Building Slowdown May Help Minneapolis Duplex Rents Rise in 2025

According to a story in the Minnesota Star Tribune, now’s the time to get a good deal on renting a new apartment if you’re a tenant.

While fall is always a good time to get a bit of a discount from a housing provider facing winter with a vacancy, the logic in the article was a bit counterintuitive. According to reporter Jim Buchta, demand for new construction apartments is down, but come 2025, when very few new units come to the market, there will be more competition for those vacancies. Of course, when demand exceeds supply, rents go up.

This tightening is due to the area having fewer new buildings in the pipeline. In fact, 2025 will see 72% fewer new units come on the market than in 2022, and 39% less than this year. Builders and developers cite higher interest rates and construction costs, as well as restrictive zoning as reasons for the pullback.

Of note; the impact of rent control on new development is monumental. Year to date just over 1800 new units have come onto the market in Minneapolis. St Paul saw just 221.

According to Marquette Advisors, which tracks data on large multifamily buildings across the metro, the Twin Cities currently has a 4.4% vacancy rate. That’s up from where we’ve been in recent years. However, it is a number that still favors housing providers, as a 5% vacancy rate is considered balanced. If vacancy rates tick up from there, tenants are in control and landlord concessions typically follow.

For those who don’t own brand-new large apartment buildings, there’s a trickle-down effect. When demand exceeds supply, rent goes up.

And when tenants can’t get or afford new, shiny apartments in the hottest areas, they often turn their attention to existing duplexes, triplexes and apartment buildings in the same vicinity. Of course, that increased demand means rents rise for small landlords as well.

Whatever 2025 may bring, it may turn out to be a pretty good year to be a Minneapolis or St Paul housing provider.