More communities in the Twin Cities region forcing developers to include affordable units
Amid an apartment building boom, St. Louis Park executives first encouraged developers to include affordable housing in their new market-priced projects.
“We got exactly no affordable units,” said the city’s director of community development, Karen Barton.
The city has therefore made the inclusion of some affordable housing a requirement for new developments. Result: 763 new affordable housing units in the western suburbs since 2015. They proudly track their results on a dashboard.
St. Louis Park is now one of 10 communities in the Twin Cities area that have adopted what is called an inclusive housing policy in recent years, according to a tally kept by the Metropolitan Council. They are part of a trend that has taken root across the country. City leaders and housing advocates praise it as a tool to increase the supply of affordable housing in the area where it remains scarce.
“It’s working,” Barton said of the city’s inclusive housing policy, which has been strengthened and amended several times. “It reduces the problem. It’s one of many tools to increase and maintain the supply of affordable housing.”
Some developers have warned that these policies, while addressing a legitimate shortage of affordable housing, are poorly designed and increase the cost of housing for everyone.
Most require developers to include a percentage of affordable units in market rate developments, often offering incentives including tax increase funding to achieve this. Some cities — Minneapolis, Bloomington and Edina — allow developers to pay fees instead of including affordable units. This money goes into other affordable housing projects.
Other cities that have adopted inclusive housing policies include Minnetonka, Eden Prairie and Golden Valley. Richfield and St. Paul need affordable units when city money is used, and St. Paul leaders are considering a more robust policy. After adopting such a policy this spring, Shoreview would be the first eastern suburb to do so.
“We expect several more apartment projects to see the light of day this year. We wanted to have [the policy] in place before they arrived,” said Tom Simonson, assistant manager of Shoreview. … Developers are open to working with us as long as they know we will be a financial partner.”
Bloomington passed its “opportunity housing” ordinance in 2019.
“We realized a lot of people wanted to live in Bloomington but just couldn’t afford it. We wanted to change that,” Bloomington Mayor Tim Busse said.
The policy has an immediate impact. Since August 2019, Bloomington has approved 11 multi-family apartment projects. Ten offered to provide affordable housing and one offered to pay the fees instead. These 11 developments include 1,829 units, of which 571 are affordable, Busse said.
He said community members understand the need to provide housing for first grade teachers, police and retail workers. They understand the need to provide housing for the next generation.
“Every time I talk about it, I get a round of applause for the people of Bloomington,” Busse said.
Busse dismisses critics who say the policies are an overreach for city governments that should leave affordable housing to state and federal agencies.
“Bloomington never stayed in his lane and his daring is something that made him special,” Busse said.
The Met Council, which sets affordable housing targets by city, broadly supports inclusive housing policies, said Lisa Barajas, director of community development at the Met Council.
“Communities in the region were seeing the need for affordable housing in their communities and are really trying to understand what other tools are available to them,” Barajas said. “No policy or approach is going to address the affordable housing shortage.”
Sue Watlov Phillips, executive director of the non-profit Metropolitan Interfaith Council on Affordable Housing, said it was “tremendously important” that affordable housing was included in every community.
“We must ensure that everyone, without exception, has safe, decent, accessible and affordable housing,” she said.
But developers too often say that these policies amount to passing the costs on to others.
“Affordable housing is a problem. No one can deny that,” said Scott Johnson, board member of the Builder’s Association of Minnesota and owner of Addilay Homes and Remodeling in Minnetonka.
“It’s not going to solve the problem. Having less regulation overall is more the direction we need to go,” Johnson said. “The cost of housing in our neighboring states is much lower than in Minnesota, simply because of regulations.”
Minneapolis passed its Inclusive Housing Policy in 2019, which provides developers with several ways to meet the affordable housing obligation, including paying fees. In the debate leading up to its passage, some proponents and advocates expressed concern that excessive policies would hurt or kill the housing industry.
Minneapolis also maintains a public scoreboard showing its results. The city added 226 affordable units and collected $6.7 million in fees in lieu of building affordable units.
“It’s a tool in our toolbox,” said Elfric K. Porte II, director of Minneapolis Housing Policy & Development.
Preserving affordable housing and other policies are also essential, said Porte, who called it encouraging to see suburban communities also recognize the shortage of affordable housing and develop policies.
Steve Cramer, president and CEO of the Minneapolis Downtown Council, led a group that raised concerns about Minneapolis’ inclusive housing policy during its debate.
“I don’t think it’s been a game-changer,” Cramer said, noting that it hasn’t halted development, but it hasn’t dramatically increased affordable housing either.
“Policymakers need to think about how much regulation they bring to the market,” Cramer said. “Historically, across the country, a highly regulated housing market is a more expensive market.”
Edina adopted its Inclusive Housing Policy in 2015, which allows developers to pay fees instead of adding affordable housing. In this hot real estate market, more developers initially opted to include affordable housing, but that trend may change, said Stephanie Hawkinson, Edina’s affordable housing development manager. The city had added about 90 units under the policy, but it collected $8.5 million in fees that went to an affordable housing trust.
This money was used to preserve affordable housing, including rehabilitating 33 homes with low-to-moderate income families. This often means seniors on fixed incomes. They have partnered with the Met Council and the West Hennepin Affordable Land Trust to add more affordable housing options.
Hawkinson said the Inclusive Housing Policy has signaled to the development community the city’s openness to affordable housing projects. Edina has approved three 100% affordable housing developments in recent years, which have added 250 units.
“It showed the city is serious about creating affordable housing if we need it for market rate developments,” Hawkinson said.
Hawkinson said city leaders are strongly committed to providing housing at all income levels for working people in the city.
“It’s our backyard. It’s our people. It’s about the health of our community,” she said.