Explaining the multifamily housing boom in the Twin Cities suburbs. (Yes, there is one.)

Picture the suburbs. What do you see? Cul-de-sacs? Big homes with attached garages amid expansive, carefully manicured lawns?

In a lot of cases, that’s not far off the mark. But it’s also not the whole story: Increasingly, suburbs around the country are making room for a different kind of development: multi-family homes: Apartments, duplexes, triplexes and fourplexes.

In 2017, communities in the Twin Cities metro permitted more than 15,200 new housing units, an increase over 2016 and a high not seen since 2005, according to building permit survey data from the Metropolitan Council collected since the 1970s. But it's not just home construction generally that's been on the rise. Multi-family home construction as a share of residential construction is up. In 2017, multi-family units made up more than half of new residential units permitted — a number that’s been on a general upward trajectory in recent years.

Much of the new construction is familiar to city-dwellers: These are the high-rises that have claimed spots in neighborhood skylines, and the new duplexes, apartment buildings and other multi-family living spaces tucked into neighborhoods across communities.

But the cities aren’t the only place seeing an increase in multi-family construction: the suburbs have seen it, too.

Prior multifamily boom

As a share of permitted housing units, multifamily housing has ebbed and flowed in the Twin Cities. After seeing a general decline in the early-to-mid 2000s, Twin Cities communities have tended toward resurgence in multifamily home permits since about 2010, as the economy was recovering from the Great Recession.

Multifamily increased from making up 20 percent of new units constructed in Twin Cities suburbs in 2009 to about half in 2017 (for these purposes, the suburbs include Anoka, Carver, Dakota, Scott and Washington counties, and all communities in Hennepin and Ramsey counties except Minneapolis and St. Paul).

This isn’t the first time the suburbs have built up. The 1970s also saw a relatively high share of multifamily permits, too.

When you look across the seven-county Twin Cities metro the increase in multifamily housing varies by suburban county, but in general the share of new residential units permitted that were multifamily has risen in recent years. The metro’s urban centers, Minneapolis and St. Paul also saw increases in multifamily housing.

Multi-family units permitted in Twin Cities, 1970–2017
Charts show the percentage of all permitted housing units that were multifamily units. Note that this includes multiple units in the same development.
Anoka
Carver
Dakota
Hennepin (not Minneapolis)
Ramsey (not St. Paul)
Scott
Washington
Minneapolis
St. Paul
Source: Metropolitan Council

The numbers shown are housing units permitted — so 100 apartments in one complex would each count as a unit, as would a single-family home. Multi-family, in this case, includes apartment buildings, duplexes, triplexes and quadruplexes. Townhomes are not included; they are counted as single-family homes.

The 1970s boom in suburban multifamily development may have been due to general flight to the suburbs: the 1950s through 1970s saw many people — in particular, white people — move from the cities to the growing suburbs.

In raw numbers, there were actually more multifamily units permitted in the 1970s and mid-’80s than there are these days, but there was a lot more construction in general then than there is now, too.

The Twin Cities were also known, along with parts of New Jersey and California, for providing incentives at times to distribute rental and affordable housing outside as well as within the urban core, said Christopher Niedt, the academic director of the National Center for Suburban Studies at Hofstra University.

Millennial and boomer-driven

Today, the drive for multifamily in general, including in the suburbs, is largely driven by two different demographics: millennials and baby boomers.

Many millennials came of age in the recession and don’t quite have the financial capacity (or don’t want) to  buy a traditional single-family home, even as they start to get married and have kids.

“They maybe have done more of the large metropolitan area living and now are seeking more space,” said Chris Osmundson, the director of development for Alatus LLC, a Minneapolis real estate development firm that is currently working on Rice Creek Commons in Arden Hills, which will include multi-family housing, among other projects. Young families might be able to get more space in an apartment in the suburbs than in the cities for the same price.

These days, there’s a big demand for new homes, but as the materials for building them and other associated fees have risen, new construction is harder for most people to afford.

“Single-family homes are more expensive than multi-family, and if people want new construction, most people have a budget and a price point they want to fall within, and it can be challenging for folks,” said Jeff Bergom, director of sales at Minneapolis-based Ron Clark Construction and Design, which largely works on multifamily developments. “That’s where the multifamily piece has come in nicely. You can get a really nice style of multifamily ... that in most cases is more affordable than a single-family.”

And then there’s the matter of maintenance. Owning a home means mowing the lawn, maintaining the exterior, and in Minnesota, shoveling snow. As people’s lives get busier, many are looking to dump some of the extra maintenance, an option multi-family homes maintained by associations provide, Bergom said.

That goes for baby boomers, too, who might want to downsize once their kids leave home, to travel more, and to not worry about mowing the lawn and scraping icy sidewalks.

Living differently

The fact that multi-family units are making up a big share of new homes these days may be similar to years past, but in some ways, many the multi-family developments going up in the suburbs today are different than the ones built in prior decades.

Whereas those complexes might have been residential only — just apartments, just condos — “We’re seeing an increased movement toward-multi-use developments,” Niedt said.

Mixed-use developments are characterized by combining commercial and residential features. At City Walk in Woodbury, for instance, there are restaurants, a coffee shop, among other shops, and a playground within walking distance of and at ground-level below housing.

“Partly that reflects a mainstreaming of what used to be called the smart growth movement, a movement of planners and architects and environmentalists who for many years have been advocating for compact mixed-use development and walkable communities,” Niedt said

For some living in suburban multi-family developments, that means not necessarily having to get in a car on Saturday morning to grab a coffee or exercise.

“We’re starting to see some shift in consumer demand ...we’re starting to see people’s preferences shift towards the type of lifestyle that this mixed-use development can provide,” Niedt said.

Pros and cons

Multifamily developments don’t always go over well with neighbors, not in the urban core or in the suburbs.

This month, the Edina city council rejected a plan for a seven-story complex that would have included retail, office space and 135 apartments — some available to families with 60 percent of the city’s median income — near Southdale Center. Neighbors opposed the height of the development, and a city council member cited concerns that the project didn’t also develop a site next door, the Star Tribune reported.

Sometimes, when multifamily developments are proposed in the suburbs, residents worry about negative effects on their property values.

A 2005 study by the Massachusetts Institute of Technology’s Center for Real Estate found that “the introduction of large-scale, high-density mixed-income rental developments in single-family neighborhoods does not, in fact, affect the value of surrounding homes.”

Many suburban cities are increasingly eager to embrace density: generally speaking, the more homes on a plot of land, the higher the tax revenue and the less expensive per unit to serve with utilities and other city services, Osmundson said.

For some cities, tax revenues generated by these bigger developments can pay for the city services they need, yes, but in some cases also subsidize services in other parts of town.

Not all affordable

Almost certainly, the boom in multi-family housing in the Twin Cities suburbs has given more people more home buying and rental options outside the urban core. There are homes to suit more budgets, more family sizes and varying appetites for home maintenance.

Since homes in multi-family developments are traditionally less expensive than single-family homes, it may be tempting to see the boom in apartment, duplex and other multi-family units as a good sign for housing affordability, Niedt said.

But many of the new units are luxury units with amenities that are not within reach of lower-income renters.

For lower-income families in the Twin Cities, the cost-burden of renting a home has increased substantially in recent years.

“At the national level, there’s been a multifamily boom, and we might think that’s a really good thing because we have all these new rental units coming online for people who need them, but increasingly, these new rental units are considerably more expensive than the units of 10 and 20 years ago,” Niedt said.

Comments (10)

  1. Submitted by Ray Schoch on 06/22/2018 - 09:53 am.

    Eventually

    …and maybe even within my lifetime, local community officials and employers are going to have to deal with the subtext to all this multi-family development. Housing costs – in this metro, and in many other metro areas – are rising far more rapidly than wages. While there are those willing to live many miles from where they work – the backups every morning and evening on I-35 and I-94 attest to this in quite dramatic fashion – beyond a certain point, “drive ’til you qualify” simply doesn’t work when the multiple costs of transportation are factored in.

    Zoning in some areas will have to change, and in the process, suburban-dwellers will have to be persuaded that a single-family home on 10,000 square feet is neither nirvana nor sustainable in either economic or ecological terms. They’ll also need to be disabused of the notion that the cost of one’s home directly correlates to one’s value as a person – a task that will likely prove to be more difficult than changing zoning, which will be difficult enough as it is.

    Growing families need space, and typically are not in the top quintile in terms of income, so developers whose primary focus is on “luxury” housing are doing nothing to address an increasing problem. Retiring empty-nesters need less space, and often want little or nothing to do with home maintenance. Addressing the housing issue will require politicians, planners, and citizens alike to think a little bit outside the box if the issue is going to be addressed constructively.

    • Submitted by Pat Terry on 06/22/2018 - 03:20 pm.

      Housing

      Part of the reason rents are so high in the cities is because the vacancy rate is so low. The demand exceeds the supply. Obviously, we need to add affordable housing, but even adding market rate and “luxury” multifamily housing does address the problem – just adding more units to the market reduces the supply and demand pressure, even if a lot of people can’t afford those new units.

      • Submitted by Paul Udstrand on 06/24/2018 - 09:24 am.

        Supply demand theories don’t always works

        This supply demand theory of housing prices simply doesn’t work. Unless you’re talking about seriously distressed cities like Detroit rents in cities always increase along with new development. This is why despite adding tens of thousands of units in MPLS and St. Paul rents keep gong up instead of down.

        Development is one issue, affordability is a different issue. Any community that want to be serious about affordable housing ends up talking about subsidies and rent control, the “markets” never solve the problem.

        • Submitted by Pat Terry on 06/24/2018 - 10:06 pm.

          Nonsense

          Actually, supply and demand always works. Always. This isn’t some radical economic theory. Its the most basic tenet of economics.

          Rents are going up in the cities because – despite the increase in building – demand still significantly exceeds supply. The vacancy rate is low, so its a landlords market. Until enough housing is built, rents will stay high. Cities that have built significantly have seen rents go down. It literally is all supply and demand. And building is the only way to fix it.

          It is true the market alone won’t create enough affordable/low-income housing, so there should be subsidies/incentives to get developers to do that. Rent control doesn’t work, though. It actually reduces the number of affordable housing units because landlords will sell or take units off the market to avoid operating at a loss. Its a band-aid solution that won’t fix the fundamental supply and demand problem.

          • Submitted by Paul Udstrand on 06/25/2018 - 09:07 am.

            It’s very simple…

            Pat, why don’t you just give us three examples of cities where rents and property value have been driven down by new construction?

            These appeals to supply and demand are faith-based economics. Sure, when markets collapse, prices can collapse along with them, but that’s not “supply and demand”.

            The only universal rule of pricing in capitalist economies is that you always try to charge as much as you can. This is why some tennis shoes cost $100, it’s not because they aren’t making enough shoes to meet the demand. There are very few circumscribed instances where supply and demand actually functions as most people assume it does. For instance, scalping tickets, when the demand and disposable income are great enough, ticket prices are driven up by demand. However almost any other scenario is far too complex to be explained by supply and demand theory, and housing prices are one of those complex scenarios.

            Even in situations where something like technology (cell phones for instance) become more affordable over time, it’s not a product of supply and demand. Apple doesn’t keep it’s prices higher than everyone else by manufacturing too few phones to meet the demand. And when prices drop it’s not a function of supply demand ratios, it’s function of changing economies of scale when production is ramped-up.

            Commodity markets, like crops and to raw materials are supply demand markets, but housing isn’t a actually a “commodity”.

            Housing prices defy supply and demand theory for several reasons. If you wanted to drive prices down with new construction for instance, you’d have to dump tens of thousands of units into most markets all at once, and even then, most owners would be willing to live with vacancies until they can get the prices they want. Owners that are willing to lower prices rather than live with vacancies tend to slum lords like the ones that just lost their rental licenses in MPLS. The effect of building booms is to drive and values and prices up, and the whole point, builders don’t build in order to make less money or to drive property values down. Even when bubbles burst you don’t get affordable housing, you get vacant properties that banks just sit on or cities end up having to take over and demolish.

            So no one should be expecting all this building will somehow magically lower rents or produce affordable housing, it just doesn’t work that way.

          • Submitted by Dean Carlson on 06/25/2018 - 03:20 pm.

            Seattle is one Example

            See this.

            https://www.seattletimes.com/business/real-estate/seattle-area-rents-drop-significantly-for-first-time-this-decade-as-new-apartments-sit-empty/

          • Submitted by Paul Udstrand on 06/29/2018 - 08:16 am.

            Two quick points

            Thank you Dean, I’ll make two quick points: 1) Yes, rents have gone down a little in Seattle (temporarily) because of they’ve overbuilt, but it’s not a sustainable downward trend, it doesn’t mean property values are “dropping” or that Seattle is becoming a cheaper place to live. 2) Those rents are NOT dropping into any “affordable” range in terms of “affordable housing”. Seattle remains one of the highest rent cities in the country. Some landlords may offer signing bonuses for new leases, and somewhat lower rents for a while, but they fully intend to raise those rent and make up the difference in the future, they’re not trying to make their apartments more affordable.

            The supply-demand claim argues that building booms are a pathway to affordable housing, not that overbuilding can drop rents a little now and then, until vacancies drop. Building booms NEVER produce “affordable” housing for any sustained period of time, this is why housing in America remains so unaffordable, and homelessness is at record highs, despite decades of building. Yes, there is such a thing as a housing “bubble”, but that doesn’t mean supply and demand dictate housing prices.

  2. Submitted by Diggitt McLaughlin on 06/22/2018 - 08:36 pm.

    Housing for young adults or adult groups

    In the large coastal cities, young singles and couples without kids are finding life better if shared with a small group. This is not the largest demographic choice of the age group, but a significant number of them are making the choice. So far, none of the housing types available in this region permit that.

    City zoning often precludes more than three unrelated adults sharing a dwelling, for instance. Most often, a group that would prefer this choice finds itself ONLY able to choose a substandard building, or one in a neighborhood that otherwise offers no support. I would like to see it recognized as a reasonable lifestyle and addressed by some adventurous city council.

    As a healthy person in my 70s, if that kind of communal housing could be created affordably, I’d move there in an instant. Not all seniors are only waiting to prepare to die, y’know?

    • Submitted by Pat Terry on 06/24/2018 - 10:07 pm.

      Yes!

      This is absolutely right. That kind of zoning regulation needs to be removed.

    • Submitted by Paul Udstrand on 06/25/2018 - 09:20 am.

      Zoning?

      Zoning can certainly be an issue, but I think in the real world space rather than zoning enforcement; limits the number of people living a single dwelling. Many zoning requirements are not very enforceable, in general you’d have to have a neighbor file a complaint and that’s usually a symptom other kind of problem. In practical terms, multiple unrelated occupants means multiple renters, and no one’s going to pay rent for a half a bedroom in a 900 sq foot apartment shared by 4 or 5 other people. I doubt that’s the dream of communal living most 70 years old’s have in mind, and typically that kind of living is what college students endure for the first year or two in student housing… it gets old quickly and I don’t know any college grads who want to return to it after college.

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