What Neighborhoods Are Up-and-Coming in Minnesota?
A buyer called me from his home in Columbus, Ohio on a Monday morning with a question that came from a specific and deliberate investment orientation rather than from the more typical search for the community that best fit his current lifestyle. He was thirty-two years old, a first-time buyer, and had been thinking about the home purchase decision as both a housing decision and a financial decision in ways that were more sophisticated than the average first-time buyer. He understood that the neighborhood a home sits in affects the trajectory of its value over time, and he was specifically interested in identifying neighborhoods where the conditions that precede significant appreciation were visible to a careful observer even if they had not yet been reflected in current prices. He was relocating to the Twin Cities for a position at a financial technology company in downtown Minneapolis and had flexibility in his housing choice that most buyers do not have because his employer was downtown and accessible from virtually anywhere in the metro by reasonable commute. This flexibility made the neighborhood trajectory question more central to his decision than it would be for a buyer whose commute constraints defined the geographic search zone. “I want to buy in a neighborhood where I am not the last person to figure out it is good,” he told me. “I want to find the places that are genuinely improving and where I can get in before the prices fully reflect what the neighborhood is becoming. Can you tell me where those places are in the Twin Cities?” His question was the right question asked in the right way, and the honest answer required both identifying the specific neighborhoods where the conditions for improvement are visible and being honest about the uncertainty that any prediction about neighborhood trajectory necessarily involves. Here is the complete picture. What Actually Drives Neighborhood Appreciation Before identifying specific neighborhoods, understanding the specific conditions that drive neighborhood improvement and appreciation provides the framework for evaluating any neighborhood’s trajectory. The conditions that most reliably precede neighborhood appreciation are identifiable and have been consistent across many markets and many decades of urban development research. They do not guarantee appreciation but they create the conditions in which appreciation is significantly more likely. Physical proximity to an already-desirable neighborhood is one of the most reliable predictors of neighborhood improvement. Neighborhoods that share a border with established desirable areas benefit from the overspill of demand when prices in the adjacent desirable area rise to levels that price out buyers who would prefer to live there. These buyers look next door, and their arrival begins the demand pressure that drives appreciation in the adjacent neighborhood. Investment in public infrastructure, including new transit lines, trail connections, park improvements, school investments, and streetscape upgrades, signals public commitment to a neighborhood that attracts private investment in its wake. New coffee shops and restaurants follow trail connections. Residential renovation follows restaurant investment. Appreciation follows renovation. The arrival of early-stage commercial investment, specifically the opening of independent coffee shops, restaurants, and specialty retail in commercial corridors that were previously underserved, is one of the most consistent early signals of neighborhood improvement. These businesses locate in neighborhoods where rents are still low enough to be accessible to independent operators and where they sense an emerging residential community that will support them. Their arrival then attracts additional residents and additional commercial investment in a reinforcing cycle. A high proportion of owner-occupied housing relative to rental housing, or a visible trend toward owner-occupation in a previously rental-dominated neighborhood, signals the increasing permanent investment of residents in the neighborhood’s maintenance and improvement. Owner-occupants improve their properties in ways that renters rarely do, and the cumulative effect of owner-occupied renovation across a neighborhood is one of the most powerful drivers of neighborhood quality improvement. Hamline-Midway and Frogtown, Saint Paul The Hamline-Midway and Frogtown neighborhoods of Saint Paul represent some of the most interesting neighborhood improvement dynamics in the current Twin Cities market and deserve specific attention from buyers who are thinking about trajectory rather than only about current condition. These neighborhoods sit along the Green Line light rail corridor that runs between downtown Saint Paul and downtown Minneapolis through the University of Minnesota campus. The Green Line has been in operation since 2014 and its effects on property values and commercial investment along its corridor have been building progressively since its opening. The neighborhoods along the University Avenue corridor, which is the spine of both the Hamline-Midway and Frogtown neighborhoods, have been experiencing the gradual commercial and residential investment that follows transit investment in urban neighborhoods. New restaurants, coffee shops, and community-serving businesses have opened along University Avenue in locations that were previously underserved or vacant. New residential construction has appeared in several locations along the corridor where the transit access has made development viable. The housing stock in both neighborhoods consists primarily of older single-family homes, duplexes, and small multi-family buildings that reflect the working-class residential character of communities that developed in the early to mid-twentieth century. This older stock is a genuine improvement opportunity for buyers willing to invest in renovation and is available at prices that are significantly below what comparable proximity to transit infrastructure commands in more established neighborhoods. The honest caveat for these neighborhoods is that the improvement trajectory, while real and continuing, has been gradual rather than dramatic, reflecting the complexity of neighborhood improvement along a transit corridor that passes through communities with significant economic challenges and that has required sustained investment over years rather than a single transformative event. North Loop Adjacent: The Near North Minneapolis Corridor The Near North neighborhoods of Minneapolis, specifically the areas adjacent to the North Loop that include parts of the Harrison and Willard-Hay neighborhoods, represent the classic proximity-to-desirable-neighborhood improvement dynamic described in the framework section. The North Loop has experienced dramatic appreciation over the past fifteen years as converted warehouse buildings have produced some of the most desirable and most expensive residential addresses