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State Housing Bills Are Dead; Time for Local Leaders to Step Up

Star Tribune

May 9, 2024

While two statewide bills in Minnesota that would allow for missing middle housing everywhere and more dense housing in commercial zones have stalled, local officials remain acutely aware of housing affordability issues. Fortunately, they do not need to wait to take effective and immediate action.

Many cities have traditionally been laser-focused on economic growth, while adding needed housing for workers was merely an afterthought. This strategy may have worked in the past, but housing prices have emerged as a critical issue. After all, home prices in Minnesota are 27% higher today than just four years ago.

In order for first responders, nurses and teachers, as well as blue-collar workers like carpenters or plumbers, to live in the cities where they work, cities need to provide more housing. Without attainable housing, workers will be forced to move away, and without workers, employers will go elsewhere.

The best way to spur housing construction is to unleash market forces by cutting red tape. Allowing individuals to build on smaller lots, reducing parking requirements, or opening up commercial areas for mixed-use development — policies similar to those proposed in housing bills HF 4009 and HF 4010 — offer the best path forward.

To pull off what failed at the state level, cities need to build a bipartisan coalition around these commonsense housing reforms. Fortunately, the message of abundant housing has something for everyone. For conservatives, supply-side reforms do not cost any taxpayer money and are entirely market-driven. For environmentalists, building state-of-the-art energy efficient buildings in already developed areas mitigates against sprawl. For progressives, reversing laws that intentionally priced minorities out of neighborhoods enables more racial diversity and economic mobility. For the business community, adding more housing expands the commercial base, which may help revitalize commercial cores affected by shrinking family sizes and suburban migration. Not to mention the countless jobs that would be created from building more homes, selling them or originating loans for them.

For cities, the prospect of moderately greater density far outweighs the negatives. Greater tax revenue from a broader taxpayer base would more than offset any additional infrastructure spending. Furthermore, new infill housing infrastructure only costs an estimated fifth of new greenfield development since the roads are already paved, the fire stations are already built, the pipes are already laid.

This is not just theoretical; comparable reforms have proved highly successful in cities around the country, including Seattle, Houston, Denver and Palisades Park, N.J. In these cities, when housing affordability became an issue, the market was allowed to respond to the higher prices by gradually converting about 2% of older single-family housing units per year into duplexes or individually owned townhouses.

This new steady drip of new housing accumulates over time and will have many positive downstream effects, such as providing younger generations with housing options near amenities to start families, instead of having to move away. Palisades Park even returned some of the extra revenue to all taxpayers by lowering property taxes.

However, to be successful, cities need to properly implement these reforms. Regulations need to be as short and simple as possible. Unneeded regulations will stop small-scale local builders from producing new housing units. For example, in Seattle, an affordability mandate for lower-income households made townhouse construction too cost-prohibitive, resulting in an 80% drop in townhouse permits. Or in Minneapolis, a floor area ratio that restricted the building envelope to essentially a one-unit home has made it impossible to build now-allowed duplexes or triplexes.

In Minnesota, St. Cloud Mayor Dave Kleis is leading the charge as the city is considering allowing accessory dwelling units and reforming minimum lot sizes, lot coverage ratios, floor area ratios and other zoning standards.

Housing reformers will inevitable run into opposition from those who will argue against any form of change and those who complain that reforms don’t contain enough affordability. They are both wrong. Fundamentally, property rights only apply to your own property, not beyond. And the best solution to combat housing unaffordability is to build more market-rate housing. All other solutions, as observed in Seattle or in St. Paul’s failed experiment with rent control, prove that case.

For Minnesotans, housing affordability will only become a larger issue in the future. Fortunately, cities do not need to wait for the state to address the issue. Local jurisdictions, just like St. Cloud, can lead the charge by moving forward with their own commonsense housing reforms.

This op-ed was originally published in the Star Tribune.

Tobias Peter is a Senior Fellow and Codirector of the AEI Housing Center.

The views expressed in this article are the writer’s own.