Minnesota lawmakers aim to stop cities from killing affordable housing

A few years ago, Solhem, a Minneapolis-based developer, sought to build some market-rate apartments in Edina. After interest rates spiked and market conditions shifted, the project started to look infeasible. Solhem pursued funding for affordable housing instead.

In December 2023, Solhem was selected by the Minnesota Housing Finance Agency to receive a significant allocation of federal low-income housing tax credits, and they began planning an 89-unit affordable housing project. Edina’s comprehensive plan guided the site to include office or residential development, and the proposed project also fit within the comprehensive plan’s guidance for density at the site.

But there was a loophole for anyone who didn’t want to see this built: City zoning had not been updated in accordance with the comprehensive plan, necessitating a rezoning in order to build housing on the site.

Soon after Solhem applied for affordable housing funding from Minnesota Housing, some residents — by no means a majority of Edina, but a vocal group — stirred up opposition. Over 1,000 people signed a petition opposing the rezoning. The new development would “adversely affect the architectural character of the neighborhood, traffic and safety, and property values,” the petition read.

The opposition here was new. When Solhem had initially been planning market-rate — meaning relatively expensive — apartments, people said hardly a word.

“There was no major backlash from the community [when we first introduced the market-rate proposal]. We got feedback from the City Council and Planning Commission. It was after we introduced the affordable housing project last May that the neighborhood opposition really mobilized,” said Amol Dixit, a vice president at Solhem.

A separate petition from a nearby townhome association called for the city to establish a “small area plan,” which is essentially another regulatory regime specific to a portion of Edina. Once established, this would begin a 12- to 18-month process to plan for future development of a multi-acre area that included the proposed Solhem site — and the City Council authorized such a plan. Dixit told the council that if the project could not receive land use approval before the small area plan was completed, Solhem would be unable to follow the construction timeline required by federal funding and would have to cancel the project.

The City Council unanimously expressed that they would not approve a project before completing the small area plan, rendering the development unviable. Multiple public officials involved cited concerns around sewage infrastructure, but Dixit said that Solhem had presented workable solutions that had been conceptually approved by the Metropolitan Council.

“We just felt like there was a lack of partnership with the city, on what are really typical zoning and infrastructure issues,” Dixit said.

So 89 affordable homes, fully funded and ready to build, will not be built in Edina.

The story is so well worn that it’s a cliche. A developer proposes affordable housing. Neighbors complain. Local government puts up expensive roadblocks that will delay the project for years. The project can no longer get built. The story ends, and our affordable housing crisis continues.

Some state legislators are tired of this story, however, and have brought land use and zoning policy to the forefront of policy discussions at the state Capitol this year.

Multiple bills have been proposed to change the regulations governing how housing gets built in different jurisdictions: One bill (HF4009/SF3964) would legalize slightly denser housing, like duplexes and townhomes, in neighborhoods across the state, and larger apartment buildings near major transit stops or in commercial areas. It would also limit bespoke, building-by-building approvals, having cities give more straightforward approvals to new housing if it’s in line with their comprehensive plans.

Another bill (HF3468/SF3572) would altogether eliminate minimum parking requirements statewide; and another (HF3351/SF3538) would direct a rewrite of the state building code to allow taller buildings with a single staircase (a change that, if done safely, would enable much more efficient apartment construction).

Essentially, the Legislature wants to set new requirements for local land use policies, which they view as overly restrictive and detrimental to housing affordability. A surprisingly diverse array of organizations and advocates are supporting these changes: affordable housing groups, environmental organizations, homebuilders, social justice groups and even the AARP.

A key intention of these reforms is to broadly lower the market prices of housing. They do this by legalizing more low-cost types of housing, and by increasing the overall supply of housing. More low-cost housing can come in the form of small-lot homes (see Houston and Portland), more efficient apartments, or accessory dwelling units that are cheaper to produce and therefore cheaper to buy and rent. Increasing the overall supply of housing prevents residents from competing for a scarce housing supply and driving prices up — that is, making sure you don’t end up like California.

This policy effort comes after historic investments in housing in 2023 — over $1 billion, or something like 20 times the spending in a typical two-year budget. The Legislature also passed a 0.25% increase in the metro sales tax to fuel future spending on housing.

That spending is mostly aimed at helping the residents that the market can’t help: Minnesotans with incomes too low to afford anything that private developers could build. In a country with far too little housing available for the poorest people, this is an enormously important goal. Funding is the core constraint here — it costs a lot of money to fill the gap between low incomes and the cost of housing for thousands of people.

Thus, while there are great benefits to both land use reforms and affordable housing funding, they are often viewed as distinct, each addressing different parts of the “continuum” of housing needs.

But we should recognize the direct ties between these two policy efforts: land use is an affordable housing issue.

Local governments and the all-too-common affordable housing backlash

Edina’s story of a stalled-out affordable housing project is hardly unique. For example, as Katelyn Vue reported for the Sahan Journal last year, multiple public officials in Shakopee attempted to kill a 46-unit affordable housing project by changing local zoning law behind the scenes. Vue obtained city emails in which a Shakopee city commissioner suggested some regulatory chicanery to allow the City Council to kill the project. Thanks to Vue’s reporting and organized advocacy in support of the project, the city backed down and the project is now in motion.

But there aren’t enough local organizers or nosy reporters to win all of these battles. Like any city in Minnesota, Edina and Shakopee have considerable leeway in their use of local zoning policies. In practice, this flexibility can easily serve as a lever to control any and all housing development that comes to a city. If a city keeps its zoning strict — even in ways contradictory to their comprehensive plan — any proposed building will need a variance or exemption of some kind.

As Sarah Larson, a principal at Minnesota-based affordable housing consultancy group Landon Group, explained, it’s common for cities to have zoning codes that make it difficult to build multifamily housing without a custom, discretionary approval process. A typical outcome of this system is planned-unit developments, which involve granular negotiations between developers and cities.

“If your zoning code hasn’t been updated or is too strict for multifamily, almost all multifamily development will need a planned-unit development,” Larson said. Once this kind of bargaining chip is in play, Larson said, cities have the ability to extract costly concessions from a new developer, or even altogether halt a project.

The quieter pains of land use policies

Localized backlash to affordable housing makes for prominent characters and attention-grabbing headlines. In other ways, restrictive land use policies more subtly reduce the capacity of affordable housing providers across the state. The funding pool for affordable housing development is always limited, and always insufficient to meet the need. When local policies raise the costs of building housing, scarce subsidy dollars will simply do less good.

Even when restrictive zoning and discretionary approvals don’t altogether halt new affordable housing, it raises the upfront risk of a development, and can delay projects by months or years — thereby increasing costs.

Other local codes and policies more directly raise the costs of building. For example, minimum parking requirements mandate that all developments include a specified amount of off-street parking, which can cost tens of thousands of dollars per parking spot to build.

Parking requirements vary wildly across jurisdictions. In a recent study, the Federal Reserve Bank of Minneapolis surveyed ten Twin Cities suburbs on the number of parking spots that would be required in a 211-unit apartment. They found that seven of the 10 suburbs would require over 272 parking spots. In those cities, developers would either have to build huge quantities of parking  — steeply increasing the development cost — or hope for a variance.

And that’s just one example. The same study found park dedication fees that ranged from $1,500 to $8,000 per unit. Some of the cities also required buildings to use more expensive external materials, such as brick and stone, for aesthetic reasons.

So we rightly dedicate public resources for building affordable housing, but then allow other public processes to reduce the good we can do with that housing money.

On the other hand, the inverse can be true: Good land use reforms can meaningfully increase the capacity of affordable housing.

As I reported in a story for Southwest Voices last fall, the Minneapolis Public Housing Authority has recently begun to open new buildings from its Family Housing Expansion Project. On 16 sites across Minneapolis, MPHA replaced single-family homes and duplexes with four-unit or six-unit buildings. These buildings could only be built due to the looser zoning under the Minneapolis 2040 Plan, as various parts of Minneapolis neighborhoods changed from allowing two homes per lot up to six, and stopped requiring fixed quantities of parking in new development.

Land is a scarce and costly resource in Minneapolis. Thanks to city rezoning, MPHA can now house dozens of additional low-income families — no raucous public hearing needed.

Can local control ever live up?

Across jurisdictions in Minnesota, our array of cost-increasing land use policies diminishes our ability to house our neighbors in need.

That’s an extremely consequential problem. Half of renters and a fifth of homeowners in Minnesota spend more than 30% of their income on housing. A lack of housing affordability and stability contributes to poor health outcomes and reduced economic opportunity.

The policy efforts underway in Minnesota would address precisely these kinds of issues — both by increasing certainty in approval processes, and taking measures to limit the policies that directly raise the costs of building new housing.

A bill at the Legislature (HF4009/SF3964), for instance, would require that cities implement quicker, non-discretionary administrative review processes in line with their comprehensive plans, which likely would have helped Solhem’s Edina project get approved.

Local governments don’t all agree with these proposals.

The Minnesota League of Cities, which represents the collective interest of hundreds of jurisdictions across the state, has been a stalwart opponent to the statewide zoning bills floating around the Legislature the past few years. As an advocacy organization, their general principle is to “oppose legislation that erodes local control in cities across Minnesota.”

Thus, every time that Minnesota policymakers have proposed a bill to change the state’s land use policies, the League of Cities has held tight to the importance of local control, urging policymakers not to change anything at the state level.

Broadly, this argument holds some merit. Local planning departments and city councils surely do know more about their infrastructure needs and development patterns than state policymakers. Generally, proposed state land use bills don’t do a ton to differentiate among different localities — at most, only providing special treatment to the smallest or most rural cities.

But what if local land use policies — either by empowering discretionary reviews or raising the costs of building housing — contradict statewide efforts to increase the availability of affordable housing?

With 182 jurisdictions in the Twin Cities alone, it would be a fool’s task to wait for every single one to rewrite zoning codes in order to better support affordable housing development.

And that’s assuming, of course, that individual cities are all on board with building more affordable housing. Unfortunately, that’s not always true. In a recent committee testimony to the Minnesota House, Sarah Larson of Landon Consulting said that on average, her firm advises three developers each year not to pursue an affordable housing project because they’d be unlikely to attain approvals.

Is it a city’s right to maintain local control also a right to maintain exclusion? At what cost are we willing to uphold that principle?

“People are stressed and struggling without homes,” said Anne Mavity, executive director of Minnesota Housing Partnership. “The cost of that idea that nothing should change — which feels justifiable when you’re just in a room talking about some esoteric development on a corner — means 100,000 households in Minnesota need homes and are suffering.”