For the last two years, I’ve been watching the rise of a six-story apartment building a few blocks from my house. Now called “The Nine,” the mixed-use building boasts 309 new apartments, now leasing with rents ranging from an income-restricted studio for $995 to $2,375 for a two-bedroom. The black-and-white building occupies a spot along Lexington and University that’s been vacant since at least the 1960s, so to me it’s a sign of progress.
The Nine marks the first market-rate apartment project in greater Frogtown for at least a half-century, meaningful because it can be hard to be the “first” development in a long neglected area. (See also: Minneapolis’ Seward neighborhood.) The housing also reflects the kind of change that many city leaders had hoped might be a fundamental part of transit investment in St. Paul, new housing catalyzed by the Green Line light rail investment along the long-neglected University Avenue corridor.
The other big takeaway around the building’s completion is that it takes an awfully long time to build new housing in this country. I first heard about this project in 2019 when it was just receiving grant funding from the Met Council, money that was later refused by the city due to anti-housing neighborhood advocacy. As I wrote in 2020, it was hardly smooth sailing from there.
The project (then known as Lexington Station) was one the last contentious cases in my nine years on the city Planning Commission, which denied it in 2021 (despite my objections) before the City Council also denied approval. Mayor Melvin Carter then vetoed the denial, allowing the building to move forward, though by that point the original financing was in jeopardy. The eventual resolution over approval for the apartments revealed how tortured local control can become. (The project was merely a site plan review decision!) To me, it marked the beginning of a turn away from pro-housing politics in St. Paul.
Fast-forward four years, and things look a bit different. In 2021, Saint Paul approved (and then modified) a strict rent stabilization policy, and has since struggled to attract housing investment. Minneapolis passed an initial approval of a theoretical rent stabilization regulation that same year. There are many possible reasons for this, but enough time might have passed to allow the data to suggest a few trends.
Steep decline in housing
I ran the numbers from the Department of Housing and Urban Development database, analyzing housing production for every Midwestern* city over 120,000. I calculated the increases and declines in housing production from a post-COVID 2020-2022 average for 60 municipalities and was surprised to see that the city of Minneapolis has the largest drop-off in the entire dataset. Its 2024 housing numbers represented a decline of over 88% from its previous three-year average, and St. Paul is just behind, ranking #7 on the list with a 81% drop-off.
(I used my subjective geographic definition here, but also threw in Portland, Seattle, Pittsburgh, and Buffalo as useful Twin Cities’ ‘comparable’ cities for good measure. Another caveat is that HUD housing data for late 2024 is preliminary, and can be revised upward in the future.)
The idea that core-city housing is slowing down should not come as a shock. (See also my story a month ago on Met Council demographic data.) Earlier this year, Libby Starling, the Minneapolis Federal Reserve’s senior community development advisor, released a worrying report about the slow pace of housing construction in the Twin Cities and how it augurs trouble for housing affordability. The Fed’s research found that 2023 was the first time in years that housing supply goals had not been met, and 2024 data looks to be much worse.
Locally, most conversations I’ve had around housing have pointed to national economic dynamics like high inflation and housing costs, while also mentioning the lack of rent growth in the Minneapolis market (an admittedly good outcome). But that does not seem to explain the whole picture, where Minneapolis and St. Paul show declines even relative to similarly-positioned cities.
From one perspective, it should be surprising that Minneapolis and St. Paul should show the largest housing construction declines, as both cities have been national leaders in zoning code reform. The (now officially unchallenged) Minneapolis 2040 Comprehensive Plan reforms were legitimately groundbreaking, and theoretically allow for an easier path toward approval for new construction than you find in many other cities (at least in ones in “blue states”). St. Paul’s reforms, passed a year later, were arguably more sweeping in loosening restrictions around single-family-only zoning.
By contrast, cities like Denver, Seattle and Milwaukee haven’t made these kinds of zoning reforms. For example, they all still have parking minimums on the books, probably the reform with the easiest “bang for the buck” of anything cities can do. St. Paul and Minneapolis got rid of theirs years ago, removing one costly requirement from the books.
The most obvious culprit to me is that both St. Paul and Minneapolis have enacted (or taken steps toward enacting) rent stabilization policies. This was an issue that I argued about back in 2021, writing that the policy proposal appearing on the referendum would amount to St. Paul “redlining itself” when it came to attracting housing investment. The bigger surprise is that Minneapolis seems to also have been affected by concerns about rent stabilization, even though they haven’t actually enacted any actual policy.
The reason why rent stabilization (or the threat of it) affects construction lies in the risk analysis of housing lenders. While I don’t know much about the opaque world of development financing, but I can tell you that many sources of money are national in scale, and investors can easily “shop around” between cities that offer the easiest path to a return on their investment. Most developers will tell you that rent control is a fiscal red flag, and a significant percentage of investors will simply not deal with cities where rent stabilization is a possibility.
Admittedly, there are other concerns about investing in Minneapolis or St. Paul. What you think those issues happen to be reveals a lot about your politics, and it’s worth pointing out that the rapid pace of housing construction from roughly 2018-2021 in both cities (especially Minneapolis) created a rent bubble and led to a decrease in rent growth.
To my eye, none of those explanations account for why the drop-off has been so stark in Minneapolis and St. Paul compared to other midwestern cities, each of which has its own unique political, economic and COVID-related problems. Given the Twin Cities’ strong regional economy, steady investments in transit, pro-housing zoning changes, and record levels of low unemployment, there’s no reason why Minneapolis should be building fewer new homes than Des Moines, Little Rock, Cleveland, Tulsa or Fargo.
How should the cities respond?
Especially given the lack of actual pro-renter outcomes in either core city, from a policy perspective the best thing to do would be for both cities to repeal their rent stabilization programs. (They should do this “in fact” in St. Paul’s case, and “in spirit” over in Minneapolis.) But given the contentious nature of both referendums — a requirement of an onerous state law — that path seems politically impossible. It would likely take another referendum to remove rent stabilization from the books in St. Paul.
Barring a clean break with rent stabilization, passing something along the lines of Mayor Carter’s reforms to the new construction exemption seems like a smart move for St. Paul, in the hopes of avoiding the watering down of the city’s investment ambitions. The recent de facto downzoning at the Ford Site/Highland Bridge is a troubling sign.
Meanwhile, it seems like rent stabilization (and even the threat of it) have led to an alarming drop-off in housing production, which means that a well-meaning policy has backfired and is worsening the housing crunch for renters. Others may have other opinions, but if the Twin Cities wants to maintain its economic and climate momentum, something has to change. Given the long-term nature of housing construction permitting, I predict that next year’s housing decline will be even steeper.
Bill Lindeke is a lecturer in Urban Studies at the University of Minnesota’s Department of Geography, Environment and Society. He is the author of multiple books on Twin Cities culture and history, most recently St. Paul: an Urban Biography. Follow Bill on Twitter: @BillLindeke.
