifted the options that people had and and meant that I was likely to lose some of those potential studio or roommate renters. That same thing happens with those NOAH buildings. Right. If if you’ve got enough options in the market that somebody who makes quite a bit of money. So actually I’m going to talk about another former tenant of mine. He was a researcher at the Minneapolis Fed. He was a single guy, and he was looking in newer buildings, this was at least a decade ago, for a two bedroom that had a kitchen he could cook in. He couldn’t find one. And when he was asking around, well, “Where do I look? Where should I be looking?” The answer that he got was, You should try looking at three bedroom apartments because they tend to have bigger kitchens. And then he found me and and he was great. He rented for me for, for a few years. And I kept thinking like usually there are three people living in this apartment, and now there’s a guy who probably makes as much money as everybody else in the house combined. Right? And it felt really strange to me. He was great. I loved having him as my tenant. I was very sad when he moved and, I was pretty happy that I could have three college students move in after he left because they probably needed that home more than other folks, Right?

Ian: [00:45:54] Right.

Janne: [00:45:54] If we had today’s rental market when he was looking, when he moved to Minneapolis for his job at the Fed, there’s no way he would have lived in my apartment. And that is what happens with those NOAH buildings. He would have taken something that was new and, that had perfect amenities, and that had professional management, and that had a security door on the front, which is not what what I can offer. That now exists, and that means that taking a a seventies walk up building, and putting in some stainless steel appliances and new flooring, is not going to let you do a 70% increase in rent…

Ian: [00:46:28]  Right. Right.

Janne: [00:46:29] …Of that building and lose that NOAH housing.

Ian: [00:46:31] Yeah. So yeah, it’s, it’s all about manipulating the market pressures to achieve the outcomes that, like, that we want, right? In this case, making sure that it wouldn’t be profitable for owners to flip a house, flip or flip a flip an apartment building, right?

Janne: [00:46:51] Yeah. They just can’t say they won’t do it. They can’t find people.

Ian: [00:46:54] Yeah.

Janne: [00:46:55] And like, as you talk about manipulating the market, I don’t know that it is manipulating in the market. It’s I think of it as the city has very limited options about what it can do to address housing and housing affordability. And one of those options is to permit people to build things right? Zoning and prohibiting — We have had an apartment ban in Minneapolis on 70% of our land for decades. We lifted a ban on apartments in Minneapolis. That’s what we actually did. Nobody’s going to do anything with that on most of those lots. A few people are going to build some apartments, like the the 12 unit things that you were talking about that are so cute and charming and lovely, but most of the things aren’t going to change. And one 12-unit building is as many housing units as on the entire rest of the block. Right? 

Ian: [00:47:45] Right. Right.

Janne: [00:47:46] That is enough. One unit on a block, or a couple of larger buildings, are going to be enough to relieve that pressure that will help elsewhere…

Ian: [00:47:56] Yeah.

Janne: [00:47:56] …In the market. And that is the power the city has, because we cannot subsidize our way out. We cannot out-compete all of the Fortune 500 companies in Minnesota who are paying a lot of people a lot of money, who then can can bid up the housing if we don’t make space for them.

Ian: [00:48:13] Mm hmm. Yeah.

Janne: [00:48:15] They also pay a lot of property taxes, actually. So another of my favorite streets.mn posts is around TIF financing, where I calculated how much additional property taxes the city is receiving due to some of those TIF projects. And one of those new buildings on the Midtown Greenway in Uptown, is paying half a million dollars a year in property taxes. That’s half a million dollars a year that renters and homeowners in older, cheaper places don’t have to pay, but that’s also money that we can use to, my favorite, subsidize more affordable housing or provide vouchers or income supports to people so they can afford their homes. So that money is something that city can do something with. No matter how it’s being used or who lives there.

Ian: [00:49:00] It turns out density is good for a lot of reasons.

Janne: [00:49:04] So the thing that I think is the most important for people who are thinking about housing policy is you have to do three things. And I’m stealing this from Shane Phillips, who wrote a book called “The Affordable City.” You have to have enough homes. And that is what zoning and related policies either allow or prohibit. Second, you have to protect tenants so they have a predictable housing situation. That’s where things like rent stabilization, and rent control are really critical, just cause eviction, the list is long. And then third, you have to make sure people have enough money to pay for what housing costs. And that’s where increasing the minimum wage, housing vouchers, subsidizing housing, all of the stuff where you’re putting money in, goes. If you don’t do all three of those things, you cannot make sure everybody has a home. So, the most important thing I want to say is you have to do them all. Don’t just focus on one or the other, because if you do one or the other, we will fail. And there will continue to be unsheltered neighbors in our streets, and people with massive housing cost burdens. If we do all three of them, then everybody will be in a housing situation where they can thrive.

Ian: [00:50:15] Yeah, so we focused on one of those today and I’m sure in future episodes we’ll get to dive into other pieces of the puzzle.

Janne: [00:50:23] Perfect.

Ian: [00:50:24] So that’s a — that’s everybody’s cue to go and subscribe to the Streets.mn Podcast in whatever podcast player you like to use, [laughing] so that you can get all the future episodes as soon as they come out. Thanks for joining us, Janne.

Janne: [00:50:37] Thanks so much for inviting , Ian.

Ian: [00:50:41] Thanks for joining us for this episode of the Streets.mn Podcast. This show is released under a Creative Commons, attribution, non-commercial non-derivative license, so feel free to republish the episode as long as you’re not altering it and as long as you’re not profiting from it. Our theme song is Tanz Den Dobberstein by Eric Brandt and the Urban Hillbilly Quartet. This episode was hosted and edited by me, Ian R. Buck, with transcript by Mike Allen. Christy Marsden is our awesome guest booker, and technical assistance is provided by Brian Mitchell. If you’re able to help make sure this team gets paid for the hard work they do, please consider donating at https://streets.mn/donate. We really appreciate it. If you have feedback or ideas for future episodes, drop us a line at podcast@streets.mn. Until next time, take care.

About Ian R Buck

Pronouns: he/him

Ian is a podcaster and teacher. He grew up in Saint Paul, and currently lives in Minneapolis. Ian gets around via bike and public transportation, and wants to make it possible for more people to do so as well! "You don't need a parachute to skydive; you just need a parachute to skydive twice!"

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