Rent!

The affordable-housing crisis comes to Uptown

The honey bear was there when Kelly Dorow came home from work one day in September. One of those molded-plastic bottles you get at the grocery store, it sat on the glass top of her coffee table. Attached to it was a note from her landlord reading: "Thanks for making my day a little sweeter." Dorow found it less than sweet to discover that someone had been in her apartment while she was out, but she didn't think much more about it.

Today the bear is an exhibit that sits alongside the small stack of evidence--letters, faxes, and handwritten notes--Dorow has accumulated over three months of doing battle with landlord Spiros Zorbalas and his company, Uptown Classic Properties. She says that since the firm bought the brick apartment complex at 905 E. Franklin Ave. (on the corner of Franklin and Hennepin) in August, she has fielded complaints from fellow tenants, had personal run-ins with company officials, and seen the rent on her apartment rise nearly 60 percent--from $595 to $945 a month. Worst of all, she says, she has learned that there's hardly anything anyone can do about it.

As she conducts a brief tour of the place where she and her boyfriend have lived since 1994, Dorow acknowledges that the apartment has been a good deal. There are hardwood floors, a spacious kitchen by Uptown standards, even an oversize closet that serves as an office. "I understand that when people live in a place for five years, the property might not be at market [rate]," she offers. "But a $350 increase--that was just really shocking." Dorow and other tenants say they have seen no evidence of any improvements to the building.

Money was only part of the problem. Soon after Zorbalas took over, Dorow--who was serving as the building's caretaker--found herself swamped with complaints about everything from rent increases to Uptown Classic employees entering apartments without prior notification. The hostility soon escalated into civil disobedience, with tenants removing the 'For Rent' signs Zorbalas had placed out front. "This made him furious," Dorow says. "It got really scary."

When contacted for this story, Uptown Classic representatives said neither Zorbalas nor anyone else at the company cared to comment. Zorbalas later left a voice-mail message on a Friday night but did not return numerous subsequent phone calls.

Tenants say they were perturbed to see Zorbalas walking around the apartment complex with a BB gun he used to shoot pigeons. Farah Husain says she noticed the landlord with the weapon as she left for work one fall morning. When she came home that night, she found a hole in her window and shards of glass on the floor. "I didn't feel safe with him walking around with the gun," she says.

Husain, who says her rent went from $700 to $900 after Zorbalas took over, says she called police about the incident but no one came to investigate. (According to Ofcr. John Murzyn of the Minneapolis Police Department's Fifth Precinct, it is illegal to fire an air rifle within city limits, but police rarely follow up on such complaints). Husain has since moved in with family and is looking for another apartment.

Dorow also contacted the authorities--figuring, she says, that there had to be a law against steep, sudden rent increases. But when she called the Attorney General's Office and the City of Minneapolis's housing department, she learned otherwise.

"Politically, rent control was resoundingly trashed in Minneapolis during the late Seventies and early Eighties," says Kirk Hill, head of the Minnesota Tenants Union. "It doesn't seem that anyone at the city wants to do much about it. So all I can do is pat people on the back and say, 'Welcome to the wonders of the free market.'"

Uptown Classic is no newcomer to that market, though it has recently been expanding its holdings. Harold Teasdale, a partner at St. Louis Park-based Minnesota Brokerage Group, says that since August his firm has sold Zorbalas four complexes, bringing its total to fourteen buildings, all located in Uptown.

During the same period, Hill has received close to a dozen calls about the company, a number he says is unusual for a single landlord. Most of the complaints, he says, have been about rent increases, alleged privacy violations, and disputes regarding damage deposits.

Zorbalas is not alone in attracting tenants' ire. Donna Harris, who oversees the city's Housing Services program, says that in the past year complaints from renters have shot up from an average of 1,750 calls per month to 2,500 calls per month. The same pattern is apparent in Hennepin County Housing Court: In 1996 the court logged 183 cases brought by tenants against landlords. By 1998 that number was up more than 50 percent, to 281, and officials are certain this year's figure will be higher still. "Because of the low vacancy rate, renters have no place to go," says Sue Nelson, who processes cases at the housing court. "So they're forced to deal with what's been dealt to them. They can't just pick up and leave."

Ask anyone about the state of rental housing in the Twin Cities and they'll invariably point to that low vacancy rate. According to surveys conducted by the rental-listing company Apartment Search, a mere 1.5 percent of all units in the metro area are available at any one time--less than half the national average of 3.9 percent (which itself is the lowest of the decade). In Uptown the rate has fallen to a measly 0.8 percent. Experts say a vacancy rate of five to eight percent is necessary to maintain a balanced rental environment.

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."

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