Laura Russ, executive director of the Shenehon Center for Real Estate at the University of St. Thomas, spoke with Minnesota Public Radio about the growing trend of luxury single-family rental developments in Minnesota suburbs. Russ explained that rising housing costs, lifestyle preferences, and demand for flexibility are driving more people toward rental housing, including higher end properties. She also noted that while some communities have concerns about affordability and neighborhood impacts, increasing housing options can help ease broader pressures in the housing market.
From the conversation:
Nina Moini: ... What are some of the concerns people raise when they see investors building some of these higher end or larger, newer single-family homes to rent?
Russ: I think the concern when new products, especially products that may feel out of reach to many current members of that community, go up – there’s inevitably a concern of, how do I fit into this? Where does this leave my community? And a couple of things that we know are in general, when we have affordability issues, it’s typically because we have too few choices, not too many.
Also, brand-new housing is always generally going to be the most expensive type of housing. That is just the nature of having to build something new. That doesn’t mean, though, that there are no community impacts to be considered. But the primary challenge as a region that we’re facing is not necessarily too much of one type of housing. It’s really too little housing overall.
The Minneapolis Fed did another study very recently. And they showed that on three metrics of housing goals for the Twin Cities region, we were not meeting, as a region, those goals. So for example, we need to build about 18,000 units of housing a year to maintain a sufficient level of housing and a range of choices. Last year, we built about 12,000.
So overall, we know that more production and more maintenance and investment in existing housing at all income levels helps decrease pressure on the market. That, however, does not necessarily mean that every new product is going to fit every income level. We have separate and important tools that we can and should use more of to reach all income levels.
Moini: I wonder, do you see any positives to this? ... Looking ahead, do you foresee these built-to-rent neighborhoods becoming a bigger part of Minnesota’s housing landscape, or do you think it’s going to remain more of a niche market?
Russ: I think time will tell ... but a few trends we know overall with housing is there has been increased consolidation, not just of ownership, but really of management. And counterintuitively, that is in part because owning and managing rental housing has become an increasingly regulated and sophisticated industry. So it’s increasingly difficult for the mom-and-pop landlords to rent out maybe their home that they moved out of. ...
