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Amid an apartment boom, a shortage of affordable options

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Kitchen in one of the Penfield apartments
The kitchen in a second floor, one bedroom, one bathroom apartment in the new Penfield Apartments in downtown St. Paul.
Tim Nelson / MPR News

The Twin Cities are in the midst of an apartment boom.  Demand is strong, and while that's good for developers and investors, the rising monthly cost of renting an apartment is making it increasingly difficult for people of limited means to find an affordable place to live.

Those who can afford shiny new living quarters have plenty to choose from. 

The 36-story LPM Apartments is nearing completion just east of Loring Park in Minneapolis. The building boasts amenities including a yoga area, game room and indoor dog run that even includes a pet washing station. 

At 5th and Nicollet, the luxury highrise Nic on Fifth features a rooftop deck with a pool and bar. Basic studio apartments in these buildings rent for $1,400 to $1,600 a month. The most expensive will set you back around five grand. 

There are also new high-end rentals in Dinkytown, the Uptown area, and in St. Paul. 

Chip Halbach, executive director of the Minnesota Housing Partnership, says apartment construction in the Twin Cities rose 70 percent in the last year. He says all the new luxury apartments on the market are just one reason that earlier this year, the average cost of a rental unit in the metro reached $1,000 a month for the first time, according to data from Marquette Advisors, a real estate consulting firm. 

Halbach also says demand from young professionals, empty nesters and people unable to qualify for a mortgage is also pushing prices up. Halbach says demand for less expensive market-rate apartments is strong too, but the supply of those is shrinking.

"The apartments around that rent for $650 a month or less, which is the really affordable stock, declined this last decade by one half," he said. "So you've lost some 70,000 apartments during that decade that were most affordable."

Halbach says that's because rents rose on existing apartments, or the buildings and land were put to other uses. He says the vacancy rate for apartments under $1,000 a month is just 2.2 percent, meaning there are few choices for people whose wages aren't keeping up with the cost of living.

"People just do not have the incomes to pay for the housing that's out there or the new market rate housing being created," he said.

At the Naomi Family Center -- a homeless shelter in downtown St. Paul -- program director Pat Watkins says she sees the effects of the housing crunch first hand. Watkins says about a dozen of the families who live at Naomi are awaiting placement in permanent housing. She says Naomi's Housing Plus transitional program was set up for 30 to 60-day stays, just long enough to find an apartment and move in. But today people tend to stay at Naomi much longer.

"We have some who have stayed 90 days, we have some who have stayed 100 days, and that's because it's been hard for them to find housing," she said. 

Naomi Center case manager Peggy Krause says there's such high demand for affordable housing that the Twin Cities Housing and Redevelopment Authority stopped accepting new applications for Section 8 rental vouchers years ago.

"The list is so long from applications they got all those years ago that people are still on the list waiting for them," she said.

The HRA says there's a 5 to 7 year waiting list to get a section 8 voucher. 

However, housing advocates say Minnesota's elected officials have recognized the severity of the problem. This year state lawmakers and Gov. Mark Dayton approved a bonding bill that includes $100 million for affordable housing projects across the state.