It seems like nobody can agree on what “gentrification” really is, but everyone knows it when they see it. The most common expression of the term is that people are forced to move directly due to rising costs of living, although I see it as a more slow and insidious change that rarely draws a direct line to people’s immediate housing choices. Gentrification can be a gradual change in demographics that is more like the anecdote of the frog in the cooking pot who does not realize the water is boiling around him. Likewise, neighborhood demographics and costs typically don’t change so quickly that poorer people are immediately relocated.

To the degree we do see rapid changes, that generally happens along transit corridors or in upscale neighborhoods. The controversial Orth House development in Uptown is an example of low-income renters being forced out of their homes because the land they reside upon is worth more to a developer than the existing structure. Thankfully, we have not seen that degree of displacement in north Minneapolis in recent history.

As a housing professional - both as a non-profit neighborhood worker and as a home mortgage originator - I tend to view gentrification through the lens of “who gets to live here and how much does that cost?” Given my field of work, I can best express that cost through home ownership requirements.

So when the Homewood neighborhood raised concerns over a historic designation study as a risk of gentrification, I wanted to see what the numbers tell us about affordability and that cost over time. What some data tells me is that the designation study area is already gentrified, the problem of affordability is getting worse, and designation studies may actually help contain the most extreme forms of gentrification.

I have my own affordability calculation, and it goes like this:

Purchase price minus down payment equals loan amount. At typical market rates for 30-year fixed mortgages, we get the principal/interest payment. Add in payments for taxes, insurance, and mortgage insurance, and that’s our housing cost. Usually an affordable housing payment is between 28% and 31% of a household’s monthly (pre-tax, pre-deduction) income, but in today’s rising market we’re seeing costs go much higher than that. For this calculation, I’m going with 35%. So we take the housing payment, divide by 35%, and get our monthly income needed to make a home affordable. Multiply that number by 12, and we have the annual income a household needs in order to affordably own a home in an area.

And this is where we find out if certain areas are gentrified, and if so, by how much?

For instance, the average purchase price of a single-family home in the Willard-Hay neighborhood as of October 2017 is $149,500. At 4.625% over 30 years, that’s a $745.58 principal/interest payment. Taxes for a homesteaded property would be $165.33, a decent home insurance policy would cost about $110 per month, and if you used a first-time homebuyer loan you could get mortgage insurance as low as $90.63. Put it all together and you have a payment of $1,111.54. In order for that to be 35% of your income, you’d need to earn just over $38,000 per year.

By contrast, a year ago the average property in Willard-Hay would have required an income of $31,850 to be affordable. In my Jordan neighborhood the 2017 income needed is $33,500 and a year ago that was $27,580.

For the Homewood designation area, there is a stark difference. With an average sales price this year of $217,000, the principal, interest, taxes, insurance, and mortgage insurance payment comes to just under $1,600. To keep that payment under 35% of a household’s income, we would need $54,600.

So when a household needs to earn almost 50% more just to have access to affordable ownership, then I hate to break it to you but your neighborhood is already gentrified. In that context, what does a historic designation accomplish?

One of the consequences of historic designation is that it is much more difficult - not impossible as the aforementioned Orth House saga shows, but certainly harder - to acquire properties for the sole purpose of demolition and new construction. Homewood residents may look to the south and lament the higher values in Bryn Mawr, but we are not too far off from the prospect of our land being worth enough to justify the kinds of purchases that only upper-income families or rich developers can afford.

House values are already increasing faster than the rate of inflation, meaning incomes aren’t keeping up with the cost of ownership. The added costs of a designation, perceived or real, is not a significant factor in housing affordability in such a context.

I don’t think I need to run the same set of calculations for acquisition, demolition, and new construction. Just ask yourself, how many poor people do you know who are going through that process to buy their homes in southwest Minneapolis or Edina? Large-scale development of multi-unit housing along transit corridors can certainly provide needed affordable housing units, but who benefits from ownership at that point? Some already-rich developer does.

And that is precisely what a designation could prevent; the acquisition of land for purposes that the average owner could not achieve or compete with on their own. We can create a historic designation process that waives or reduces fees. We can direct city staff to equitably support and guide owners instead of our culture of enforcement and punishment. Done right, historic designation can be a tool that prevents, not causes, gentrification.

Jeff Skrenes is a Mortgage Loan Originator with eighteen years of experience in home mortgage and non-profit housing work. He specializes in first-time homebuyers and down payment assistance programs. Jeff has been recognized by Minnesota Housing as a top-producing loan originator for their bond and assistance loans. 

He brings his passion for quality housing to volunteering and has served on the board of the Jordan neighborhood.  He helped create a series of housing assistance loans for the Jordan neighborhood. When Jeff isn’t working, he enjoys cheering on the North High Polars football team, cooking spicy food, and appreciating Theo Wirth Park with his dog Rayne.

Northeast Minneapolis 

Brenda Kayzar's Response

The recent growth of Northeast Minneapolis follows a familiar blueprint of neighborhood change seen across the country, including a few decades prior in Minneapolis’ Warehouse District: Artists move into a former industrial area which has experienced disinvestment; they create a sense of vibrancy attractive to outsiders; and they are eventually unable to afford the area whose success they made possible.

The featured comments by residents and business owners in Northeast echo that pattern of revitalization and displacement, as well as the viewpoints expressed by other community members we at the Preservation Alliance of Minnesota interviewed through our efforts to investigate cultural assets in Northeast. In our work, we focused on the social and cultural value of the places community members have been able to establish because of the area’s affordability—places like coffee shops and cafes, locally owned restaurants and businesses, and artist studios and galleries.

Their answers give some insight into why, socially, this cycle occurs and what stands to be lost. What exactly is it about a place like Northeast that has made it so attractive to outsiders? What qualities make it so ripe for commodification and a spike in demand that’s led to a rapid decrease in affordability?

As a former industrial hub of Minneapolis, Northeast has a long tradition of attracting immigrants—first from Scandinavia and Eastern Europe, and now from other places across the globe. Businesses representing the Latino, Hmong, Somali, and other communities dot the streetscape along Central Avenue.

Largely because of this immigrant community, Northeast has historically been rich in “third places,” a term coined by sociologist Ray Oldenburg to describe where people spend time away from home and work and accrue social capital. These are places where people can build community and relationships, and become connected to civic and social groups. The many dive bars and churches which define Northeast have long served this purpose, and continue to do so.

As artists moved into Northeast from the North Loop, they augmented this culture of great places, repurposing abandoned industrial warehouses into studios and opening art galleries, coffee shops, and restaurants.

The rising popularity of Northeast has no single explanation, but we chose to examine it through the lens of successful places. Community members—whether they were homeowners, renters, artists, or small business owners—we spoke to consistently highlighted the authenticity of Northeast. They viewed this authenticity largely in terms of businesses and the arts, as well as through the historic homes and churches and the industrial legacy of Northeast found in the railroads and cobblestones.

We came to understand authenticity to mean small, local, and unique. Authentic places are ones that reflect the community and its history. They create a rich sense of place because they’re exclusive to the community in which they’re deeply rooted. The value of and attraction to these places has been accentuated by the increasing homogeneity of American culture—a sense that you could be in one place, but any place at all because of a sameness that pervades everything from the style of new apartment complexes to national chains.

Authentic places are an antidote to this sameness. As American society becomes more standardized, people increasingly prize authenticity and individuality. Places like local bookshops, diners, and art studios are important to people both because of the services they provide, and because they represent a culture of authenticity.

The irony is that authentic places tend attract homogenous ones. The density of great places increases the desirability of Northeast, making the area less affordable for those very people and places which made it attractive in the first place. Demolition of older buildings which provide affordable rents decreases the supply of small, affordable spaces for entrepreneurs. High rent prices in newer developments exclude all but national and regional chains and luxury boutiques, as lenders often pressure developers to exclusively lease to these “safe” tenants. Meanwhile, rents of older commercial and residential properties rise for many reasons. This can push out entrepreneurs, longtime businesses, and preclude new ones from emerging in the first place. For those who stay, they often experience a sort of cultural gentrification, in which they no longer see themselves represented in their neighborhood or feel welcome there. They feel that new groups “set the rules” for socially permissible behavior in the community.

All agree that neighborhood change is inevitable—even desired. The artists haven’t always been in Northeast, nor have the same businesses from the early 20^th century endured to the present. You’re more likely to hear Spanish and Somali spoken on the street than Swedish or Polish. The narratives shared by Northeast stakeholders in this snapshot emphasize the idea that the community opposes not change more broadly, but the current type and pace of change.

Revitalization isn’t neutral. Without concerted planning efforts, growth stands to benefit wealthy outsiders, rather than people of color and low-income residents who helped usher in the wave of growth. In Northeast, community members have been experiencing an inequitable growth that doesn’t always reflect their vision or needs, but rather those of outsiders.

Policy makers and politicians of all leanings can largely agree on the importance of small businesses, entrepreneurship, and artists. The economic, social, and cultural benefits have been well-established. The success of these places, however, threatens their very ability to exist without deliberate and diligent policies to support them and the people who have built them.

An ideal community includes a spectrum of affordable to high-end residential, commercial, and industrial spaces. Land use and zoning policies, regulation on developers, and planning documents ought to reflect that principle of tiered affordability.  Technical assistance programs and access to capital must be readily available to support great ideas. And, most importantly, community members must be empowered with the resources to guide change in line with their vision in order to benefit from growth.

Michael Tolan currently serves as a Community Engagement Coordinator with Preservation Alliance of Minnesota. Michael works with community members to identify cultural assets and opportunities to preserve and activate them. He aims to increase civic engagement around place, encourage residents to become active participants in the development of their neighborhoods, and develop policies that encourage cultural preservation and sustainable change.

Michael holds a B.A. in Classical Studies from Carleton College and is a graduate of the Coro Fellowship in Public Affairs, a national program centered on public policy, civic engagement, and leadership development.

South Minneapolis 

Jessica Lopez Lyman's Response: Bodies Who Leisure in Midtown