The century-old duplex in north Minneapolis is locked and empty. The front window is cracked. A neighbor says only teenage squatters lived there in the last year, since a blaze displaced 24 people that had been crowding into eight bedrooms.
Last month, the home sold for $46,500 cash to a California investor after languishing for months on the market. It is the latest sale in a tumultuous journey that began nearly a decade ago, when the duplex sold for $290,000 and then endured two foreclosures, an investor that went belly-up, a chain of Wall Street bank trustees, and placement on the city’s vacant building registry after the fire rendered it uninhabitable.
The fortunes of the housing market in north Minneapolis are reflected in the tortured history of this home at 1611 Hillside Av., still scarred by fire. The surrounding Jordan community hosts more vacant homes than any other neighborhood in Minneapolis, and here a vacant home typically means an investor is its only way out.
Even as the housing recovery is taking hold throughout the metro area, progress in the neighborhoods of north Minneapolis has been slower. Homes that are in foreclosure or at risk of foreclosure represented about 45 percent of all transactions in 2013, almost twice the rate across the metro area.
Some neighborhoods, such as Willard Hay and Near North, saw significant gains in median sales prices in 2013 as investors swooped in to take advantage of some of the lowest-cost housing in the metro area. But in Jordan, home of 1611 Hillside, the median sales price fell nearly 9 percent from 2012.
“The housing market is rebounding, but there are pockets around Jordan that continue to struggle where homes are in somewhat challenged conditions and the price is right for an investor to come in and buy it, fix it up to minimal standards, rent it and make a lot of money,” said Minneapolis housing director Tom Streitz.
City officials and housing advocacy organizations have poured millions of dollars into housing assistance programs, including down-payment assistance and low-interest rehab programs. Increasing the number of owner-occupied homes has long been seen as the best means to improve the overall quality of life on the city’s North Side.
But the cycle that has prevailed here — vacant homes, bought by investors, rented to people with little interest in the neighborhood — is still in full force.
“They drive up with them big rental trucks and they’re in,” said Jerry Millner, who lives on the 1600 block of Hillside. “Two months later they drive up with a big rental truck and they’re out.”
Debra Wagner, an agent with Greenway Homes Realty who lives in Jordan, said that she has worked with a range of people to buy homes in north Minneapolis, from single women to empty nesters, who want more for their money after the housing crisis. But as long as homes are “undervalued” in the area, she said, investors will continue to come in.
And taking a home off the city’s vacant and boarded registry often means bringing a building back up to code, a process that could prove too costly for a first-time home buyer.
“Most people coming in to buy a house buy a house to live in,” Wagner said.
The number of homeowners in Jordan dropped by about one-third between 2000 and 2010. While the number of renters also dropped slightly, so many people left the neighborhood altogether that the makeup of homeowners vs. renters is now equal.
“The proportion is off-kilter,” said former longtime council member Don Samuels, who lives a block from 1611 Hillside. He has repeatedly advocated for higher ratios of people who own their homes as a way of improving the neighborhood but acknowledges that people want to live somewhere with less crime and better schools.
Foreclosed, then condemned
Aging homeowners dominated the 1600 block of Hillside when Mary Caesar moved in 38 years ago. But as they died off, she said, the buildings shifted hands to investors with rental licenses. Crime, vandalism and troublesome tenants took over. Now two-thirds of the homes there are rentals.
In recent years, the house next door to 1611 went into foreclosure, as did the one across the street. Another neighboring home is owned by Mahmood Khan, a controversial landlord from Roseville who has tangled with the city over thousands of dollars in housing violations. On the next block over, near Samuels’ home, a mansion set to be demolished was rescued last year by Nicole Curtis, host of cable show “Rehab Addict,” though it still has boards over the doors. And the city is still trying to unload a vacant parcel of land nearby for $5,000.
Foreclosure proceedings began a year after a man bought 1611 for $290,000 in 2005.
It was auctioned off to the lender for $80,000, who then passed the property on to JPMorgan Chase Bank. After a year of going through bank trustees, Pamiko Properties nabbed the duplex with a mortgage from Minnwest Bank Metro as part of a broader investment in dozens of North Side residences.
Pamiko’s owner was Paul Koenig, dubbed by City Pages in a 2010 investigation as the “one-man housing crisis” after his housing empire collapsed, sending shock waves through the North Side’s already distressed housing market. Then 1611 Hillside fell into foreclosure again. Finally, in 2011, Assertive Mpls Properties stepped in and bought the property and another Pamiko house for $110,000. But the stability did not last for long.
The last round of renters at 1611 Hillside were the worst, Caesar recalled.
“There was just so many people there coming and going all the time that some of us thought there was drug dealing going on there. … I’ve never heard of that many people living in a house like that,” she said.
In January 2013, two fires in the same evening displaced 24 people.
The city condemned the property and placed it on the vacant registry, but neighbor Millner said he saw as many as nine teenagers living in the building last summer — and that it was not boarded up past the immediate aftermath of the fire, contrary to city regulations for vacant buildings.
The property was advertised on the Northstar Multiple Listing Service for $75,000. Its description: “Huge duplex — 8 total bedrooms. 4 bedrooms up & 4 bedrooms on lower unit. Fire damage so plan your showing accordingly.”
It offered the potential for great profits, listing combined rents of $2,615 a month.
But when no one jumped, the price dropped. And dropped some more.
The new owner of 1611 Hillside, Jon Erickson, said he doesn’t want people to ever drive by his properties and say, “There’s a rental!”
He vowed: “My goal is to be able to help improve the neighborhood so that my property values go up, and my neighbors’ values are going to go up. … When 1611 Hillside is going to be done, it’ll be the nicest duplex” in the area.
Erickson said he wants to hold onto the building for at least five years. He’s bought nearly a dozen properties in the city over the last year and a half, often for five figures and some in foreclosure. He said he is in Minneapolis every other week. He plans to begin renting out 1611 Hillside in March, after making repairs.
Why not invest in San Francisco, 30 miles from his home in Danville, one of Northern California’s wealthiest communities? The economics of the Bay Area’s high-priced housing market don’t work out quite as well as they do in Minneapolis, according to Erickson, who has also invested in other states.
John Hoff, a controversial blogger who writes under the name Johnny Northside, said it is harder for people to obtain loans on boarded-up homes with assessments left on them, “yet the path is wide open to these investors.”
“The economic field is weighted toward these investors that have money at the ready, that can snap these properties up,” said Hoff, who calls the “Hillside hot spot” cursed. “We need more homeowners, bottom line.”
Erickson said the problem is not due to investors buying too many properties.
“You need to make it a community in which families want to buy homes and raise their children,” he said. “Right now, north Minneapolis isn’t that area.”