Study shows wages not keeping up with rents in southwest Minnesota
REGIONAL — Rents are steadily increasing across Minnesota while wages are generally stagnant, according to a recent report from the Minnesota Housing Partnership.
In southwest Minnesota, rents are barely rising, but renters on average still cannot afford a market-rate two-bedroom apartment — a benchmark that shouldn’t be hard to reach, argues Carolyn Szczepanski, MHP communications and research director.
“The reality is we’ve gotten to a point in our country where that seems like such an unrealistic thing to work a full-time job and have a two-bedroom apartment,” she said.
Among southwest Minnesota counties, Nobles County renters have by far the highest average hourly wage at $12.46. It’s significantly higher than the $10.01 average among Greater Minnesota renters, but still not enough to make rent affordable — 30 percent or less of total income. The study says an average Nobles County renter needs to work 1.1 full-time jobs to afford a market rate two-bedroom apartment at $712 per month.
Among Nobles County’s neighbors, market-rate rents are slightly lower at $697 — requiring a $13.40 hourly wage to be affordable. Rock County is the second best with an average renter wage of $11.84, while Pipestone County is the lowest at $9.04. Cottonwood and Pipestone counties have it the worst by far — renters need to work 1.6 full-time jobs.
Though the numbers don’t look pretty in southwest Minnesota, they’re still better than many parts of the state. In the Grand Forks metro area, renters make an hourly average of $8.53, far less than the $18.58 wage needed to afford a market-rate two-bedroom apartment. Chisago County, located north of the Twin Cities, is arguably the worst gap — $8.46 to $20.88 — or 2.5 full-time jobs.
Szczepanski noted wages are a large factor in rental affordability, but the biggest issue is the lack of new affordable housing developments. The two issues are connected in southwest Minnesota cities, where renter income simply doesn’t support a market-rate complex.
“It really doesn’t cost any less to build a 36- or 48-unit complex as it does in a larger metro area, but the household incomes don’t support the rent that’s necessary to make it an attractive investment,” Steve Robinson, Worthington city administrator, said. “That’s where even with grants and financial aid coming from different sources, it’s still difficult to move forward with investors.”
Worthington received an $868,000 workforce housing grant from the Minnesota Department of Employment and Economic Development on Dec. 15, 2016, but the city has not yet secured a developer able to build an affordable rental housing complex. An Illinois developer had initially been awarded the grant to build a 72-unit apartment complex on Grand Avenue, but the deal fell apart because the developer couldn’t get enough financing.
Robinson said the city is currently talking with a developer that will be able to provide its own financing, but the situation highlights the difficulty of attracting major rental housing developers to Greater Minnesota cities, even with a significant state grant in hand.
“Most of the major developers or investors are from outside of the area, and they don’t need to travel to Worthington to develop market rate housing,” Robinson said. “Wherever they’re at — whether it’s Sioux Falls, Mankato or the Twin Cities — they have plenty of opportunities there.”
Recent housing projects in Worthington received state grants and city financing to make things work. Minnesota West’s Blue Jay Villas got $900,000 in gap financing from the city and a $500,000 grant from the state, and Grand Terrace Apartments got funding and tax credits from the Minnesota Housing Finance Agency, along with tax increment financing from the city.
In neighboring cities like Luverne and Windom, where wages — and the tax base — are even lower, things are even more difficult. A lack of market-rate rental housing has been highlighted as a reason why those rural cities have had trouble attracting young workers.
As the region has a higher average age than the metro area, Szczepanski said the job market in southwest Minnesota is expected to need more personal care assistants in the future — a low-paying job that will cause the workers to struggle to meet rent.
Szczepanski said significantly more resources need to be dedicated to affordable rental housing — by the public and private sector — as wages simply aren’t keeping up with increases in rent.
“We as a society invest in things like roads and education, and we should be investing in housing, especially if we want to have a productive workforce and have a vibrant economy,” Szczepanski said. “We need to get business involved — we need to get employers out there becoming advocates for affordable housing and advocating for policies that make it feasible for there to be housing for their employees.”
The full study can be found on the MHP website.