Apartments go boom!

With all the chatter about apartment construction in the last couple months, I wanted to see whether the current level of activity is really an aberration or just a way to sell newspapers.  There certainly are a lot of proposals floating about, but after the severe downturn of the last few years, it’s hard to know what’s normal.  Besides, is it a coincidence that the paper that says the most about the new construction just happens to have a subscribers only online map of it?

But what exactly is the current level of activity?  If 8500 units were under construction or proposed as of September, what does that mean in terms of eventual places to live?  Presumably almost all of what is under construction will be finished, but much of what is proposed will never see the light of day.  I thought it safe to compare the number proposed to building permit data, although probably a bit more is proposed than actually gets permitted.  From F&C’s 8500, I thought it safe to subtract 2000 considering my count of 1,732 units that were under construction in 2011 just in Minneapolis (most of which would have been permitted in 2010).

So how rare is it for 6500 multifamily units to be permitted in the metro area?  Met Council data going back to 1970 gives us a hint:

Permit rainbow!

Well, not very rare.  10 of the last 40 years saw 6500 units permitted.*  In fact, in the 70s the average year saw 6100 multifamily units permitted, helped out by the massive years 1970-1972 that permitted over 10,000 multifamily units each.

I think the story here is more likely that not nearly enough rental units were constructed in the last 20 years.  As I’ve noted before, the 90s were a disastrous decade for dense development.  When multifamily heated up again, it was the condo craze, leaving little room for renters.  But while the ownership housing stock was increased, sometimes at the expense of rental housing, the number of renter households was increasing faster than the number of owner households.

In other words, it’s true that there is more multifamily rental units being proposed and built than in recent years, but don’t think of it like a speculator-driven bubble.  Instead it is more likely to be a “new normal,” where the market is providing a supply in reaction to demand.  That’s good news for people who want an energy-efficient, walkable, low-maintenance place to live.

Zooming In

There’s more news buried in this building permit data, and I’m going to finish up with a long digression on it.  Check out this table of the top 10 metro area cities for total residential building permits issued between 1970 and 2010:

City DTQ DUP MF3 MF5 SFD TH Total
Minneapolis 98 854 21507 6543 4238 2807 36047
Plymouth 44 118 9172 240 13925 3273 26772
St. Paul 146 652 16033 3234 4537 1172 25774
Eden Prairie 32 1112 6498 95 12132 4430 24299
Eagan 75 704 6886 68 12430 3710 23873
Woodbury 107 442 4836 1127 12490 4123 23125
Maple Grove 157 565 3646 692 14496 3473 23029
Brooklyn Park 16 834 2750 475 12820 3504 20399
Burnsville 0 366 8431 394 7472 3305 19968
Coon Rapids 2 736 4760 48 9106 3462 18114

DTQ=Duplex, Triplex, Fourplex

DUP=Duplex

MF3=Multifamily (3 units or more)

MF5=Multifamily (5 units or more)

SFD=Single-Family Detached

TH=Townhome

Minneapolis has a comfortable lead, appearing to have added more housing units in the 40-year period than any other municipality (assuming the same rate of actual construction resulting from permits across all the municipalities and years).  This lead seems to have primarily resulted from the 70s and 00s, in the latter of which Minneapolis added significantly more housing units than anywhere else in the Twin Cities.

Seas of purple and green

So how could Minneapolis add tens of thousands of housing units in the last 40 years, while simultaneously losing more than 50,000 residents?  Some of the reasons for a similar effect in the 60s are also valid for later decades; the entirety of the drop occurred in the 70s, when a great deal of (edit: Froggie points out in the comments that most of the clearance for freeway construction had been wrapped up by the 70s) freeway construction and some slum clearance was still underway.

Later decades fared better.  The 90s saw a population increase; looking at population by sector makes it clear that the mediocre performance of the 00s was almost entirely a product of the foreclosure crisis:

Sector 1980 1990 2000 2010
Downtown 19155 21824 24977 31034
North 61278 64001 67674 59970
Northeast 37507 36515 36913 36255
South 137551 136333 142150 139854
Southwest 83728 79912 78292 77989
University 29615 29798 32612 37476
Citywide 368834 368383 382618 382578

The two sectors with the most foreclosure activities were also the only two with significant population decline.  In the case of North, two decades of steady growth were wiped out.

The 80s are the mystery for me.  Seven or eight thousand units were constructed in Minneapolis, which should have resulted in some population growth.  Instead the most population growth occurred in North, not in the Downtown and University neighborhoods that saw the most units added.  I don’t have demolition permit data, so I don’t know if an unusually high number of units were demolished.  Household size may also have been a factor, since many of the units added were likely smaller than any units lost.

Regardless of what happened in the 80s, the census data seems to suggest that, barring any new freeway construction or popular predatory lending practices, Minneapolis should see steady population growth in this decade.  Wandering back to the main topic of this post, the return to historic levels of multifamily rental construction, a greater proportion of which tends to occur in central cities, is another indicator that the chatter may soon be about how Minneapolis and St Paul are leading the metro in population growth.

*Until 2004, semi-detached units with more than two units were counted in the multifamily category.  In 2004, they were moved into the Duplex category.

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14 comments on “Apartments go boom!

  1. Jon says:

    My hunch is in the details of who moves in an out. A young family of four moves out in the 80’s to a bigger house in Burnsville. In their place moves in a 22 year old single renter. Net result is a -3 population change. This is a drastic oversimplification, of course. But, I would guess if you looked at demographics, Minneapolis in 2000 had less families and more singles than Minneapolis in 1960 (by percentage of total population, anyway). I think now we are seeing a lot of those 22 years olds are 32 year olds who want to stay, but that’s a whole other topic.

    • Alex says:

      The average household size reported in the censuses since 1970 is really interesting because it correlates very closely with the total population. I’m sure that household size played a role in population change but I’m just as sure that it isn’t a smoking gun because similar household size changes affected other developed Hennepin County municipalities but their population wasn’t affected in the same way. Thanks for bringing it up because I may do a mini-post just on this issue.

  2. mulad says:

    This analysis underlines my sense that I’ve almost exclusively lived in areas that are on the upswing. My hometown has grown a lot since I was born (though the density has been dropping off as it has completed its transformation from small railroad town to suburb). After that, I lived on the UMN campus and in that area, which has been densifying noticeably. I’m not quite sure what the deal is in my current neighborhood in Saint Paul, but there has been some considerable turnover with 20- and 30-somethings slowly filtering in as the older generation around here moves on to nursing homes and the like.

    So, for the most part, I don’t really know what it’s like to be in a neighborhood that’s deteriorating. I wouldn’t really want to, either, but I feel it gives me a bit of a blind spot when it comes to dealing with the pitfalls of a de-populating area.

    (Hmm, just kind of a random comment, I guess…)

  3. Froggie says:

    Not so sure you can pin the ’70s drop on freeway construction, at least not within the city of Minneapolis. The bulk of the freeways were already cleared out and/or constructed by 1970. The only exceptions were 94 through North Minneapolis and 394…and the latter resulted in minimal right-of-way acquisition within the city.

    • Alex says:

      You’re right – I was thinking 35W in NE was cleared in the 70s but it looks like it had mostly been cleared by 1969. Reviewing the aerials I’m surprised to see that much of the route for 94 had been cleared by late 60s also – what a bummer for the Northside.

      • Froggie says:

        It’s not quite as much of a bummer as you think, at least taken in the historical context. Yeah, some housing was taken out for 94, but remember that at the time, the river was HUGELY industrial and I-94 was seen as a buffer between that industrial land and the neighborhoods to the west.

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