A (Very) Early Analysis of the Minneapolis 2040 Plan
Daniel Kuhlmann
In this paper, Daniel Kuhlmann, an assistant professor in the Department of Community and Regional Planning at Iowa State University, looks at the impact of the initial elimination of single-family zoning by the Minneapolis 2040 plan on single-family home sales prices.
Key Takeaways
- The redevelopment possibility of a property appears to influence the future value after the elimination of single-family zoning. This effect on value seems to affect the land value most prominently, rather than the physical structure of the property.
- Kuhlman’s analysis suggests that the city’s approval of the 2040 plan increased the sales prices of single-family homes in Minneapolis by 3-5% as compared to properties just outside of city limits.
- The effect of the increased values is most prominent with the smaller houses in the neighborhood, where the median assessed value is lower and where the single-family property is a smaller property as compared to its neighbors. One of the suggestions as to why smaller properties benefit more is that the net benefit of potential redevelopment of small properties is higher than its larger counterparts. Underutilized properties that have ready access to transit and are less expensive to redevelop appeared to experience more value increase.
- Areas where single-family zoning acts as an assurance to the owners that the neighborhood demographics and property composition will remain homogeneous may not experience the same price increase and if there is less redevelopment potential for the home, they could experience little to no additional increase in value (relative to properties just outside of city limits).
Minneapolis’ upzoning ordinances were approved by the city council in December 2018, and continued on to the regional body, the Met Council, where they were approved with amendments in October 2019. Kuhlmann regards the city council’s original approval of these new zoning ordinances (including the elimination of single-family zoning) in December 2018 as the “signal to property owners that land use changes were on the horizon”. He considers the year prior to the city council’s approval of these changes and the year following in his analysis (2018-2019).
The zoning ordinance approved by the city council would allow for a maximum of 3 residential units to be located on what was previously restricted to being a single-family lot. The regional body introduced additional restrictions not put forward in the city council’s original approval, such as “additional setback requirements”, making the plan that was put into action in 2020 more tempered than what was originally approved by the city council.
In the analysis of the years 2018-2019, Kuhlman’s model showed that houses within Minneapolis city limits overall had a 3%-5% increase in sales price when compared to the growth in value that was seen in houses outside of Minneapolis’ city limits. This comparison between homes in the city and just outside of the city controls for the increase in value that homes are expected to see each year.
One of Kuhlmann’s assumptions is that existing areas zoned for multifamily housing are made more valuable since they are limited in the urban context. When single family zoning is eliminated, it is expected that the value should partially transfer to residential parcels with high redevelopment potential (close to transit, smaller homes, areas with lower median income, etc.). This would result in residential parcels with a higher land value, which leads to a slightly higher initial sales price for the property overall. If the parcel is then redeveloped with a duplex or triplex, the multifamily housing units should be less expensive than the property that existed prior. Kuhlmann argues that residential housing prices will (and must) increase in areas of high potential for redevelopment so that, once more density is introduced as a result, there will be less pressure on the housing market with more affordable multi-family units available.
There is evidence that some houses may experience little to no additional increase in value (relative to properties just outside of city limits) if they do not show high redevelopment potential, are large relative to the surrounding homes, are not near transit corridors and if a large part of the value of the property is dependent on the homogenous character of the neighborhood that it is a part of.
It is important to remember that this initial study took place prior to the ordinances being put into action, and before they were tempered in the regional council. There is the possibility that these results were influenced by the perceived potential for development opportunity and would be moderated or level out over time if redevelopment did not occur. The initial home value increase in Minneapolis does contradict some fears that single-family zoning elimination will result in lower home sales prices. Kuhlmann notes that the results also raise concerns about the potential for displacement. 87% of the smaller homes that he identified as having high redevelopment potential are owner-occupied in Minneapolis, which assuaged some worry regarding the displacement of low-income renters.
More research is needed from other cities eliminating single-family zoning, such as Arlington, VA, to show additional city contexts and the results their citizens experience in the short and long term.
Reference:
Daniel Kuhlmann (2021) Upzoning and Single-Family Housing
Prices, Journal of the American Planning Association, 87:3, 383-395, DOI:
10.1080/01944363.2020.1852101
Link to Article: