Minneapolis case study: Abolishing single-family zoning an effective rent stabilizer
Bloomberg reports that since the Twin Cities took an axe to single-family zoning, housing construction has surged while keeping rent prices affordable. However, a concurrent rent control policy has halted—by making financially untenable—certain projects.
In May, the Twin Cities became the first major metropolitan area to see annual inflation fall below the Federal Reserve’s target of 2%. Its 1.8% pace of price increases was the lowest of any region that month.
That’s largely due to a region-wide push to address one of the most intractable issues for both the Fed and American consumers: rising housing costs. Well before pandemic-related supply-chain snarls and labor shortages roiled the economy, the city of Minneapolis eliminated zoning that allowed only single-family homes and since 2018 has invested $320 million for rental assistance and subsidies.
That helped unleash a boom in construction of apartments and condos in the region that proved to be a powerful antidote against inflation, given that the cost of shelter accounts for more than a third of the overall US consumer-price index. Minneapolis shelter prices were up at half the nation’s annual pace in May.
The housing initiatives have not all worked the way policy makers intended. Critics say a stringent rent-control policy implemented in St. Paul in 2021 has chilled development of some projects because the financing no longer worked when the rents would be capped for years to come.
This article originally appeared in Bloomberg. Read the whole thing here.
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