Fear, Loathing, and Zoning Reform in Minnesota

Minneapolis, Minnesota, earned itself a spot in the YIMBY pantheon for being the first city in America to end single-family-only zoning. The latest edition of Rent Free checks back in on how things have developed in the city and across the state. This week, we cover:

• The latest evidence that Minneapolis' zoning reforms are actually working.
• Bills in the state legislature that would bring those reforms statewide.
• An update on the court case that could bring this YIMBY success story to a crashing halt.

But first, our lead item on a Montana man who wants to build an ADU, the new state law that would let him, and the NIMBY legal activism getting in the way.

The Man That Would Build an ADU

Seven years ago, an avalanche destroyed a detached garage on David Kuhnle's rental property in Missoula, Montana. There it sat for several years.

Then came the wave of pandemic-era in-migration to Montana, which sent housing demand, and housing prices, through the roof. This gave Kuhnle, a realtor and landlord, the idea of turning the ruined garage into more housing. In early 2023, he started the process of building an accessory dwelling unit (ADU) on the site.

It was the best of timing and the worst of timing.

That spring, the Montana Legislature passed a slew of laws easing local regulations on new housing construction, including on ADUs.

Under Missoula's regulations, ADUs could only be 600 square feet and had to come with an off-street parking space. The city also required that the property owner live in either the ADU or the primary dwelling.

The new state law, by contrast, let Kuhnle build a 1,000-square-foot ADU. He also didn't have to provide parking or live on the property. After the law passed, he started drawing up plans to meet these more permissive standards.

But in December 2023, just before the state ADU legislation went into effect, anti-density activists convinced a Gallatin County judge to enjoin the new law. They'd made the unusual argument that the state's ADU law violated equal protection guarantees because it allowed ADUs in neighborhoods only where private covenants didn't already ban them.

"We were ready to submit [plans] in early January, then we got word about the injunction," Kuhnle tells Reason. "My excavators, my framers, my concrete guy, everyone I had lined up to break ground are all stuck in limbo world."

With the injunction in effect, Kuhnle can now only build to Missoula's more restrictive local standards—something he says is difficult to make pencil with today's interest rates and building costs.

Missoula is working on updates to its zoning code that would incorporate many of the new state standards, but that will take time. Rather than wait for the lawsuit to play out, Kuhnle—with the help of the Pacific Legal Foundation—is asking to intervene in the case on the state's side.

Critics of Montana's new state laws argue they improperly preempt cities' local control. Kuhnle counters that activists all the way in Gallatin County are stopping him, hundreds of miles away, from improving his property.

"They think they're going to stop the whole state from implementing rules and regulations. I don't see how the logic there makes any sense at all," he says.

Rule of Law Returns to Minneapolis Homebuilding

In 2018, Minneapolis passed Minneapolis 2040—a major update to its comprehensive plan that eliminated single-family-only zoning and parking minimums and allowed larger apartments to be built in more areas of town.

The city has been implementing the reforms piece by piece over the intervening years.

Cheerleaders of Minneapolis 2040 point to increasing apartment construction and flattening rents. Another metric of their success is increasing predictability in the development process.

Earlier this month, the City Planning Commission (CPC) released its annual report showing that the variances requested by builders have plummeted.

In 2020, builders asked the commission for 223 variances that would waive rules around parking standards, massing restrictions, height limits, and more. Last year, builders asked for only 63 variances.

Jason Wittenburg, a planner with the city planning department, says the "primary driver" of the falling variance requests was the "built form" regulations the city adopted in January 2021 as part of the Minneapolis 2040 comprehensive plan.

Prior to the zoning changes, builders were frequently asking for variances to build taller apartments in neighborhoods where the city's comprehensive plan called for more housing, but where zoning rules blocked most denser development.

Now that those zoning rules have come into line with the comprehensive plan and the comprehensive plan has also been updated to treat housing more liberally, developers need far fewer variances. Wittenburg says this has added a lot of certainty for builders proposing projects. It's also given neighbors a clearer idea of the kinds of projects that might be built next door.

A less ad hoc process lessens everyone's view that some developers are benefiting from special favors. Zoning in Minneapolis is getting closer to approximating what some people call "the rule of law."

As Minneapolis continues to get its house in order, the Minnesota Legislature is considering taking many of the city's reforms statewide.

Minnesota Speed Runs the YIMBY Agenda

Working the way through the Minnesota Legislature are a series of bills that would eliminate parking minimums, allow at least two units of housing on all residential land (and four units in larger cities), shrink minimum lot sizes, legalize ADUs, ban aesthetic design requirements, and allow residential projects in commercial areas.

"This is fundamentally about choice," says Rep. Alicia Kozlowski (DFL–Duluth), the author of the House bill allowing multi-family development in commercial areas.

Many of these policies were also part of the Minneapolis 2040 plan. A few are new ideas attempting to address some of the shortcomings of the city's reforms.

"Minneapolis showed housing reform what is possible, but it also taught us some lessons," says Nick Erickson, senior director of housing policy for Housing First Minnesota, a building trade association.

For instance, Minneapolis allowed three units to be built on formerly single-family-only properties. But its floor-area-ratio regulations, wonky rules that establish how much actual floor space can be built on a property, required new triplexes to be the same size as single-family homes. Few got built, as a result.

Minneapolis has since loosened its floor-area-ratio rules. The "middle housing" bill in the state Legislature would prohibit cities from imposing them in the first place—while still guaranteeing their ability to create height limits, setback rules, and the like.

One risk of doing zoning reform at the state level is that local governments, whose land use powers are being preempted, will still find ways to block new types of housing the state government is telling them they have to allow. This has characterized California's efforts to legalize duplexes statewide, for instance.

Minnesota lawmakers are trying to head off this risk by directing state officials to write a model ordinance that automatically goes into effect if cities don't update their zoning code to comply with new state standards or if the state determines a locality's zoning update wouldn't enable as much housing as the state's model ordinance.

Much Ado About Environmental Review 

Minnesota's YIMBY bills could bring Minneapolis' reforms to the rest of the state. They could also bring them back to Minneapolis.

After the passed the Minneapolis 2040 plan, local activists filed a lawsuit against the city arguing that Minneapolis had failed to properly study the environmental impacts of its zoning changes.

Last September, a Hennepin County judge sided with activists and ordered the city to halt implementation of the Minneapolis 2040 plan in neighborhoods formerly zoned for only one- and two-family housing.

The lawsuit is ongoing. There was a hearing before a state appeals court last week. Meanwhile, the city is hedging its bets. The Star Tribune reports that the city has hired a consulting firm to start analyzing the environmental impacts of the 2040 plan.

The Legislature will also consider a bill, which has yet to be introduced, that would exempt comprehensive plan updates like the Minneapolis 2040 plan from the need to undergo environmental review in the first place. A similar measure was considered by the Legislature last year, but it failed to pass.

Local governments are typically skeptical of efforts to do zoning reform at the state level, arguing doing so improperly impedes their local control. Lawmakers say environmental review reform is one area where localities and YIMBYs have a lot of common ground.

"Cities really want us to address that. The current ruling has changed how comprehensive plans are supposed to be used," says Rep. Larry Kraft (D–St. Louis Park), the author of the house version of Minnesota's middle housing bill.

Quick Links

• According to the "zoning theory of everything," zoning impacts, well, everything in society. That includes child care. In Kentucky, lawmakers are considering a bill that would ensure localities' zoning laws aren't preventing new childcare facilities from opening up.
• Hawaii builders are trying to create new tiny homes to shelter people displaced by last year's wildfires in Maui, but red tape is getting in the way, reports the Washington Post.
• Milton, Massachusetts, voters are now reaping what they've sowed. After voting to repeal state-mandated zoning reforms allowing apartments near transit, the Boston suburb is losing a state seawall grant.
• Illinois is considering a bill that would eliminate single-family-only zoning in larger cities statewide.
• The Philadelphia Inquirer editorializes against "inclusionary zoning" policies that require new development to include below-market-rate, often money-losing, affordable units.
• The Associated Press reports that Oregon is considering tweaks to its long-standing law limiting exurban housing development.
• Milford, Delaware, is backing off a plan to use eminent domain to seize land for a new trail after the threatened property owner erected a billboard calling the city council "thieves."