Renting vs. Owning: A Profile of Minneapolis Housing Trends

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Minneapolis is the largest city in Minnesota and, together with its twin city St. Paul, constitutes one of the Midwest’s major metropolitan areas. It has long been a center of commerce, first as a hub for grain mills and the lumber trade, and more recently as the global headquarters for five Fortune 500 companies, including Target. The city is diverse, cosmopolitan, and home to a burgeoning tech scene.

Plus, it’s growing. Since 2010, Minneapolis has added over 30,000 new residents, according to the U.S. Census. In a city with a population of 413,651, that translates to 8% growth.

How does such growth affect the housing market?

Like many major metro areas, Minneapolis has a higher percentage of renters than the national average. Nationally, 37% of all housing was occupied by renters in 2015. In Minneapolis, that figure is 52.9% — and if the past five years are any indication, the percentage will only continue to climb.

Minneapolis has seen an increase in renters of 2.4 percentage points over the past five years, with the share of homeowners exhibiting a concurrent, complementary decrease. Aside from 2013-2014, the share of renters has increased every year since 2011. This matches the national trend away from ownership and toward renting — over the same time period, the national renter share increased 1.6 percentage points.

As the renter population in Minneapolis has increased, so have rent prices. In 2011, the median rent for a one-bedroom apartment was $819. In 2015, it was $912.

Interestingly, the decreasing homeownership rate in Minneapolis did not correlate to increased costs. Median homeowner costs actually decreased from 2011 to 2015, hitting a low of $1,538 in 2014 before rebounding to $1,616 in 2015.

As is the case in most of the country, in Minneapolis there is a wide income gap between renters and homeowners. Renters in Minneapolis make a median salary of $33,495, which is slightly less money than the national renter median figure of $35,863. Of those renters, 28.7% are under the poverty level, and 48.4% spend more than 30% of their income on rent.

Homeowners, on the other hand, make significantly more in Minneapolis than they do nationally — at $86,705, the median income for a homeowner in Minneapolis is almost $15,000 higher than the national homeowner median income. Only 2.92% of homeowners are below the poverty level, and only 24.7% of them spend more than 30% of their income on housing costs.

Homeownership in Minneapolis is disproportionately white, with 83.4% of owner-occupied units identifying as caucasian, despite making up 67.5% of the population. African Americans make up 17.3% of Minneapolis’s population and 27.8% of the renter base, but only 5.6% of homeowners are black. Hispanics constitute 6.1% of the population, 2.8% of homeowners, and 9.1% of renters. Asians are the only race/ethnicity whose representation in homeownership (4.9%) and renting (5.8%) is consistent with population share (5.4%).

Minneapolis is an increasingly diverse city, with several large immigrant populations — most notably Somalis, whose numbers in the city greatly increased after the Somali Civil War. But many of Minneapolis’s housing policies better reflect its more racially homogenous past than its heterogenous present. In recent years, the city’s affordable housing initiatives have been criticized for “clustering” low-income housing downtown, which can lead to income- and race-segregated neighborhoods. Such clustering significantly impacts Minneapolis’s schools, which are surprisingly segregated. According to the Minnesota Star Tribune, the majority of elementary schools in Minneapolis have student bodies that are over 80% minority — and while only 10% of white students attend high poverty schools, 62% of black students do.

Time will tell if the city’s economic and population growth will exacerbate the segregation alarming city planners and residents, or if the city’s progressive reputation will manifest itself in policy. One thing’s for certain, though: With a growing population of renters taking advantage of relatively low rents and high quality of life, Minneapolis’s urban core is primed for continuous change.

For press inquiries, contact Sam Radbil.

Methodology

We analyzed data from The U.S. Census Bureau’s 2015 American Community Survey 1-year estimates about occupied housing units in Minneapolis City, the primary city of the Minneapolis-St. Paul-Bloomington, MN-WI, Metropolitan Statistical Area. We calculated the percentage of occupied housing units that were renter-occupied during each of the previous five years and tracked median ownership costs and median gross rent over five years using the ACS table of Comparative Housing Characteristics for 2011-2015. Ownership costs include payments for mortgages, debts on the property, insurance, and utilities. (A comprehensive list of payments included in this estimate can be found on the ACS website.) Gross rent includes rent price together with an estimate of average monthly cost of utilities.