MINNEAPOLIS — It’s hard to find an affordable home in the United States these days. Even though the average 30-year fixed mortgage is down about a full percentage point over the last year, the median sale price for an existing home is up 3.1%, according to the National Association of Realtors.
But a program in Minnesota might hold one of the keys to fixing the problem, even though it has faced a fair share of controversy.
In 2019, Minneapolis became the first major U.S. city to end single-family exclusive zoning, opening the door for developers to build multifamily buildings on lots where a single-family home used to be. Through a plan known as Minneapolis 2040, the city invited developers to mix up the types of projects across different neighborhoods, including units specifically for affordable housing.
The plan included other reforms, such as the elimination of parking requirements and a priority on designs favoring public transit users, pedestrians and bicyclists.
“If we’re going to put up affordable housing, we don’t just want to house one family. We want to house five or six or eight or 25 families,” said Minneapolis Mayor Jacob Frey, who has overseen the Minneapolis 2040 plan. “We’re allowing for a greater diversity of housing options.”
On the campaign trail, housing has become a front-and-center issue. The economy at large is top of mind for voters, but with 70% of the rise in inflation attributable to the costs of shelter, the debate over cooling price growth is, by proxy, a debate over how to slow housing costs.
Both former President Donald Trump and Vice President Kamala Harris have broadly promised to provide some support for first-time homebuyers, with the Harris campaign offering more details. Harris and her running mate, Minnesota Gov. Tim Walz, want to build 3 million new homes to address the housing affordability crisis.
Trump campaign national press secretary Karoline Leavitt blamed the higher housing costs on the current administration’s policies, as well as an “unsustainable invasion of illegal aliens.” The campaign broadly said Trump’s housing plan involves freeing up federal land for housing and cutting regulations.
Supply meeting demand
It’s been five years since Minneapolis 2040 was passed, and Frey said “the results speak pretty clearly for themselves.”
A Pew Research report noted that between 2017 and 2022, covering the beginnings of the Minneapolis 2040 plan, housing stock grew by 12% in the city, compared to 4% statewide. An NBC News measure of home buying difficulty shows that Hennepin County, where Minneapolis is located, is the second-easiest county to buy a home in compared to the seven counties adjacent to it — even though Hennepin is the most populous county in the state.
The pump looks primed for more homebuilding. Ryan Allen, a professor of urban planning at the University of Minnesota, analyzed 50 years’ worth of filing permits in Minneapolis and found that over the last five years, developers have been filing permits to build in the city at rates two and a half times the yearly average.
“That’s a clear signal of interest and faith in the housing market here on the part of developers,” Allen said.
The endgame is still to make living more affordable in the city. And although there are a number of factors that determine market rates for a home (like amenities, local economy, cultural factors, migration patterns), early signs show Minneapolis’ plan on housing coinciding with lower rents.
In the roughly five years since Minneapolis 2040 was approved, rents across the country surged by 22%, according to Apartment List estimates. The housing market endured a series of unprecedented shocks during that time. The global pandemic dramatically reshuffled where Americans chose to live, followed by a supply chain nightmare and high interest rates that constrained new housing supply and handcuffed many homebuyers to their current homes.
By contrast, rents in Minneapolis fell by 4% in the same five-year period. California Bay Area neighbors San Francisco and Oakland are the only cities with larger populations also to have seen rents decline, according to the Apartment List estimates.
“When you increase the supply to meet that demand, it’s like supply-side progressivism as a political philosophy. You’re able to prevent major jacks in the rent,” said Frey.
But Frey, a Democrat, acknowledges that the plan was hugely controversial. Signs across the city popped up pleading with developers not to “bulldoze my neighborhood.”
In Northeast Minneapolis, a sign in the yard of a single-family home reads “Stop the NE Land Grab,” referring to the northeastern part of the city. The sign now sits across the street from the Solstice Apartments, a new complex that opened in the spring this year. There are 23 units in the building, a fifth of which are certified affordable units, on the same footprint where just one single-family home used to sit. The building has rented all but one unit, meaning there are at least 22 households now sharing the address where just one family used to be.
Cody Fischer is the developer behind it and says the project would not have been possible prior to Minneapolis 2040.
“Absolutely not. It was a combination of zoning and parking requirements. It just wouldn’t have been possible,” Fischer said. He added that it would be an “understatement” to say the plan was a bit controversial. “The folks on the block really did not want this apartment building here.”
Jeremy Wieland, who lives a block up from the development, is one of those people. Wieland worries that the Solstice Apartments, which didn’t come with off-street parking, will make traffic in the area worse.
Wieland said the Solstice project didn’t do enough to listen to neighbors. But, he added, he supported other multifamily buildings in the neighborhood that better fit the “spirit of 2040” — such as buildings with more two-bedroom units instead of one-bedroom units where single tenants are more likely to move in.
“The building over there is in my backyard and I like it, and down there, [the Solstice Apartments] is in my backyard, and I don’t like it. So it’s always going to be about the specific instance,” Wieland said.
Fischer, the developer, said he designed the building to be part of the community, adding that the neighbors’ “worst nightmares” on parking have not materialized.
Environmental groups have also lodged complaints against Minneapolis, arguing that the city needed to do more to prove that increased density of living wouldn’t be harmful. A lawsuit from a group of nonprofits alleged that the city violated the Minnesota Environmental Rights Act by failing to prove that the 2040 plan would not harm the environment. In 2022, a court order halted the implementation of Minneapolis 2040.
The Minnesota state Legislature later passed legislation essentially protecting the plan from lawsuits. Walz, whom Frey said was “committed to the mission” on affordable housing, signed the measure into law in May. Last month, the Minnesota Supreme Court decided not to review the lawsuit, giving the plan a green light to move forward.
With the project gathering steam, and housing under intense national scrutiny, proponents say the Minneapolis experiment illustrates the need for a multipronged approach — with regulations and community engagement just as important as funding and tax breaks.
“We need the market to step in,” said the University of Minnesota’s Allen. “But I would also argue that’s not enough either. We also need to have more active state, local and federal government policies that look to support the housing market.”
Andrew Davis
contributed
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