Many Minneapolis homeowners opened their property tax bills this year to find a bigger number than expected. While city spending often gets the blame, Steve Brandt, president of the Minneapolis Board of Estimate and Taxation, says the real drivers are more complex — and less easily fixed.
“It’s not just government spending that drives your tax bill,” Brandt says. The bigger factor is how shifts in property values change who pays what. When downtown office buildings lose value, a larger share of the tax burden falls on homeowners.
Downtown Decline
Downtown Minneapolis commercial property values have fallen for five consecutive years. Office towers that once commanded high rents now have empty floors and shrinking leases, pushing down their assessed values. As commercial values drop, the tax share shifts to apartments and single-family homes.
Brandt, who spent nearly 40 years covering city finance as a journalist before joining the board in 2021, has tracked this shift closely. In just six years, the homeowner share of total city property taxes has risen by seven percentage points. That’s not because home prices are surging — most have grown by about 2 percent per year — but because commercial property is declining more quickly.
“When commercial property drops in value, the burden shifts toward the two other major classes: apartments and homeowners,” Brandt explains. With downtown values still falling, homeowners should expect more of the same.
Homeowners Are Feeling the Squeeze
Several overlapping challenges are putting pressure on Minneapolis’s commercial tax base — and by extension, on residential taxpayers.
First, the pandemic emptied downtown offices as remote work became widespread. Even with some companies recalling staff, occupancy is nowhere near pre-2020 levels.
Second, the unrest following George Floyd’s death in 2020 led to property damage and business closures, further shrinking the downtown tax base. More recently, stepped-up federal immigration enforcement has led some businesses to close temporarily, further reducing commercial activity.
Third, concerns about downtown safety — whether justified or not — have kept some workers and visitors away. Brandt commutes home by bus after games without problems, but acknowledges that “perception is everything.” Fewer people downtown means less business for restaurants, shops, and entertainment venues, which in turn depresses property values.
Brandt once thought downtown’s commercial tax base might rebound in five to seven years. Now, he’s less confident about a quick recovery.
The Tax System
Minnesota’s property tax system is based on relative values, not just absolute spending. Even if city spending stayed flat, your bill could rise if the value of your property increases relative to the rest of the city — or if another class, like commercial, declines.
For example, if your home’s value goes up 2 percent but downtown offices drop 10 percent, your share of the city’s tax levy increases, even if your own property hasn’t changed much. This dynamic is especially visible in certain neighborhoods. On Minneapolis’s north side, for instance, rising home values recently pushed property tax bills up as much as 14 percent in a single year.
“City costs go up just like household expenses,” Brandt notes. “You pay for fuel for police cars, diesel for dump trucks, material for paving roads, and wage increases. Don’t expect your property tax bill to stay flat when nothing else does.”
Relief Programs
Minnesota offers some relief for homeowners facing steep increases. If your household income is below about $130,000 and your property tax jumps more than roughly 12 percent in one year, you may qualify for a state refund. There is also assistance for those whose property taxes take up a large share of their income.
Brandt argues these credits are not enough. Two years ago, he refused to support a property tax increase unless city leaders agreed to study new revenue sources. That study is underway.
One leading idea is a city income tax on higher earners. Brandt’s preferred model would levy a 1 percent tax on household incomes above $200,000 — more than double the city’s median. He estimates this could generate $48 million per year, split between funding services and providing property tax relief.
Other proposals include a deed transfer tax, voluntary payments from large nonprofits, and possibly an empty homes tax, though Brandt doubts this last option would raise much money.
However, Minneapolis cannot adopt new local taxes without approval from the Minnesota legislature. The current session is gridlocked so that any changes will depend on the results of this fall’s elections.
What’s Next
As long as commercial property values remain depressed, homeowners should expect property taxes to keep rising. Converting offices to housing could help, but Brandt sees current efforts as too small to make a major difference. Only one significant conversion project is underway so far.
The best hope is that businesses find downtown Minneapolis attractive again because of lower rents, leading to higher occupancy and a more stable tax base. For now, however, Brandt sees a slow path to recovery. “I’d like to be an optimist,” he says, “but I need to see clear signs before I go there.”
About the Expert: Steve Brandt is president of the Minneapolis Board of Estimate and Taxation, which sets the city’s maximum annual property tax increase and approves bond issuances. He is a retired journalist who covered government finance for nearly four decades before joining the board in 2021.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.
