Minneapolis has seen plenty of new multifamily units hit the market in the last three years. But the vast majority of these apartments have been luxury units, catering to wealthier renters.
When it comes to apartment units that are affordable to the average working people of the Twin Cities? There hasn’t been much of that type of housing hitting the market.
That is now changing, at least a little. Lupe Development and Rose Development are now developing Broadway Flats at the northwest corner of Penn Avenue North and West Broadway in North Minneapolis. The project will bring 19,000 square feet of commercial space and 103 units of affordable multifamily housing to an area that was hit hard when a tornado swept through in 2011.
This location was once home to several buildings owned by the Rose family, the family behind Rose Development. These buildings were among the 3,000 or so properties that the 2011 tornado damaged.
Saint Paul-based Oak Grove Capital has played a key role in this mixed-use project, originating a $9.3 million FHA construction loan for it.
Ken Dayton, managing director at Oak Grove Capital, said that Broadway Flats will provide at least one more option for working-class residents who want to rent in Minneapolis. Most of the new apartment projects in the area come with rents too high for these residents, Dayton said.
“It’s been a challenge to develop new housing in North Minneapolis for working-class families,” Dayton said. “They can’t generate high-enough rents to make them economically feasible for developers. This project is going to provide a high-quality, professionally managed housing development that will provide the workforce housing that is lacking in this part of town.”
Dayton said that the new multifamily developments in downtown or uptown Minneapolis come with rents for one-bedroom apartments that range from $1,400 to $1,600 a month, far out of the budget of many working-class renters who are making $30,000 to $50,000 a month.
This is a problem, as many workers can’t afford to live near the companies at which they work.
But one-bedroom rents at Broadway Flats will range from $700 to $900 a month, Dayton said, far more affordable.
“There’s a big need for this type of housing all across the metropolitan area,” Dayton said.
The challenge? How can developers create affordable apartment housing but still make a profit? Dayton said that the development of Broadway Flats will cost about $19 million. Oak Grove Capital, of course, has already provided a construction loan to cover $9.3 million of construction costs.
But developers need more financial assistance from cities and governmental agencies to make affordable-housing projects work. Fortunately, Lupe Development and Rose Development have gotten just that. Dayton said that $6 million more in funding sources came from seven different sources affiliated with the city of Minneapolis and other organizations. The city provided TIF financing to help support the project. And a tax-exempt bond with a 4 percent credit raised more than $4 million in equity.
“Without the assistance by all these funding sources, the developers could never make a high-quality project like this happen,” Dayton said.
As far as the overall multifamily market in the Twin Cities goes? Dayton isn’t worried that developers are over-saturating the market with new multifamily units. Demand is still high for apartments in Minneapolis and Saint Paul, he said.
But Dayton is noticing that some pockets of the Twin Cities market are starting to get slightly crowded with new apartment projects.
“We are still seeing strong velocity in terms of these projects leasing up. They are renting their units,” Dayton said. “But we are starting to see more concessions in these areas to spur the leasing activity. That is driven by the sheer number of new units coming up in certain areas of the city, by developers trying to get a quicker lease-up in these buildings.”