Market Rate Housing

When searching for an apartment or other rental housing in Minnesota, one term you will come across frequently is “market-rate.” 

What does “Market Rate” mean?

Market-rate apartment rentals refer to units that are rented out at prices set by the current local market, without any restrictions or subsidies. The rent for these apartments is determined by various factors, including the prevailing demand and supply in the rental market, the unit’s location, its amenities, its condition, and other economic forces. The price you pay is what the market dictates based on these combined factors.

How Does “Market Rate” Work?

Suppose there’s high demand for apartments due to an area’s amenities, proximity to workplaces, and other desirable factors, and there is a limited supply of available apartments. In that case, the rents for market-rate units will likely be higher. Conversely, rents may be lower in areas with less demand or an oversupply of units.

Landlords typically analyze comparable properties and their rents in the neighborhood, and they also consider their costs, desired profit margins, and perceived value of their property to set the rent for their market-rate units.

Why does the term “Market Rate” exist?

The term differentiates these apartments from other rental categories like “affordable housing” or “income-restricted housing.” In many cities, including those in Minnesota, there are programs designed to ensure that people of varying income levels can access to housing. These programs might offer units at below-market rates to qualifying individuals based on their income.

For instance, a building might have a mix of market-rate units and affordable units. The affordable units would be priced based on specific criteria set by a housing authority or program, ensuring that renters within a certain income bracket aren’t priced out of the housing market.

Knowing what “market rate” means can help you make an informed decision about where you choose to live and what you can expect to pay. The market’s forces determine market-rate rentals, but other housing options are available for those who qualify, ensuring diverse housing solutions for all Minnesotans.


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