Amid an apartment building boom, St. Louis Park leaders initially encouraged developers to include some affordable housing units in their new market-rate projects.
“We got exactly zero affordable units,” said the city’s community development director Karen Barton.
So the city made including some affordable units a requirement for new developments. The result: 763 new affordable units in the western suburb since 2015. They proudly track their results on a dashboard.
St. Louis Park is now one of about 10 communities in the Twin Cities area that have adopted what is called an inclusionary housing policy in recent years, according to a tally kept by the Metropolitan Council. They’re part of a trend that has taken root across the country. City leaders and housing advocates laud it as one tool to increase affordable housing in the region where it remains in short supply.
“It does work,” Barton said of the city’s inclusionary housing policy, which has been strengthened and amended several times. “It’s chipping away at the issue. It’s one of many tools to increase and sustain the supply of affordable housing.”
Some developers have warned these policies, while responding to a legitimate shortage of affordable housing, are ill-conceived 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 increment financing to accomplish it. Some cities — Minneapolis, Bloomington and Edina — allow developers to pay a fee in lieu of including affordable units. That money goes into other affordable housing ventures.
Other cities that have adopted inclusionary housing policies include Minnetonka, Eden Prairie and Golden Valley. Richfield and St. Paul require affordable units when city money is used, and St. Paul leaders are studying a more robust policy. After adopting such a policy this spring, Shoreview is believed to be the first eastern suburb to do so.
“We expect several more apartment projects to come through this year. We wanted to have [the policy] in place before they came through,” said Shoreview Assistant City Manager Tom Simonson. “Our Council and Economic Development Authority strongly believe in having affordable housing choices in our community. … Developers are open to working with us so 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 simply couldn’t afford to. We wanted to change that,” Bloomington Mayor Tim Busse said.
The policy is having an immediate impact. Since August 2019, Bloomington has approved 11 multifamily apartment projects. Ten proposed to provide affordable units and one proposed to pay the fee in lieu. Those 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-year teachers, police officers and retail workers. They understand the need to provide housing for the next generation.
“Every time I talk about it I get a proud round of applause for Bloomington residents,” Busse said.
Busse dismisses critics who say the policies are an overstep for city governments who should leave affordable housing to state and federal agencies.
“Bloomington has never stayed in its lane and its boldness is something that made it special,” Busse said.
The Met Council, which sets affordable housing goals by city, broadly supports inclusionary housing policies, said Lisa Barajas, Met Council’s director of community development.
“Communities around the region were seeing the need for affordable housing in their communities and are really trying to figure what other tools are available to them,” Barajas said. “No one policy or approach is going to remedy the shortage of affordable housing.”
Sue Watlov Phillips, executive director of the nonprofit Metropolitan Interfaith Council on Affordable Housing, said it’s “critically important” that affordable housing be included in every community.
“We need to make sure everyone, without exception, has a safe, decent, accessible home that is affordable to them,” she said.
But developers say all too often, these policies amount to passing on costs to others.
“Affordable housing is an issue. No one can deny that,” said Scott Johnson, who is on the board of the Builder’s Association of Minnesota and owner of Addilay Homes and Remodeling in Minnetonka.
“That is not going to solve the problem. Having less regulation as a whole is more the direction we need to go,” Johnson said. “The cost of housing in our neighboring states is far less than in Minnesota just due to regulation.”
Minneapolis passed its inclusionary housing policy in 2019, which gives developers several ways to meet the affordable housing obligation including paying fees. In the debate leading up to its passage, some developers and advocates expressed concern that overreaching policies would wound or kill the housing business.
Minneapolis, too, keeps a public dashboard showing its results. The city has added 226 affordable units and collected $6.7 million in fees in lieu of building affordable units.
“This is one one tool in our tool box,” said Elfric K. Porte II, Minneapolis director of Housing Policy & Development.
Preserving affordable housing and other policies are also critical, said Porte, who called it encouraging to see suburban communities also acknowledging the affordable housing shortage and developing policies.
Steve Cramer, president and CEO of the Minneapolis Downtown Council, led a group that raised concerns about Minneapolis’ inclusionary housing policy when it was being debated.
“I don’t think it’s been a gamechanger either way,” said Cramer, noting that it hasn’t halted development but it’s also not dramatically increased affordable housing.
“Policymakers need to be thoughtful about the degree of regulation they bring to the market,” Cramer said. “Historically, across the country, a highly regulated housing market is a more expensive market.”
Edina passed its inclusionary housing policy in 2015, which allows developers to pay fees in lieu of adding affordable units. In that hot real estate market, more developers had initially chosen to include affordable units, but that trend may be shifting, said Stephanie Hawkinson, Edina’s affordable housing development manager. The city had added about 90 units under the policy, but it has collected $8.5 million in fees that are have gone into an affordable housing trust.
That money has been used to preserve affordable housing including rehabbing 33 homes with families who have low and moderate incomes. That often means fixed-income seniors. They’ve partnered with the Met Council and the West Hennepin Affordable Land Trust to add more affordable housing options.
Hawkinson said the inclusionary 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 will require it of market-rate developments,” Hawkinson said.
Hawkinson said city leaders feel strongly about providing housing at all income levels for people who work in the city.
“It’s our backyard. It’s our people. It’s about the health of our community,” she said.