I still remember the feeling of taking the Blue Line light rail for the first time in 2004. Gliding on rails high over Highway 62, looking out over the river valley, zipping toward the city, it felt like the urban future had arrived. Minneapolis, a city that had long shirked away from density, was turning a corner.
The plan was that efficient, comfortable transit between downtown and the airport would bring more people into South Minneapolis without the corollary of car traffic. Because the Blue Line was built in the middle of the wide Hiawatha corridor — featuring acres of parking lots and sparsely-used industrial land — there was plenty of room for the neighborhood to grow along with the rail traffic.
That was 18 years ago. And ever since, for the most part, the pace of transit-oriented development has seemed glacial. According to Metropolitan Council studies, more than 12,000 new apartments have been built along the Blue Line since its opening. But if you glance at a map, the vast majority of this construction has been downtown, or else subsidized in some way. For most interstitial stops along Hiawatha, south of downtown, there’s been very little new housing construction. Even the rosiest development booster would have to admit it’s been a slow climb.
Things are changing. The pace of housing construction has quickened over the last few years in South Minneapolis’ Longfellow neighborhood. Within a few blocks of the 46th Street station, four miles southeast of downtown, a half-dozen new projects boasting 500 new apartments have been completed since 2019. At the corner of 46th Street and Minnehaha Avenue, a landscape that was once gas stations, parking lots, and windowless warehouses resembles a real city.
An acute housing shortage
“We’re trying to build small units in nice neighborhoods, and make them look really nice,” said Sean Sweeney, a principal at Hall Sweeney Properties, which recently opened a new 126-unit apartment building on the corner. “Most of our tenants are young people, where it’s their first or second apartment.”
Sweeney has been in the housing business for 20 years, working in California before coming to the Twin Cities. The Wakpada (Dakota for “the creek”), an apartment complex at the corner of 46th Street and Minnehaha Avenue, is the second Longfellow project he’s worked on.
All the new housing is important because the Twin Cities has the most acute housing shortage in the Midwest. According to the regional demographers, the metro needs to build 50,000 new homes to meet existing demand and keep costs from spiraling ever higher. Even with Minneapolis’ brisk pace, the Twin Cities is nowhere near that level.
The disconnect between demand and supply has long made me wonder why some parts of the city see significant new housing construction and others can go half a century without any new apartment buildings at all.
I was curious: Why did it take so long for housing to be built by the Blue Line stop? And why does housing construction seem to happen all at once?
“We had the confidence to move on it, frankly, because of the success of MN46 and Lowa46,” Sweeney said, referring to two nearby projects. “Those were the first two projects at 46th and Minnehaha that came online, and both did really well.”
To be fair to the Blue Line transit-oriented development, new housing was not completely foreign to the area. Oak Station Place, a four-story, 104-unit mixed-use project across Minnehaha Avenue, has been around for almost a decade. Elegantly wrapped around a transit station, and featuring patios and public space, it set a high bar for development in Longfellow. But it took a long time for others to follow.
According to Sweeney, the reason is simple. After many years of roughly tracking inflation, rents in Minneapolis started going up, and that’s driven a development boom.
“It really boils down to rent levels in every neighborhood,” Sweeney said. “Historically, rents in (Longfellow) were too low to justify much new construction. Few projects worked here (and so) while there were a few things built 10 years ago, you didn’t see a large boom. But area rents have grown, which allows new construction to be feasible.”
It’s true that Minneapolis rents have increased more quickly since about 2015, though not nearly as much as in other parts of the country. During that period of economic fluctuation and the housing shortage have made rents more volatile in many Minneapolis neighborhoods. If it sounds economically clinical, that’s because it is. Developers need to raise funds from investors and take on loans from banks, and the rent numbers, along with data from nearby projects, allow that to happen.
But once a neighborhood hits that threshold, housing can arrive rather quickly, and with a tight rental market and high demand, the apartments go fast. Sweeney’s Wakpada building, open for a few months, is already 85% leased.
The other promising trend for South Minneapolis housing is that the parking to unit ratio is going down, which is good news for the climate. The Wakpada only has 73 parking spots, much less than one spot per apartment. That represents a big change from how buildings were designed and marketed in the past.
“I’ve been doing this for 20 years, and it used to be that if you didn’t have at least a parking spot for every unit you weren’t going to lease those units,” Sweeney told me.
The fact that a development, this far out of downtown, can be successful with so little parking is a good sign if Minneapolis wants to achieve its ambitious climate goals. And because the average parking spot costs over $30,000 to construct, reducing parking allows the rents to go down, which is especially appealing for tenants these days.
“Life in Minneapolis is still mostly car dependent, but it is starting to change,” Sweeney said. “People are beginning to understand the benefits of walkability and transit.”
While the bulk of the new construction has been centered around the downtown and University of Minnesota campus areas, some of the development has begun to expand outward into Minneapolis’ traditionally single-family areas. The zoning changes made by the city’s 2040 Comprehensive Plan make this kind of infill density even more likely to occur.
But that requires investors and developers eager to build on Minneapolis’ parking lots and gas stations. And if Sweeney is right, those days might be coming to a slow halt. Inflationary costs, the labor shortage, and a slowing real estate economy due to higher interest rates is having an effect, and Sweeney sees the pace of construction slowing down.
One of Sweeney’s biggest complaints is that the city’s higher sidewalk closure fees, charging daily fees for blocking rights-of-way during construction, increased costs for the Wakpada by around $100,000. Similarly, he predicts that any city rent stabilization provisions are likely to put an additional damper on housing investments.
Most likely, housing will continue at a slow pace, not as much as the city needs. Sweeney and his partner are now working on a 204-unit housing development on 36th and Nicollet, on the former site of an auto parts strip mall. In its place will be a six-stories of apartments, set to begin leasing in about a year.
“The good and bad of working here is that it’s a very steady market,” Sweeney told me. “You don’t have huge (price) increases, but the bottom rarely falls out either. Some other places boom and bust, (but) this a nice place to be a developer.”