What’s Minneapolis’ secret to home improvement? Build more

It’s hard to find an affordable home in the United States these days. Although the average 30-year fixed mortgage is below up about a full percentage point over the past year, the average sales price for an existing home is up 3.1 percent, according to the National Association of Realtors.

However, a program in Minnesota may hold one of the keys to solving the problem, even though it has faced much of the controversy.

In 2019, Minneapolis became the first major US city to end single-family exclusive zoning, opening the door for developers to build apartment buildings on lots where a single-family home previously stood. Through a scheme known as Minneapolis 2040the city invited developers to mix project types in various neighborhoods, including units specifically for affordable housing.

The plan included other reforms such as removing parking requirements and prioritizing projects that favor public transit users, pedestrians and cyclists.

“If we’re going to create affordable housing, we don’t want to house just one family. We want to house five or six or eight or 25 families,” said Minneapolis Mayor Jacob Frey, who oversees the Minneapolis 2040 plan. . “We allow for a greater variety of housing options.”

On the campaign trail, housing has become a central issue. The economy in general is above the minds of the votersbut with 70% of the inflation increase attributable to housing coststhe debate about cooling price growth is, by proxy, a debate about 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 Walsh, want to build 3 million new homes to address the housing affordability crisis.

Trump campaign spokeswoman Karoline Leavitt blamed higher housing costs on the current administration’s policies, as well as an “unsustainable influx of illegal aliens.” The campaign broadly mentioned Trump’s housing plan includes releasing federal land for housing and curtailment regulations.

It’s been five years since Minneapolis 2040 passed, and Frey said “the results clearly speak for themselves.”

A Pew survey report noted that between 2017 and 2022, covering the principles 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 its seven neighboring counties — even though Hennepin is the most populous county in the state.

The pump looks primed for more building. Ryan Allen, a professor of urban planning at the University of Minnesota, analyzed 50 years of permit filings in Minneapolis and found that over the past five years, developers have filed permits to build in the city at rates two and a half times the annual average.

“This is a clear signal of interest and faith in the housing market here on the part of developers,” Allen said.

The end game is still to make life more affordable in the city. And while there are a number of factors that determine market rates for a home (such as amenities, the local economy, cultural factors, immigration patterns), early signs show that Minneapolis’ housing plan is coinciding with lower rents.

In the roughly five years since Minneapolis 2040 was enacted, rents nationwide have risen 22 percent, Apartment List estimates. The housing market suffered a series of unprecedented shocks during this period. The global pandemic dramatically rearranged where Americans chose to live, followed by a supply chain nightmare and high interest rates that limited supply of new homes and with handcuffs many home buyers in their current homes.

By contrast, rents in Minneapolis fell 4% over the same five-year period. San Francisco and Oakland, California’s neighboring Bay Areas, are the only cities with larger populations that have also seen rents decline, according to the apartment list estimates.

“When you increase supply to meet that demand, it’s like a political philosophy of supply-side progressivism. You can prevent big rent spikes,” Frey said.

But Frey, a Democrat, acknowledges the plan has been highly controversial. Signs appeared across the city imploring 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 northeast part of the city. The sign is now across the street from Solstice Apartments, a new complex that opened this spring. There are 23 units in the building, one-fifth of which are certified affordable units, in the same footprint that once housed just one single-family home. The building has rented all but one of the units, meaning there are at least 22 households now sharing the address where there was only one family.

Cody Fischer is the developer behind it and says the project wouldn’t be possible before Minneapolis 2040.

“Absolutely not. It was a combination of zoning and parking requirements. It just wouldn’t be possible,” Fisher said. He added that it would be an “understatement” to say the plan was a bit controversial. “The people on the block really didn’t want this apartment building here.”

Jeremy Wieland, who lives a block away from the development, is one of those people. Wieland is concerned that the Solstice Apartments, which had no off-street parking, would worsen traffic in the area.

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 renters are more likely to move.

“That building over there is in my backyard and I like it, and down there, [the Solstice Apartments] it’s in my backyard and I don’t like it. So it’s always going to be case-by-case,” Wieland said.

Fisher, the developer, said he designed the building to be part of the community, adding that neighbors’ “worst nightmares” about parking have not come true.

Environmental groups have also filed complaints against Minneapolis, arguing that the city should have done more to prove that increased living density would not be harmful. A treatment by a group of nonprofits claimed the city violated the Minnesota Environmental Bill of Rights by failing to demonstrate 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 effectively protecting the plan from lawsuits. Walz, who Frey said was “committed to the mission” of affordable housing, undersigned the measure was signed into law in May. Last month, the Minnesota Supreme Court decided not to consider the lawsuitgiving the plan the green light to go ahead.

With the project gathering steam and housing under intense national scrutiny, advocates say the Minneapolis experiment shows the need for a multifaceted approach — with regulations and community engagement 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 even that is not enough. We also need to have more active state, local and federal government policies that intend to support the housing market.”