As a public school tutor and recent college graduate, Forrester Pack can’t afford many of the rents advertised for the new housing being built around him.

Pack, who shares a house rental with friends in Minneapolis’ Prospect Park neighborhood, attended the University of Minnesota at a time when luxury apartment buildings like WaHu Student Living and the Venue were under construction by Stadium Village. He worries that pricey new construction will displace the working poor.

In the new luxury buildings, “the two-bedrooms are $1,400 and $1,500 a month,” Pack said. “On local incomes, that’s not possible for most people. I consider myself part of that class, the lower-working class.”

Pack and other critics have begun to question a truism of the housing industry that’s been largely embraced by supporters of higher-density construction: As private developers build more apartments, the growing volume will stabilize rents, or even lower them, because of the rules of supply and demand.

Pack is part of a growing number who worry just the opposite is happening.

LUXURY APARTMENT BOOM

The boom in luxury units may be creating a higher new-housing price point in middle-income neighborhoods such as St. Paul’s Lowertown and Selby-Snelling neighborhoods, or Prospect Park in Minneapolis.

Not only do the new buildings often replace less expensive housing, they also draw flashy new restaurants and other amenities, raising concern they could be putting pressure on area landlords to raise rents, even in modest, traditional housing stock.

It’s clear that, so far, the uptick in St. Paul’s housing volume hasn’t significantly lowered rents.

Are new luxury units inflating rents for the traditional housing around them, or drawing renters from an entirely different market? Will new units eventually meet demand for new housing, helping to stabilize and even lower rent prices that would otherwise continue to soar?

“It’s kind of counter-intuitive — new housing is being built, and at the same time affordable housing is going away,” said St. Paul City Council Member Chris Tolbert.

I live in Prospect Park near 2700 University and 22 on the River. Their pricing hasn't seemed to increase rents charged by longtime landlords nearby. Different audiences. — Serafina (@SerafinaScheel) January 24, 2018

CONCERNS ABOUT AFFORDABILITY

In recent weeks, concerns that dense new housing construction will be unaffordable to local residents has peppered discussions in St. Paul about rezoning South Snelling Avenue for housing and retail.

It’s also been part of the conversation about rezoning the former Ford manufacturing site in Highland Park, an area Tolbert represents, to allow apartment buildings. The same concerns have entered community discussions about student apartments planned in Merriam Park.

Pricey apartment developments are spreading from downtown Minneapolis and downtown St. Paul to unlikely corners, such as the industrial area north of University Avenue near Minnesota 280. It’s alarming some housing advocates who hoped to see rents soften.

“There’s a construction boom going on with housing, but as we can see, it’s not really helping with affordability and access,” said Pack. He said he believes the Metropolitan Council’s approach toward development is too geared toward increasing housing volume as opposed to affordability.

Others say that given the metro area’s remarkably low vacancy rate — 2.4 percent for multi-family buildings — and continued job growth, rents will go up everywhere regardless of whether luxury housing moves into the neighborhood.

SUPPLY IS TIGHT

One issue everyone agrees on: supply is tight.

“We didn’t produce much housing during the key years of the Great Recession, and we’re just now catching up,” said Jon Commers, a real estate consultant who represents a large part of St. Paul on the Metropolitan Council.

Commers said he doesn’t believe luxury housing, on the whole, is impacting rent prices in surrounding neighborhoods.

“(Consider) the 1920s era brick apartment building. If you choose not to develop luxury housing on Lake Street, it’s not going to avert rent pressure at 33rd and Colfax,” Commers said. “We just don’t have enough supply.”

I owner-occupy an apartment building near a new luxury building. Hasn't affected my rents (although the general housing shortage has). I attract different tenants. — Janne K. Flisrand (@janneformpls) January 23, 2018

Despite a recent building boom, the shortage continues.

“Everything I keep reading right now is we’re still going to have a (housing) shortage, largely because we have so many Fortune 500 companies and companies here that are hiring people,” said developer Clint Blaiser, president of the Halverson and Blaiser Group.

His company co-developed the Pioneer-Endicott buildings in downtown St. Paul, which, like other high-end downtown properties, has raised its rents annually since it opened in 2013.

“Even though our rents are going up, our tenants’ wages are going up faster,” Blaiser said. “I’m still seeing a lot of baby boomers and empty-nesters wanting to move downtown after their kids are grown and gone.”

AFFORDABLE HOUSING FOR RICHEST OF THE POOR

What’s clear is that the private market alone is not producing new units for families earning 50 percent of area median income ($45,000 for a family of four), let alone earning 30 percent of area income — $27,000 for a family of four.

Even with public subsidy, private developers are not building three-bedroom family apartments with monthly rents between $705 to $1,175.

According to the Met Council, affordable-housing production picked up after hitting a recent low in 2014. Most of the 1,724 affordable-housing units built in 2016, however, were either senior housing or in multi-family apartment buildings targeted to families earning 60 percent of area median income ($51,480) — the richest of the poor.

“When we’re looking at the market, it’s not producing housing for that group of folks that desperately need it,” said Anne Mavity, executive director of the Minnesota Housing Partnership, a statewide advocacy organization. Related Articles Q&A: What does banning TikTok and WeChat mean for users?

Man pleads guilty to poaching black bear on northern Minnesota reservation

McConnell vows quick vote on next justice; Biden says wait

Supreme Court Justice Ruth Bader Ginsburg dies at 87

Hundreds gather at Supreme Court to mourn Ginsburg’s death

Meanwhile, compared with new affordable-housing construction, roughly as many units that were previously considered affordable fell out of that category.

Among them, Meadowbrook Manor in St. Louis Park, with 551 units, and the Crossroads at Penn in Richfield, with 678 units, were converted to market-rate housing, displacing low-income residents.

In short, the Met Council found little, if any, net gain in affordable housing last year.

“We need intentional strategies to target the lowest-income families to make sure new housing is produced and existing housing is retained,” Mavity said. “These are folks that are working full time or more and still are struggling to find housing.”

Tolbert, who became chair of the city’s Housing and Redevelopment Authority in January, said the HRA’s main focus over the next year will be affordable housing. Key questions loom, he said, over whether to build new affordable units or put more energy into preserving what affordable housing already exists.

“It’s a big term, and it covers a lot of different things,” Tolbert said. “Everyone has a different definition of it.”

Often, multi-family apartment buildings in urban areas have received government grants for land cleanup and connections to transit lines, money that critics like Pack say could otherwise be spent on building low-income public housing or other efforts that would really house the poor, like “inclusionary zoning” — which would mandate or incentivize a certain percentage of affordable units in market-rate buildings — or even rent control.

Proponents say, however, that without those grants, new apartment buildings would be even pricier.

I live near a new bldg on W 7th (3-4 stories?) Can’t say much re rent, but it replaced a really sketchy video store & improved neighborhood. Feels a lot safer to walk that street. — Rick Varco (@RVarco) January 23, 2018

“They’re pushing for more private development, in the hopes that just by numbers there’s going to be more affordability for people down the road,” Pack said. “And it’s clear by the increase in homelessness that’s not what’s happening.”

DEVELOPMENT BOOM, BUT …

Over the past year, developers have built more than 6,600 new leasable, multi-family housing units within the seven-county metro area.

It’s the most in any year since the recession of 2008 — with another 9,400 housing units slated to open their doors over the next 12 months, according to Colliers International.

But volume alone hasn’t helped average rental prices go down.

In fact, average rents across all multi-family housing developments within the Minneapolis-St. Paul area have climbed steadily from about $1,000 in 2014 to $1,250 in 2017 — more than 19 percent higher than the national average, according to Colliers.

National apartment listing companies produce frequent reports on the housing market. Minneapolis and St. Paul both stand out for growing rental pressure. Abodo.com reports that median one-bedroom rents in St. Paul grew from $1,148 to $1,250 from January to February, an 8.9 percent hike that leads the nation for percentage increase.

During the winter months, Minneapolis and most other markets saw prices go down at least a few dollars.

“The February rental data shows that St. Paul experienced the number one largest rent change in America,” said Sam Radbil, an Abodo spokesman.

There's a newish (1 year?) luxury apartment building across the street from me in Uptown. My rent increase has been minimal. I'm grateful! — Katie Schutrop (@kshoop) January 23, 2018

Analysts point out, however, that reports from companies like Abodo.com and Zumper.com are based on each company’s own vacancy listings, which tend to feature new construction that lands on the pricey side.

As such, they’re skewed toward high-end luxury housing, and they don’t fully reflect what’s happening in the traditional market — older apartment buildings with established tenants.

GREEN LINE’S IMPACT

Russ Stark, a St. Paul City Council member, participated in the Central Corridor Funders Collaborative’s “Big Picture Project,” which studied the Green Line’s impact on housing in the neighborhoods he represents, such as Hamline-Midway.

The project struggled to determine whether rents had gone up in older buildings as a direct result of the train, and at least one study from the University of Minnesota found only incremental change as of late 2015.

In 2014, another study focusing on 49 properties around the U actually found a decrease in rents as upscale student housing came into the neighborhood.

The study, however, compared Zillow.com listings from 2010 and 2012, a relatively narrow slice of the market.

“We had the same challenge with getting good data in the Big Picture Project work,” Stark said.

TOO POPULAR?

The Twin Cities may be a victim of its own popularity.

The metro area’s multi-family apartment buildings average a 2.4 percent vacancy rate — staggeringly low, even compared with high-demand cities such as New York and San Francisco.

The Colliers year-end report notes that while some housing demand seems to be shifting from the the metro’s urban areas to its suburbs, St. Paul may be an exception.

“With the success of … new developments in St. Paul, like the Vintage on Selby and the Oxbo, developers have taken note and recognized a pent-up demand both in the St. Paul (city boundary) and in nearby neighborhoods,” the Colliers report states.

I'm in an older downtown MPLS highrise, and nearby Maverick and Lat45 apartments haven't had much impact yet. Rent increase into year 2 was modest, likely worse w/o them — Erik Lundborg (@eriklundborg93) January 24, 2018

Commers, of the Met Council, notes that the regional planning agency projects continued job and population growth in St. Paul for years to come.

“That, honestly, is a problem that civic leaders in the 1970s would have paid to have,” he said.

The Colliers report points out that the metro area is home to an educated workforce and “abundant and excellent employment opportunities” that produce above-average incomes, including 16 Fortune 500 company headquarters, as well as large local employers like the University of Minnesota.

There is a new development going up right across the street from the home my wife and I purchased in New Hope. We are concerned it will affect property values & chances of resale.

Although they are luxury units, it will be an adjustment for sure once they are constructed. — Andrew Wambach (@andrewwambach) January 23, 2018

DRAWING TENANTS FROM FAR AND WIDE

Stark, a former board member with the Family Housing Fund, represents Green Line neighborhoods that have seen an uptick in both affordable and market-rate housing construction.

He has a few theories of his own about housing trends.

One reason rents are still high may be that new luxury housing stock draws in new tenants from across the region and even the nation — young professionals and retiring baby boomers — rather than appeasing demand of the city’s existing low- to middle-income renters.

The demographics fueling that trend could change, but the pattern itself is likely to continue. Some signs point to millennials settling down and buying suburban-style housing to accommodate growing families, but their departure will likely be offset by new retirees leaving the suburbs for the city.

“My belief, overall, is that in order to moderate rental prices we need to keep increasing the supply of all units AND keep investing in subsidized affordable units at a faster pace than we have been,” said Stark, in an email. Related Articles West Side pedestrian bridge mural debuts 6 p.m. Monday

St. Paul City Council debates halting charter school bond requests for six months

St. Paul City Council relaxes housing density restrictions near transit corridors

St. Paul poised to redraw residential zoning rules near major public transit

He points to the experience of Seattle, where recent reports show a building boom has finally contributed to a leveling out or even small reduction in average rents due to a higher vacancy rate. But Seattle rents remain high.

“But even then ‘average rents’ in a city or a region don’t necessarily translate to rents going up or down in a particular neighborhood,” Stark said. “My sense is … we would have to see a very substantial additional building boom before prices started to come down.”