BOISE — Rapidly rising rents and property values are on the brain in Boise and throughout the Treasure Valley, but this is not a problem isolated to Idaho.
Fifteen-hundred miles to the east, the city of Minneapolis is struggling with an affordability crisis of its own. Skyrocketing property values, stagnant incomes and the flipping of affordable housing options into upscale living are putting pressure on residents similar to what’s hitting southwest Idaho. And just like Boise, Minneapolis city officials approved a plan at the end of 2018 to try to make a change.
Both cities are hoping that by building smaller, denser housing and creating land trusts to make affordable housing cheaper to develop it will stabilize the market and keep low-income residents from sliding into homelessness. With more attainable housing options available for purchase, officials believe residents would be able to build wealth though home ownership that would otherwise be unattainable in a skyrocketing market.
When it was time for Minneapolis to create a new comprehensive plan, officials decided to go all in and take an ambitious, data-fueled approach to address affordability in the city and systemic racial and socioeconomic inequality. Called Minneapolis 2040, the dramatic plan eliminates single-family zoning throughout the city, pumps $40 million into programs to support renters and laid the groundwork to soon require developers to include affordable units in any new project.
In certain ways, the plan has similarities to Boise’s Grow Our Housing initiative rolled out in the fall. Boise also plans to change its code to allow more density in single-family and commercial areas and will establish a land trust to make development of affordable housing cheaper. But because of Minneapolis’ deeper pockets and the less restrictive Minnesota state law, its plan is a deep, aggressive restructuring of the backbone of the city’s zoning code to even the playing field for residents in the housing market.
Heather Worthington, Minneapolis’ director for long range planning, said the city started analyzing the economics of the city about a year ago and were alarmed by growing inequality. By the city’s count, the city has lost over 10,000 units of naturally affordable housing in the private market over the last decade.
“We saw rents going up and incomes going down,” she said. “That trend was particularly alarming amongst African-Americans and Native Americans, so we started looking at that data when it came to planning. What was driving this trend line, what were some of the historic drivers, and what could we do to start to reverse that trend line and bend it in a better direction?”
ELIMINATING SINGLE-FAMILY ZONING
Exacerbating the affordability crisis in Minneapolis is a long history of racial discrimination that kept black, Native American and other residents of color out of large swaths of the city. Starting in the 1920s, single-family zoning began to dominate the majority of the city, which, combined with financial discrimination often called "redlining" led to a deeply segregated city.
Worthington said that prior to single-family zoning, Minneapolis neighborhoods had a diversity of single-family houses and multifamily housing that allowed people of all socioeconomic levels to live together and access the same schools and other services. But once the city adopted single-family zoning, it meant developers stopped building denser, more affordable units in large portions of the city and zoned housing that had been in reach of the lower class largely out of existence in middle-class or more affluent neighborhoods.
One of the main anchor points of Minneapolis 2040 includes eliminating single-family zoning entirely, meaning that buildings with up to three units can be built anywhere in the city by right. Even taller and denser projects can be built along the city’s handful of bus rapid transit lines and light rail transit. The hope is that this will boost housing inventory but also do it in a way that puts smaller townhouses or apartments in the same neighborhoods as more upscale single-family houses to help desegregate the city.
Andrea Brennan, Minneapolis’ housing policy and development director, said Minneapolis will begin the process of rezoning the entire city this year, and it will take up to three years for everything to come into compliance with the comprehensive plan. It also needs to be approved by a regional planning organization.
Boise’s plan also includes zoning changes to allow denser development in certain areas but on a much smaller scale. Set for public hearings this year, the changes would alter requirements for single-family residential zones to allow smaller minimum lot sizes and denser developments to be approved by right. The proposed changes would mean increasing the allowed density for Residential-1C zones from eight units per acre to 10 and boosting the density for Residential-2D from 14 units per acre to 20.
When asked about Boise’s lighter touch when it comes to rezoning and addressing the housing issue in comparison to Minneapolis, Boise spokesman Mike Journee emphasized the city’s smaller, more suburban nature and desire for a careful strategy.
“Minneapolis is a very well-established, urban city in ways that while we are becoming that, we are not quite there yet,” Journee said. “Being measured is a big part of our response to this.”
Boise is a smaller city, clocking in at roughly 226,000 people in comparison to more than 420,000 in Minneapolis. Both have grown rapidly in recent years, with Minneapolis seeing a 10.4 percent growth rate between 2010 and 2017, according to the U.S. Census Bureau. Boise grew 8.7 percent in the same time period.
From the get-go, Boise has been heavily invested in trying to increase supply of housing at all price points in an effort to drive prices down, or at least keep them stable. With its new denser zoning policies, Minneapolis is also banking on the private sector to help boost housing availability to get cost of living under control, but it is also instituting a new ordinance that will mandate affordable units be included in every new development. This is called inclusionary zoning.
There are still a lot of details to be worked out, but in the meantime Minneapolis has instituted an interim ordinance that only impacts developers seeking to build projects that require significantly more density than is currently allowed in a zone. Brennan said the goal in adding the provision requiring developers to reserve units for low-income residents is to balance out the increased power the loosened zoning policies give the private sector.
“As we expand choice and opportunity for housing it’s important to make sure there are affordability mechanisms built in to make sure that it doesn’t just relate to density, form and to size, but also to affordability levels,” she said. “Inclusionary zoning policies aren’t going to be a huge generator of new affordable housing units in the short term, but in the long term it will be something that will add significant affordability.”
The interim ordinance requires any multifamily development with rentals that would exceed the current density allowed by 60 percent to provide a certain number of low-income units. Developers can choose to make 10 percent of the units be for residents making 60 percent of the area median income or less, or 20 percent of the units be for residents making 50 percent of area median income or less. If the developer chooses the second option, there is a subsidy available from the city to make that feasible.
While this might sound like a solution for Boise, it is not that simple. Inclusionary zoning is on shaky legal ground in Idaho, and if the city chooses to implement a similar ordinance it could possibly face a civil suit. The city of McCall established one of these ordinances right before the recession to try to incentivize middle class housing, but was promptly slapped with a lawsuit from the McCall Central Board of Realtors. The case went to district court and the city lost, forcing it to rescind the ordinance and pay back all of the fines.
McCall’s Community and Economic Development Director Michelle Groenevelt said the city did not have the legal resources or desire to take the case to the Idaho Supreme Court at the time, leaving the decision to stand. She said the ruling had implications for the entire state, causing several communities around Idaho to either roll back or change their ordinances.
“(The court) said the ordinance was unconstitutional and that localities didn’t have the authority to levy a tax in that way,” she said. “We rolled back the ordinance and repaid all of the fees we had collected.”
A similar legal battle took down an ordinance requiring workforce housing or developers pay a fee in the city of Sun Valley in 2007.
The issue resurfaced in 2017 when real estate developer and Boise City Councilman Scot Ludwig moved to develop a mixed-use building in downtown Ketchum, but was told that he would either have to build “community housing” or pay $840,000 in fees by city ordinance. Citing the earlier decision in the McCall suit, Ludwig told Ketchum the tax was illegal and filed suit.
Eventually he dropped his legal challenge and pitched a 46-unit development geared toward local workers instead of more high-end customers to avoid the fee, but he said Ludwig found the project did not make business sense to pursue the project in that form. He sold the property to another developer and moved on, but Ludwig said if he wasn’t able to sell he would have filed his lawsuit again so he could build his project without the added fees.
“Affordable housing is a communitywide issue, not a single landowner’s sole responsibility,” he told the Idaho Press last month. “That approach abrogates private property rights and is not warranted by our Idaho Constitution.”
Reception to Boise's plan for affordable housing has been largely positive in the business community. Both the Boise Metro Chamber of Commerce and the Boise Regional Realtors are supportive of the city's plans so far, with Chamber President and CEO Bill Connors saying he supports the city's move to add more density to the city with housing at all price points. Boise Regional Realtors President Phil Mount said the organization is endorsing the first piece of the city's plan related to relaxing restrictions on accessory dwelling units, but is waiting for firm details to officially support the entire proposal.
"We're really excited that the city of Boise and to the extent that other cities are doing this as well, that they are looking at the local stakeholders to do the decision making," Mount said. "The fact that in particular Boise is being proactive in taking a look at what can be done to make housing more affordable and encourage growth in the right way is terrific."
In Minneapolis, reactions to the city's more radical approach from the developer community have been more mixed. Jonathan Weinhagen, president and CEO of the Minneapolis Regional Chamber of Commerce, said local developers acknowledge the growing housing crisis and are glad to see the city allowing more flexibility in zoning that will bring more inventory to the city. Though the new ordinance will allow triplexes anywhere, Weinhagen isn't sure it will immediately change entire neighborhoods.
"What the plan is going to do is create a lot of uniform flexibility across the city," he said. "I think the flexibility is positive, but if we see a future where single-family homes are eliminated, that would be very challenging for the city."
Although there is general support for the plan, Weinhagen said there is a lot more concern about how the inclusionary zoning ordinance could cool the market by disincentivizing developers to build. He said this could cause short-term issues with supply now, making it even more competitive to find a place to live and driving up prices, but it could also mean a lack of more affordable housing supply decades down the road.
"The inclusionary zoning is well intended, but it could be stifling to what has been a very robust multi-unit development environment in Minneapolis the last couple of years," he said.
FUNDING FOR AFFORDABLE HOUSING
Alongside inclusionary zoning to force the private sector to accommodate low-income residents, Minneapolis is also throwing $40 million of taxpayer resources toward helping struggling residents keep a roof over their head. This includes additional funding for existing programs, as well as taking a shot on programs the city has never tried before to address the crisis.
The biggest piece of that $40 million is a $21 million infusion of cash into the city’s Affordable Housing Trust Fund to support developers who want to build or maintain multifamily developments for low-income residents. This is almost triple the amount the city put into the fund in 2017.
Boise is in the process of jump starting its own Affordable Housing Trust Fund, which is still being worked out. Currently the plan is to start the trust fund with $10 million from city coffers and another $10 million from private donations. At the end of 2018, City Council approved $80,000 for a land trust feasibility study and modeling, and an additional $25,000 for land trust-related legal services to sort out the details. Some of the questions up for consideration are if it will be only for multifamily rental developments or also accommodate the construction of single-family homes for purchase.
The idea behind land trusts is by the property developer not having to purchase the land itself, it cuts down on costs and makes the entire project more economically feasible so it is possible for lower rents to be charged.
Other tools in Minneapolis’s $40 million tool box include a new program called “Stable Homes, Stable Schools” to provide $3 million in emergency rental assistance to families in the school system on the brink of homelessness. The city is also committing $150,000 to pay for legal staff to represent evicted residents in housing court, increasing their chances of a more favorable outcome that is not as financially crippling as going in without an attorney of their own. Officials estimate this could help 100 to 125 families a year.
Another initiative includes funding for developers who are interested in preserving affordable housing units that already exist in the private market, instead of purchasing them to flip into luxury properties to maximize profit.
While Boise has not announced any plans to financially support existing low-income options in the same way Minneapolis will, the city is working out details for an affordable housing incentive program that would provide a financial windfall to developers building low-income units throughout the city. The details are still in flux, but the target would be for units aimed at residents making 80 percent of the area median income or less. This is $36,050 for a single person in Boise, which comes out to be $1,386 per biweekly paycheck before taxes.
Journee said the city is doing everything it can with the money it has available and the authority it has from the state, but the city’s main focus is increasing supply.
“We’re looking for opportunities to create more housing because it will drive down prices across the board, we believe,” he said. “Absent any tools like rent control or inclusionary zoning or other things like that, there’s not a whole lot we can do other than try to impact that supply.”