Nick Erickson, senior director of housing policy for Housing First Minnesota and executive director of the Housing Affordability Institute, said the affordability data emerging since 2020 has drawn a sharp distinction between the cities.
“There’s a great report that (the Pew Research Center) put out a year or two ago that shows that Minneapolis reforms actually kept rents lower (than St. Paul),” he said. “Minneapolis, thanks to their reforms, has been going the housing abundance route. That first year or two of Minneapolis reforms had about 1% rent inflation, so far below wage growth, which is great.
“That was the first time that happened in a long time we’ve seen in the Twin Cities — housing cost growth with rent or ownership below the wage growth. Then in St. Paul, yes, (rent increases) were limited to their mandated amount, but it still was a greater increase than was seen in Minneapolis, and that was just on the front end.”
Minneapolis doubled down on policies meant to make it easier to build housing by expanding where multifamily and “missing middle” housing can go, updating built-form rules and easing lot-level restrictions.
These changes built on the landmark Minneapolis 2040 plan that removed many single-family only zoning rules and added new built-form districts to guide density near business and transit corridors.
St. Paul voters approved a Residential Rent Stabilization Ordinance in November 2021 — capping most annual rent increases at 3% and directing the city to create implementation rules and exceptions. The ordinance has been adjusted by the city in subsequent rulemaking.
A broker’s view from the field
Patty Zuzek, a broker at Fieldstone Real Estate Specialists, said that even with the recent reforms, Minneapolis and St. Paul remain difficult places to build, and that buyer behavior is shifting accordingly.
“Minneapolis and St Paul are still very difficult to build in, just because of the additional cost to builders to be able to pull permits and stuff like that,” she said. “Inventory has gone up and we’re seeing more people wanting to move to our suburbs, somewhere a little quieter while still maintaining access to the downtown areas.”
Zuzek, who served a a regional vice president in 2023 for the National Association of Realtors, said that return-to-office trends could further reshape housing demand.
“My concern is with people now having to go back to work and people who have been out, are they going to start coming back in (to live downtown)?” she asked. “Our markets remain very different, the downtowns and our first- and second-ring suburbs.”
What actually changed for neighborhoods?
Much of the public conversation around Minneapolis’s zoning overhaul focused on the elimination of single-family-only zoning and the specter of triplexes.
Erickson said the practical outcome has been more modest and more compatible with existing neighborhoods.
“The triplexes were kind of the big fear-mongering tactic, since this debate was beginning in Minneapolis several years ago,” he said. ”But those really haven’t appeared, and part of the reason is the package that was passed was designed not to actually allow those.”
He said the zoning changes created theoretical allowances without dramatically altering neighborhood scale.
“(Triplexes) were allowed on paper, but not in practice,” he said. “They didn’t increase the floor area ratio for those structures. So, you couldn’t feasibly do a triplex unless one of the units was in the basement or utilizing the basement for space.”
The suburban price gradient
Zuzek said real estate agents must understand how pricing — along with sales and leasing activity — change as buyers move outward from Minneapolis and St. Paul.
“The minute you get out of St Paul-Minneapolis to the suburbs, you see the market is very busy,” she said. “The first-ring suburbs are very pricey because it’s convenience, just the proximity to the downtown areas.”
Development constraints differ dramatically by location, Zuzek added.
“If we’re looking at new construction versus existing, in your first ring, we don’t have a lot of green space where we can build and develop,” she said. “You go up further to our second rings, that’s where we have more green space to develop and grow.”
Corridors, transit and incremental density
Erickson said Minneapolis reforms unlocked smaller apartment projects in targeted locations — a shift that agents can see in new listings and redevelopment opportunities.
“The main success has been on more of, I would say, smaller-scale work,” he said. “We’re not talking a 30-story, multi-hundred-unit building. There’s really been a focus on those neighborhood apartments. That’s where we’ve seen the most potential unlocked.”
He pointed to city guidance that clarified where added density made sense.
“There’s this wonderful map that the city put together,” said Erickson. “(Development) along many of these major thoroughfares, close to bus routes or to the two train lines, allows greater density in those areas. And that’s where we’ve seen the most success from a land-use reform standpoint.”
Did land reforms go far enough?
Zuzek said zoning reform alone, as it stands, cannot overcome rising development costs.
“You know, we need to change and take a step back and look at all the cost factors,” she said. “… The cost for permit, the number of agencies that are involved in a build, just to get the land ready or to build a house, is catastrophic.”
She drew a stark comparison for agents advising buyers on affordability.
“If I’m comparing Minnesota to Wisconsin on new construction, we can build the same home in Wisconsin for $40,000 less — just because of government regulations and entities involved in a build process, the codes and the ordinances and everything that is involved,” Zuzek said. “I think they can still go further with (land and zoning reforms) around here.
“As agents, it’s our job to help be the educator and to share that information with local officials, whether they’re city council members, planning commissions or anyone else. We need to be the boots on the ground and have that conversation.”
Erickson and Zuzek each said the future of affordability depends on cooperation across the metro area.
“We are successfully building in communities that are out quite a ways from the Twin Cities,” Zuzek said. “We’re working with cities to bring obtainable housing to different communities, and those are the areas that are really having success in building obtainable housing and bringing in new workforce members.”
