Minnesota renters feel apartment squeeze

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A recent national report on housing affordability tells a familiar story for Minnesota: a growing need for low-income housing and scarce funding for new affordable units.

Apartment renters across the state are paying more than what they can afford because affordable options are falling well short of demand, according to the report by the National Low Income Housing Coalition.

Though Metropolitan Council data show market-rate multifamily projects have boomed in recent years – particularly in urban areas – affordable units have largely stagnated.

The problem isn’t that developers don’t want to build affordable housing, said Markus Klimenko, Hennepin County program manager for housing and homeless initiatives.

“We have some of the best developers in the Twin Cities who are raring to go, who would like” to build affordable housing, he said. “But there’s not enough (public) funding and it’s extremely costly.”

The new report, Out of Reach 2016, shows the average renter income in the state is dwarfed by the amount needed to live in a modest two-bedroom apartment. An apartment is considered affordable if it costs 30 percent of a household’s total income or less.

Minnesota ranks No. 22 in the nation for the most expensive place to rent, making it one of the priciest states in the Midwest, according to the report.

In the Twin Cities metro area, a one-bedroom unit rents for an average of $943 a month, but that number shoots up to more than $1,000 in many Minneapolis neighborhoods, according to a new report by Minneapolis-based Marquette Advisors.

The average Minnesota renter can afford just under $700 a month with a full-time job, according to the National Low Income Housing Coalition. Meanwhile, people who earn the state minimum wage of $9 per hour can’t afford a fair-market value apartment in any Minnesota county, the data show.

State, city and county officials have for years set lofty goals to boost housing affordability. The Met Council projects that more than 37,000 affordable housing units need to be added to the seven-county area between 2020 and 2030 to meet demand.

But the region is averaging much lower than that. In 2014, 759 affordable units were built – the lowest recorded number in the Met Council’s data to-date.

While neighborhood pushback can sometimes delay or stop a project, much of the backlog comes down to money, said Alan Arthur, president and CEO at Minneapolis-based nonprofit developer Aeon.

“To prove that siting is not the problem, every single dollar that the Minnesota Housing Finance Agency has for affordable housing gets spent every year,” he said. “They must have 45 applications for every 15 projects they fund … if not more.”

When Aeon opened the 90-unit Rose mixed-income complex at 1920-1928 Portland Ave. in Minneapolis, 1,000 applicants lined up for 47 low-income apartments, Arthur said.

Developers and real estate professionals face a competitive marketplace for the grants and tax subsidies that make workforce housing possible. In large part, the funding squeeze stems from reduced federal housing dollars, which puts more pressure on state agencies to fill the gap.

But the state alone isn’t likely to solve the problem, Klimenko said.

“I think most people realize that either local government or state government can’t fill that gap,” he said. “How do we reinvigorate … the dollars coming from the federal government to help?”

Throughout the state, affordable housing funding has been a hot topic as the Minnesota Legislature narrowly failed to pass a bonding bill before the session ended last month.

Gov. Mark Dayton and the Senate earlier this year proposed $90 million for housing in this year’s bonding bill, which would have helped construct, rehabilitate or maintain 3,500 units around the state.

The House’s package didn’t include housing dollars until a last-minute compromise of $45 million was reached, but the proposal failed to pass out of the Senate in the final minutes of the session.

Housing advocates are waiting to see if the governor calls a special session to iron out details on bonding. If he does, it’s time to get serious about the problem that isn’t going away on its own, said Chip Halbach, executive director of the Minnesota Housing Partnership.

“Lack of basic, decent, affordable places to live plays out in many, many ways,” he said, noting that there are economic and social implications for people who can’t afford housing. “It behooves us all to pay a little more attention to it.”

Related content:

• Out of Reach 2016 report
• House sidelines housing, roiling advocates
• Green Line affordable units level off