Eric Hauge knows the effects of Minnesota’s housing affordability crunch all too well. As executive director of HOME Line — a hotline for renters dealing with issues like negligent landlords, unexpected rent hikes or eviction notices — he said more and more people are calling with one main concern: Finding a way to remain in their homes, since there are so few affordable places for to live.

By studying lease agreements and renter protections, HOME Line attorneys and advocates try to identify ways clients can stay in their homes, whether through legal strategies or working out deals with property owners. But sometimes, when landlords are following housing laws and tenants are unsuccessful in their negotiating, HOME Line has no other option than to tell callers they must move. “If you don’t already have some sort of subsidized housing, it can be very difficult,” Hauge said.

The rising pressure on HOME Line and similar housing nonprofits exemplifies the region’s growing housing disparities. Most new apartments in Twin Cities are unaffordable for almost half of the population, according to census data and the Family Housing Fund, a Minneapolis-based housing nonprofit. Since 2013, new one-bedroom apartments in St. Paul, for example, have monthly rents ranging from $1,275 to $1,700 — prices that are only affordable to households that earn roughly $50,000 to $75,000 annually.

That gap in affordable housing has prompted a slew of new policy efforts in the past year, ranging from investments to maintain — or build more — housing for low-income renters to inclusionary zoning rules that offer incentives to developers who keep rents below market rates.

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But while cities’ efforts vary in size and scope, no municipality has taken a more dramatic response to the housing gap than Minneapolis. In December, the City Council approved its long-term plan for development, Minneapolis 2040, which made Minneapolis the first major U.S. city to eliminate single-family zoning all together. The move was celebrated by local residents who see increased density as key to the city’s housing inequalities while attracting the attention of the national media and housing-rights activists who think other metros should follow Minneapolis’ lead to increase residential density.

But for all the buzz generated by the plan, far less attention has focused on a very basic question about the change: If, or to what extent, will the elimination of single-family neighborhoods actually help with housing affordability in Minneapolis?

The disproportionate effects of the housing crunch

Minneapolis 2040 includes two major land-use changes to spur taller, bigger housing complexes in more places: One to allow new three-to-six story buildings along some transit corridors; and another to eliminate single-family zoning and allow housing of up to three units, or triplexes, in all parts of the city.

The abolition of single-family zoning received the most attention from national onlookers, many of whom touted the change as step toward reversing some of the damage from historical exclusionary zoning policies. “Minneapolis, Tackling Housing Crisis and Inequity, Votes to End Single-Family Zoning,” A New York Times headline read, while a Reuters story noted: “In U.S. first, Minneapolis rethinks housing density to make homes cheaper.”

In Minneapolis, one progressive advocacy group, in particular, marked the zoning change as a major win. The group, Neighbors for More Neighbors, argued greater density citywide will help make the city more walkable, diverse and affordable. Members also often cited the rising cost of Minneapolis’ single-family homes as a reason why so many residents rent in the city instead. (The median home value in the city is now $266,800.) But advocates argued more diverse options could make housing more affordable.



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“I want everyone to have the same access to affordable housing that I’m currently enjoying,” one activist, Nicole Salica, said during the city’s debate over Minneapolis 2040. “Every neighborhood should have a variety of housing.”

The backdrop to Minneapolis’ new plans for residential development is the region’s anticipated growth and population changes. To meet existing demand for housing and build homes for future residents, cities across the Twin Cities metro would need to add more than 14,000 homes each year for the next two decades, according to the Family Housing Fund. But right now they are building about three-fourths of that, on average.

And though rising rents and housing costs are on track to impact households of all incomes, one demographic is expected to feel the pressure especially hard: low-income residents. The Family Housing Fund expects retail and restaurant employees, child care workers, nursing assistants and home health aids among people who will struggle the most.

Already, the shortage of affordable housing is taking a toll on Minneapolis’ poorest residents. Currently, about 27 percent of the city’s households earn less than 30 percent below the area’s median income (AMI) — $28,300 for a family of four — according to research by the University of Minnesota’s Center for Urban and Regional Affairs. That is the U.S. Department of Housing and Urban Development (HUD) definition of “extremely low income” and a demographic that can apply for public subsidies.

Meanwhile, thousands of local households of higher incomes are living in homes that are better priced for those low-income workers, with monthly rent prices below about $700, research found. “When you look at what the housing needs are in Minneapolis, St. Paul, the region, the state, really the biggest chunk of the folks who are struggling the most are households that are making less than about $25,000 a year,” said Margaret Kaplan, policy director at the Housing Justice Center, a local nonprofit that works to maintain and expand affordable housing options. “We are basically blocking out a large chunk of our population from being able to access housing.”

For people of all income levels to live comfortably, experts say renters should not spend more than about one-third of their monthly income on housing costs. And homeowners, meanwhile, should not buy homes that cost more than 3.5 times their annual household income. If, or when, a household exceeds those thresholds, it is likely to start sacrificing money on other basic needs, such as food and clothes.

According to Census data, more than 36 percent of all Minneapolis households are in that tight financial situation, including about one in every two renters.

More options, but little benefit for low-income residents

Supporters of zoning changes to add density, like Minneapolis’ elimination of single-family neighborhoods, often cite the theory of supply and demand for their land-use adjustments. If you build more housing of any kind, you will decrease the cost of housing overall because people who can afford higher prices will move into those new places with more amenities (luxury apartments with spacious layouts, condos with yards, etc.).

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But, according to Kaplan, that theory doesn’t always reflect what happens in the housing market, for several reasons. First, people often pay far above what they should on rent or mortgages, just so they can remain in a particular neighborhood or living situation, or because they have no other option, she said. That complicates the economic ladder for housing and makes the market unique. Also, housing is often ranked highest on residents’ lists of expenses. “Some commodities you don’t need, and so when the price gets high enough you’re going to say, ‘I’m not going to do it unless they lower the price,’” Kaplan said. “Housing isn’t like that. We all need a place to call home.”

Minneapolis 2040’s move to allow triplexes everywhere is not likely to help people at the bottom of the city’s income scale very much.

The area’s increasing cost of labor, construction and land puts existing single-family neighborhoods out of range for most developers of affordable housing, Kaplan said.

Nonprofit or for-profit organizations that build housing for low-income residents (for those at or below 50 to 60 percent AMI) are usually in the business of large-scale properties of 40 units or more, she said. For housing aimed at poorer households (30 percent AMI), developers need local or federal subsidies. They typically want to spread the cost of construction and maintenance over as many units as possible, and some sources of subsidy don’t work well for small-scale multi-family housing. HUD’s Low Income Housing Tax Credits, for example, require transaction costs that make them very difficult to use for smaller buildings, Kaplan said. As a result, there are few developments in Minnesota for households below 30 percent AMI that have fewer than 20 units.

All of which means the zoning change is likely to give middle- to- upper class residents more options for owning or renting. A homeowner, for example, could decide to gain a new stream of revenue by renovating their house into a duplex and renting out the new space. “It might not be a $3,000 unit, but it’s probably not going to be a $500 unit either,” Kaplan said.

‘It’s crisis mode’

To Kaplan and her colleagues at the Housing Justice Center, Minneapolis 2040’s lack of specifics to help the city’s poorest residents is a misstep. “We’ve oversold the benefits of doing this,” she said. “I think we’ve declared victory too early.”

About a month after the City Council approved the long-range-pan, a senior attorney from the group, Jack Cann, wrote a letter of objections to leaders of the Metropolitan Council, which coordinates comprehensive plans across the seven-county metro. The letter alleges that the plan violates the federal Fair Housing Act by limiting the possible construction of affordable housing and missed an opportunity to describe future operating subsidies for low-income housing, among other claims.

“Unless the council is prepared to effectively address the housing problems of extremely low income, disproportionately minority households, its commitment to regional equity will prove to be extremely hallow,” Cann wrote.

As Vice President of Aeon, a Minneapolis-based company that buys and renovates properties for low-income renters, Blake Hopkins is another person with firsthand experience of helping people navigate the limited market for affordable housing in the area. He also said Minneapolis’ unprecedented zoning change will have minimal impact on Aeon’s work since it primarily manages large-scale properties. “We’re at a point right now where it’s a crisis mode,” Hopkins said. “We’re seeing more communities coming to us to address affordable housing issues.”

HOME Line’s Hauge, meanwhile, said that while the majority of the organization’s calls are about housing conditions, it is seeing a spike in tenants seeking help to deal with rent increases or informal notices to vacate. Oftentimes, those issues are a result of property owners planning to remodel, change their clientele or sell their apartment buildings, he said.

“That’s happening consistently throughout the metro — private market customers have really fragile leases,” Hauge said. “That’s a tactic some landlords take to demonstrate their property is a good investment for upscaling, for renovating, and so then they put people on month-to-month leases and then they have minimal notice” before having to move.

Change to be measured in decades

Another wrinkle in the goal to address a housing deficit via Minneapolis 2040: Many owners of single-family lots in Minneapolis have no plans of moving anytime soon. That means the zoning change could take years, if not decades, to make any noticeable impact on the housing supply.

Currently, about three-fourths of Minneapolis’ population live in neighborhoods zoned primarily for single-family homes or small multifamily housing, according to land-use maps and Census data. In those areas, there are currently just two rental units for every three owner-occupied homes.

Demographers expect the number of homeowners in the city to decrease when some of them do eventually decide to sell, while the number of renters grows to make up more of the majority. To accommodate that shift in the market — which researchers expect to affect St. Paul, too — the Twin Cities need to boost their stock of multifamily housing (from 40 percent now to 43 percent) and decrease its proportion of single-family housing (from 60 percent to 57 percent) in future years, according to the Family Housing Fund.

Enter Minneapolis 2040. Its call to allow multifamily housing across the city, sometimes referred to as “upzoning,” could help spark new development to meet those projections.

Across the country, the idea of upzoning is a hot one in urban planning, especially among leaders of cities that are also grappling with a gap of affordable housing. All efforts have faced some pushback from residents who call upzoning a misguided approach to solving housing equity problems, saying it would alter the look and feel of neighborhoods, hand too much power over to developers or raise property values.

In Minneapolis, those concerns were at the heart of a citizen-led campaign, Minneapolis for Everyone, that successfully persuaded city planners to dial back their original idea of allowing fourplexes everywhere in the city to allow for triplexes instead.

“I think the city has an extensive housing crisis, and I think it has an affordable housing crisis, but those things are solved in different ways,” said one of those advocates, former City Council member Lisa McDonald, during the city’s discussion over the 2040 plan. “Just building triplexes — that’s not going to solve the affordable housing problem.”

A 2019 study of upzoning in some Chicago neighborhoods found some truth in that critique and highlighted the long-term nature of such zoning changes. The researcher behind the study, Yonah Freemark, who is a doctoral candidate at the Massachusetts Institute of Technology, analyzed housing prices and construction permits in areas where Chicago began upzoning in 2013 and 2015. He found increasing property taxes, but little change in the areas’ housing supply as as a result of the zoning changes.

In other words, buyers quickly took advantage of the new land-use designations and were willing to pay more for buildings, but housing construction didn’t accelerate, the research found.

“The study’s overarching account raises concerns in that it tempers the expectation that upzoning can be by itself a remedy for housing affordability through increased construction,” Freemark wrote. “Whether these trends continue into the longer term is unclear.”

Freemark has urged cities that are considering upzoning to listen to residents who are worried about rising housing costs and to make other types of investments in new affordable housing while working “to promote immediate new construction, not just speculation related to the possibility of future construction.”

No illusions

City Council President Lisa Bender, a proponent of increased density who signed off on the comprehensive plan, does not have any grand illusions about Minneapolis 2040 solving the city’s affordability woes.

She sees the elimination of single-family zoning as a sequel to an ordinance she authored in 2014 that allows accessory dwelling units on residential lots (ADU’s). Under that zoning change, owners of single-family houses can build an additional dwelling — or simply rent out an existing space — on their properties, changes that often take the form of mother-in-law units or carriage houses. Supporters have touted that zoning change as a low-key way to add housing density without upsetting neighbors. Minneapolis homeowners have built some 140 ADU’s since its adoption, which accounts for 0.2 percent of single-family lots.

Bender expects similar, gradual results from Minneapolis 2040, which will take effect when the City Council updates zoning codes neighborhood-by-neighborhood as early as this year.

Instead, she said, the comprehensive plan’s call for more density near some transit corridors is likely to spur more noticeable change to the city’s streetscapes compared to the new triplex policy.

Upzoning “isn’t likely to have an immediate impact on, you know, our rental vacancy numbers, which are very low and some of those other extreme pressures on our housing market,” she said. “But over time it will help create more housing units, especially smaller units in more neighborhoods, creating flexibility for property owners and allowing people to use their homes and buildings in new ways.”

Responding to those who believe the plan does not go far enough to help the city’s lowest-income residents, Bender added: “I certainly would never argue … that the change alone would address affordability,” she said. “This plan looked at housing affordability holistically. We looked at ways to address our supply problem because we literally don’t have enough homes for people who want to live in our growing city, and that’s causing all kinds of problems that are affecting our more vulnerable, low-income renters.”