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.