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The Blueprint
- Snelling Yards in Minneapolis will add 95 affordable apartments by 2026.
- Fox and the Grouse Phase II in Eden Prairie brings 188 units with affordable options.
- Affordable housing projects dominate new construction amid high costs and tight lending.
Multifamily construction activity in the Twin Cities has blossomed in recent weeks, but experts aren’t quite ready to declare that everything is coming up roses for the sector.
After a miserable month of permit activity in July, the 13-county metro area bounced back with solid year-over-year homebuilding numbers in August and September, according to the Keystone Report.
The report, released Friday, reveals that metro area cities issued permits for 291 new multifamily units, up 61% year-over-year in September. In all, the Twin Cities permitted 919 new homes, including 628 single-family houses.
Fueling the multifamily numbers are two notable projects: The 95-unit Snelling Yards affordable housing development in Minneapolis, and the 188-unit Fox and the Grouse Phase II in Eden Prairie. Both are reflected in the September Keystone data.
James Vagle, CEO of Housing First Minnesota, noted that multifamily accounted for about a third of all permitted units in September, which is a “healthier balance” compared to previous months.
“That was very welcome news to see multifamily reemerge,” Vagle said.
Even so, market watchers aren’t convinced that the sector has turned the corner.
Among other things, multifamily construction was inordinately slow at this time last year, so the bar is low when it comes to year-over-year comparisons. In September 2024, the metro area permitted 181 multifamily units, down 78% from the previous year.
“Any movement can look like large percentage changes when you’re dealing with very small numbers,” said Cecil Smith, president and CEO of the Minnesota Multi Housing Association.
Andy Babula, director of the Real Estate Program and the Shenehon Center for Real Estate at the University of St. Thomas, said one or two months don’t necessarily make a trend. If the market is seeing “four, five, or six months of consistent upticks, I think that’s more promising,” he added.
Babula noted that developers have an incentive to build because demand for housing exceeds supply. But construction costs are high and the lending environment remains difficult.
Affordable housing represents most of the current apartment construction activity, Babula said, because those projects tend to have government funding or other sources of gap financing to make the numbers work.
Cecil Smith, president and CEO of the Minnesota Multi Housing Association, agrees.
“The capital stack for affordable is very different than doing market rate, and it is very difficult to pencil market rate deals right now,” Smith said.
Both of the big apartment projects permitted in September are affordable or have affordable components.
Under construction at 6901 Flying Cloud Drive in Eden Prairie, the Fox and the Grouse Phase II includes studios, one-, two- and three-bedroom units. Twenty-five percent of the homes will be affordable at 50% and 80% area median income (AMI), as previously reported.
JLL Capital Markets announced in August that it secured $55.62 million in joint venture equity and construction financing for the Fox and the Grouse Phase II.
JLL represented Greco and Eagle Ridge Partners in facilitating a $39.12 million, three-year, floating-rate loan through MidWestOne Bank. JLL also sourced $16.50 million joint venture equity from Amstar Group.
For its part, Snelling Yards is under construction at 3601 E. 44th St. in Minneapolis. The $34 million project will create “predominantly large family units to meet the needs of the Longfellow community,” according to the developer, Lupe Development Partners.
A city of Minneapolis staff report reveals that the Snelling Yards rental units will be “affordable at 80%, 50% and 30% Area Median Income (AMI)” and will offer a “mix of one-, two-, and three-bedroom units.”
Scheduled for completion in late summer 2026, the project is funded in part with Low Income Housing Tax Credits. Other sources include the city of Minneapolis, the Metropolitan Council, and Hennepin County.
“We closed on financing at the end of August, and we’re now under construction. We are digging dirt and putting foundations in,” said Aaron Diederich, vice president of construction at Lupe Development Partners.
While construction of Snelling Yards is just getting started, Lupe recently put the finishing touches on Lakefield Apartments, a 110-unit affordable apartment project in Minneapolis’ Lyn-Lake community.
Lakefield Apartments concludes the third phase of Lupe’s campus on Lake Street near Lyndale Avenue. The campus, which includes Lago and Lake Street Dwelling, has created 353 units of affordable and market-rate housing in the past five years.
Speaking in general terms, Diederich said the multifamily sector saw a big slowdown in market-rate projects for a number of reasons, including tariffs and interest rates that were too high to make projects pencil out.
“The deals that were getting done were the affordable deals, because they’re not as sensitive to the interest environment; they still are, but not as much as market rate is,” Diederich said.
“A lot of market rate developers are waiting for the Fed to cut rates. … Now I think there’s more certainty that rates will come down a little bit. We saw it recently, so I think we’re going to see a little bit more market rate” construction in 2026.
