Renters in 84 of the Minnesota’s 87 counties are making less and paying more for rent than they did in 2000, according to a study published Thursday by the Minnesota Housing Partnership.
The study, which measured the changes in median rent prices and median renter income using data from the 2000 U.S. Census and the 2008-2012 U.S. Community Survey, ranked the state’s counties by how big the gap between rent prices and renter income grew since 2000.
Of Minnesota’s northwest counties, Lake of the Woods County had the biggest increase in the gap between median rent and median renter income, ranking sixth in the state at 47 percent, with a 34 percent increase in median rent and a 13 percent decrease in median renter income, both adjusted for inflation.
The next highest in the region was Red Lake County, which tied for ninth in the state with a 42 percent gap resulting from a 29 percent increase in median rent and a 12 percent decrease in median renter income.
Lee Meier, director of the Northwest Minnesota Housing and Redevelopment Authority, said much of the rent increase in the northwest part of the state has resulted from the demand in housing brought on by a boom in the manufacturing sector.
“The manufacturing sector has been strong for over five years so, as you get more growth, they need more employees,” he said. “The rental market doesn’t always keep up.”
Rental demand is also up because the number of renters has increased since the nation’s foreclosure issue in 2010, according to Leigh Rosenberg, research and communications director with the Minnesota Housing Partnership.
“We’ve seen kind of a spike in renting, so there’s more demand for renting,” she said. Rosenberg added that nationwide rates of rental construction are the lowest they have been in 50 years.
Meier, who is responsible for helping individuals find programs that will help them with rental assistance, said landlords and property owners often have little choice but to raise prices during a housing shortage, especially if they’re going to construct more housing.
“With any market, when there’s a strong demand (for housing), the rent amount increases,” Meier said. “So rents are going up a little bit because they can, and for owners and landlords that’s just part of business. It’s kind of difficult sometimes to meet the demand and yet as a private developer you need to make some money.”
Meier said rental costs often increase for two reasons. One is to cover increasing costs for building maintenance from year to year. The other is to offset the cost of building new apartment buildings when the housing demand calls for the construction of additional housing units.
Rosenberg said that sometimes the costs of new developments aren’t viable in small communities.
“It is challenging to develop rental housing, especially in small communities,” she said. “The cost of doing it is a certain amount (with the) cost of land plus construction, and in order to make the rents that would need to be made (to cover costs), they would be out of range for that market.”
Despite the growing gap between rent and income, Meier said he hasn’t seen landlords price gouging in the area to take advantage of the housing demand like many property owners have done in Williston and other oil-boom towns in North Dakota where rents have doubled or tripled.
“I don’t see any landlords in our region that are gouging anybody,” he said. “It’s just the market trend.”
Bridging the gap
To alleviate some of the financial issues caused by the gap between rental prices and renter incomes, Rosenberg said work is being done on the state and national level to create funds for low income housing through various tax credits and other forms of legislation.
On a national level, Rosenberg said the National Housing Trust Fund that was formed in 2008 ran into trouble when its funders, the Federal Home Loan Mortgage Corp. (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) went into financial crisis.
But now that these entities are recovering, Rosenberg said funds from the NHTF, which are intended to fund and provide income-based housing, might be able to help the state.
At the state level, Rosenberg said legislators are looking to push for similar housing initiatives to fund low-income and income-based housing at the state level.
While the vast majority of counties are suffering from increasing gaps between renter income and the cost of rent, Marshall County is one of only three to have seen this gap decrease since 2000. It tied with Stevens County for second lowest in the state with the gap decreasing of 4 percent, which means renter income has increased faster than rental prices in the area.
Rosenberg said that she could only speculate about Marshall County, but she guessed that if Marshall represented trends seen in other small communities or counties, the improving conditions might be a result of people moving out of the county to live elsewhere.