Legislature takes a pass on zoning reform, focuses on state funding for housing

With a housing market facing generational challenges in supply and affordability, the Minnesota Legislature chose to allocate state funds to an array of housing subsidies and support programs. All told, the Legislature and Gov. Walz signed off on a housing bill with more than $1 billion dedicated to housing programs over the next biennium. The new law also includes a metro sales tax which would increase taxes in the seven-county metro area by a quarter-cent to fund state-based vouchers and housing programs run by local governments.

Largely absent from the debate was transformational zoning modernization, which has been the centerpiece of housing legislation throughout the country for states grappling with similar housing challenges. Industry leaders lamented the narrower approach of the Legislature.

“Passing a major funding bill for housing was a significant accomplishment, but not pairing it with zoning modernization legislation was a miss,” said James Vagle, CEO of Housing First Minnesota.

The lone zoning modernization discussion came late in the session and was limited to one legislative hearing, with the Legalize Housing Affordability Act being heard and passed out of the House of Representatives Housing Committee. Authored by Rep. Steve Elkins (DFL-Bloomington), the bill contained several key issues to limit outdated and unnecessary homeowner mandates, while returning home size and aesthetic choices to homeowners. Nearly a dozen testifiers spoke in support of large portions of the bill, while representatives of local units of government spoke in opposition.

“Minnesota suburbs, like many local governments nationwide, use zoning to curate which types of people can move to town,” said Salim Furth, a housing policy expert with the Mercatus Center at George Mason University. “This is an inappropriate use of government power and tramples on property rights and fair housing principles.”

The bill passed out of its first committee, but it was not debated after its initial hearing. The Minnesota Senate held no hearings on zoning modernization during the 2023 session.

The Legislature’s focus on housing funding yielded large investments in several programs.

Housing Bill funding highlights:

• $200 million for down payment assistance programs. This includes $150 million for first-generation down payment assistance.

• $200 million for housing infrastructure investments.

• $95 million for the Economic Development and Housing Challenge Program to support new workforce housing.

• $40 million to support workforce housing and infrastructure in Greater Minnesota.

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