Editorial: What can Minneapolis teach NWA (and the US) about reversing rising housing costs?

NWA community member, Isaac Stevens, reviews how Minneapolis handled their housing crisis and how we can apply their strategy to NWA.

Editorial: Written by Isaac Stevens

It’s no secret— housing costs are on the rise in the US, and especially Northwest Arkansas. Rent prices have been rising 10%+ every year, while the median single-family home in NWA is 55.3% more expensive than it was only 4 years ago. As a result, housing and transportation costs in NWA as a percentage of income are now higher than notoriously expensive New York City. This isn’t a good metric to be “Number 1.” So how do we fix it?

A good starting point might be Minneapolis. While peer cities in the Midwest have experienced rising housing costs, Minneapolis has seen a 20%+ decrease in average rents since 2017, adjusted for average earnings. Minneapolis has been successful at building new housing, and is reaping the rewards. This is because, as thoroughly demonstrated around the world, building more housing reduces housing costs for everyone. Let’s dig into what they did to increase housing supply and how we can apply that success to NWA.

Minneapolis has dramatically outpaced peer cities in housing construction, and rents are easing as a result.

The Minneapolis 2040 Plan

In 2019, Minneapolis approved their new Minneapolis 2040 Comprehensive Plan. While it isn’t uncommon for cities to create comprehensive plans, (Rogers, AR is in the middle of creating theirs, and Bentonville is starting the process as well), Minneapolis included a number of reforms. We’re going to focus on two that pertain most heavily to housing supply.

So, two reforms. Numero Uno was the allowance of up to 3 units on any residentially zoned parcel. A less NIMBY-friendly description of that policy would be “the elimination of single-family zoning.” And Numero Dos was the elimination of off-street parking minimum requirements city-wide.

In conversations surrounding Minneapolis’ success, it is often the first policy that gets the praise. “Abolishing single-family zoning” is often cited as the silver bullet that saved Minneapolis housing prices.

“Single-family zoning was eliminated, and new housing boomed as neighborhoods were reformed from single-family into triple-family throughout Minneapolis, a sea of new triplexes stretching into the horizon. The housing issue was solved with the silver bullet of zoning reform…”

Wait, it didn’t work?

It makes for a nice story, but “the abolition of single-family zoning saved Minneapolis” isn’t the open-and-shut fairy-tale ending that some would lead you to believe. In the wake of the new zoning code, the city has permitted only 64 duplexes and 21 triplexes, and half of the duplexes are on lots unaffected by the rezoning. It turns out that remaining policies restricting the building size, lot size, height restrictions, and other codes have hampered much ability of developers to take advantage of the new codes to provide more housing.

An example of building restrictions that can make it more difficult to provide housing where needed.

More Than Meets the Eye

So if that wasn’t the cause of the city’s housing boom, what was? Recall the second reform that was highlighted, no more parking minimums. It turns out this policy could have been a far bigger contributor, but not for the reason you might expect.

To start, we must address what parking minimums have to do with housing supply in the first place. When developers build housing, they are making a financial investment. A big part of that investment is the land, so efficient use of space is key, especially on smaller developments. Every parking spot takes up 325 sq ft, over half of the average 1bed apartment. More parking spots mean less room for housing, so any reduction in “needed parking” contributes greatly to the number of possible units and how affordable those units can be.

There are two types of “needed parking.” This distinction is what makes the difference between the housing boom in Minneapolis and the more muted response in other US cities that have tried eliminating parking minimums. It’s the difference between legally required parking and market demanded parking.

This difference is the key to understanding why Minneapolis succeeded where other cities failed. Yes, you can eliminate parking requirements throughout the city. Make it perfectly legal to build entirely without parking. But if residents can’t get around your city without owning a car, the parking is getting built anyway. The demand is simply too high for builders to shirk the parking spots in their development plans.

Minneapolis succeeded because it is the best biking city in the US. It succeeded because it has a reliable public transit system that is competitive with driving throughout the city. In Minneapolis, a developer can confidently invest in a small, multifamily development with less than 1 parking spot for every 2 units, knowing that residents won’t really mind. In a city with such great alternatives to driving, who needs a parking spot anyway? Minneapolis’ superpower is the exceptional mobility it has provided its residents through a robust bike network and reliable public transit.

In 2020 we brought one of the first projects ever built in Minneapolis to market with reduced parking counts. 41 units, 20 underground parking spots. Everyone told us we were nuts. Kolo was 100% leased within 45 days of completion and it has rarely been less than 100% occupied in the three years since. Don’t believe the false narrative that tons of parking in cities is absolutely necessary. - Sean Sweeney, June 15, 2023.

It’s this housing type- 10- to 100-unit buildings with 3–6 stories of apartments over a single level of parking on small sites- that has led to the housing boom in the city. This is a type of housing that is only possible in a city that has eliminated not just legally required parking, but also market demanded parking. In a city where only half of residents travel by car most frequently, and even more prefer to use other modes of travel, it becomes possible to build housing with less than half a parking spot per unit.

Only half of Minneapolis residents travel by car most frequently, and even more prefer to use other modes of travel.

Simply put, this type of housing growth just isn’t possible unless the city provides sufficient mobility to make car-light living attractive. If a city isn’t meeting the mobility needs of its residents through public transit and bike access, this approach to affordable, small-scale housing just won’t get built.

NWA Takeaway

If Minneapolis mobility is what enabled its success, let’s look at NWA’s. Northwest Arkansas has been making great progress on creating greenway and sidepath corridors that make getting around town possible by bike. That said, there is still a lot of work to do. If people can’t safely and reliably bike to work, school, the store, and the movies, they are more likely to contribute to the demand for parking that makes solving our housing crisis more difficult.

Could you get from home to work and back if your only roads were the dark green lines? This is the reality of our current bike network.

If people can’t count on ice and snow to be cleared, lighting for nighttime commutes, and working beg buttons at intersections (all real issues I have encountered as a NWA bike commuter), they are less likely to fill the housing units of those NWA developers who are taking risks and providing housing with less parking available.

And then there’s public transit. As of 2019, the regional transit authority for the Twin Cities region, MetroTransit, had a budget of ~$275 per resident. Compare this to Little Rock, which contributes about ~$50 per resident to its transit authority. Then compare this to Ozark Regional Transit, the transit authority for Northwest Arkansas, which only has a budget of $6.4m for 2023, to serve a metro of 576,000 people and growing. This comes out to ~$11 per resident.

This is shamefully, abysmally low. How can we be expected to address the demands of NWA’s housing crisis when we’re only funding public transit with the equivalent of a yearly Big Mac combo?

I don’t want to diminish the active efforts of the many NWA residents working to improve conditions on all fronts- zoning reform, parking minimums, bike access, public transit funding, and even more not mentioned here. I do, however, hope to open eyes to the real, consequential relationship between transportation and housing. Zoning reform on its own isn’t enough to solve rising costs of housing if it isn’t paired with an aggressive approach to making life in NWA possible without owning a car. If we truly want affordable housing in NWA, we must reduce the demand for parking spaces and car-centric life metro-wide by providing safe, reliable, preferable alternatives to driving.

To wrap up— this article is not a complete exploration of all of the factors that have contributed to the Minneapolis’ housing boom, and the city is not a perfect analog to NWA. Fayetteville alone has welcomed more new residents in the past 5 years than the Twin Cities combined. NWA is welcoming 36 new residents per day, meaning we need 18 new housing units per day to break even, much less to meet the 2045 estimate of 1 million residents.

That difference should not be taken as a dismissal of the lessons that Minneapolis can teach us. Instead, it should be a catalyst for taking even more ambitious, necessary steps to improve alternative transportation and increase housing supply in the Northwest Arkansas metro. Let’s take those steps together.

Author’s Note: I want to thank Alex Pemberton, who wrote the X thread that kickstarted the writing of this article. It wouldn’t have happened without his insight. Definitely read his thread and give him a follow.