According to U.S. Census data released in September 2021, the Twin Cities has the worst housing shortage in the country. And the issue is not simply a housing shortage — it is a lack of affordable housing.
Every year, the Department of Minnesota Housing agency receives proposals from housing developers for thousands of new multifamily units or apartment homes, but can only finance one in every three or four of the proposals. According to Minnesota Housing Commissioner Jennifer Ho, the projects are lined up, but funding is allocated from the state legislature and federal government each year. There is not enough funding to keep up with the demand.
“We may have the development capacity in the state, but not the resources to make every good project happen,” Ho says. It will take years of increased investments to close the gap on the housing shortfall in the state.
Ho says Minnesota needs more housing of every type and price point. The greatest shortage of housing is for low-income households, which earn less than 30 percent of an area’s median income. The data, Ho says, shows that 80 percent of these Minnesota families are spending more than 30 percent of their income on housing; 63 percent of these households are severely cost burdened, putting more than half their income into housing.
Minnesota Housing continues to push for increased development resources from the state. Every year, the agency issues a Consolidated Request for Proposals, which is an invitation to multifamily and single-family home developers to send their proposed developments — both new construction and rehabilitation, or preservation, of existing homes. “While the last two years of selections have been the largest in agency history, we know more needs to be done,” Ho adds.
Breanne Rothstein, economic and housing director for the City of Brooklyn Park, echoes Ho’s concerns with funding to meet demand. As she wrote in a column for womenspress.com: “A common misconception about housing is that its primary purpose is to create homes for people. In reality, the primary purpose of housing development is to make money for investors. … If we want to change this reality, we have to be willing to explore actions that remove housing from the commodity market. These actions would be supporting nonprofit ownership, making conversions to co-ops or condos, and enabling more public and land trust ownership.”
One way that the state attempts to encourage more low- income housing is through its Housing Tax Credits (HTC) program, which offers investors a ten-year reduction in tax liability in exchange for funding to build affordable rental housing units.
The HTC program is widely used, but Rothstein says it has limitations and does not get at the root of the crisis. “But if we want a bunch of queued-up and approved projects to get through, this is the best immediate thing we can do,” she says.
A creative solution to the housing crisis, Rothstein says, would be to convert hotel rooms into affordable housing units. “Take 40 to 60 percent vacant hotels — they could be the long- term solution,” she says. “We would keep people together for community purposes, services would be provided efficiently, and immediate needs for immigrants and refugees would be addressed.”
One solution is being developed by the Stable Homes Stable Schools program, which is a collaborative partnership between the City of Minneapolis, the Minneapolis Public Housing Authority, Minneapolis Public Schools, Hennepin County, the YMCA, the Pohlad Family Foundation, and other philanthropic partners.
“The program is focused on the Minneapolis public elementary schools with the highest rates of homelessness. It seeks to increase housing and educational stability of elementary school students and their families through monthly rental assistance or one-time emergency assistance and wrap-around services,” says Andrea Inouye, director of strategic partnerships for the City of Minneapolis. It started as a pilot in 2019 and is now part of the City of Minneapolis’s 2021 budget.
Additionally, Inouye says the Envision Community program has assisted people transitioning out of homelessness. “It is a collaborative effort to create an intentional community that is designed and led by residents with lived experience of homelessness,” she says. “Minneapolis 2040 allows new forms of intentional community cluster housing to house people transitioning out of homelessness, which makes the Envision proposal possible from a land use perspective.”
Solutions for Inequities
Inouye emphasizes that racial equity and economic justice also must be considered prominently in solving the housing crisis. “Minneapolis has one of the worst homeownership disparity gaps in the country — the difference between the percentage of white homeowners compared to the percentage of Black, Indigenous, and people of color (BIPOC) homeowners,” she says.
Inouye says Minnesotans can combat the crisis by working to make affordable housing a priority in their own communities. “Show up and say ‘yes’ when a new development is proposed in your neighborhood or city,” she says. “Advocate for more funding at local, state, and federal levels.”
Getting involved at every level is vital to solving the housing crisis, says Ho. “The state’s housing efforts would not be possible without partners from every sector. State government funding is one piece of the puzzle, but it requires the actions of private and nonprofit developers, county and city governments, lenders, local nonprofits, and social service providers to bring development to life,” she says.
Getting neighborhood support is crucial. “Speak up for housing developments proposed in your community, especially for multifamily developments that will be affordable,” Ho adds. “The private market is successful in creating market-rate and luxury apartments, but does not finance more affordable homes well because the deals do not [make sense financially]. Community opposition can get in the way of building the homes that let people stay in their own communities as they age or housing needs change.”
In the upcoming legislative session, representatives will be debating how to spend an unprecedented $7 billion surplus. Some will push for tax cuts for all. Others will want to invest in underfunded programs, such as housing, mental health, and education.
The Minnesota Housing Partnership, an advocacy organization, is suggesting $1 billion be dedicated to build and preserve homes — affordable rentals to improve the condition of housing stock — and $1 billion for access and opportunity, such as rental subsidies, homeownership counseling, and down payment assistance.
In a Tight Rental Market
Saint Paul recently became a model of a successful rent control campaign for cities across the country. A few years ago, Housing Equity Now St. Paul (HENS) started working to pass tenant protections, such as establishing security deposit limits and requiring property owners to provide advance notice to renters before selling a building — previously there had been no requirement. There was one major issue that continued to plague renters: increasing rent.
“People would ask, ‘Is there anything that will protect me from my rent going up $400 or $500 per month?’ And, no, that was legal,” says Tram Hoang, HENS campaign manager. “Prior to rent stabilization passing in 2021, there was no city, state, or federal law to protect renters from egregious rent increases.”
Like most housing inequities, this issue disproportionately affected low-income renters and renters of color. Homeowners and renters alike were noticing that friends and neighbors were having to leave because of rent increases. “Saint Paul is such a wonderful place to live,” Hoang says, “How [could] we make sure that the people who make it wonderful are able to stay?”
She goes on to answer her own question: “By following the lived experiences of those who have struggled with housing instability, by listening to people and understanding what they need in order to have stable housing, rather than assuming that we know what people want.”
Hoang says the campaign was a people-led movement — people talking to their neighbors about rent stabilization and what that would mean for their ability to put down roots in the community. As a result, in the 2021 elections, “Saint Paul passed one of the most progressive rent stabilization ordinances in the country.”