When the Minneapolis City Council adopted its inclusionary zoning ordinance, together with its Unified Housing Policy, in late 2018 there was optimism that the ordinance would result in the creation of much needed affordable housing in the city.  The ordinance mandates a minimum percentage of 10-20 percent of units within multifamily buildings be affordable where the project requires certain approvals, including variances, zoning amendments, or density increases.  Since it became effective at the beginning of this year, the ordinance has failed to make gains towards affordability.

In Minneapolis, planning staff estimated between 364 and 728 affordable dwellings would have been created had the inclusionary zoning ordinance been in effect from 2015 through 2018.  Housing advocates expected that subsequent development would follow suit.  However, in the first six months the ordinance has been in effect, only one project was subject to the ordinance.  At only seven units total, that project at 2521 Bloomington Avenue did little to move the needle on the city’s affordable housing numbers.

While the pace of multifamily development in Minneapolis does not show signs of slowing, the inclusionary zoning ordinance has not created new affordable units.  The development community loudly warned of such unintended impacts, forecasting that developers and investors would avoid substantial loss by working around the mandate of developing unsubsidized affordable housing.  This prediction appears to be materializing, as developers are finding ways to avoid the triggers for inclusionary zoning.

Developers appear to be making concerted efforts to propose projects that avoid rezoning applications, variances and density bonuses, all matters that would trigger the ordinance.  If this is true, it is possible that an unintended consequence of the inclusionary zoning policy is that it is encouraging developers to follow adopted city policies and zoning ordinance more closely.  On its face, this is a desirable outcome from a planning perspective.

However, another likely long-term effect of this trend is that the supply of readily developable land in the city will disappear, driving up land prices and, as a result, the cost of housing.  Accordingly, as developers continue to avoid triggering the inclusionary zoning requirements, the city’s inclusionary zoning efforts may have the opposite effect of the city’s intent by reducing affordability of new units.  While the city has indicated that it will continue efforts to fine tune the inclusionary policy, early results are not promising.