Story by Adam Belz • Photography by David Joles • Graphics by Michael Grant and Jeff Hargarten • Star TribuneDec. 30, 2016 — 12:00AM

Kendrick Bates fought his way out of poverty to within two semesters of a bachelor's degree. Now he needs an apartment.

He's been accepted at a college in suburban Roseville, but he hasn't been able to find a home in a good neighborhood that he can afford.

Bates, who now lives near the southern Minnesota town of New Ulm with his two daughters, grew up in poverty in Mississippi and is wary of the trade-offs of urban life. He is looking beyond the metro area and likes Stillwater, Hudson and New Richmond in Wisconsin.

"I don't know what's going to happen," Bates said. "I'll sleep in my car before I live in somebody's project. Worked too hard to get out of that situation."

The slow-moving, almost imperceptible erosion of cheap housing in cities and suburbs has become a tangible obstacle to the American dream. It has forced parents like Bates into extreme choices and stoked fractious debates across the country.

To take his family into the middle class, Bates needs to finish college. But to do that, he must sort through the paradox that, while small towns are great places for his children to grow up, the jobs, connections and education that he needs are in bigger places. Bates so far has been unwilling to risk the effect that life in a lower-income urban neighborhood could have on his daughters.

Economists who studied the economic progress of millions of people who were born poor found that the clearest path to success in the Midwest starts in small towns and rural areas, not in large urban centers like the Twin Cities.

A key reason is the clustering of rich apart from poor. Hennepin and Ramsey counties are nearly twice as segregated by income as the rest of Minnesota. "In a place like Minneapolis, it's much easier to separate. That's what you see, neighborhoods stratified by income," said Raj Chetty, an economist who led the research.

Economic forces and social choices are now reinforcing that stratification. Apartment rents have risen sharply in the Twin Cities for several years, leading owners to upgrade buildings and price the poor out as their income fails to keep up. Countless, heated meetings at city councils and planning agencies have yielded this: no publicly subsidized apartments have been built this decade in more than 80 suburbs and exurbs around Minneapolis and St. Paul, according to analysis by Dougherty Mortgage, a firm that tracks the local apartment market.

HOUSING CRUNCH: Kendrick Bates finished his final assignment for a course he is taking at Martin Luther College in New Ulm while his daughter worked on her math homework from their trailer in Hanska, Minn. He is among those struggling to find affordable housing in suburban areas.A slow bleed

Kendrick Bates, 31

Location: Hanska, Minn.

Job: Substitute teacher, full-time student at Martin Luther College

Family: Single father with four daughters, two who live with him

Housing: Rents a mobile home

Hometown: Gulfport, Miss.

How his upbringing informs his own parenting decisions:

Statistical evidence that a better neighborhood can lift children out of poverty grew in the past year when Chetty and colleague Nathaniel Hendren revived a landmark 1990s study called Moving to Opportunity.

The original experiment looked at 4,600 young, low-income families. A third of the families received a traditional Section 8 voucher, a third received an experimental voucher that required them to move to a wealthier neighborhood and a third received no voucher at all and served as the control group.

Earlier analysis by other economists showed little positive effect for the children who moved. But in 2015, Chetty and Hendren looked at the experiment's youngest children, who are now adults. The children who moved to higher-income neighborhoods now enjoy incomes 31 percent higher than the children whose families didn't get vouchers. They were also more likely to attend college and get married before having children — all indicators of greater success later in life.

"It appears important to target such housing vouchers to families with young children — perhaps even at birth," the economists wrote.

Such vouchers don't exist in Minnesota, and the number of cheap homes in better neighborhoods is declining.

Take for example the Crossroads Apartments in Richfield, where 698 units sit in the shadow of Best Buy Co.'s headquarters. It is one of the largest apartment complexes in the state and, for 50 years, was a pocket of low-income diversity in an otherwise middle-class neighborhood. In an appealing location along I-494, however, the apartments were ripe for an upgrade.

Last fall, a developer bought the apartments for $41 million, re-christened them "Concierge" and sent a letter to residents explaining that renovations were on the way, rent would rise and the complex would no longer accept families of more than two — "no exceptions."

Among those who needed to move were Alex and Henry Saenz, who lived there with their parents and little sister Esmaralda for six years. The church and doctor's office were nearby. Parents in the complex looked out for each others' kids, and families held potlucks on Sundays. The children had room to play outside and the boys excelled at nearby Richfield schools. Alex, 13, and Henry, 12, both say they are interested in joining the military. Henry wants to be a police officer.

"We're really going to miss what we had there," said Aurora Saenz, a native of Mexico who did not immigrate to the U.S. legally but whose children are all U.S. citizens.

The rent rose from $740 to $899 per month, and the family decided to find a new place before winter. They quickly rented an apartment off Nicollet Avenue in Bloomington, thinking it would be temporary.

They wanted to move back to Richfield so the boys could stay at their schools, but they couldn't find anything they could afford, and won't be moving back.

And the upscaling of the Crossroad Apartments is not an isolated incident.

This year in the Twin Cities metro, almost two of every five project-based affordable units — those where the owner receives a direct government subsidy for keeping the apartments affordable — is set to expire, according to data collected by the Urban Institute. The owners will be free to upgrade them and raise rents, and many likely will.

"Landlords can do away with affordability with a single piece of paper after 20 years," said Alan Arthur, CEO of nonprofit developer Aeon. "And they do when the market is hot, and the market is very hot right now."


nderstanding his potential

Bates, a broad-shouldered, soft-spoken 31-year-old, has overcome massive obstacles. He spent childhood bouncing between homes in Natchez, Biloxi and Gulfport, Miss. He never knew his father, a white police officer in Natchez. His black mother worked three jobs at a time and moved a lot.

With an unstable and sometimes violent home life, Bates suffered and ran roughshod at elementary school. He landed at reform school in fifth grade, fathered his first child in seventh grade, couch-hopped through his teenage years, often carried a gun and never graduated.

"Failure. Just failure at every corner," he said.

In his early 20s, at the urging of a junior college basketball coach, he tested for his high school diploma and passed. He later read Myles Munroe's "Understanding Your Potential," which he said gave him the determination to earn a college degree.

After picking up credits at schools in Wisconsin, North Dakota, Missouri and Illinois, Bates ended up at Martin Luther College in New Ulm, where he earned an associate degree and settled with his two youngest daughters.

He now substitute teaches, coaches, and for a year held a job at a special education school in New Ulm. The next step is to finish his bachelor's degree and start work on a master's at the University of Northwestern in Roseville, where he also hopes to play sports.

Figuring he couldn't afford to both go to school and provide a home for his daughters, he applied for and received a Housing Choice Voucher — known as Section 8 — that gave him up to $950 a month in government assistance for rent. Even with the voucher, he couldn't find a suitable place in the Twin Cities. He looked in Minnetonka, Oakdale, Hudson and Houlton, and called 16 landlords.

He stuck it out in New Ulm until he lost his voucher because he got a full-time job and was making too much money. Now he lives in a mobile home park in Hanska. It's a good place for his kids, he said, and he's taking classes at Martin Luther, but he needs to get to Roseville to finish his degree.

"I don't know, man," he said. "I just stopped trying so hard."

aiting list purgatory

Poor people in the Twin Cities have to wait years for a Section 8 voucher.

The Metropolitan Council, which oversees Anoka, Carver, and most of the suburbs in Hennepin and Ramsey counties, opened its waiting list in February 2015 for the first time since 2007. The agency received 35,000 applications for a Section 8 voucher in four days. Only 2,000 names were pulled in a lottery, and those families faced a wait of up to three years to actually get the voucher.

Even when people have vouchers, they can't easily find a landlord who will accept them. Section 8's reputation is negative, and landlords don't want to deal with the extra inspections and paperwork.

"With the market as competitive as it is, it's really a landlord's market, so they don't see why they have to go through the hassle," said Christine Hart of the Community Action Partnership of Suburban Hennepin.

So far this decade, 28 communities in the Twin Cities have added 4,584 new affordable rental units. That amounts to just one year's worth of metrowide demand. More than half of those units were built in Minneapolis and St. Paul, according to the Met Council, though the two cities account for just one-fourth of the region's population.

Eden Prairie hasn't built any new affordable housing since 2005, according to Met Council data. Neither has Shakopee, Andover, Shoreview or Prior Lake. St. Louis Park, Edina and Golden Valley combined have built fewer than 500 affordable units over the past 10 years.

Why aren't suburbs building more affordable apartments? In a statement, the Met Council said, "There's no simple answer to that question. It differs from community to community and can be very complex." The free market isn't producing a lot of cheap apartments, and housing advocates say federal funding is inadequate.

uburbs are sometimes blamed for not wanting low-income residents, and neighborhood resistance to affordable housing can make for great theater at City Council meetings. But in many places, the challenge runs deeper than a not-in-my-backyard impulse.

Almost 50,000 people work in the city of Plymouth, many of them in service jobs, and city leaders would like to build more affordable housing, said Jim Barnes, the city's housing programs manager. But high land costs, a lack of land for development and a shortage of funding for affordable housing stand in the way. Only 200 affordable housing units have been built there in the past 10 years.

"We do want a broad spectrum of housing in our community," Barnes said. "It doesn't pan out a lot, because the economics don't work."

In Eden Prairie, the city has focused on homeownership, with deferred loans for first-time home buyers and participation in the West Hennepin Affordable Land Trust. Combined, the two programs have helped about 35 low-income families buy a house.

Meanwhile, the city is trying to preserve the affordable housing that remains, in one case by extending a tax increment financing district to encourage a developer not to upgrade apartments. "That's very important, that the city not lose ground on what we have," said Molly Koivumaki, manager of housing and community services.

Edina has tried to encourage affordable housing. "We would like to see people have a chance to live here if they want to, and send their kids to a good school," Mayor James Hovland said.

Ground was broken in July on 39 units for young adults who have experienced homelessness, a project the city championed. Edina requires apartment developers who ask for zoning changes to make 10 percent of their new units affordable. The city established a tax increment financing district around Southdale Center to funnel revenue from increased property value to an affordable housing fund.

But the dynamics at work in Plymouth are at work in Edina. Land is too expensive for affordable homes, the city is almost entirely developed, and there's demand for upscale apartments. Recently Dominium, an affordable housing developer, floated the idea of building on land vacated by UnitedHealth Group off Hwy. 169.

"They couldn't put a deal together because the cost of the land was too high," Hovland said.

A different developer is now building luxury apartments there. 612-673-4405Finding opportunity

The ability to rise to another income level varies by region, but the Upper Midwest stands out as an exceptionally good place to raise a family.