Minneapolis Property Tax Burden Shifts as Downtown Values Fall

Written by:

Steve Marcinuk

Date:

23 Apr 2026

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Downtown Minneapolis commercial property values have declined for five consecutive years, forcing city leaders to rethink how essential services are funded. As office buildings and retail spaces lose value, the property tax burden is shifting to homeowners and apartment buildings — a trend city officials warn is unsustainable.

Steve Brandt, an elected member of the Minneapolis Board of Estimate and Taxation, has watched these changes unfold firsthand. A retired journalist with nearly 40 years of experience covering government finance, Brandt joined the board in 2021 and now helps oversee one of the city’s most critical financial issues.

“When commercial property drops in value, the burden shifts toward apartments and homeowners,” Brandt says. In Minneapolis, the share of property taxes paid by homeowners has risen by seven percentage points over the past six years.

Downtown’s Decline Squeezes Homeowners

Minneapolis’s tax challenges reflect national patterns, but local events have sharpened the pain. The pandemic emptied downtown offices, and the economic disruption following George Floyd’s death and subsequent unrest further eroded commercial activity. The city’s tax base has shrunk at a time when costs are rising.

Enforcement actions by Immigration and Customs Enforcement (ICE) have recently added to the strain. Some businesses temporarily closed to protect their immigrant workforces, reducing commercial activity and tax receipts further.

Unlike many cities, Minneapolis relies heavily on property taxes to fund services. When commercial property values fall, the math is straightforward: other property owners must make up the difference. “Everybody else is going to pay more,” Brandt says.

Remote Work Is Not the Only Factor

The national conversation often blames remote work for downtown struggles, but the reality in Minneapolis is more complex. Some downtown employers have brought workers back, and government offices now require in-person attendance. Still, the recovery is incomplete.

Vacant storefronts line the main pedestrian mall, evidence that many businesses have not returned. The city has tried to repurpose empty spaces by offering them to artists for studios and galleries at low cost. This helps with downtown vibrancy but does little to offset lost tax revenue.

The entertainment district remains active, anchored by sports venues and theaters. These attractions bring people and dollars downtown, but their success depends on team performance, theater schedules, and public perceptions of safety.

Office Conversions Offer Little Relief

Turning unused offices into housing is often proposed as a fix for downtown vacancy, but in Minneapolis this strategy faces obstacles. Only one major conversion project has been completed, and Brandt is cautious about its overall impact.

“It’s problematic because residential needs differ from business needs, especially for light and space,” he explains. Brandt estimates that even if more projects move forward, the effect on the city’s tax base will be minor — “more rounding error, to be honest.”

The Case for a City Income Tax

With property taxes rising and commercial values still low, city leaders are looking for alternative revenue sources. Brandt has become the most vocal advocate for broadening the city’s revenue base.

He refused to support the latest budget increase without a commitment from the mayor and city council president to study new options. That study is now underway, examining how Minneapolis could reduce its reliance on property taxes.

The leading proposal is a city income tax. Brandt suggests a 1% tax on household incomes above $200,000 — more than double the city’s median income — which could generate about $48 million per year. He proposes splitting the revenue between covering rising costs and providing property tax relief, particularly through expanded state credits for low-income homeowners.

Legislative Path Remains Difficult

Passing a local income tax would require approval from Minnesota’s legislature, which remains closely divided between Republicans and Democrats. Brandt acknowledges the proposal is unlikely to advance under current conditions. “It’s not going to get through in the current climate,” he says.

This year’s statewide elections could alter the political landscape. Brandt hopes a shift toward Democratic control might make lawmakers more open to granting cities new revenue tools. However, recent fraud scandals in state-administered programs have fueled skepticism about government expansion, giving Republicans a stronger platform.

How Property Tax Burdens Shift

Brandt emphasizes that most homeowners do not fully understand how property taxes are calculated. Tax bills reflect not only government spending but also changes in property values across different categories.

“If residential property is gaining 2% a year, but every other classification is headed down, your share of the burden goes up,” he explains. This dynamic has hit certain neighborhoods especially hard. In Minneapolis’s North Side, where homes were long undervalued, rising prices have led to significant tax increases for longtime residents.

Minnesota offers some relief through income-based property tax credits, but many eligible homeowners do not apply because they are unaware of the program.

Minneapolis as a National Case Study

The Minneapolis experience highlights the vulnerability of cities that rely heavily on commercial property taxes. When downtown values drop, homeowners bear more of the cost and the city’s ability to fund services is threatened.

Brandt argues that cities must diversify revenue sources to withstand economic downturns. Municipal budgets rise each year due to inflation in wages, fuel, and materials, regardless of property values. “City expenses go up each year, just like a household,” he says.

As Minneapolis studies new revenue options, leaders are weighing the potential impact on residents and businesses. One concern is whether higher taxes might drive upper-income residents out of the city and, if so, whether newcomers would replace them. The city’s study is also considering deed transfer taxes, voluntary contributions from large nonprofits, and taxes on vacant homes similar to those used in other cities. The income tax, however, appears to offer the greatest potential to close the budget gap.

For real estate investors and developers, the current downturn in downtown property values could present buying opportunities for those who believe in the city’s long-term prospects. A sustained recovery will require a stable revenue plan and renewed demand for downtown space.

Cities across the country face similar issues as remote work, changing consumer habits, and shifting population patterns undermine traditional sources of tax revenue. Minneapolis’s push to diversify revenue may serve as a model for others.

About the Expert: Steve Brandt is an elected member of the Minneapolis Board of Estimate and Taxation, where he has focused on the city’s long-term fiscal sustainability since joining the board in 2021. He brings nearly 40 years of experience as a journalist covering government finance, giving him a rare combination of policy oversight and public accountability expertise.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.