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I have seen estimates of multi-family apartment building construction costs of $125-$200 per square foot so clearly reduced size is going to lower the cost per dwelling unit. Not sure what the market is to sell an apartment of less than 500 square feet. I rented a one bedroom that was about 600 square feet and it was ok for one person but I wouldn’t have bought it had the building gone condo.
The profit margins on luxury apartments just have to be so much higher than affordable units because the real cost difference is in finishes and amenities. This is why I think the developers will use the room under the 2040 zoning rules to build higher end apartments. It’s simply more profitable for them.
Ahhh capitalism...well that won’t stop me from proceeding with my plan of building a modestly profitable affordable housing complex....as soon as I win the lottery.
Thank you for your reply. It is well received. While I agree that a multifamily housing condominium complex would create an ownership opportunity at a different price point than a house. I (perhaps mistakenly) thought that the intent of greater density was to create opportunities for people who would traditionally be priced out of a neighborhood. Building a condominium complex is incredibly expensive and opens the door to all sorts of litigation when steps are missed or when an association sues the builder. It's the reason why we do not have more condos popping up, but rather, we have apartments where there is only a single owner (or corporate entity).
Let's use an example as a premise for this discussion: You want to build a 3 unit building near uptown, and list the units for sale. Your intent is to create an ownership opportunity with these three units. To do this, first we need to buy a house (traditionally zoned R1, but now R3 with the 2040 plan). Let's say we find a basic house with no frills, in a decent neighborhood. This basic house sits on a 6000 sqft lot, and is listed for a mere $300k.
Now we tear down this house. Having been through the tear-down process, I can assure you that the bids range anywhere from 15k-30k. For this example, let's say that it's $20k to tear down the house.
For this new development we want to build, we need to get our permits issued. Let's say that each unit is 1,200 sq ft, and it will run us (as a builder) around $150/sq.ft. to build with builder grade finishes, using our own crews.
Since we have 3 units at 1,200 sq.ft. each, our builder cost is around $540,000. We'll use that number for our permit. A $540,000 permit in Minneapolis will run us about $12,000 (this includes the Park dedication fee that we must pay!)
So now, we haven't broken ground yet and we're in at $332,000.
Assuming that we actually can stay on-track with our builder grade finishes, we build the 3-plex for $540,000 and not a penny more.
Our total cost to build is now $872,000.00 (332+540). That's our cost and that's with builder grade finishes (toss the Cambria and Wolf appliances out; throw the Kohler black/black faucets out too; forget about full hardwood floors throughout the unit, and there's no garage room for multiple cars per unit at this facility).
This doesn't include our holding costs or the costs of the interest we're paying during construction. If we borrow the $872,000 from our Rich Uncle Pennybags, we can skip paying the interest.
Now, we need to turn a profit on these units. A typical profit is around 20% ($174k in our case). We will receive this profit once all of our units sell.
To earn some kind of return, we need to sell each unit for $348,600. ($1,046,000.00 total, includes our profit)
To your point, Thedosius, we just created 2 new opportunities for housing in an area (we took the 1 SFH opportunity and turned it into a 3 unit building).
Assuming we sell these units (ownership opportunity) as condos, a low assocation "due" on a small set of units would be $400/month.
A $348,600 mortgage at 4.5% (prime rate) is $1645.00 + $400/mo dues + $400/mo taxes + $100/mo insurance + $50/mo electricity, all in you're at $2595/net $ per month for a unit.
While it is indeed true, more ownership opportunities have been created, these opportunities have been created for people who could arguably already afford a house in the area. They've also been created for people who are already paying market rates for apartments. The nicer the area, the more luxury finishes/amenities we'll need to put into our example to attract buyers, which means our cost will continue to rise. Once the three units in our example are sold, their cost will continually rise over time. At some point we reach a "peak" cost, or a theoretical maximum range, but it's all speculation as to what the maximum would be.
The plan, as it's written, only helps someone who really wants to build a triplex in an R1 area today. It does nothing to address the code compliance (high standards) that the city currently imposes on builders. Getting through the permitting for a condominium complex is a lot more involved than just building an R3 apartment complex (for rent), and the risk that you (as a builder) assume is high. I don't see it changing the design or landscape of the city, nor do I see it changing pricing for an area. I'd be willing to wager that many builders won't even get involved in building a triplex, especially not as condominiums. If these triplexes are created as rentals, then no new ownership opportunities have been created.
I don't have a horse in this race. Only time will render the above outcome valid or invalid.
It’s time for the Met Council to go. They have too much power for an appointed team and are without control. An unelected governing body. The city council can do their job and be answerable to the voting population.
I don’t have a strong opinion on the density/affordable housing debates but I just have to say that the last few pages here are a perfect example of how to debate/disagree online. Refreshing to see folks.
Supply cannot be increased sufficiently to put downward pressure on prices. That’s not what 2040 tries to accomplish anyway. The city is not trying to tank existing real estate prices. That would be political suicide.
Given that there is plenty of poor-outcome historical precedent for localized action that Minneapolis 2040 meets or exceeds in scope (is there another modern case of eradicating urban residential zoning laws on such a relative scale?), no one can state with certainty what Minneapolis 2040 is trying to achieve.
This action looks suicidal on the community level, given the neighborhood-by-neighborhood poor historical track record in economically equivalent cities for such action, and so there looks to be an unstated or vaguely stated motivation at play.
For example, hypothetically speaking, what if there is a corporate-money goal to lower housing costs and living expenses (which can only be done with a reduction in quality of life measures that will come from an increase in poverty and crime throughout the city) over time in order to lower salary costs / increase the lower wage labor supply?
If this is a motivation, or a roughly parallel one exists (more probable imo), then political suicide is not a concern. Your baseline assumption of fundamentally good, above-board intentions is not rational in modern multicultural society.
First, in reference to possible to political fallout, once the damage is done then it is done. This mayor will move on with his life after his terms are over. He's an outsider. He has no family stake in Minneapolis, either extended or nuclear. What does he care about the politics or even the state of Minneapolis after his goals are met? He has zero skin in the game. There is zero penalty for him for any long-term outcome. He looks like an outsider hired to do one specific job, and he should be viewed with suspicion (especially given his suspicious prioritized push for such impactful change in his first year that has such a high downside risk for the community: thousands of families).
Second, increasing the low wage population within the city limits tends to perpetuate liberal governments, not result in less of them. Low wage people buy the false promise of legislated and welfare class-improvement, seemingly endlessly, in spite all nationwide evidence to the contrary.
The only true way out of bad neighborhoods is self control, study, and government school loans taken for a professional degree. That combination would allow any lower class person to move to a place like Southwest Minneapolis and successfully integrate. I know because I underwent that process myself.
I fail to see any political risk for anyone except the sociopolitical, quality of life, financial, and miscellaneous community risk inherent for the current residents of Minneapolis in single family zoned neighborhoods.
Think of how the banks benefit from all of those home sales and new mortgages when people flee rising crime and a decreasing quality of life. The banks don't make money on inter-generational ownership of the same home. They make money from large population shifts, which are certain to occur in periods of mass sociopolitical change. Who pays the toll?
What is definite is that this action carries, at best, too much unseen community risk. More realistically, the relatively high probability risk is visible and they are moving ahead regardless.
The argument isn't that supply will put downward pressure on prices: inflation adjusted.
The argument is that the type of supply will put downward pressure on prices for the reasons aforementioned. It doesn't take much of it.
There are no historical examples in the USA where such a change, in economically equivalent neighborhoods outside of the central core, has led to a maintenance or increase in housing prices adjusted for inflation.
What does exist is a multitude of exceedingly clear cases in which such change led to the slide of large areas of a city into lower class or ghetto status over time.
I've directly experienced this process in another city with a better economy than Minneapolis.
Minneapolis is not San Francisco, economically speaking, wherein the labor demand puts upward price pressure on all housing types and no matter how they are mixed. Minneapolis isn't even Seattle. Minneapolis is more akin to a northern Phoenix. Ghetto creation is possible / probable once portions of the city become even marginally unpalatable for the existing population.
See the relatively good cost of living in Minneapolis in general, and stable home prices. There isn't much price pressure in Minneapolis as it stands. Integrate lower and middle economic populations in a frozen city, through nonsensical quality of life law eradication, and watch how easily downward pressure manifests within the city limits. It will do both urban and suburban developers as well as banks a service, however, and there will be no long term quality of life improvement for the section 8 renters that move in after the neighborhoods slide.
Eradicating single housing zoning for the entire city, and not just one strategic part as needed, is exceedingly irresponsible and unprofessional from a planning standpoint. So much so that it looks like the city planners are forgoing responsibility to meet a goal that defies any rationale offered to the public.
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They are hoping that by removing certain zoning restrictions, developers will choose to build low cost housing. By and large, they will not. Developers will not build low priced units if they can build and sell higher priced units.
They can convert existing housing. They don't have to build. Once they convert a house into a duplex or triplex, Section 8 (or the equivalent) housing makes sense. They can indeed (and will, as this plan is meant to facilitate) convert more houses than the working professional market is demanding.
Such sweeping zoning changes are not meant to service large development projects, primarily, within the city limits (though, they of course do that as well).
They are meant to change the fundamental character of every neighborhood in Minneapolis on a block by block basis with converted single family structures. These will be somewhat slow but steady to manifest at first.
As low income duplexes and triplexes begin changing neighborhoods, upward price pressure will stall or downward pressure will grow, and the neighborhoods will begin to change at a faster rate as the price for houses slated for conversion becomes cheaper.
Professional demand for apartments will fall within the city limits outside of the central core (see every other equivalent city in the nation), and the conversions will then begin to become low-income at a greater rate.
All of those initially supplied or existing amenities, such as yuppie food markets (and possibly even standard food markets) will begin to close outside of the central core.
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Housing in Minneapolis and St Paul is generally more expensive than comparable housing in the surrounding area and has been for some time. Building 15 story apartment buildings across from Minnehaha Falls will not change that.
It absolutely will. Minneapolis is unique, today, because it has mostly nice urban neighborhoods outside of the central core. This is why prices are higher and this is what the Plan will change.
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As these expensive neighborhoods also show, a mix of of multi- and single- family housing does not destroy neighborhoods - in fact many of these neighborhoods are quite charming (Aldrich through Girard avenues between Franklin and 36th street are good examples).
With all due respect, it shows no such thing. You aren't comparing apples to apples.
You are comparing a neighborhood with middle-class, low-crime renters with professional jobs to a future neighborhood with crime prone renters with many on welfare. "Charming" won't carry over once little Brian gets victimized in his own neighborhood, and his parents move out in response. This doesn't occur in the expensive neighborhoods because those apartments don't draw the same people. These people will not magically change their habits once they are able to move to other parts of the city. That's not how this works. Their neighborhood is their product, not the other way around.
The new neighborhoods change, the people do not. The opposite statement is the fundamental propaganda in this entire affair. The just and sociologically stable method out of lower class neighborhoods is for people to raise themselves out using the method that I prior described.
Society will always have tiers that are inherent to the habits of the people in each tier. Those habits can be changed with effort, not with mass relocation. Mass relocation is only a means of assuring that the tier that they are relocated to largely relocates itself (again, benefiting bankers and developers if not others).
I don’t have a strong opinion on the density/affordable housing debates but I just have to say that the last few pages here are a perfect example of how to debate/disagree online. Refreshing to see folks.
You are comparing a neighborhood with middle-class, low-crime renters with professional jobs to a future neighborhood with crime prone renters with many on welfare. "Charming" won't carry over once little Brian gets victimized in his own neighborhood, and his parents move out in response. This doesn't occur in the expensive neighborhoods because those apartments don't draw the same people. These people will not magically change their habits once they are able to move to other parts of the city. That's not how this works. Their neighborhood is their product, not the other way around.
The new neighborhoods change, the people do not. The opposite statement is the fundamental propaganda in this entire affair. The just and sociologically stable method out of lower class neighborhoods is for people to raise themselves out using the method that I prior described.
And while I don't have a horse in this race, the above impact is the one that I don't often see discussed. If the goal is to create many luxury triplexes, then that can be accomplished without making city-wide zoning changes. The goal isn't to create luxury housing. The goal is to create more affordable housing. Crime is high in cheap areas. The cheaper an area, the more crime that occurs. This is evidenced by data. Even within our beloved Minneapolis -- take a look at the shot-spotter system. Shot-spotter is a system which tracks the sounds of gunshots in Minneapolis. Almost all of the gunshots or sounds of gunshots are isolated in north Minneapolis (north of Broadway / west of I-94). The majority of the police response in the city is focused on North Minneapolis. And, when the news reports someone shot or injured in Minneapolis, you can make a safe bet that the crime occurred in north.
Neighborhoods and communities with working-class requirements are not subject to this type of nonsense. It's why you don't hear about shots fired along millionaires row (near the Guthrie) or armed robberies in Linden Hills.
Many communities are naturally gentrifying. Northeast is a shining example of this, especially as you get close to the river. There's millions of dollars of new investment being poured into the Sheridan area. Those dollars will create a new community. It's already happening with the luxury housing that's popping up in the district. It happened a bit earlier right next to Sheridan near the new Nordhaus apartment complex and all of the housing along Hennepin. The same thing happened to Uptown. Look at how much it's changed in the past 10 years. Even Dinkytown has been reimagined and features luxury housing for college students.
If the city wants to do an integration experiment, try this: Let the city pay market rate for tenants to live in these working-class communities. The city will need to set up a system where the landlord can get paid immediately for any damages that occur as a result of the city's tenant on their property. It could be made into an online form that a landlord could visit, take a few pictures, and get reimbursed. The city would also be responsible for removing problem tenants, and removing them in a timely manner, or continuing to pay a landlord for any issues that arise. The city will need to make this program asymmetrical, eliminating all risks that come with rentals (bad tenants, lack of on-time payments, structural damage coverage, insurance coverage for tenants with dangerous animals, reimbursement if the police kick down the apartment door, etc.) If the city made a program such as this, landlords would be signing up in droves. It would be the greatest integration experiment of all-time too, and it could be done without changing the zoning laws. The results would be tracked and readily available for anyone to review.
More realistically though... the doors are open for anyone to improve their lives and move to a different community. It takes time to get there, and it cannot happen through government intervention alone. The choices that each of us make in life largely dictate where we will end up.
Thank you for your reply. It is well received. While I agree that a multifamily housing condominium complex would create an ownership opportunity at a different price point than a house. I (perhaps mistakenly) thought that the intent of greater density was to create opportunities for people who would traditionally be priced out of a neighborhood. Building a condominium complex is incredibly expensive and opens the door to all sorts of litigation when steps are missed or when an association sues the builder. It's the reason why we do not have more condos popping up, but rather, we have apartments where there is only a single owner (or corporate entity).
...
The plan, as it's written, only helps someone who really wants to build a triplex in an R1 area today. It does nothing to address the code compliance (high standards) that the city currently imposes on builders. Getting through the permitting for a condominium complex is a lot more involved than just building an R3 apartment complex (for rent), and the risk that you (as a builder) assume is high. I don't see it changing the design or landscape of the city, nor do I see it changing pricing for an area. I'd be willing to wager that many builders won't even get involved in building a triplex, especially not as condominiums. If these triplexes are created as rentals, then no new ownership opportunities have been created.
I don't have a horse in this race. Only time will render the above outcome valid or invalid.
There have been a lot of responses that I simply don't have time to respond to... and there have been a few that I flatly don't even understand or follow. That being the case, I'll respond to this particular post as I think it hits on some important points.
My first response to your post, Arc, is that it is hypothetical. Nothing wrong with that - it must be so!
My second response is that which you imply is impossible is already the current state of affairs. I don't know if anyone has done what I suggested in my first post: go the themlsonline.com, filter for a maximum home price of $200,000, and look at the areas around the chain of lakes. Maybe 1 out of 20 properties you find available there are single family units. Everything else are condominiums. Somehow, currently in the real world, condominium/multi-unit ownership models are the most affordable ones. Your hypothetical model suggesting that multi-unit ownership opportunities could not possibly be significantly more affordable than single family homes in the same neighborhoods is directly contradicted by the reality we see around us. That's strong evidence that there's something wrong with your model - a model that does not garner results similar to what we see in reality is necessarily a flawed model.
My third response is to reiterate what someone else said: the zoning change does not necessitate tear downs and building from the ground up, it also covers conversions and additions, which I suspect will be much more common.
My fourth response is that your hypothetical fails to consider economies of scale. If a tear-down is done, the fixed costs incurred can either be absorbed by one eventual buyer or 3 (in this example). Obviously, those split costs will be cheaper per individual. And that is only considering one of the economies of scale: property taxes, city sewer connectivity, etc. will all be split by 3 prospective owners rather than just one.
My fifth response is that most of the objection to the 2040 plan seems to be premised on a very unrealistic idea of what zoning is and does. Zoning is not a matter of waving a wand and - voila! - all single family homes will suddenly be triplexes! Looking at the ADU ordinance that passed several years ago shows that: only a handful of ADU's have been built since people were allowed to build them. ADU's are a bit of special case, however, and the difference between allowing ADU's versus allowing single-family to triplex conversions is significant (I think the triplex upzone will be more 'successful').
My sixth (and final!) response is this - though the triplex upzone portion of the plan will likely only garner incremental benefits on housing costs - that's ok. Personally, in my toolbox I choose to put a wide variety of tools, even that tiny phillips screwdriver that I use perhaps once a year. I do not look at any one of my tools and say "well, it can't do everything, so it's a waste of time to even put it in there". Zoning by it's very nature does nothing but create an environment or change an environment where a range of possible outcomes can happen. It defies not just logic but real world, replicable, provable experience that multi-unit ownership opportunities are more affordable than single family housing. The contradictory notions that evil developers are behind this plan which will yield economically non-viable development opportunities, or that neighborhoods will be destroyed by economic non-opportunities to develop properties bear all the hallmarks of conclusions desperately in search of arguments (regardless of how poorly they coexist) rather than arguments leading to conclusions.
It’s time for the Met Council to go. They have too much power for an appointed team and are without control. An unelected governing body. The city council can do their job and be answerable to the voting population.
I'll stop you right there.
It would be disastrous to dissolve the Met Council. Which happens to be a widely-admired role model for other metropolitan regions across the country.
Why? Let me paint a broad picture.
It's because the Twin Cities are made up of over 200 separate municipalities. Imagine the chaos of each city going for an "every man for himself" philosophy. This attitude is a major contributor to Detroit's demise.
What if Fridley decided it would no longer participate in the Met Council's water quality standards? Literal crap could be discharged into the Mississippi. And Minneapolis residents would be drinking it.
Without a Met Council, do you want to take a bus from Eden Prairie to downtown Minneapolis? "OK sir. That'll cost you 12 bucks and you'll have to transfer three times because you're traveling between several different municipalities' transit systems. A One-Way trip will be 110 minutes."
There are very, very strong arguments for a metro-wide governing body like the Met Council that governs all metro cities and sets living standards for everyone. Sorry if it offends anyone's idea of "liberty." i.e. "I should be able to do anything I want. If I pee into my neighbor's well, it's my right to do so."
I'm sorry, but Libertarian BS is not good for cities. Especially when those towns live side-by-side with each other as they do in the Twin Cities area.
Last edited by Astron1000; 12-01-2018 at 09:08 PM..
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