Jun 22, 2022 - Real Estate

Minneapolis, St. Paul housing construction could take a dive

Illustration of the facade of a triplex being held up by wooden beams.

Illustration: Brendan Lynch/Axios

Suburban apartment construction could heat up as developers get squeezed by recent changes in Minneapolis and St. Paul.

What's happening: A Hennepin County District Judge issued a ruling last week that halted implementation of the Minneapolis 2040 Plan, which allows for more dense housing.

  • The decision is creating chaos for city officials and developers and Mayor Jacob Frey has promised an appeal.

Meanwhile, in St. Paul, a new rent control policy has all-but stopped housing development, though there's a new lawsuit hoping to reverse the ordinance.

Why it matters: Both of these actions make it harder to build in the central cities. If developers don't build housing in St. Paul and Minneapolis, they'll be forced to look to the suburbs to satisfy a growing need for multi-family homes brought on by smaller family sizes, downsizing baby boomers and a single-family housing market that has become too expensive for many, said Dean Dovolis, principal at DJR Architecture.

What they're saying: “You squeeze on the two cities and it pushes the demand out to the periphery," said Dovolis, who designs buildings and helps them get city approvals.

  • Dovolis said the recent Minneapolis ruling will slow down new projects as they go through multiple layers of approvals that the 2040 Plan had removed.
  • Already, the City Council has delayed four projects that needed rezoning, according to the Star Tribune.

Catch up fast: The 2040 plan allowed for at least triplexes on almost every lot and up-zoned many of the corridors to allow for taller and denser development.

  • Very few of the triplexes allowed by the 2040 plan have been built. Developers have instead taken advantage of the new rules allowing taller buildings on transit corridors.
  • Three groups sued the city — Smart Growth Minneapolis, the Audubon Chapter of Minneapolis and Minnesota Citizens for the Protection of Migratory Birds. They said the 2040 plan violates the Minnesota Environmental Rights Act and will increase stormwater runoff, erode soil and create more traffic congestion and air pollution.
  • Jack Perry, an attorney for those groups, said his clients warned the city that it would need to do an environmental review of the 2040 Plan, and a slowdown in housing production could have been avoided had officials listened.

The big picture: Minneapolis and St. Paul accounted for about 21% of the 25,800 new units of housing in the greater Twin Cities metro last year, according to U.S. HUD data.

  • Minneapolis development has stayed strong in 2022, but St. Paul development has fallen 86% in between January and April.

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