Can inclusionary zoning ease Mpls’ housing crisis?

Or will it just stifle development?

Cities across the United States are suffering from a growing housing crisis, and Minneapolis is no exception. According to the Minnesota Housing Finance Agency, a branch of state government, roughly 2,000 affordable housing units statewide are lost each year. Homelessness during the harsh Minnesota winters can be deadly.

“It’s Minnesota—we can’t have people sleeping on the streets,” said Andrea Jenkins, Ward 8 Minneapolis city council member and the council’s vice president. “We have a really pernicious affordable housing crisis in this city, and we have to really try to take measures to create more affordable housing for people.”

To help combat the growing crisis, Minneapolis introduced an intermediary inclusionary zoning policy in December of 2018. Inclusionary zoning is a strategy meant to set aside more affordable housing in new developments for people with low-to-moderate incomes. This zoning measure was implemented as an official regulatory policy on January 1 of 2020.

The policy says that developers must make 8% of all units affordable to households at 60% AMI (area median income) for 20 years and make 4% of project units affordable at 30 percent AMI for 20 years. Also, developers can seek City financial assistance if they pledge to make 20% of units affordable at 50% AMI for 30 years.

Developers can otherwise pay an in-lieu fee to the City, build other affordable housing offsite, maintain existing affordable units within a half-mile of the “market-rate development,” or donate land to the city.

The policy can be complex and has been controversial in Minneapolis since its implementation. “It may, in fact, create some barriers for some developers who say they just can’t meet it, but I think there are a number of developers out there who will,” Jenkins said.

“It’s not like they’re not making money. They’re just not making as much money as they would like to.”

Ward 5 City Council Member Jeremiah Ellison supports the policy and described some of the controversy as a technical debate. “We are asking ourselves what we can demand that won’t infringe too much on that profit that they’re [developers] trying to make,” Ellison said.

He doubts that the policy will truly drive development away from the city. “I think we will continue to see people building, especially now that we brought that percentage from 10 to eight,” he added.

In the midst of all the hard numbers and profit margins, Hope Community Executive Director Shannon Smith Jones takes a “people first” and community-centered approach to affordable housing.

“So how do people keep place?” Smith Jones explained. “Anti-gentrification, anti-displacement—taking community approaches to things and really valuing and listening to that voice.” She added that questions should be asked of developers such as, “Does this work for the community that’s in place, and if not, what is your purpose other than just your profit margin?”

She added that not to address affordability costs the City one way or another. “If homelessness increases we know that E.R. visits increase, we know that the schools are impacted, education is impacted, the police are impacted.”

Smith Jones, like Jenkins and Ellison, said that inclusionary housing is one tool that can begin to chip away at the margins for people that most need affordable housing. She described how Hope Community employs multiple strategies to achieve this goal.

The organization’s Parks in Power campaign analyzes racial equity to examine how park resources are allocated and seeks “investment without displacement,” so the communities that are already there can continue to afford to live there post-investment. Rent control and “just-cause eviction” are also topics of policy discussions and potential tools in the housing crisis.

According to Ellison, there is at least one developer in his ward who has shown up in “good faith.” Randolph Street Realty Capital is developing a housing project in the Minneapolis Harrison neighborhood at 277 Girard Ave North that is scheduled to break ground in the latter part of this year.

Although the project was initiated under the interim policy with somewhat insulated protections for the developers, Ellison added that the group went out of its way to work with the city and the community members in the area. “They offered moving fees and other things voluntarily to the handful of folks who were still living in the homes that they are looking to build in place of.”

Ellison added that the interim policy’s rate of 10% AMI could’ve been negotiated down to 8% under the official regulation, but the group held firm at 10%.

Inclusionary housing is complicated, and the benefits are not immediate. At the end of the day, “Housing is a human right,” Jenkins said. “It is not an easy strategy to implement, and it’s only one part of a solution. It’s not the solution.”