How Rising Property Taxes in the Twin Cities Are Impacting Small-Scale Landlords

Every year, property owners in the Twin Cities brace themselves for the inevitable—their new property tax assessments. And lately, those numbers have been climbing at an alarming rate. For small-scale landlords, this isn't just an inconvenience; it’s a financial squeeze that threatens their bottom line, their ability to maintain their properties, and in many cases, their decision to remain in the rental business at all.

The Property Tax Surge: What’s Happening?

In the past five years, property taxes in the Twin Cities have surged, leaving many landlords scrambling to keep up. According to local government data, property taxes in Hennepin and Ramsey counties have increased by an average of 15-25% since 2019, with some neighborhoods seeing spikes as high as 30%. These hikes are driven by rising property valuations, increased municipal budgets, and a growing demand for city services.

While large investment firms can often absorb these costs, small-scale landlords—who typically own one to three rental properties—are hit the hardest. Many of these property owners rely on rental income to cover their mortgage, maintenance, and other expenses. When taxes rise, profit margins shrink, making it more difficult to sustain long-term property ownership.

How These Rising Costs Are Affecting Landlords

1. Higher Rents and Tenant Turnover

To offset these increased costs, many landlords have no choice but to raise rents. However, with the Twin Cities rental market already strained, this leads to higher vacancy rates and tenant turnover. A recent study by the Minnesota Housing Partnership found that over 40% of renters in the Twin Cities are already considered cost-burdened, meaning they spend more than 30% of their income on rent. Pushing rents higher can result in lost tenants and longer vacancies, further straining landlords.

2. Reduced Maintenance and Property Upkeep

When landlords have to funnel more money into taxes, maintenance budgets often take a hit. Deferred maintenance can lead to deteriorating properties, which not only affects the quality of housing but also increases long-term costs for repairs. It’s a dangerous cycle—higher taxes force landlords to cut back, which in turn leads to declining property values and potentially even more tax increases.

3. Selling Under Pressure

With mounting costs, many small-scale landlords are opting to sell rather than continue struggling with rising expenses. The Minnesota Multi Housing Association reports that small landlords are selling their properties at the highest rate in over a decade, shifting rental housing into the hands of larger corporate investors. This shift means fewer local landlords and potentially less personalized property management for tenants.

One of our recent clients, Mr. Bill, experienced this firsthand. After years of owning rental properties in the Twin Cities, he found himself unable to keep up with rising property taxes, mounting repair costs, and the stress of tenant turnover. His once-profitable investment had become an overwhelming burden. Ultimately, he decided to sell his properties to regain financial freedom and peace of mind. You can read more about his story here.

What Can Landlords Do?

While property tax increases may seem unavoidable, landlords do have some options to help mitigate their impact:

1. Appeal Your Property Tax Assessment

Many landlords don’t realize they can challenge their property tax assessments. If your property’s assessed value has skyrocketed beyond what seems reasonable, you can file an appeal with your county assessor’s office. In some cases, assessments can be lowered, reducing your tax burden.

2. Explore Tax Deductions and Incentives

Minnesota offers various tax deductions for property owners, including deductions for property depreciation, home office expenses, and energy-efficient improvements. Consulting with a tax professional can help landlords take advantage of every available deduction to reduce their overall tax liability.

3. Shift to Long-Term Leases

Long-term leases can provide more stable rental income, reducing turnover and helping landlords budget for rising expenses. Many tenants are willing to sign longer leases in exchange for slightly lower rent increases, creating a win-win situation.

4. Work with Local Advocacy Groups

Organizations such as the Minnesota Multi Housing Association and the Minneapolis Property Rights Action Coalition advocate for fairer property tax policies and landlord protections. Getting involved can help landlords stay informed and potentially influence policy changes that could curb excessive tax increases.

The Future of Small-Scale Landlords in the Twin Cities

If property taxes continue on their upward trajectory, small-scale landlords in the Twin Cities will face increasing pressure to either sell or find new ways to absorb costs. The result could be a shift in the rental market that favors larger investors over independent property owners.

For landlords feeling the financial strain, the key is to stay proactive. Appealing tax assessments, maximizing deductions, and staying informed about legislative changes can make a significant difference in weathering these rising costs.

Final Thoughts

The landscape for small-scale landlords is changing, but staying informed and taking strategic action can help you adapt. Whether you choose to fight rising property taxes or seek an exit strategy, knowing your options is the first step toward protecting your investment and financial future.

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Molly Ancel and Jerry Anderson are Minnesota-based real estate investors helping homeowners overcome financial challenges with flexible solutions. Former business professionals, they now focus on empowering families and strengthening communities. Learn about how they help at peerpointmn.com.