Minneapolis will soon consider whether to require or offer incentives to spur the creation of affordable units in new housing projects, echoing policies in other cities across the country.
The proposal, still being crafted, would represent a more aggressive effort by the city to expand its stock of affordable housing. Edina recently took similar steps this October, requiring developers of certain new apartment buildings to either include affordable units or build them elsewhere in the city.
City Council Member Lisa Bender, who represents an Uptown-area ward, announced Friday her intent to pursue a so-called “inclusionary zoning” policy in Minneapolis. A group of experts will hash out what form the proposal should take early next year, she said.
“We’re looking for ways to either encourage or require developers to include affordable housing units within market-rate projects,” Bender said. The city currently uses direct subsidies to help construct affordable units for very low-income residents, which are otherwise difficult to finance.
The new policy could apply broadly across the city, Bender said, or focus on the strongest or emerging markets. “We plan to do all of that with an eye toward making sure that we know what our market can absorb,” Bender said.
Other cities, such as Seattle, Boston and New York, already have such policies. Seattle allows developments greater housing density if they include affordable units, but the city is expected to switch to a stricter system next year.
“We could use incentive-based tools to encourage developers to put affordable units within market-rate projects. So anything from that through a mandatory policy I think will be considered,” Bender said.
Minneapolis already allows developments containing 20 percent affordable units to have higher density. But Bender said no developer has pursued it, in part because the same bonus is achieved by providing underground parking.
Developer Kelly Doran, who is behind many projects around the University of Minnesota, said he has no problem with the city exploring new affordable housing incentives. But he bristled at the notion of imposing a requirement on developers.
“It will probably slow down significantly or kill much of the development being proposed in the city,” Doran said. “Because the rates of return that most developers are currently getting in the city of Minneapolis would not support a further reduction.”
Cathy Capone Bennett with Urban Land Institute Minnesota has been educating local cities about how they can apply different incentives to achieve mixed-income housing development.
“Having a policy … helps to provide clarity of what the goals are of the city,” Bennett said. “If there is a strong policy that they would like to include some affordability within new developments … then it lets a developer know that that’s what the expectation is going to be.”