Roofs, repairs, and rodents: How housing quality has climbed in the Twin Cities

When surveying the Minneapolis-St. Paul area housing market, the lack of affordability can be a bit dispiriting. Adjusted for inflation, since 1997 rents in the Twin Cities area¹ have climbed by 16 percent and house prices by 60 percent.² Housing affordability in the Twin Cities area and nationwide reached historic lows in 2023.

Over the same time period, nearly all of 34 different housing-quality measures for the Twin Cities area show observable improvement. Housing quantity is also up. For example, the number of square feet per person is up about 7 percent since 1997.

Simply comparing average rent and home prices over time in the Twin Cities area can be misleading, since unlike most other goods, housing constantly evolves through depreciation, maintenance, improvements, and demolitions. Housing that has deteriorated over time or become less desirable due to a lack of space or amenities is gradually replaced with typically larger, higher-quality new construction and renovations. While housing prices are important, considering how living conditions have evolved across the income spectrum is critical context for understanding how the well-being of Twin Cities area residents has changed over time.

In a recent paper co-written with researchers from the University of Wisconsin-Madison and the University of Illinois-Chicago and initially published by the Minneapolis Fed, we measured the evolution of housing quality for low-income households over the past several decades across the United States. We found broad and generally large increases in housing quality and smaller but still important increases in living space. Using the same research approach on metropolitan-level data reveals a similar story for the Twin Cities area.

This work advances the Minneapolis Fed’s mission to pursue an economy that works for all of us. The Community Development and Engagement team at the Minneapolis Fed supports that mission through a focus on economic outcomes for low- and moderate-income households and communities.

Measuring quality improvements

Housing quality, while important for residents, can be difficult to measure and quantify. In our paper measuring and tracking U.S. housing quality for all types of housing over time, we used data on 35 indicators of poor-quality housing collected by the American Housing Survey (AHS),³ including matters such as leaks, roof damage, plumbing and appliance presence and working condition, the presence of rodents, and the presence of visible trash around the neighborhood.⁴ Combining these 35 quality indicators and weighting by relative prevalence, we created a Poor-Quality Index for housing. Housing units, which in these data include any renter- or owner-occupied dwellings,⁵ are “good quality” if they report none of the poor-quality indicators. Conversely, we define “poor-quality” housing as housing units whose index values are in the bottom 10 percent of the sample pooled across all years of data.

When we apply our methodology to a new analysis that focuses on the Twin Cities area using the 34 indicators for which local data are available, we find a gradual improvement in housing quality over time among both higher- and lower-income households.⁶ For instance, the rate of poor-quality housing in the Twin Cities area decreased from 13.6 percent to 5.0 percent from 1997 through 2021. As shown in Figure 1, households earning below the median household income saw a larger decline, with the share living in poor-quality housing falling from 22.7 percent to 7.6 percent. For households earning above the median household income, the rate of poor-quality housing fell from 9.0 percent to 2.4 percent.

Concurrently, the share of households living in good-quality housing—that is, housing units reporting no poor-quality indicators—rose from 14.1 percent to 32.7 percent in the Twin Cities area from 1997 through 2021. As shown in Figure 2, for households earning below the median household income, the share living in good-quality housing increased from 8.6 percent to 25.6 percent. This improvement in housing quality was similar across the income distribution. For households earning above the median household income, the share of households living in good-quality housing grew from 16.9 percent to 39.9 percent.

Figure 3 shows how some of the poor-quality indicators changed from 1998 through 2021⁷ for Twin Cities households earning either above or below the median household income. Across the 34 indicators for which local data are available, the observance of poor-quality features declined by an average of 45 percent. For households earning below the median household income, nearly all of the 34 poor-quality indicators decreased over this period, with only one (not shown in the figure)—presence of holes in the floor—increasing slightly.

Put a deck on it: Homes in the Twin Cities area expand

In addition to becoming higher-quality, Twin Cities area housing has been expanding over the past quarter century. Overall, the size of occupied housing units increased by 81 square feet and 0.15 rooms per person from 1998 to 2021. For households in the top half of household incomes, the increases are 70 square feet per person and 0.06 rooms per person (increases of 5 percent and 1 percent, respectively). As seen in Figure 4, for households in the bottom half of household incomes, the increases are 92 square feet per person and 0.24 rooms per person (increases of 9 percent and 7 percent, respectively). Diving deeper into the patterns for households in the lower half of the income distribution, we also find increases in more granular measures of space and structure, such as the number of bathrooms (a 19 percent increase) and the shares of households that have a garage (a 7 percentage point gain, or 11 percent increase overall) or a porch, deck, or patio (a 12 percentage point gain, or 19 percent increase overall).

Prices are up, but homes are getting nicer

As housing quality and quantity are getting better, how much more are households paying for it? According to the AHS, for below-median-income Twin Cities area residents, real monthly spending on housing increased by 32 percent from 1998 to 2021, from $1,008 to $1,333. Around half of below-median-income Twin Cities households remain housing-cost-burdened (spending 30 percent or more of their income on housing) and a quarter remain severely housing-cost-burdened (spending 50 percent or more of their income on housing). For many families that spend a large fraction of their income on housing, findings about general housing improvements may be tough to appreciate.

However, our analysis indicates that greater housing spending reflects not only higher housing prices but also Twin Cities area residents’ ability to afford housing that is larger and nicer. Overall, the average housing budget share only increased by 4 percentage points from 1998 to 2021, from 36 percent to 40 percent of income, which indicates that most of the growth in spending on housing is driven by higher incomes, better quality, and more spacious homes, as opposed to needing to allocate a greater share of income for the same, unimproved housing.

Endnotes

1 The list of counties that make up the Twin Cities area varies depending on the data source. Generally, “Twin Cities area” refers to either the metropolitan area’s seven core counties of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington, all in Minnesota; or the greater metropolitan area’s 15–16 counties, which include the seven core counties plus Chisago, Isanti, Le Sueur, Mille Lacs, Sherburne, Wright, and sometimes Sibley counties in Minnesota, and Pierce and St. Croix counties in Wisconsin. See endnote 2 for details on how “Twin Cities area” is defined for the rent and house-price increases indicated here.

2 Both percents are index values covering the second quarter of 1997 through the second quarter of 2023, accessed via FRED (Federal Reserve Economic Data, a resource from the Federal Reserve Bank of St. Louis). The rent value is from the Consumer Price Index for All Urban Consumers from the U.S. Bureau of Labor Statistics. For the rent value, the Twin Cities area is defined using the U.S. Census Bureau’s core-based statistical area (CBSA), which is made up of the 15 counties listed in endnote 1 (that is, excluding Sibley County) plus six additional counties in Minnesota: Benton, Goodhue, McLeod, Rice, Stearns, and Steele. The house price value is from the U.S. Federal Housing Finance Agency. For the house-price value, the Twin Cities area is defined as the 16 counties listed in endnote 1.

3 The AHS is sponsored by the U.S. Department of Housing and Urban Development (HUD) and conducted by the U.S. Census Bureau.

4 We used the national sample for the Twin Cities metropolitan area in 1997–2015 and the metropolitan area samples for 1998, 2017, and 2021.

5 This includes any dwellings that are intended for occupancy and are of any structure type, including single-family detached and multifamily structures.

6 For the data we used in this analysis, HUD defines the Twin Cities area using the U.S. Census Bureau’s 21-county CBSA, which is defined in endnote 2.

7 For technical reasons related to sample sizes of national versus metropolitan data in the AHS, 1998 is the first year of data for the portions of our analysis discussed from this point on, not 1997.