Tuesday was Alex Panhorst’s day off.
But the University junior, who is working as a tech aide at 3M Corp. this summer, didn’t spend the day relaxing. He has another full-time job: looking for an off-campus apartment.
Panhorst spent the sunny day at the Housing and Residential Life office in Comstock Hall scouring classifieds in three newspapers, scrolling apartment postings on the Web, examining Apartment Search listings and calling landlords.
Though he came up with ten possibilities, Panhorst went back to work on Wednesday still unsure where he’s going to live in two weeks.
Panhorst needs an apartment by Aug. 1. The rent in his dilapidated one-bedroom, Marcy-Holmes apartment is being raised from $450 to $625 a month, which he simply can’t afford.
“I’m trying everything,” the chemical engineering junior said of his apartment search.
He’s not looking for anything special. A one-bedroom in the $500-$550 range with off-street parking would suit him fine, he said. But Panhorst, like many other searchers, is finding out such an apartment is elusive near campus, if it exists at all.
With the campus-area vacancy rate dangling below 1 percent and the citywide rate hovering around 2 percent, heavy demand is shooting rents to new highs while apartment conditions are deteriorating to new lows, students say.
The situation has many students feeling trapped. As Panhorst put it, “I can either pay through the nose, move far away or get a bunch of weird roommates.”
Of course, he could stick it out at the apartment and deal with the rent hike. But that apartment is falling apart — literally.
About six months ago, the ceiling fan in his living room came loose and, blade-spinning, fell 10 feet to the floor.
Panhorst, who was watching television below, jumped out of the way and narrowly escaped injury. A couple months later, the kitchen cupboard housing Panhorst’s food and dishes came unhinged and crashed into his sink.
Despite several phone calls and a letter complaining about the apartment’s condition, his landlord has yet to respond.
Panhorst has considered a legal remedy (see tenant rights story), but is worried about being blacklisted.
There are at least 10 or 20 applicants for every unit. And when landlords see he’s gone to court in the past, they’ll just skip to the next application, he said.
“It’s not worth it,” he added.
Like Panhorst, architecture student Sabina Beg is also searching, so far unsuccessfully, for a one-bedroom apartment.
Beg returned from Europe last month to learn the rent on her apartment was being hiked out of her price range, despite peeling bathroom tiles, water damage and unrepaired smoke damage.
“I’m just getting so frustrated with this,” she said of the apartment search. “I’m not picky, I just want a decent apartment in a semi-safe neighborhood and I don’t want to pay a ridiculous amount.”
In today’s market, however, that is picky.
Causes of the crunch
Housing experts attribute the lack of clean, affordable housing space to several factors. Perhaps the most significant is high property taxes on rental properties.
Rental apartment owners will pay 2.4 percent on market rate properties this year, compared with 1 percent paid on homesteads, according to a recent study conducted by the Affordable Rental Housing Task Force, a consortium of state housing experts. In other words, apartment taxes are 2.4 times greater for an equally valued property.
The stratified code makes affordable housing construction a risky investment for potential developers.
Given the low rents collected on such properties, “your bottom line doesn’t work out when taxes are so high,” said Micah Kinder, of UM Properties LLC, a Southeast realty company.
At the federal level, experts cite the repeal of tax incentives as another major contributor to the crunch.
In 1986, the federal government changed the tax code and effectively eliminated advantages for affordable housing development.
Shortly after, construction stagnated and vacancy rates plummeted nationwide.
The campus-area market, at more than 9 percent vacancy in 1991, contracted to the less than 1 percent felt today.
The report also noted the perception that affordable housing will bring “the wrong types of people” to a neighborhood, zoning restrictions, excessive government fees and a burdensome approval process as barriers to construction.
Demolition has also played a major role. Between 1991 and 1997, the city has experienced an average annual net loss of 317 units. Most units destroyed have been in lower income neighborhoods.
On the demand side, booming enrollments, increasing numbers of students deciding to live near campus and the influx of an expected 10,000 young professionals are exacerbating the problem near campus.
Some suggestions
To deal with the property tax issue, the task force report recommended the state Legislature reform the tax code to bring rental property taxes in line with taxes for homeowners.
Such proposals have been considered by the Legislature and are supported by East Bank Rep. Phyllis Kahn, DFL-Minneapolis.
“We need something to deal with the manifestly unfair point that someone who rents the same value house as someone who owns it … is obviously going to pay much more because of the higher tax rate.”
However, she said, legislators are concerned about shifting the property tax to income or sales taxes due to political considerations.
“There’s just no easy way to do it,” she said.
Ward 2 Minneapolis City Council Rep. Joan Campbell said the federal government should take action to provide relief in the form of tax incentives and low-interest loans.
“Government has to do something — there’s no question about it — but, because city government is really dependent on property taxes, we have to find a level of government that’s dependent on the income tax,” she said.
“Until they get involved, it’s going to be very difficult to get this built,” she added.
Some encouragement was offered this week when U.S. Sen. Paul Wellstone, D-Minnesota, announced his co-sponsorship of a bill to direct $5 billion to the production of affordable housing.
The bill would appropriate funds for matching state grants and national non-profit organizations aimed at providing housing relief.
Off-campus developments
Though sparse, some new apartment space is rising in campus-area neighborhoods to attempt to provide relief.
Mueller Apartments, a five-story complex along the 600 block of 14th Avenue Southeast, will be completed in August.
On the West Bank, Riverton Community Housing has finalized the purchase of the City’s 94 complex on Franklin Avenue. The cooperative plans to renovate the building and provide inexpensive housing.
GrandMarc will provide 370 luxury apartments on Washington Avenue Southeast. Efficiency Apartments will rent from around $760 a month, utilities included.
The University is looking to build another University Village-style apartment complex. In August, the University will consider several private proposals and is expected to begin construction later this fall.
The search continues
Meanwhile, Panhorst is sweating out the summer with no ceiling fan and watching his dishes pile up on the kitchen table.
He is still checking the Web, scouring ads and calling landlords daily. But, even as the Aug. 1 deadline rapidly approaches, Panhorst said he hasn’t given up all hope just yet.
“I’ve still got another stack of numbers to call,” he said.
— This article originally appeared in the July 17th edition of the Daily.

Todd Milbourn welcomes comments at [email protected].