Comprehensive Zoning Reform in Minneapolis, MN

Background

Over the last few decades, Minneapolis failed to build enough housing to support population growth, resulting in unaffordable housing prices. From 2010-2016 the city added more than 37,000 residents, but only 12,000 new housing units. Minneapolis also saw a decline of about 15,000 affordable units (available for households earning 50% of the area median income) since 2010, as prices increased for many previously affordable units. Meanwhile, the median home price rose from around $200,000 in 2014 to over $320,000 in 2021.

Exclusionary zoning policies have also contributed to racial segregation in Minneapolis. A working paper by the Mercatus Center found evidence of a strong relationship between single-family zoning and racial segregation in both Minneapolis and St. Paul, with single-family zoned neighborhoods housing 21% fewer non-white residents than neighborhoods that allow apartments, controlling for price differences.

Reforms Implemented

 In 2015, the Minneapolis City Council passed a law that eliminated parking requirements for buildings with three to 50 units near high-frequency public transit (with service every 15 minutes or less) and allowed for a 50% reduction in these requirements for larger residential buildings.

Then in 2019, the Minneapolis City Council approved its 2040 Comprehensive Plan, effective at the start of 2020. By approving the plan, Minneapolis became the first large city to eliminate single-family zoning citywide. The plan also included provisions to:

• Expand zones that are eligible for housing
• Allow the highest-level density housing in and near downtown
• Allow multifamily housing and density on public transit routes
• Eliminate minimum off-street parking requirements on new developments citywide

However, in June 2022, a county judge ordered an injunction against the 2040 plan, ruling that the city must halt implementation and revise the plan to follow the Minnesota Environmental Rights Act in response to a lawsuit by Smart Growth Minneapolis and the Audubon Chapter of Minneapolis. Minneapolis appealed the decision and has been allowed to implement the 2040 plan during the appeals process—though, as of April 2023, zoning codes were still being updated to align with the plan.

Early Evidence

2015 Changes to Parking Requirements

While it is possible that other factors played a role, Minneapolis did see an increase in multifamily housing after 2015 compared to previous years, indicating that eliminating parking minimums could have helped encourage housing development. Specifically, the ratio of parking spaces to housing units fell significantly, and there are several prominent examples of new, large housing projects with much less parking than previously required—further evidence that reduced parking requirements could have played a pivotal role in allowing for more housing.

2040 Plan

As it has been only three years since the 2040 plan went into effect, it may take several years for the market to respond and to measure the plan’s impact. New housing has not yet seen a significant uptick compared to years prior to 2020—though compared to other midwestern cities, Minneapolis multifamily housing construction in the first six months of 2022 was particularly robust.

Rolling back single-family zoning was intended to spur the development of duplexes, triplexes, and other “missing middle” housing. In the first years following the adoption of the 2040 plan, Minneapolis only saw a modest increase in the number of permits for these types of units. However, as the graph below shows, 2- to 4-unit housing has made up an increasing share of housing relative to single-family housing in recent years. From 2020 through 2022, the three years following the 2040 plan taking effect, Minneapolis averaged 57 permits for 2-4 unit housing, a 45% increase over the annual average for 2017 through 2019.

Data from the Federal Reserve Bank of Minneapolis indicates most of that new 2- to 4-unit housing is in areas not previously zoned for single-family housing. However, new missing middle housing may have been supported by other provisions in the 2040 plan, such as the elimination of off-street parking requirements.

While some advocates hoped to see a larger, more immediate rise in missing-middle housing, there are several factors that may have limited its growth. First, the reforms went into effect just before the COVID-19 pandemic, which sharply reduced new housing production across much of the nation. The two years immediately preceding the reform—2018 and 2019—saw an unusual spike in larger multifamily housing permits and permitting in 2021 and 2022 compares more favorably to previous years. Uncertainty about the continued legal status of the 2040 plan could also have discouraged developers from taking advantage of new zoning capacity, as the plaintiffs filed their lawsuit in December 2018, and the case continued to make its way through courts over the following years.

Even though single-family zoning was eliminated, the new law did not require substantial increases in allowable heights or sizes of buildings on lots—meaning, even though developers and homeowners theoretically could build duplexes or subdivide houses, it may not be feasible to develop multiple units on a lot given the size limitations of buildings in certain neighborhoods, with duplex and triplex construction having to abide by standards designed for single-family homes. Many neighborhoods still have requirements for lot sizes and setbacks that pose further challenges to increasing density and various fees and regulations continue to make new housing expensive.

Finally, prohibitions on single-family zoning take time to have an effect. While legalizing duplexes city-wide increased the potential housing capacity of the city immediately, because there has been so little missing middle housing in recent decades, there is not an existing ecosystem of developers and financers to take advantage of new capacity. By its nature, legalizing duplexes and triplexes allows for gradual, gentle changes to neighborhoods—it can add a few units per lot, unlike apartment complexes that can add hundreds of units per lot. Also, developers must wait for owners willing to sell, as single-family neighborhoods tend to be composed of homeowners.

Read more zoning and land use case studies here.