The northland has its own housing crisis

A successful marriage requires many ingredients, several of which I had to locate after the fact. But for my wife and me, a mutual desire to live on a lake in northern Minnesota sure helped. I distinctly recall the phone conversation after our first date when we stumbled on this shared goal. 

Seven years later we broke ground on a lake house with our first child on the way. Eighteen years after that, we’re still here on the swampy shores of one of Itasca County’s 1,000 lakes. That baby graduates high school next week.

Though bookended by larger, more expensive homes, our house comfortably fits a family of five. Our dream came true, but would have died in the crib had we been born later.

Today, we couldn’t afford to build or buy what we currently have, certainly not at the income we had 20 years ago and probably not now either. Construction costs doubled since 2005 and the real estate market went from a buyer’s delight to a seller’s bonanza.  

The complex reasons why this happened tie closely to a changing global economy and climate. And while I’m talking about rural real estate, the same problems may be found in towns and cities. 

In fact, what might most unite Minnesotans right now is the difficulty and expense of finding a place to live. 

For those left behind in the explosion of costs and the dearth of available homes, we look for answers behind the statistics.

‘My shoes melted’

Rebekah Zemansky and her husband bought a lake home a few miles away from us last year. She’s a freelance journalist; he’s an information technology professional. They had only visited Itasca County once before deciding to move here from Phoenix.

As remote workers, the couple could work anywhere they could find high speed internet. Over the past five years, the Bemidji-based telecom cooperative Paul Bunyan Communications captured millions in state broadband grants while investing heavily in a fiber optic network throughout Itasca County. This includes the dirt road where Zemansky lives and, for that matter, the dirt road where I live. 

But rural high speed internet wasn’t the only appeal of living here. Zemansky said she and her husband were attracted to the temperate climate and proximity to nature, a far cry from the 110-degree heat of Arizona.

“How the girl who’s prone to heat sickness ended up there I don’t know,” said Zemansky. “My shoes melted. … They were my nice pair of work flats and they melted on me the day I got heat sick.”

Zemansky said it took two years to plan the move, but it worked out well. Home prices in Phoenix spiked during the time they lived there, turning a $365,000 house they bought in 2018 into a $600,000 windfall when they left. They bought their home in Itasca County for $530,000, leaving them with manageable bills in a climate they and their dogs have grown to love.

“Our families are getting bombarded with pictures of deer,” said Zemansky. “We were looking to live around wildlife, to have seasons again. This has met all of our goals and exceeded them.” 

Zemansky’s tale reminds of a March 13, 2023 New York Times story about an influx of new residents to “climate-proof” Duluth. One recent Reddit post became a massive thread on people moving to Minnesota for the climate and left-leaning politics. 

Such claims must be tempered, however. On a net basis, Minnesota actually lost residents to other states in recent years. Between 2021 and 2022, according to Census data, Minnesota lost about 19,400 people to other states. Even if that turns around, the scale of the in-migration is expected to be small. Minnesota’s State Demographic Center predicts a modest 885,000 resident increase over the next 50 years, mostly in the metro area, a relative drop in the bucket. 

It’s the market that’s making waves.

Pumping up prices

Septic systems are a hallmark of rural life that often confound townies. We must remove all our own waste, from sink goo to collective poo. My dad remembers emptying a septic tank by bucket when he was a kid. Personally, I prefer to pay for the pumper truck to come. During the pandemic, it was time to pump our tank.

We weren’t alone. With everyone home in 2020, Scooter, my septic-pumping guy, said he’d never been busier. But it wasn’t just the pandemic, he said. People were moving to their cabins permanently. Some were buying seasonal properties and turning them into retirement homes. New high-speed internet lines made it possible for others to work here. Anxiety over riots in Minneapolis provided the final push in some cases. 

Understand that I’m paraphrasing Scooter here. Jesse Davis is a real estate agent in Grand Rapids and last year served as president of the Itasca County Board of Realtors, and he confirmed what Scooter was seeing.

“People are seeking a little more peace, more space, more breathing room,” Davis said. 

The economic and demographic factors behind the movement revved real estate prices, even though northeastern Minnesota’s economy lags behind the state average. That affects everyone. The sale price of homes can inflate the cost of owning any house.

“Lakeshore always has value, but it’s higher than ever,” said Joan Cotton, a longtime real estate agent based in Hibbing, just over the St. Louis County line.

She says cabins currently sell for $200,000 to $300,000, lake homes for $300,000 to $500,000. Sale prices of $800,000 on lake homes are “not uncommon.” While these numbers might not shock people in the Twin Cities market, they seem stunningly high to people whose parents may have paid a fifth of that for the same properties just 20 years ago.

“They want to live in nature,” said Cotton of her current clientele. “It’s a mindset. They want to escape crime and people. They want rural housing. If not lakeshore, then rural, if not rural, then small town.”

Burdensome rent and home prices have long vexed urban and suburban residents. Costs still run higher in the supercharged metro real estate markets, where an entire generation laments being trapped in expensive rental housing well into middle age. 

But rural housing woes are rapidly catching up to their metro counterparts. So is inflation. One analysis published Jan. 27 in The Conversation suggests that rural areas feel cost of living increases more acutely, mostly due to transportation costs.

A March 15 Daily Yonder story by Taylor Sisk and Jan Pytalski highlights that rural homelessness and housing insecurity is rising faster than in metro areas.

You don’t even have to buy or sell a home to feel the pinch. County tax assessments have skyrocketed in Itasca and St. Louis counties because of the higher sale prices. Though the relationship between assessed value and taxation is complex, property taxes have risen for most.

All demand, no supply

Higher prices are just one problem home buyers face. When I talked to Cotton in February she had no houses to sell. That was during the winter lull, but worse than usual, she said. Davis had the same problem. Aspiring home buyers in northern Minnesota must steel themselves to make a life-altering financial decision on short notice because of the limited time properties spend on the market.

Building is no easier. There’s plenty of land in rural Minnesota, but the rising cost of lumber, steel and copper is inescapable.

Betsy Olivanti is the community development director for the Hibbing Economic Development Authority. 

“If you’re looking to own a home and build equity, it’s not happening,” she said.

Olivanti said the typical Habitat for Humanity house in Hibbing costs up to $175,000 to build, showing that even cost-conscious builders with altruistic aims can’t beat the price crunch. Davis said the same is true in Grand Rapids.

“You can’t build for less than $300,000,” said Davis. 

Davis said the lack of labor is one of the biggest challenges in building new homes at the scale that would cut costs. Cotton said the same, arguing that few large contractors in northern Minnesota are willing to invest in housing developments.

Meantime, Davis points out that the vacancy rate for rental properties in Itasca County is less than 1%, a fact that keeps rents high and apartments hard to find.

“I still think with rentals getting more expensive that it makes more sense to buy,” said Davis.

Like real estate across America, sales in northern Minnesota slipped in 2022. By January of this year, the Itasca County Board of Realtors reported a drop of 29% in new listings, almost 24% in pending sales and almost 7% in closed sales. But local real estate agents say demand remains just as strong. There just aren’t enough houses for sale.

When I talked to Cotton in February she had an afternoon to spare. She had a long list of potential customers and zero houses to show them. Her advice for buyers was succinct.

“Work with a local lender and realtor, and they better be on their game,” said Cotton. “I don’t see this year being any better [for housing supply]. It feels worse.”

The region’s demographics also play a role. Davis said that St. Louis and Itasca counties have the state’s oldest residents and oldest housing stock. Most of the mining town houses built in the 1920s had one bathroom located on a second floor, an acute challenge for an aging population.

“Couples sit on rural houses because there are no one-levels in town,” said Davis. 

Meantime, younger couples want the rural houses that push their budget. But locals from families without land or capital quickly find that this new market makes no allowances for them. They’ll be renting indefinitely, hoping to buy a fixer-upper in town. 

“Some families have been living here a long time near a river or lake, but this generation can’t afford to do that,” said Davis.

Some may dream of inheriting their parents house, but it’s easy to lose that waiting game. The cost of nursing care often forces families to sell. Meantime, larger families find it hard to divide an estate mostly tied up in a home.

That’s something that writer Maria Corradi Haines talks about in a recent essay about her family’s northern Minnesota cabin. Her large family has shared a cabin on Blackduck Lake in Beltrami County for generations. But she writes that she’s started to see changes in the form of “For Sale” signs and higher property values.

“I have never wanted all that much — a safe home, fresh air, clean water, people to love; things that constitute a good life,” she writes. “But even our family’s circumstances are changing. Eventually, ownership of the cabin will transfer from one generation to the next. Unlike prior generations, this next transition does not seem as obvious. … when money and property are on the table, unspoken concerns and past grievances can rear their ugly heads.”

These are the grandsons and granddaughters of miners who bought property cheap in the 1970s. The market demands they sell, even though they cannot afford to buy again.

Building solutions

Solving the housing problem in rural Minnesota is a lot like what you see in big cities. You have to address market rate housing as one issue and low-income housing as another. But towns in northern Minnesota don’t have the same resources as metro counties.

Hibbing is the largest city in Minnesota by area. At 186 square miles, the town has ample room to build. But even though it’s bigger than Minneapolis and all of Ramsey County, Hibbing’s small population and the unique nature of taconite mining taxation leave it with fewer financial tools to address housing.

Olivanti said Ramsey County’s estimated market value is 66 times bigger than Hibbing’s. Minneapolis has 58 times the levying power of Hibbing. Bigger cities can also multiply their investments through scale, while small rural towns have to pick and choose which expensive projects to attempt.

But Olivanti said local employers — from the mines, to the hospital, to smaller manufacturers and service providers — now recognize the housing problem when they try to hire professionals from outside the area. This, she said, is finally spurring action.

Hibbing is pushing for a housing trust fund, which is when cities pool state and federal grants to encourage private housing development projects. This will allow the city to capitalize on new state housing programs enacted this month.

Olivanti said Hibbing is also pursuing grant funding to help encourage seniors to rehabilitate and sell their homes when they would benefit from downsizing. The availability of land is the city’s biggest asset. The shortage of contractors and cash remains the problem.

Most rural millennials grew up thinking that the pretty house in the woods that so inspired earlier generations is an impossible goal. At these prices and their wages, that’s true.

The housing crisis that consumes city politics is just as pronounced in rural Minnesota. It’s just hidden down long dirt roads in a place some call God’s Country. They call it that because it’s like heaven, only in this version you need lots of money to pass through the gates. Millionaires buzz through the eye of the needle on jet skis.