After Years of Talk, Minneapolis Inclusionary Zoning on Track for 2020

A policy requiring affordable housing as a part of new development in Minneapolis heads to the City Council for final approval after last night’s sign-off at the Planning Commission. It’s been years in the making.

Inclusionary zoning is kind of painful to write about because it’s impossible to not string a bunch of numbers and percentages together. Well, here’s some bad news for fans of easy reading: the city’s inclusionary zoning consultant has added even more numbers, percentages and time triggers.

One thing you should know before we get too deep into numbers: AMI stands for area median income (But WHAT DOES THAT MEAN?). Here’s a chart showing the rent levels that apply at various AMIs in the Twin cities.

# Bedrooms30% AMI50% AMI60% AMI80% AMI
1 Bedroom$562$937$1,124$1,499
2 Bedrooms$675$1,125$1,350$1,800
3 Bedrooms$780$1,300$1,560$2,080
4 Bedroom$870$1,450$1,740$2,320

Another thing it’s important to say every time we talk about inclusionary zoning is that it’s always been a companion policy to citywide upzoning. Council President Lisa Bender’s constant mantra in the 2018 debate about the 2040 plan was we can’t have one without the other. A couple of Commissioners talked last night about the 2040 plan’s upzoning being a carrot for developers, while inclusionary zoning is the stick. Ideally the policy that comes out of this process creates equilibrium that maintains financial feasibility for new housing production in Minneapolis — just with a certain portion of those new homes being income restricted affordable housing. Planning Commission President Sam Rockwell said it’s important that this is happening at this moment in order to “reclaim some of that value for public benefit.”

Developers still think it’s a terrible idea. They say it will make development in Minneapolis financially infeasible. Downtown business guy Steve Cramer, speaking last night on behalf of a developer group called Building Minneapolis Together, wants tax increment financing (TIF) to apply to a 10% requirement for those making 60% AMI. Right now the policy only provides a TIF subsidy to developers when they produce 20% of units at 50% AMI.

Though developers are still unhappy, that doesn’t mean the plan hasn’t been changed in an attempt to address concerns of financial feasibility. The 10% requirement at 60% AMI was adjusted down to 8% in the proposed permanent policy.

Rockwell asked Cramer about similar complaints from developers ahead of last year’s adoption of the interim ordinance — that it would kill development. The unspoken criticism here being that developers have cried wolf before. Cramer’s response was that he wasn’t among those making that criticism.

Then there’s the question of what size buildings the policy will apply to. The short answer is 20 units. But it’s not so simple. There’s also a chart full of numbers and percentages! This is a fix for the “one under” problem — that developers will inevitably build one unit under whatever the city’s trigger point is.

You can see from the chart that the percentage of affordable units required goes up as the number of units increases. A building with 20 units has a 2% requirement. A 100 unit building has the full 8% requirement. This is also a way of minimizing conflict with existing city goals and policies meant to encourage smaller scale development.

Unlike the interim inclusionary zoning policy which exempts student and ownership housing (condos), the permanent policy will apply to both of those.

Affordability requirements for condos will phase in over time after a certain number of units are approved and permitted. 500 units would trigger a 4% requirement at 80% AMI. 1000 units would trigger an 8 % requirement. The idea is to phase in the requirement over time because policymakers would prefer not to stomp on Minneapolis’ current weak market for new condos — preventing a future resurgence.

The Minnesota Student Association, which represents 30,000 U of M undergrads in the Twin Cities, organized a group of about ten students who testified at last night’s Planning Commission. The MSA’s local government coordinator Rebecca Cowin told the Commission that the current policy only makes 3% of students eligible for affordable units, using “federal requirements defined within the internal revenue code.” This leaves out a lot of students with financial need. The student group wants to expand eligibility to students who receive Pell Grants, a federal education subsidy provided to college students with financial need.

Commissioner Sweasy responded to the students’ requested changes by saying she didn’t think this policy was meant for them. “It’s great to see the young people here and engaged” but “my understanding of it primarily is that it’s meant for long-term residents… not that I’m unsympathetic to the student issue.” She mentioned she has two college students herself.

Analysis: I believe that students are real and legitimate residents of the city of Minneapolis entitled to equal attention from affordable housing policies.

There are a number of compliance alternatives for developers:

  • Pay a fee
  • Donate land where there’s an affordable housing need
  • Create or preserve affordable housing within a half-mile of the site

The fee to buy out of producing units on site would be set higher than the developer’s cost of building the units on site. This is because one of the goals of the policy is to create the affordability across the city, creating mixed income neighborhoods.