The Rise of the Renter: Part 1

by Camille Galles on 27 July 2014

This week kicks off a three part blog series examining the rise of the renter–not only throughout Minnesota, but across the nation.  Why are so many people seeking rental housing, and why does it matter?  What has (or hasn’t!) the government done to aid renters?  And lastly, how do we move forward?  What is the best course of action for local and federal housing policy?  Each week’s post will attempt to answer one of these questions.  This week, we breakdown current US and Minnesota population data, and explain where all these renters came from.

Today’s renters are unique because until very recently, most were homeowners.  Very successful homeowners too—until the housing bubble burst. But what is the housing bubble, and why did it burst?  Bubble conditions can occur in any economic market when prices don’t align with a consistent, long-term plan.  Because prices–or in case of the housing market, interest rates–are so good, people buy and buy and buy—until they can’t anymore.

In 2005/06, homeowners enjoyed peak home values. Attractive subprime mortgages triggered a strong housing market—too strong.  These mortgages were popular because of adjustable interest rate loans that began with low interest rates. After a few years, the interest rates increased, which meant that the lenders would ultimately benefit.   Unfortunately, these high rates forced most borrowers to default on their loans, resulting in NO payoff for the risky lenders.  Then in 2008, the average home price dropped a record 18%.  Combined, these two events resulted in an overwhelming rate of foreclosures.  As lenders started backing away from housing market, household spending decreased, which lead to a decline in business investment as well.  Most experts point to the housing crash as the source of the 2007-2009 American recession.

This created a crisis on Wall Street, but average Americans were hit the hardest.  Losing a home meant losing the majority of your wealth, as well the safety, security, and comfort of a roof over your head.  Families were desperately seeking more affordable housing—namely, rental units.  The housing market collapse put a stop to most single- and multi- family housing construction, and as families flooded the rental market, the supply could not meet the demand.  The struggle to find affordable housing was felt most keenly among low income populations, seniors, the disabled, and populations of color.

The housing market has started to bounce back from this crash, but the recovery has been slow and uneven.  For example, housing values in North Minneapolis, St. Paul’s Eastside and Frogtown (primarily black neighborhoods) lost as much as 57% of their home value from 2005-06 and 2013.  Additionally, the amount of people seeking rental housing remains significant.  In Minneapolis alone, 52% of people are renters—that’s over half the population!

Graph courtesy of The Homes for All Campaign of Right to the City Alliance

Graph courtesy of The Homes for All Campaign of Right to the City Alliance

And sixty six percent of low income renters spend 30% percent or more of their income on housing.  That 30% is significant—it is the upper limit of what families can spend on housing while still affording other expenses.  Minnesota renters are stretched tight, and they’re not the only ones.  As the following chart demonstrates, this problem persists across America.

Graph courtesy of The Homes for All Campaign of Right to the City Alliance

Graph courtesy of The Homes for All Campaign of Right to the City Alliance

Is there enough affordable rental housing to support these populations?  In Minnesota, the answer is no.  The vacancy rate for Twin Cities apartments priced under $1,000 fell by .1% since last quarter to 2.2%.  This means that are an extremely low number of units are  available, making it a struggle for families to find safe, affordable housing.  People with the lowest incomes and/or worst credit are often limited to renting places with terrible health and safety conditions.

Five years later, the housing market is still reeling from the housing crash.  Renters have become a large and important presence in Minnesota and the nation’s population, but there are too many renters paying too much for housing.  And just like homeowners, they deserve safe and affordable places to sleep at night.

Next Up: What has the government done for renters since the housing crash?     

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The Livability of Minnesota’s New Minimum Wage

by Camille Galles on 20 July 2014


Governor Dayton signed a new bill raising minimum wage in the State Capitol on April 14th. (Tom Scheck/MPR News)

Governor Dayton signs a new bill raising minimum wage in the state Capitol. (Tom Scheck/MPR News)

On April 15th 2014, Minnesota Governor Mark Dayton signed a bill that officially increases the state’s minimum wage.  Although the wage increase is a government mandate, workers will not see their paychecks grow overnight.  Rather than automatically spiking, the wage increase will be slowly phased in.  Gradual increases over two years will result in a final $9.50 hourly minimum wage by 2016.  The first increase begins on August 1st, 2014, and raises minimum wage from $6.15 to $8.00 an hour, which will benefit 325,000 Minnesotans. Already this is significant—the previous minimum wage of $6.15/hour was among the lowest in the nation.

Please see the points below (courtesy of the Minnesota Budget Project) for an in-depth breakdown of each phase.  “Large employers” are businesses with gross sales of more than $500,000.  This includes large franchised companies, such as target.  “Small employers” have gross sales that are less than $500,000, and would include smaller, privately owned companies.

Thanks to MinnPost for this in-depth breakdown of the Minimum Wage Bill's phases.

Thanks to the Minnesota Budget Project for this in-depth breakdown of the Minimum Wage Bill’s phases.

An additional and important feature of this bill is the way it accommodates inflation.  Inflation leads to higher prices for food, clothing, rent, and other basic necessities.  Beginning in 2018, the minimum wage will continue to increase each year along with these rising costs, a process called “indexing.”  Through this process, the government attempts to make minimum wage livable, and a means by which people can afford to live decent and comfortable lives.  Supporters of the minimum wage bill believe that these wage increases will lift thousands of Minnesotans out of poverty.  But how does this bill account for the cost of housing, one of the most basic, important, and biggest expenses?  Nearly 600,000 households in Minnesota pay more than 30% of their income for housing.  What does this bill mean for these families?

According to this study from the National Low Income Housing Coalition, Minnesotans need to earn $16.46 an hour to rent a two-bedroom unit.  Even if the minimum wage immediately increased to its final amount of $9.50, a household would still need two minimum-wage workers to afford an apartment.  And to afford a two-bedroom apartment in Minneapolis/St.Paul, a household needs to earn $18.19 an hour.  Faced with these statistics, as well as the recent luxury-housing boom throughout the Twin Cities, the new minimum wage increases can seem pretty unsubstantial.

The definition of “economic security”  policymakers seek to create must expand to include the security of having a stable place to sleep at night—affordable housing.  Increasing the minimum wage is helpful, but is just not always enough.  However, this was not the only bill passed this year.  The Homes for All bill was also approved, which substantially increases funding for affordable housing.  Hopefully, these two bills can work together to help close the gap between wages and housing costs.   And in a nation where not a single full-time minimum wage worker anywhere can afford market rate housing, policymakers should take a page out of Minnesota’s book.


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$100 Million for Affordable Housing: Where It Comes From, Where It Goes

July 6, 2014

Welcome back to Homeline’s Public Policy blog!  Check back often as we begin to cover important Minnesota housing bills that were passed during the 2014 legislative session.  We’ll start by breaking down the “Homes for All” bonding bill, which sets aside  $100 million for affordable housing projects. Where does this money come from?  The term [...]

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Whose business is housing?

September 25, 2013

Created by OnlineMBA  recently shared this video contrasting how businesses and governments operate and interact with people they serve. Please take a moment to view the video—and return to read how this discussion relates to housing, and in particular, the dynamics of tenant/landlord interactions. If you look at MHP’s most recent 2 x 4 [...]

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HOME Line’s 2013 Tenants’ Bill of Rights and Tenants’ Survey

July 30, 2013

Based on calls from our statewide tenants’ hotline and our organizing efforts, HOME Line has selected nine proposed changes to Minnesota’s landlord/tenant law to push for in the 2014 legislative session.  We believe that these nine bills, each giving greater and clearer rights to Minnesota tenants, will help make our state a more fair and [...]

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Renters: Is a contract for deed a lease?

July 11, 2013

“There’s a real problem out there with landlords scamming people,” said Rep. Joe Mullery, DFL-Minneapolis. “They’re putting people into rentals and then turning those agreements into contract-for-deed sales without even telling them about it. … I think some of those landlords will keep doing it because they think they won’t get caught.” Jeffrey Meitrodt’s July [...]

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Renter’s Credit Increased!

June 17, 2013

As of recently, the legislature passed a $15.5 million increase in Minnesota’s renters’ credit, the tax rebate used to off-set the property taxes households pay through their rent. During the past several years, the legislature showed interest in cutting this important tax credit to help balance the state budget. Due to the on-going advocacy of [...]

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Fresh air for renters with low incomes

January 25, 2013

It does not take very much to understand that the renter’s credit is a big issue for HOME Line. It is something that government officials have been quick to propose as a tool for balancing the state budget, and renters have been quick to fight for it. Since 2004, the renter’s credit has continued to [...]

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What would Voter ID mean for you?

November 5, 2012

I would like to make it clear that Voter ID law is not currently in effect. For the upcoming November 6th election, you will NOT need to present an ID to vote if you are already registered. If you are utilizing same day registration, please look here to see what documentation you will need to [...]

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Voter ID Laws: Creating Barriers Between You and the Ballot

October 17, 2012

Somehow, October is flying by, and election day is almost here! While every election is important, not every election calls voting rights into question. Currently, in Minnesota, you only need an ID to vote if you are registering to vote on election day. For more information on what you need to vote or same-day registration, [...]

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