In the last year, the explosion of residential property values of the early 21st century slowed, partly because of repercussions of the sub-prime mortgage crisis.
Though it wasn’t good news for Wall Street, the resulting higher vacancies and lowered property values could be a boon for renters in the Twin Cities – especially students.
Since 2002, rents in Minneapolis rose from an average of $789 per unit per month, to an average of $868 at the close of 2007, according to the city’s Department of Community Planning and Economic Development. This means the average rents have kept pace with inflation.
V.V. Chari, an economics professor, said the foreclosures that came out of the sub-prime mortgage crisis have put downward pressure on housing costs.
“Difficulties in the sub-prime mortgage debacle and the slowing of the economy in general, reduced land prices quite substantially,” Chari said. “It has tended to reduce housing cost.”
Chari said the decline in property values spread to other parts of the metro area, including student areas.
“Any decline in housing prices across the region tends to spill over to housing prices all over the region,” Chari said.
While student neighborhoods have largely escaped the foreclosures that plague other parts of the Twin Cities, renters, who make up more than 90 percent of residents in the University neighborhood, still benefit from this spillover.
Although students live in a region of Minneapolis with a low vacancy rate – about half that of the city as a whole – rent in the University area, at $818, is still below the city average of $868, according to the 2007 Minneapolis Trends Report.
The condominium boom of the early 21st century, which introduced thousands of units into the city, has also helped stabilize rent prices.
Cecilia Bolognesi, principal planner for Community and Economic Development, said a factor affecting rent could be the many condos transformed into rental units in recent months, in a sense, flooding the market.
In October 2007, three large condo projects in Minneapolis announced they were being foreclosed by lenders. Together, the three projects had a cumulative 553 units.
Bolognesi said another factor is that many developers in Minneapolis have turned to building rental units instead of condos or single family homes.
These trends have led to more vacancies and therefore more competition in the rental market, which could mean lower costs for renters, she said.
“More apartments are available,” she said. “This is why rent will not go up so fast.”
Student renters said they have noticed little change in rent cost in recent years, but they’ve learned how to better navigate housing costs during their time at the University.
Art history senior Kait Sergenian said she currently lives in the Phillips neighborhood of Minneapolis.
“It’s slightly easier every year,” Sergenian said. “I had less people with me, and also we were looking outside campus, so the quality of houses was slightly better.”
Theater junior Skyler Nowinski said he pays roughly $400 a month to sublease a room in a house with three other roommates.
“Personally, things have become cheaper for me,” he said. “The place I’m at is smaller and further away, less amenities. As you go on, you learn what to look for.”
