Minneapolis land trust homeowners shocked by big property tax increases

Homeowners across Minnesota are facing a bump in their property taxes for the next year, after some cities and counties increased their tax levies. That’s the case in Minneapolis, where the city council approved a levy increase of about 7 percent.

But owners of land trust houses in Minneapolis are facing a bigger shock: property tax bill increases of more than 40 percent.

It’s the result of a change in state law that’ll bring taxes down for land trust homeowners in the rest of the state. But that law overrides city rules in Minneapolis that had given residents a better deal.

Low-income land trust homeowners say the tax increase will be a strain on their budgets.

Charlie Zieke bought a land trust house in south Minneapolis in 2018. They had been renting in the neighborhood for several years, but rent prices kept going up. They wanted the stability of owning a home. 

Zieke was in their 20s, working at a school — not making enough money to buy a house on the open market. But they qualified for help from the City of Lakes Community Land Trust. They said it’s the reason they stayed in Minneapolis.

“If I hadn’t bought a land trust house, I would have spent the last six years of my life moving from cheap apartment to cheap apartment, and then needing to leave again when the rent goes up,” Zieke said. 

The City of Lakes Community Land Trust serves Minneapolis; it’s one of 14 community land trusts around the state. The land trusts chip in money to help income-qualified applicants cover the cost of a house. In return, the trust retains ownership of the land. When homeowners sell, they get back their equity, plus 25 percent of the profit. The rest of the money stays with the trust. That keeps the home affordable; homeowners agree to sell to other income-qualified buyers.

The trust paid about a quarter of the cost of Zieke’s home, and gave them a grant for needed improvements on the house. Zieke’s mortgage payments were less than what they had been paying in rent.

“It’s life-changing to have an affordable house,” Zieke said.

But early in December, Zieke got a surprising notice in the mail: their property taxes are going up more than 40 percent.

Zieke is one of about 400 homeowners in the Minneapolis land trust program. They’re all seeing similar tax hikes this year.

“It’s a significant change, and it’s on a segment of folks who don’t have that wiggle room,” Zieke said. 

Jeff Washburne was the director of the City of Lakes Community Land Trust until 2023. He now works at a statewide coalition of land trusts. He said the Minneapolis tax hike is an unintended consequence of the new state law, which was intended to bring taxes down for land trust homes.

The new law taxes land trust homeowners across the state at just 75 percent of the rate they would otherwise pay.

"Every other community land trust homeowner who didn’t live in Minneapolis in 2025, in theory, is seeing probably a 25 percent reduction in their property taxes,” Washburne said. 

But Minneapolis already had its own system in place. In 2020, the city started taxing land trust homeowners at the amount they paid after getting help from the trust — instead of basing the tax on the full market value of the home. 

That was a big difference. Washburne said the trust often covers close to half the price of a house.

“So in many cases, homeowners saw almost a 50 percent reduction in their property taxes, which was a huge benefit to them,” Washburne said. He said Minneapolis was the only jurisdiction he knows of with that system.

But now, the state law says land trust homes have to be taxed according to the market price — and overrides the previous policy in Minneapolis. That means land trust owners in the city next year will still pay a lower tax rate than people who bought homes on the open market — but much more than they paid in the past few years under the city’s rules, and likely more than they had budgeted for.

“There’s some unintended consequences of, I think, some good policy that only hit Minneapolis,” Washburne said.

Andrea Reese is the executive director of the City of Lakes Community Land Trust. She also owns a land trust house. She learned taxes would be going up after the bill was passed by the Minnesota Legislature. Reese said it’s a frustrating change.

“The purpose of our program is to create affordability, and if these laws are coming behind us and doing the opposite… that is just kind of contradicted,” Reese said. 

The land trust sent a letter to its homeowners explaining the situation and some options for financial help. The land trust has an emergency fund homeowners can apply for, and there are outside resources like the state’s property tax refund program.

Charlie Zieke says they’ll be able to pay the increased tax bill — but it will have an impact. They said homeownership has been getting less affordable, even with the help from the land trust that got them into a house. Insurance is more expensive, as are other costs of living.

“I used to be able to save money living here,” Zieke said. “Between the property tax increase and my insurance for the house, I’m not able to save at the same amount, or really at all.” 

That’s a blow to land trust homeowners who aimed to build wealth or eventually buy a house at market rate — something the trust is designed to help with. 

Reese said she’s in touch with other homeowners and looking for solutions.

“I don’t know if there’s anything that we can do super immediately, in the short term, but we can help our community of homeowners be advocates and potentially get this changed either back or to something different,” Reese said.

She and Washburne both said they’ll go back to legislators in the upcoming session to ask for a change to the law.

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