Here's why it now costs more than $1,000 to rent a Twin Cities apartment - Bring Me The News

Here's why it now costs more than $1,000 to rent a Twin Cities apartment

Landlords looking to capitalize on wealthier tenants have contributed to rising rental prices in the Twin Cities.

If you're an apartment renter in the Twin Cities, chances are you've seen your rent go up at some point in the past five years.

It's part of a rising trend seen since 2010, according to the "Sold Out" report by the Minnesota Housing Partnership, which found the rise in rent is being caused by a huge increase in the sale and renovation of apartment properties across the metro area.

And because more people who earn higher wages are turning to renting, property owners are charging them more. As a result, these apartments become less affordable for lower-income renters, and in some cases causes them to be displaced.

We'll break down the details from the report below.

There aren't enough rental properties

In 2014-15, some 21,500 multifamily rental units were sold, an increase of 165 percent on five years earlier. The report also notes there has been a boom in the construction of luxury apartment complexes during that time.

Despite there being an increase in construction, rental property supply is still incredibly tight, with a 2.3 percent vacancy rate even though the numbers of lower-income renters have remained relatively stable.

This is because of a nine percent rise in people entering the rental market since 2010, some of whom did so after losing their homes to foreclosure during the financial crisis.

And landlords are capitalizing on a 31 percent increase in renters earning more than $50,000, which in turn has contributed to a 16 percent rise in average rents – to $1,046 – at a time when wages for low-income families have not kept pace.

Another factor in rising rents is the amount that people are now paying for apartment buildings compared to 2010, since when the average unit price has risen 56 percent to $87,700.

"While not all apartment property sales resulted in a loss of affordability, in the region’s tight rental market many property owners can raise rents without seeing their vacancies increase," the report says.

"In most Twin Cities communities, new and existing apartment property owners are charging more for rent, with or without making improvements to their properties."

The Crossroads impact

The report cites an example of the impact apartment property sales can have on current residents, referring to the sale of the Crossroads at Penn complex in Richfield last year.

The report says the 698-unit complex had provided "reasonably priced apartments to nearly 2,300 residents in Richfield," but after it was sold, upgraded, and rebranded as the "Concierge Apartments," rent went up 40 percent.

The new rents were "far above what was affordable to most of the residents," and with the new owner also no longer accepting Section 8 housing vouchers, more than 1,000 people were displaced.

The report does note there are positives resulting from the sale and upgrading of apartment buildings, namely they are preserving the life of these buildings and changes perceptions of rental housing. But it comes with the cost of less affordable accommodation, displaced tenants and less-diverse communities.

So, what's the answer?

The report says the loss of unsubsidized affordable rental homes "threatens the stability of low-income families" across the Twin Cities, and as such there needs to be an effort to encourage developers to build new, non-luxury rental housing – whether subsidized or market rate.

This could "relieve the upward pressure on rents in a period of extremely low vacancy rates," the report said.

Help is coming in the form of the Greater Minnesota Housing Fund's "NOAH Impact Fund," which is being used to preserve the state's stock of unsubsidized affordable housing.

It has only been set up this year, but so far has been used to preserve 1,000 of the 167,000 rental units in the Twin Cities consider affordable.

The Star Tribune notes Minneapolis Mayor Betsy Hodges has set aside $1.5 million in the 2017 budget to help preserve affordable housing.

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