One consequence of the tight market is sharply higher rents: According to Apartment Search, rents citywide have risen more than 20 percent over the past four years. In Uptown rents have gone up 23 percent; some units, such as three-bedrooms, have risen more than 17 percent in the past year alone. (Nationally, according to a study released in the fall by the Dallas-based apartment research firm M/PF Research Inc., rents have been rising an average of 4.4 percent per year, substantially outpacing inflation.)
"It's just a huge problem," says Rod Johnson, an economist at the Minnesota office of the federal Department of Housing and Urban Development. "Yet I'm afraid that we're not going to get out of this very quickly." In the free market of economic theory, Johnson explains, developers would respond to low vacancy rates and high rents by building new units; that in turn would raise vacancies, help stabilize prices, and allow tenants to leave bad landlords. "But we're not getting the production in the amounts to match demand," Johnson says.
According to data compiled by Metropolitan Council researcher Kathy Johnson, throughout the 1990s slightly more than 26,000 construction permits for units of rental housing were issued--a 63 percent drop from the 60,000-plus permits handed out in the 1980s. Depending upon whom you ask, the reasons have to do with Minnesota's high taxes on apartment buildings, or with Congress's decision in the mid-Eighties to remove tax incentives for rental property. Either way, says Jerry Boardman, director of housing at the Minneapolis Community Development Agency (MCDA), the rental-housing shortage is "reaching critical levels."
But, Boardman adds, don't expect local government to come up with a quick solution. In September a city-appointed Affordable Housing Task Force released a report noting that roughly 15,000 families in Minneapolis earn less than $19,000 per year and don't have affordable housing--defined as a unit costing no more than one-third of a family's monthly income. The task force urged the city to spend $50 million annually on building new units or subsidizing existing ones, but the Minneapolis City Council only approved $10 million. So far, only $8 million of that has actually materialized. "There are obvious funding gaps," Boardman acknowledges. "We're just hoping to build up to $10 million right now."
But that money probably won't help people who live in Uptown. It is earmarked to assist families who make up to half the city's median income (roughly $31,000 per year). As a result, Boardman and other experts say, rental units that are being built now cater either to low-income renters or to wealthy professionals, leaving people like Dorow, who works two jobs to make ends meet, stranded.
Hill says things aren't likely to get better anytime soon. Though Zorbalas's rent increases may seem drastic, he says, other property owners might well follow suit. "Landlords are going to start saying, 'If old Zorbalas over there can squeeze it out of them, then we can squeeze it out of them too.' We're really just seeing the tip of the iceberg."
Kelly Dorow is escaping the squeeze--at least for now. She has recently found a building in St. Paul, where rents are a little cheaper. These days her apartment is littered with boxes spilling clothes, books, blankets, and other possessions in preparation for a millennium move. But not all her fellow tenants are so lucky. "Everyone in this building is just out of college," she says. "We're not necessarily poor, but we don't have a lot of money, either. We don't qualify for assistance. And there's no rent control, so there's really nowhere people like us can turn. We just have to move."