Ababiy: Tax the luxury apartments

Taxing luxury apartments to preserve affordable housing would be a way to preserve our communities while encouraging economic development.

Jonathan Ababiy

Luxury apartments are rising near the University of Minnesota. The Hub on Washington Avenue is slowly gaining its outer sci-fi shell, day by day. A 25-story tower behind the Pillsbury Mill will potentially go up in Marcy-Holmes. 

These apartments are financially out of reach to many, so community groups have long tried to persuade builders to include affordable units. The Minnesota Student Association is currently trying to persuade the developer of the Marcy Holmes tower to add some affordable units to the building. 

MSA should be applauded for its efforts, but what the University community and City of Minnesota as a whole needs is action from the city. Begging developers to add affordable units will not solve the large gap between the ever growing demand and dwindling supply of affordable rentals.

Many living in sustainable housing have found themselves the subject of rent hikes or evictions, because their landlord wants to offer their apartment at a higher rate. Much of the naturally occurring affordable housing is a little run down, but the market is so juicy right now that landlords will force their residents out. Doing so would allow the landlord to lightly renovate the apartment and offer it again at a much higher, non-affordable rate. In this way, many in Minneapolis have lost their homes and have had their community gentrified. If all the affordable housing in Minneapolis is a cup full of water, then the cup is leaking in front of a dehydrated audience. 

However, the luxury-tax-financed fund could be able to buy sites where affordable housing exists and residents are at risk of a rent hike. In Richfield, 422 units were saved when the city stepped in and purchased an affordable apartment building that was going to go for sale. Had a private developer stepped in, the Richfield apartments would have gone for much more. 

This fund will soon be used in the University area. The Lego-like Bunge tower in Southeast Como will be converted into a 150-unit affordable apartment complex. As the Minnesota Daily has reported, a housing nonprofit financed by the city’s housing fund will start construction near 2018. Como’s historic landmark will be preserved, and its housing needs will be addressed. The building won’t be for undergraduate students, but it will ease some of the competition over housing between students and non-students in Como. 

Expanding the city’s fund through sales taxes on luxury units would make sure that the historical and affordable nature of Minneapolis will be preserved. With the tax, developers could build their luxury “____-Haus” in whatever way they wanted, even without affordable units, and the city could use the boosted fund to create more targeted housing in areas that need it most. Fundamentally, the city is facing a supply shortage of both affordable and high-end units. Building luxury apartments and affordable housing addresses both sides of the supply shortage. 

Housing in Minneapolis has been on a swing between historical preservation or pure economic development. Through the luxury tax, the city could trek the middle course and provide housing for people of all income levels. 

Cities and denser living is the future of America. Minneapolis’ housing policies should make sure there is a home for everyone in that future.