Minneapolis urges America to build more houses, eliminate suburban-style zoning, and end inflation.

Minneapolis urges America to build more houses, eliminate suburban-style zoning, and end inflation.

Minneapolis: A City Tackling Rising Housing Costs and Inflation

Image

In May, the Twin Cities became the first major metropolitan area in the United States to see annual inflation fall below the Federal Reserve’s target of 2%. With a pace of price increases at just 1.8%, Minneapolis outperformed all other regions in terms of keeping inflation in check[^1^]. This achievement can largely be attributed to the city’s persistent efforts in addressing one of the most challenging issues facing the Fed and American consumers alike – rising housing costs.

Well before the disruptions caused by the pandemic, Minneapolis took a proactive approach to tackle housing affordability. In 2018, the city eliminated zoning restrictions that limited construction to single-family homes. Additionally, it invested $320 million in rental assistance and subsidies to encourage the construction of apartments and condominiums, resulting in a housing boom in the region[^1^]. This increase in housing supply has been a powerful tool in curbing inflation since shelter prices comprise over a third of the overall US consumer-price index[^1^]. In fact, shelter prices in Minneapolis experienced only half the annual growth rate compared to the national average in May[^1^]. Contrary to skeptics’ fears of gentrification or skyrocketing rents, the city’s approach has proved highly effective in curbing inflation and maintaining housing affordability[^1^].

Minneapolis’s success in tackling housing costs demonstrates the pivotal role that state and local policies can play in managing inflation. The city’s initiatives, which include partnerships between business, philanthropy, and the public sector, strive to add at least 18,000 new housing units annually until 2030[^1^]. This collaborative effort is effectively picking up where the Federal Reserve’s monetary tightening leaves off. Such regional economic initiatives show how the opposition to new construction, often driven by the “not in my backyard” (NIMBY) movement, can be overcome to create a boost in the economy[^1^]. While projects in other parts of the country have been thwarted by local backlash, Minneapolis has managed to create an environment conducive to affordable housing initiatives[^1^].

Compared to the national average, Minneapolis has witnessed minimal rent growth since 2017[^1^]. According to the Pew Charitable Trusts, the city’s share of affordable rental units and rent-to-income ratio are much better than most comparable US metro areas[^1^]. Moody’s Analytics Chief Economist Mark Zandi highlighted the effectiveness of expanding the supply of affordable housing in reining in inflation. He stated, “there is no more effective way to rein in inflation than to expand the supply of affordable housing and increase housing affordability”[^1^]. However, it is essential to acknowledge that Minneapolis is not exempt from housing disparities and inequality. People of color in the region are nearly twice as likely to live in households burdened by shelter costs compared to White residents[^1^]. This disparity underscores the need for continued efforts to address systemic housing issues and ensure equitable access to affordable housing.

The positive impact of these housing initiatives is further evidenced by the Minneapolis Saint Paul Regional Economic Development Partnership. Its CEO, Peter Frosch, believes that the city’s successes are intrinsically tied to its housing initiatives, stressing the importance of maintaining focus on this aspect[^1^]. By providing more options for lower-income renters, these initiatives help those most impacted by inflation[^1^]. These efforts have also created a diverse range of housing options, enabling individuals like Gina Kowalczyk, an elementary school teacher, to be pleasantly surprised by the affordability of one-bedroom apartments in Minnetonka[^1^].

While the Twin Cities have seen tremendous progress in their housing initiatives, challenges still exist. For instance, a stringent rent-control policy implemented in St. Paul in 2021 has curtailed the development of certain projects, as rents become capped for an extended period[^1^]. Additionally, homeownership rates and housing cost burdens between Black and White households remain highly disparate[^1^]. Addressing these persistent problems is crucial to further leveling the playing field in the region’s housing market.

The Twin Cities’ positive housing market conditions may not be glaringly apparent to all Minneapolis residents, as high costs for groceries and other goods have made it more difficult to notice the favorable trends in housing[^1^]. However, Minneapolis boasts one of the lowest “misery” rates, which reflects a combination of inflation and unemployment, among 21 metro areas as measured by Bloomberg[^1^]. The dropping utility prices since the previous year have also contributed to the city’s improving inflation landscape[^1^].

Minneapolis’s unique characteristics, such as its concentration of ANBLE 500 companies and a population that has remained relatively consistent, have bolstered its ability to maintain an affordable housing market in comparison to the nation as a whole[^1^]. According to Ron Feldman, vice president at the Minneapolis Fed, efforts are underway to ensure that this remains the case[^1^].

In conclusion, Minneapolis’s innovative approach to housing affordability has proven to be a potent weapon against inflation. By embracing a range of housing initiatives, the city has successfully kept inflation under control, with shelter prices growing at a slower pace than the national average. Minneapolis’s achievements highlight the critical role that state and local policies can play in curbing inflation and creating a vibrant regional economy. However, challenges persist, and ongoing efforts are needed to address housing disparities and ensure equitable access to affordable housing. By continuing to focus on housing initiatives, the Twin Cities can foster a thriving community that benefits all residents and maintains its reputation as an affordable housing market.

References [^1^] Retrieved from Fortune.