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Tax Levy Reinforces Renter Demand;
Notable Additions Taper Long-Term Pipeline
Urban rental outlook benefits from homeownership barriers. The city councils of Minneapolis and St. Paul closed out their December sessions by increasing property tax levies for the 2023 calendar year. The new respective tax rates of 1.33 and 1.47 percent add to higher home values and elevated interest rates, which have pushed homeownership costs to new heights. These difficulties will likely result in increased renter demand across the urban landscape. The Downtown Minneapolis-University submarket registered Class A rent growth of 9.4 percent over the four-quarter period ending in March. A delivery slate of more than 1,000 units here for the fifth consecutive year, however, may challenge performance in the near-term. Demand is also flowing into St. Paul, aided by the recently-enacted rent growth cap. This resulted in Class B and C availability in the East and Central St. Paul submarkets remaining below the market average.