Don’t Forget: We Need More Large Apartments

Back in May, the City of St. Paul released the results from its early engagement on Phase 2 of the 1-4 Unit Housing Study, a policy initiative from St. Paul Planning and Economic Development to consider legalizing more types of “neighborhood scale” housing, such as duplexes to four-plexes, row houses and cottage clusters. 

These potential changes could end the scourge of single-family zoning in St. Paul and allow for housing options that are more dense, flexible and affordable. And as a supporter of zoning reform, I believe the survey results showed good news: People were generally in favor of policies to zone for more housing in their neighborhoods. 

The graph below shows which types of housing survey respondents thought were needed in their neighborhoods. When I first saw this graph, I focused on the results about the “missing middle” types of housing that are within the scope of the 1-4 Unit Housing Study, noting the majority support for all of these kinds of housing.

But it’s also noteworthy how much support drops off for large multifamily buildings. Many respondents of this survey who were supportive of “neighborhood-scale” housing were not supportive of buildings with more than five units, and especially not supportive of even larger developments. This lack of enthusiasm for larger developments has shown up more than once in St. Paul recently, with some residents pushing against large proposed developments on Grand Avenue and Mississippi River Boulevard.

However, housing advocates cannot forget the importance of large developments to St. Paul’s housing. These types of housing developments contribute enormously to the housing stock in our cities. With the Twin Cities’ low rental vacancy rates and expected population growth, we need more housing of many stripes, including large multifamily. We will not have enough housing without such housing projects. 

To begin understanding why this is true, we can first look at the composition of housing permits in St. Paul since 2000. Almost all of the housing construction in the city has come from multifamily buildings with over five units.

Now, it’s a tautology to say that there were almost zero units added from two- to four-unit buildings because those buildings are illegal to build in much of St. Paul. Advocates like Daniel Parolek, who coined the term “missing middle housing,” make this point: in our current zoning regime, housing comes either in the form of single-family homes or very large buildings. 

What about places that have changed these kinds of zoning laws recently? Minneapolis famously legalized this kind of housing across their city with the 2040 plan. As Alex Schieferdecker has shown, Minneapolis didn’t see a surge in two- to four-unit development after passing the plan. But with such a low baseline unit contribution of two to four units, even a relative “surge” in housing production would have had a limited impact on total housing production.

We can also look at Portland, which had a neighborhood-scale zoning reform of its own a couple of years ago. 

This is not to say that Minneapolis’ and Portland’s small-scale zoning reform victories weren’t successes. Such changes matter, and should be replicated in other cities. According to one report, the nation today is building about 10 to 15 percent as much two- to four-unit housing as it was in the 1960s and ’70s. This is a failure that needs to be addressed (and probably not just via zoning reform).

Yet ultimately, addressing the housing shortage requires us to play the numbers game. A duplex is two units; large apartment buildings can have 200 units. While we need the former, we can’t get by without the latter. Using a Met Council dataset of permits in the metro area from 2009 to 2018, we can get a more granular breakdown of this information. We see that it’s not just buildings with five or more units doing the heavy lifting, but especially very large buildings.

Large apartments don’t just account for the bulk of new market-rate homes in our city; they also account for the majority of subsidized affordable units. Because market rate-housing has more benefits for high earners than low earners, this question should be of considerable interest. The below graph shows the composition of low-income units by building scale among all projects built or preserved using the Low-Income Housing Tax Credit in Minneapolis and Saint Paul, since the program’s inception in 1986. We once again see the importance of large buildings — especially very large buildings.

One of the most important factors at play here is the economies of scale involved in affordable housing production. Managing LIHTC properties has large fixed costs for management and compliance. As a result, it’s rarely worthwhile to build an affordable housing project that is just 20 units. 

Additionally, more than half of St. Paul’s public housing stock comes via its 16 high-rise buildings, which average about 160 units per building. 

Larger buildings also appear to matter for other outcomes than quantities of housing units, too. In their new report on zoning in the Twin Cities, researchers Salim Furth and MaryJo Webster generally find that block groups with less restrictive zoning tend to have sizably larger non-white populations — and in particular, that the amount of racial diversity increases the most on block groups zoned for multifamily housing. 

The authors hypothesize that non-white Twin Cities residents are more likely to rent, and areas with multifamily housing tend to have higher proportions of rental units. One takeaway is still the same: Allowing more multifamily developments should be a top priority.

Again, none of this is to say that we shouldn’t fight for ending single-family zoning or allowing more two- to four-unit buildings — just that we also ought to fight for pro-housing policies that increase the amount of larger multifamily buildings. 

When Minneapolis passed its 2040 plan, the headline just about everywhere was that the city had ended single-family zoning and legalized triplexes across the city. But the national conversation mostly neglected the other changes that allowed larger developments near transit and enacted a minimum height requirement in some parts of the city. Likewise, we should celebrate California zoning for duplexes statewide, but it’s probably a bigger deal that they passed a bill which variously zones different commercial corridors for taller buildings with 30 to 70 homes per acre. 

These changes would mean far less without reductions or eliminations of parking minimums. Both Minneapolis and St. Paul have eliminated parking minimums in the past few years, while California recently did the same for all developments within a half-mile of major transit stops. Building 100-unit buildings is unnecessarily challenging when you also need 150 parking spots.

Addressing our urban housing shortages and achieving housing affordability will require fighting a battle on many sides at once. Don’t forget that part of that battle is having more large housing developments in our cities.

For questions on data and code, email zyudhishthu@yahoo.com

About Zak Yudhishthu

Zak is a student at Macalester College studying economics and music. He's interested in all kinds of urban politics and policy, and is the student representative for the Macalester-Groveland Neighborhood Council.

22 thoughts on “Don’t Forget: We Need More Large Apartments

  1. ROGER GOERKE

    Looking at Portland Oregon for guidance on how to best promote low income housing options will lead to more tents under every bridge in the city. Saint Paul does not need that or more large apartment buildings. Saint Paul needs more tree lined boulevards and better street lighting.

  2. Sheldon Giti

    How many times is Zak Yudhishthu, the student at Macalester College, going to regurgitate the same ridiculous claim that there are “low rental vacancy rates” in the Twin Cities metro area, and then once again, link to the ridiculous garbage by Bill Lindeke in MinnPost?

    As I asked the last time Mr. Yudhishthu he regurgitated Lindeke’s ridiculous “low rental vacancy rates” garbage, and Mr. Yudhishthu failed to respond:

    “In a metro area with maybe a half-million renters, how many 10s of thousands of vacant apartments do you need before the vacancy rate is considered high rather than low?”
    https://streets.mn/2022/03/18/housing-and-collective-action/

    The “low” vacancy rates appear to be concocted to maintain exorbitant rents and to justify public subsidies for enormously-expensive, ugly, big box apartment buildings sitting on top of parking garages next to freeways. There’s no shortage of such buildings, and no shortage of vacant apartments in such buildings.
    https://www.apartments.com/roseville-mn/

    1. zyudhishthu

      Would you agree that the Twin Cities need more affordable units? Even if you don’t buy the premise that we should have more market-rate apartments (which is fine for you to believe, and not something I’m really interested in arguing about), I clearly make the point in this article that we won’t get enough affordable housing without large buildings, either.

      1. Sheldon Gitis

        Sorry, I missed your “clearly made” point. How are large multi-unit apartment buildings, built at a cost of $300,000/unit or more, the solution to affordable housing? What makes you think a $300,000 apartment unit is more affordable than $300,000 house? If a full-time wage-earner, making $15/hour or roughly $30,000/year, can’t afford to live in a $300,000 house, why would they be able to afford the cost of living in a $300,000 apartment unit?

        1. Zak Yudhishthu Moderator   Post author

          Please — that is not at all the point that I’m making. I am talking about subsidized, income-restricted affordable housing, built and operated via either developers using the Low-Income Housing Tax Credit, or St. Paul Public Housing Agency. I’m not saying all large apartments are innately cheaper on the market. For these kinds of affordable, income-restricted projects, most of the units come in large properties.

          1. Sheldon Gitis

            “For these kinds of affordable, income-restricted projects, most of the units come in large properties.”

            Why is that? You seem to have a rather limited and narrow-minded view of public housing. Maybe you should try reaching out a little further from your sphere of influence.

            And PLEASE, do not continue posting the link to Mr. Lindeke’s MinnPost article, regurgitating absurd, big box apartment industry claims of low vacancy rates in big box apartments. There’s many 10s of thousands of apartment vacancies in big box buildings sitting next to highways in the Twin Cities metro area, just waiting to suck up every nickle of student loan debt and every other public subsidy they can find.

    2. Bill LindekeBill Lindeke

      As much as I hesitate to engage with Mr. Gitis, who I have found to be borderline abusive in online comments, here are some links to vacancy rate information from legitimate sources, unlike apartments.com:

      https://mhponline.org/issue-5-hennepin-county/ … Minnesota Housing Partnership

      “Low vacancy rates mark an increasingly competitive market for cities with more naturally occurring affordable units

      Vacancy rates are highest in cities that contain properties with higher average rent, including Excelsior (14.4%), Golden Valley (10.5%) and Edina (6.0%), all of which have seen increases in vacancy from 2017 to 2018. In contrast, the vacancy rate in Hopkins, Mound, Crystal, and Brooklyn Center is extremely low, remaining under 2.8%; these cities have seen a tightening of the market with a 58%-70% drop in their vacancy rates since just 2010. Currently, 75% of the 24 cities in Hennepin County have a vacancy rate below 5%, with 42% seeing vacancy rates plummet by 40% or more from 2010 to 2018. ”

      https://metrocouncil.org/Data-and-Maps/Publications-And-Resources/MetroStats/Land-Use-and-Development/What-a-Difference-a-Rate-Makes-Population-Growth,.aspx … Metropolitan Council

      “• The region’s rental vacancy rate has been under 5% since the fourth quarter of 2014. The rental vacancy rate remained below “healthy” levels despite the addition of nearly 25,000 rental units region-wide between 2015 and 2017.”

      1. Sheldon Gitis

        My apologies to Mr. Lindeke if he finds my opinion of his MinnPost article “borderline abusive.”

        The Minnesota Housing Partnership is a group funded by and for vested interests in the multi-unit housing industry. Board Members include: Erin Mathern (Chair) Shareholder, Attorney Winthrop & Weinstine; Buffy Beranek (Treasurer) Executive Director Southeast Minnesota Multi-County HRA; Cecile Bedor CommonBond Executive Vice President of Real Estate; Harry Melander Consultant Colliers; Mark Moorhouse Partner and Senior Vice President Dominium; Nick Place Senior VP and Chief Lending Officer Bridgewater Bank; George Sherman President/Owner Sherman and Associates; and Dan Smith Senior VP and Market Manager U.S. Bank.
        https://mhponline.org/mhp-board-of-directors-2022/

        Mr. Lindeke’s suggestion that the Minnesota Housing Partnership is somehow a more credible source of vacancy information than Apartments.com is simply absurd. Do you think the multi-unit housing industry is going to publicize the fact that there’s a glut of available apartment units in their mega-box buildings plopped atop parking garages? If anything, the listings on Apartments.com are an under-estimate total number number of available units, and do not include all the small mom-and-pop shop landlords that may have only 1 or 2 small properties with just a few units for rent.

        And if you think the Met Council is the go to place for credible information, I’ve got a cost-effective, $3 billion LRT line connecting a highway hellhole in Hopkins to a billionaire’s baseball stadium to sell you.

  3. Sam B.

    Great article! St. Paul has so much vacant or underutilized land that could be put to better use with large multifamily buildings which would increase the housing stock, add liveliness to neighborhoods with more foot traffic, and grow the municipal tax base. Plus, larger buildings come with amenities that only scale when you have a large number of units. When I lived in St. Paul, my building had a gym, pool, hot tub, grills etc. You don’t get that as a renter in a 2-4 unit building.

    1. Sheldon Gitis

      The large multi-unit buildings, more often than not occupied by young, single adults rather than families with children, and more often than not, sitting on top of and surrounded by large parking facilities ample enough to accommodate each of the large number of apartment units, and more often than not, sitting very close to a highway, are anything but pedestrian/bicycle friendly, and do little, if anything, to increase foot traffic.

      Furthermore, as any property tax payer knows, any addition to the tax base that the large multi-unit buildings may eventually provide, after investors in the publicly-subsidized, enormously-expensive enormous buildings receive their full, tax-exempt return on their investment, is more than offset by the increased public expense that the large multi-unit buildings require.

      Name one municipality that has seen property tax decrease due to large multi-unit apartment buildings and I’ll eat my hat.

  4. Monte Castleman

    Down here in Bloomington, the city is looking at things like ADUs and cluster housing because they feel they should. And this is something I’m not opposed to. But as has been reported here before in respect to Minneapolis and St. Paul. I don’t see many takers
    A) There’s the expense and hassle
    B) It’s perfectly legal to let granny live in your spare bedroom, your adult kid live in the basement, or even rent out a room to strangers without the hassle and expensive of a formal ADU.
    C) Short term rentals are banned by city ordinance, and the city does go online listings to look for violators.
    D) People tend to buy single family detached houses because they’re the sorts that want their space and privacy and don’t want to share their lot with strangers. If they did they’d just buy a duplex or a townhouse or something rather than buy a single family detached house and then turn right around and build and ADU on it.

    There have been a number of new large scale new apartments built on vacant or underutilized land. The city saw that the industrial base, (and with them living wage paying jobs that are obviously of value to the city,) was starting to erode in favor of residential and commercial redevelopment. So they designated a large part as “protected industrial”, which while not set in stone, will be allowed to be rezoned only for really good reasons. Someone wanting to take out a large plot to build apartments or yet another mini-storage is not going to happen. But there’s opportunities. Either completely vacant lots in commercially zoned areas, or aging mid-century office building that the pandemic has made obsolete.

    A few of the more recent ones built or approved
    Risor of Bloomington (55+), 145 units on land that was planned for an office building in the South Loop Apple Tree Square complex that was never built.
    Noble: 149 units replacing a 3 story office building at 82th and I-35W
    Lyndale Flats: 81 affordable units at 94th and Lyndale on vacant commercial land that was cleared prior to the 2008 recession
    Oxboro Heights (55+): 125 affordable units at 92nd and Lyndale on (mostly) vacant commercial and industrially zoned land. One parcial is protected industrial, but they city allowed rezoning considering it was vacant and not likely to interest an industrial developer.
    Cadence: Old Cedar and 82nd, 69 units replacing a one story office building.

    There hasn’t been a lot of controversy because these are either far from single family houses, or replacing office building that are also bulky and generate a lot of noise and traffic.

    There’s no formal proposal yet, but the 8.74 acre Southpoint Office Building site on I-494 is now owned by the same company that previously built 284 apartments on a 8.55 acre former industrial site immediately adjacent to the south. All the office building tenants had their leases non-renewed and the building has been completely vacant since last winter.

    What’s not happening is the city’s vision of a bunch of 5 over 2s with ground floor commercial to make 98th and Lyndale and Southtown to be something more like Heart of the City. For reasons that have been discussed here before, developers absolutely don’t want to do mixed use unless the city forces them to. A situation that’s only getting worse now that fast-casual chains are demanding freestanding pad sites rather than mixed use spaces so they can have a drive through. Bloomington lacks the teeth to force developers to do what the city wants with zoning thanks to a legal precedent they set when they let a nonconforming Wendy’s scrape their site and rebuild essentially what was there before. My understanding is that Minneapolis requires the destruction to have been not be the property owner’s doing, like a riot or a tornado, and the existing foundation reused. But Bloomington let them voluntarily demolish the restaraunt to the dirt and rebuild it.

    So, in addition to not banging on the city hall doors begging to build mixed use, developers are doing what they want- Lakewinds and Hy-Vee both got approval (because the city would have been sued if they had refused) to replace one story commercial buildings with other one story commercial building in these areas. (In the end these projects sputtered out because construction inflation was increasing so much faster than grocery inflation so the supermarkets and the developers and stores couldn’t find a number for the lease that would work for both parties.) One thing that is going through is a one story office building on 98th is being replaced with a “substantially similar” mammoth car wash.

  5. Joe

    “One of the most important factors at play here is the economies of scale involved in affordable housing production. Managing LIHTC properties has large fixed costs for management and compliance. As a result, it’s rarely worthwhile to build an affordable housing project that is just 20 units.”

    I’ve found the Construction Physics substack to be a great resource for learning about costs of housing production, and have been surprised at how little economies of scale there are in actual construction of large buildings. Like you said, there are some, such as actual management of the units, and there would probably be more if the regulatory regime wasn’t so cumbersome.

    I would only add that I found large unit housing to be a great stepping stone from college life to real life. I mean, given how fancy college housing has become, large scale units kinda feel like an honors dorm or graduate school housing complex. My own housing journey has been one of increasing responsibility, from renting at a large complex, to renting a unit of a fourplex, to renting a duplex, to renting a house, to renting a new-ish duplex, to owning a house. There’s something to be said about the sterile simplicity of dealing with a corporation, especially if you’re a new entrant and don’t really know what you want or what you need to look out for.

    And thanks for another great piece, Zac. I always learn something!

      1. Zak Yudhishthu Moderator   Post author

        Thanks for the kind words Joe! The author of Construction Physics Substack holds some pretty incredible granular knowledge and I have looked at some of his stuff before — I will go back and see what I can learn about this specific question.

        That reminds me of something that I thought about while writing this article but did not ultimately address: what costs and economies of scale are “hard” vs. “socially constructed” constraints? So, maybe there’s not great economies of scale in the physical construction of buildings, but there are in the management of LIHTC properties. Well, that’s not necessarily a good thing; maybe it’s just because LIHTC is more cumbersome to deal with than it ought to be and a better-constructed policy would actually have less economies of scale (FWIW, i have no ability to gauge if this is true). Similarly, people don’t necessarily get mad when you build a new single-family house in the Twin Cities, but depending on the neighborhood larger buildings can get increasingly contentious and create more procedural costs, planning commission appeals, community meetings or whatever else. These costs are also “socially constructed”, and in my ideal policy regime would be far lesser. So all of these things might change the magnitude of the points I’ve made here, because the data is of course contingent on current planning and policy regimes.

        And thanks for that personal story on your own dwellings over your life. It jives with some of my own thinking that our housing markets should be offering a lot more choice.

  6. Bill LindekeBill Lindeke

    This is a great article Zak. The charts are excellent, and illustrate your point nicely. I’m hopeful that smaller-scale projects can be more common. When you talk to developers about why they don’t do smaller (<50 unit) housing, they will say that it’s just as expensive and time consuming to get permission for a project at that scale as it is for one with >150 homes. I.e. the approval process, hearings, back-and-forth about setbacks, etc. So why not build a bigger one, if small ones are going to be fights of equal duration and intensity. Maybe if people Mpls and STP become more used to smaller projects, and folks realize they’re not so bad after all, that dynamic will change…

    But in the meantime, as you say, it’s a numbers game.

      1. Zak Yudhishthu Moderator   Post author

        Thanks a ton Bill, and I did make the charts!

        And yes, I hope we do a lot to make 2-4 unit development not just legal but easy and straightforward. That’s part of why I referenced this report (https://www.nar.realtor/sites/default/files/documents/Housing-is-Critical-Infrastructure-Social-and-Economic-Benefits-of-Building-More-Housing-6-15-2021.pdf), where on Page 3 you can see a huge decline in 2-4 unit buildings since 30-50 years ago. There’s plenty of benefits to each type of building.

  7. Scott BergerScott Berger

    I love when new, large apartments go up near my residence.

    Why?

    Because more homes means more people. More people brings more amenities. And I love amenities!

    (Increasing the tax base doesn’t hurt, either!)

  8. Alex SchieferdeckerAlex Schieferdecker

    Spot on.

    Twenty five fourplexes add the housing of a single, not especially massive, 100 unit building. Small multi-family projects are great on their own terms, because they need less capital to build, are likely future NOAH, and can be cheaper to rent. But they are not a panacea for the housing shortage.

    1. Sheldon Gitis

      Regardless of what the AECOM concrete project Engineers and their Junior Planner underlings may want you to believe, there is no shortage of vacant apartments in 100-unit or larger buildings.
      https://www.apartments.com/roseville-mn/

      The shortage is in less expensive to build, rent and purchase, relatively small, multi-family projects that may become naturally-occurring affordable housing for future generations, rather than naturally-occurring blight for bulldozers to clear, but not before, the Developers, Construction Contractors, Property Managers, Bankers, Telecom Operators, Investors and other Big Business interests have gotten filthy rich from public subsidies, aka corporate welfare.

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