Real Estate Tax Savings of $55,000+ in 2025 with Recently Passed Legislation 

Recently passed legislation in Minnesota (SF 1957) will reduce the property tax rate on qualifying low-income rental housing. Currently, such housing has a two-tier rate schedule—0.75% on the first $100,000 per unit of value and 0.25% on the remaining value. The proposed change will remove the tiers and apply a rate of 0.25% to the full property value which will reduce the real estate tax bill by 66%!

In Minnesota, real estate taxes are paid in arrears. Cottages of White Bear Lake’s payable 2023 property tax is estimated to be $74,006 which is based on a property valuation of $9,762,300 in 2022. The 2023 market value is $10,669,700 which would have an estimated tax bill of $80,885 in 2024. If the tax rate were 0.25% instead of 0.75%, the property tax would be approximately $24,669 and the property would save approximately $56,216 per year in comparison to the estimated payable 2024 tax bill. The tax reductions will go into effect in 2025.

Rents at LIHTC Maximum Allowable 

The current achieved rents at Cottages of White Bear Lake are at the maximum allowable limits per rent restrictions, which speaks to the desirability of the asset and location. Since 2013, Minneapolis-St. Paul-Bloomington, MN-WI HUD Metro FMR Area’s four-person AMI has increased by 5.18% over the last 10 years. In 2013, the four-person AMI was $82,300 and has increased 51.76% to $124,900 in 2023. A new owner can reasonably expect maximum allowable LIHTC rents to increase and be captured in 2024.

Limited Senior Housing Options in the White Bear Lake Submarket  

In recent years, research shows the population of senior citizens has expanded significantly as the number of residents in the 55+ age group increases. The White Bear Lake metro has only nine existing 55+ properties over the 100-unit threshold, totaling just under 850 units (including Cottages of White Bear Lake). Furthermore, White Bear Lake has only six affordable senior properties in the entire metro. Additional developments totaling 227 units are set to be delivered Q4 2023 or Q1 2024. With a 55+ population of approximately 67,427 in St. Paul MSA (White Bear Lake included), the demand outweighs the supply of strongly amenitized, age-restricted housing.