The COVID-19 pandemic threw Duluth’s housing market for a bit of a loop in 2020, as demonstrated by some of the findings in the city’s recently released Housing Indicator Report.

Rental vacancy rates doubled from 2019 to 2020 — climbing from an extremely tight 2.6% to a healthier 5.2%. That may be due largely to fewer college students attending classes in person, theorized Jason Hale, Duluth’s senior housing planner.

But Hale also noted the desire by many renters to become homeowners during the pandemic.

He suggested that renters working from home may well have decided they could use a bit more space than their apartments afforded. Hale added that low interest rates provided an additional incentive for people to take the plunge into homeownership.

Newsletter signup for email alerts

“The single-family housing market has been moving very fast, and the inventory is historically low. There are often multiple offers being made for properties and cash offers from people outside of the community. So, it’s a very competitive market,” Hale said.

With many factors in play, he said, “The vacancy rate is very difficult to interpret, because we had a very abnormal decrease in enrollment, and we all have these other nuanced things happening.”

Hale cautioned against drawing many conclusions from 2020 vacancy rates.

“So, I personally would not look at the increased vacancy rate and say: That’s the trend, and it’s where Duluth is going. I would look at it and say that’s indicative of a very tumultuous year and a lot of changes in the market,” he said.

The increased rental vacancy rate could also be at least partly a function of fewer people competing for a space to live. The estimated number of households living in Duluth declined by 1,192 — or 3.1% — from 2019 to 2020, according to an estimate of the U.S. Census Bureau American Community Survey.

During a time of economic turmoil, more combined households or intergenerational family living arrangements could account for some of the decline.

Rents still a reach

Perhaps as a result of decreased scarcity, local rents appear to have softened a bit, as well, with a city survey indicating a median rent of $1,124 in 2020, down $42 from the previous year.

Hale said it’s difficult to tell if the 22% of landlords who responded to a city survey provide a true reflection of the market as a whole.

“But given the data we have, rent still is not cheap. Paying $722 for a studio, if you’re making $10 an hour or less, is a difficult thing to swallow. It’s a difficult price to pay,” he said, referring to the median cost of such a unit in Duluth.

People who spend 30% or more of their income to keep a roof overhead are considered cost-burdened by the U.S. Department of Housing and Urban Development. And to remain below that precarious financial threshold a person earning $10 an hour would need to work 56 hours a week to comfortably afford a typical studio apartment.

Meanwhile, many local residents saw their incomes erode during the pandemic, as the median household income in Duluth dipped 6% from $55,819 in 2019 to $52,463 in 2020, according to the American Community Survey. That's just 73.6% of the median household income in Minnesota.

Assistance falls short

A number of people on the lower end of the income spectrum have struggled greatly to locate affordable housing. The waiting list for a housing voucher or a placement in public housing was about a full year. And even when people got housing vouchers, they were often unable to use them.

The housing report showed that 11.2% of vouchers went unused in 2020.

That’s because many recipients could not find suitable apartments that fit the cost parameters of the program, explained Jill Keppers, executive director of the Duluth Housing and Redevelopment Authority.

Even though the Duluth HRA sets its rent thresholds near the maximum allowed by HUD, Keppers said, “There’s just not enough units that either accept Housing Choice vouchers or that meet the payment standards that we’re allowed to set.”

“It still doesn’t match what landlords can get for rent in Duluth,” she said.

Keppers noted that many of the new apartment buildings that have gone up in recent years are out of financial reach for people on rental assistance.

“We have a lot of new market-rate rental housing that’s been built the past few years, which is great for the city of Duluth, but they’re high-end rentals. They’re not anything close to the payment standards that we’re allowed to set,” she said.

Keppers also pointed out that HRA pricing guidance is usually based on data that is a few years old. And the data that factors in median rents for the whole Duluth-Superior Metropolitan Statistical Area, including all of St. Louis, Carlton and Douglas counties — rather than just Duluth proper, which consistently has some of the highest rents in the region.

Providing supportive services for people living in assisted housing is yet another significant challenge, according to Laura Birnbaum, St. Louis County’s housing and homelessness programs team supervisor.

“Sure, there’s affordability issues across the continuum. But really looking at people who have experienced homelessness or long-term homelessness, the need for permanent supportive housing is huge in our city,” she said.

Birnbaum said she’s encouraged by some projects currently in the works, but they offer no quick fix.

“I’m excited about some of the projects that are going to be coming on line,” she said. “But those are a year or two out, when we have people who have been waiting a year or more and are currently experiencing homelessness.”

Birnbaum also noted that communities of color have disproportionately experienced homelessness.

She suggested St. Louis County and Duluth have an opportunity to do better.

“Knowing that federal funds will be coming through federal programs, such as the American Rescue Plan etc., we really want to make sure that racial equity is a priority with how those resources are used,” she said.