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MN2020 - Uneven Recovery: Modest Gains, Many Still Struggling
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Uneven Recovery: Modest Gains, Many Still Struggling

March 06, 2014 By Lee Egerstrom, Economic Development Fellow and Leigh Rosenberg, Minnesota Housing Partnership

Find more articles in the Uneven Recovery series, an ongoing collaboration between Minnesota 2020 and Minnesota Housing Partnership.

Minnesota has made a significant housing recovery since the depths of the Great Recession; however, it’s been an uneven recovery. For too many Minnesotans affordable housing is still out of reach and mortgages are still underwater.

One in eight Minnesota households paid more than half their total income on housing in 2012, including 115,000 owner-occupied households and 132,000 renter households, according to Census Bureau’s American Community Survey (ACS).

The same survey showed 58 percent of Minnesota households making $50,000 a year or less paid 30 percent or more of income on housing in 2012, including 66 percent of renters. That’s the threshold set by the U.S. Department of Housing and Urban Development (HUD) as the upper limit for what households can comfortably pay on housing and still meet other household and family expenses.

“We still have severe problems with affordability and availability,” said Jan Plimpton, executive director for Habitat for Humanity in Minnesota, in sizing up housing conditions at the beginning of the series. “Those are the two big questions everywhere. It is a problem in every county in the state,” she added.

It applies to renters and homeowners alike. In February, the Minnesota Home Ownership Center released its 2013 report  counting 11,834 foreclosed homes in the state that were sold at sheriffs’ sales. That was a 34 percent drop from the 17,895 foreclosures the year before and less than half the numbers of sheriffs’ sales in 2008 and 2010 – the worst years for Minnesotans losing their homes.

While that marks improvement, said Julie Gugin, the Center’s executive director, “it still means that more than 11,000 Minnesota families lost their homes, and thousands more struggled with payments.”

It also matters where you live. In a January article for the Federal Reserve Bank of Minneapolis, Michael Grover made that point by looking at the 160,000 homeowners who lost their homes in the six-state Ninth Federal Reserve District between 2002 and 2009.

“[Y]es, geography does matter, and…consumers in middle- or upper-income neighborhoods returned to the mortgage market twice as fast as those who lived in lower-income neighborhoods,” Grover wrote.

It is a slow recovery in North Minneapolis and some adjacent suburban areas home to many low-income households, with the 2011 tornado compounding the pain. In areas already squeezed for affordable homes and apartments, the tornado caused damage to 3,700 buildings – mostly homes – on the north side. There were still 316 vacant and boarded up home properties at the end of 2013, between foreclosures and the tornado.

The hardships in North Minneapolis and adjacent areas of Brooklyn Center and Brooklyn Part especially impacted low-income African-American families. In the East Metro area of St. Paul’s Eastside and Frogtown, west of the State Capitol Building, new immigrants and refugees were especially impacted.

Jim Erchul, executive director of Dayton’s Bluff Neighborhood Housing Services, calculates that St. Paul homeowners lost a billion dollars in family household wealth with the housing crash. Only a fraction of that has been recovered since low points in 2010 and 2011, with Dayton’s Bluff and Payne-Phelan neighborhoods especially slow to recover.

Twenty to 25 percent of dwellings in some areas are abandoned, he said, and this adds demand pressure for rental properties, raising rents at the same time the area’s household incomes have been falling.

Exurban communities have also been hit hard. In Wright, Sherburne, Kanabec, Pine, Isanti and Chisago counties, for instance, homelessness jumped by 40 percent between 2006 and 2012, according to Wilder Researchers. These counties also had disproportionately high mortgage foreclosure rates.

The areas never had sufficient affordable rental properties, but rents rose as foreclosed owners flocked to the rental market and increased demand for apartments. Many of the homeowners who lost homes in these counties were long-distance commuters who needed two household incomes that didn’t survive the recession, said Mary Westlund at New Pathways Inc. in Cambridge. Transportation and energy costs added to housing burdens.

Greater Minnesota communities have different sets of housing problems, reflecting the diversity of the state’s population and economy. North-central communities and towns across the Iron Range didn’t join the run-up in housing costs associated with the housing bubble, but jobs in mines and in forestry-related occupations took hits during other economic cycles.

Housing officials at Bemidji and Brainerd said affordable rental properties have always been in short supply. Grand Rapids had a spurt of new rental housing construction in 2013, but Northern Minnesota communities struggle with increased homelessness, poor quality of much of the rental housing, and an uneven housing recovery.

Housing is, as Habitat for Humanity’s Plimpton said, a lingering problem for all 87 Minnesotan counties.

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