Duluth's rental and housing markets remain tight

DULUTH — Finding rental housing here grew tougher last year, even as the cost to rent soared.

The average market-rate rent increased by more than 17%, or $195 per unit, and the rental vacancy rate was 2%, less than half of what it was in 2020, according to the city of Duluth's latest housing indicator report, which received surveys from property owners who own more than a quarter of the city's licensed rentals.

The 2020 vacancy rate — high in part because the pandemic led to more home-buying and fewer college students in the area — was healthier, said Theresa Bajda, a city planner.

"We're just not meeting the demand," she said, attributing the lack of vacancies in 2021 partly to more people staying put rather than "stepping up" to more expensive housing.

"The cost of construction and maintenance is significantly higher in Duluth right now," she said, with a smaller trades labor force to draw from than larger cities.

As for higher costs to rent market-rate housing, Duluth Landlord Association President Barbara Montee isn't convinced landlords simply raised prices.

"There are lots of higher end rentals, with people vacating single-family homes and allowing young families to get into the market," she said, citing the Endi apartments, with their views of Lake Superior, and the latest building in eastern Duluth's BlueStone complex as examples.

More luxury rentals have entered the market, skewing the data, she said, noting the self-reported numbers only capture a portion of the city's rental inventory.

Continued demand for homes also led to a major jump in the median sale price of a home, which increased by 17% to $240,000.

That was largely because competition for a limited number of properties led to multiple bids, and buyers paying more than the asking price, said Karen Pagel Guerndt, president-elect of the Lake Superior Area Realtors Association in Duluth.

She had a client who made one of 22 offers on a house in rural Duluth last year. The client got the house, but $55,000 over asking.

"And in some ways, we are seeing more desperation now than I was even last summer," she said, with people looking earlier in the season for homes than is typical.

The report also details a higher percentage of low-income housing vouchers unused. That probably means a supply issue, with people not finding a rental property that will accept them, Bajda said.

"When we say we need housing, we need it across all income levels," she said.

The city is hoping to alleviate some of those problems.

With an ongoing limited affordable housing stock and expansions planned in Duluth's medical district and in the aviation sector, city leaders are working overtime to increase its housing supply, even setting aside $19 million of federal COVID-19 relief money to pay for it. Six proposals for a piece of that funding that would total nearly 400 units of affordable housing are up for approval. The City Council also approved a Housing Trust Fund last fall that aims to improve and increase the city's aging housing stock, and in the works are several "tiny home" developments throughout the city.

"We're working with groups who are really trying to crack this code of innovative solutions to make housing more affordable," Bajda said.