The City Council adopted the amended and restated Unified Housing Policy on July 31, 2020.
I. Consistency with City housing goals
Minneapolis 2040 identifies goals to increase the supply of housing, its diversity and location types, to produce more affordable housing and to preserve existing affordable housing.
The City supports the development of new affordable housing throughout the City to expand affordable housing opportunities and support mixed income communities.
The City recognizes assets, value and cultural wealth in every part of the city and will work to ensure that people continue to have housing opportunities in all parts of the city.
The City will prioritize the creation of units affordable to households with incomes less than 30% and 60% of Area Median Income (AMI) through new construction/positive conversion, preservation, acquisition and substantial rehabilitation.
The City supports improved access to homeownership, especially among low-income residents, black, indigenous and people of color.
The City will coordinate its housing and economic development strategies to improve access to affordable housing, jobs, transit, amenities and services for Minneapolis residents.
Anti-Displacement Policy: The City recognizes that housing is the foundation for health, well-being and success in education and employment. Involuntary displacement leads to disparities in health, educational and employment outcomes. Everyone must benefit from the City’s growth, which requires policies to minimize involuntary displacement of residents, particularly low-income residents, seniors, black, indigenous and people of color.
Homelessness Response: We must address the affordable housing crisis if we ever hope to prevent and end homelessness in Hennepin County. The major problem underlying shelter use and unsheltered homelessness is the lack of permanent affordable housing and permanent supportive housing, especially for households with an income at or below 30% of AMI, and households facing other housing barriers such as credit or criminal history or health conditions. The metropolitan region is experiencing a severe shortage of affordable housing that is exacerbating homelessness in our community, and there is a need for a metropolitan-wide response to address homelessness and supportive service needs of persons experiencing homelessness.
The City partners with Hennepin County to support the City of Minneapolis and Hennepin County’s Office to End Homelessness to plan and implement the response to prevent and end homelessness in Hennepin County.
1 For purposes of Inclusionary Zoning Requirements, the Unified Housing Policy in effect on the date a completed land use application is submitted to the City will apply. For purposes of a City land sale or subsidy, the UHP in effect on the date the City Council approves the land sale or subsidy will apply
Homeowner Supports: The City supports sustainable homeownership opportunities for low and moderate-income households to maintain and improve housing stability and to expand access to homeownership for black, indigenous and people of color, who have historically not had equal access to homeownership.
Preservation of Affordable Housing: The City supports interventions to preserve and stabilize affordable housing of all types. The first priority of the City is to preserve and stabilize federally subsidized low-income housing that is in danger of converting to market-rate housing, having subsidies expire, or is deteriorating due to age, poor management or physical condition. The second priority of the City is to preserve and stabilize Low Income Housing Tax Credit (HTC) housing and locally subsidized housing that is approaching the end of its affordability period, and unsubsidized affordable housing that is at risk of experiencing significant rent increases (Naturally Occurring Affordable Housing). Naturally Occurring Affordable Housing is unsubsidized housing where at least 20% of the units have rents affordable to households with an income at or below 60% of AMI.
Senior Housing: The City encourages affordable housing options for seniors in all parts of the city so that seniors can age in place in their community. The City supports the following senior housing goals:
- create one housing development with at least 35 affordable units suitable for seniors in each ward of the City by 2025, and
- b. support funding for homeowner rehabilitation programs that assist seniors to make needed repairs and modifications to their homes to support aging
Tenant Supports: The City recognizes the value and contributions renters bring to communities. In addition to investing in production and preservation of rental housing, the City seeks to improve living conditions in rental housing and ensure that renters can fully participate in community life by reducing evictions, supporting renter’s rights to habitable homes, and expanding tenant protections.
For the purposes of this Policy:
- “AMI” means the median family income for the Minneapolis/St. Paul metropolitan statistical area, as adjusted for family size as determined by the U.S. Department of Housing and Urban Development.
- “City financial assistance” includes, but is not limited to, tax increment financing, land write-down, issuance of bonds to finance the project, pass-through funding, and other forms of direct or indirect subsidy, but not Revenue Loss Offset Assistance.
- “CPED Director” means the City’s Director of Community Planning and Economic Development.
- “Large development project” means a development project with multiple buildings on contiguous property.
- “Net residential area” means the sum of the gross horizontal areas measured from the interior faces of the interior walls of the space occupied by dwellings. Net residential area shall not include space devoted to accessory off-street parking or loading facilities, including aisles, ramps and maneuvering space, common hallways or stairwells, elevators, mechanical rooms, storage areas outside of the dwelling units or common areas including, but not limited to lobbies, amenity spaces or recreation rooms.
- “NOAH” means naturally occurring affordable housing.
- Project” means a development (either construction or rehabilitation) that includes new residential units.
- “Short-term rentals” means units that are rented in periods of less than one month.
- "Site” means each building for which a building permit is issued by the City of Minneapolis.
- “Student Eligible Housing” means a project triggering the Inclusionary Zoning Ordinance Requirements located in the University Overlay District that is providing on-site affordable units pursuant to Section III(A)(1)(i) below.
- “Revenue Loss Offset Assistance” means financial assistance to a rental housing developer pursuant to the City’s Inclusionary Zoning Revenue Loss Offset Assistance Policy.
- “Unit” means either a for-sale dwelling or a rental dwelling for which a lease is signed prior to occupancy.
II. City financial assistance and City land sales
Any project that either: receives City financial assistance; or is developed on property purchased from the City (even if no City financial assistance is being provided) must meet the following affordable housing requirements:
Affordability Period: Unless a shorter affordability period is specifically approved by City Council adopted program criteria, the affordability period for affordable units subject to this Section II shall be for a period not less than 30 years for rental property and for a period of 30 years that is renewable upon each sale for ownership property.
Alternative Public Purpose: Any specific projects requesting exemptions to the foregoing affordable housing requirements above must seek City Council approval based on alternative public purpose, which may include new market- rate housing development on City-owned land in areas where none has occurred in the previous three years.
City Relocation Policy: The City’s relocation policy applies to all private development receiving City direct (not pass- through) financial assistance that will result in the temporary or permanent displacement of residential or commercial tenants.
Large Development Projects: Large Development Projects may meet this requirement on a blended basis, provided the City is provided adequate assurances that the affordable units will be delivered. Only buildings or phases that include affordable housing for at least 20% of the units (rental) or 10% of the units (for-sale) or receive a pass-through funding waiver as provided below will be considered eligible for City financial assistance.
Pass-Through Funding: Projects that receive City financial assistance in the form of pass-through funding for environmental remediation may request a City Council waiver from the foregoing affordable housing requirements based on the following factors: (1) to allow newmarket-rate housing development in areas where none has occurred in the previous three years; (2) when the total combined land value of all parcels involved in the project is less than the total projected environmental investigation and remediation costs required for the project; or (3) to facilitate a phase or building in a large development project that will meet the affordability requirements on a blended basis.
2 For student eligible housing, units with multiple bedrooms can be counted on a per bedroom basis if all leases in the building for units with multiple bedrooms are signed for individual bedrooms rather than on a unit basis.
Program Specific Requirements: Specific City programs, including the Affordable Housing Trust Fund and Family Housing Initiative, may have deeper affordability requirements. The CPED Director may develop administrative compliance manuals and regulations to administer this policy in the context of various City financial assistance programs and land sale requirements.
Ownership Projects: at least 10% of the units must be affordable to and occupied by households with an income at or below 80% of the AMI and the sales price must be set at a price affordable to a household at 70% AMI. The City calculates the sales price by assuming a prime, fixed-rate first mortgage including principal, interest, property taxes, and home insurance does not exceed 29% of the income of a household at 70% AMI adjusted by household size and the number of bedrooms in a unit. The City of Minneapolis will calculate and publish the affordable sales prices annually. Projects with homeowner association fees will be underwritten on a per project basis to include homeowner association fees in the determination of affordable sale price.
Rental Projects: at least 20% of the units must be affordable to and occupied by households with an income at or below 60% of the AMI.
Short-Term Rentals: Master leasing of short-term rentals is prohibited for a term of 30 years in projects that receive City financial assistance and/or are developed on property purchased from the City. Staff may recommend a waiver to this prohibition to be considered for approval by the City Council.
SRO Replacement: The City prohibits the demolition/condemnation/elimination of SRO-type housing for any project receiving City financial assistance, as defined above, unless demolition/condemnation/elimination is unavoidable, in which case replacement of such units will be required as part of the project finance plan.
III. Inclusionary zoning requirements
Any project containing at least 20 residential units that is subject to the Minneapolis Code of Ordinances, Title 20, Article XIV (the “Inclusionary Zoning Ordinance”) must meet the requirements of this section, except:
- Housing owned and operated by or on behalf of a college or university.
- If at least 20 percent of the units on the site are affordable to and occupied by households with an income at or below 60% AMI and meet any of the following qualifications:
• the units are subject to a housing assistance payments contract under Section 8 of the United States Housing Act of 1937, as amended;
• the units are rent-restricted and income-restricted units of a qualified low-income housing project receiving tax credits under section 42(g) of the Internal Revenue Code; or
• the units are subject to rent and income restrictions under the terms of financial assistance provided to the rental housing property by the federal government or the state of Minnesota, or a local unit of government, as evidenced by a document recorded against the property.
A. On-site compliance
- Rental Housing. Sites with rental units shall be subject to one of the following:
i. At least 8% of the units must be affordable to and occupied by households with an Income at or below 60% of AMI. Projects that meet this affordable housing standard are not eligible for Revenue Loss Offset Assistance3.
ii. At least 4% of the units must be affordable to and occupied by households with an income at or below 30% of AMI. Projects that meet this affordable housing standard are not eligible for Revenue Loss Offset Assistance, but can use project-based rental subsidies.
iii. At least 20% of the units must be affordable to and occupied by households with an income at or below 50% of AMI. Projects that meet this affordable housing standard are eligible to apply for Revenue Loss Offset Assistance. Notwithstanding the requirements of this Section III(A)(1)(iii), if a project applies for Revenue Loss Offset Assistance and the City’s Finance Officer determines that available financial assistance is insufficient for the project to achieve financial feasibility, the CPED Director shall have the discretion to authorize an unassisted affordable housing requirement below 8% as necessary to facilitate feasibility.
Delayed Phase-In for Smaller Projects: Projects with 20-49 units are exempt from the above requirements until 6 months after the first 500 units in 20-49 unit projects have been approved and permitted pursuant to the Inclusionary Zoning Ordinance.
Affordability Period: The minimum affordability period shall be 20 years if no Revenue Loss Offset Assistance is provided. The minimum affordability period shall be 30 years if Revenue Loss Offset Assistance is provided.
2. For-Sale Units:
i. Starting 6 months after the first 500 for-sale units have been approved and permitted pursuant to the Inclusionary Zoning Ordinance, at least 4% of the units must be occupied by households with an income at or below 80% of AMI and priced to be affordable to households earning 70% of AMI.
ii. Starting 6 months after the first 1000 for-sale units have been approved and permitted pursuant to the Inclusionary Zoning Ordinance, at least 8% of the units must be occupied by households with an income at or below 80% of AMI and priced to be affordable to households earning 70% of AMI.
Affordability Period: The minimum affordability period shall be 30 years and renew upon each side.
3. IZ Requirement Calculations:
i. Scaling for Smaller Projects (rental or for sale): For buildings with less than 100 units, the following scaling rules shall apply: The first 15 units in buildings with 20-85 units that are not receiving Revenue Loss Offset Assistance are exempt from the above requirements. For buildings with 86-99 units, the number of exempt units shall decrease by one unit for every additional unit in the building, from 14 exempt units for an 86-unit project down to 1 exempt unit for a 99-unit project.
3 Adjusted to reflect a reduced rent limit (60% of the maximum rent for an efficiency unit at the 60% AMI limit) for units being counted and leased on a per bedroom basis for student eligible housing.
See Table 1 attached hereto.
ii. Fractional Units: If the inclusionary requirement results in a number that includes a fraction of a unit, the developer can choose to pay an in-lieu fee for the fraction of the unit, or round up (not down) to the next whole unit.
iii. Newly Occupied Units: The inclusionary zoning requirements for a site will be calculated based on the number of residential units that will be newly occupied as a result of the project on the site.
iv. No Net Loss: If a project with 100 or more units will demolish units that are 50 or more years old, the inclusionary zoning requirement shall be the greater of 8% of the units in the project or the number of units that were 50 or more years old that will be demolished because of the project. If the project chooses an alternative compliance option below, the alternative compliance requirement will reflect the revised inclusionary zoning requirement.
B. Alternative compliance options:
Instead of on-site compliance, developers may satisfy the inclusionary zoning requirement through any of the following alternate means:
1. Cash in-lieu payment:
i. For sites with buildings of up to 7 stories in height, the contribution shall be $15 per net residential area of market-rate residential development.
ii. For sites with buildings of 8 or more stories in height, the contribution shall be $22 per net residential area of market-rate residential development.
iii. In-lieu fees shall be adjusted annually based on the annual change in the construction cost index for the Minneapolis area as published by Engineering News-Record.
iv. For the period of time during which the on-site requirement for sites with for-sale units is 4%, the in-lieu fee for the required number of for-sale units in such projects shall be half of the in-lieu fee for rental units.
2. Off-site Units.
i. For completed land use applications submitted between January 1, 2020 and June 1, 2020, a site may meet the requirements of the Inclusionary Zoning Ordinance by facilitating the development of the required number of units in a separate building with or without a partner developer provided:
• The off-site units are provided within ½ mile of the market-rate project; and
• The market-rate developer provides the City with a cash deposit or equivalent guarantee of the amount the project would be required to contribute through a cash in-lieu contribution until there is a construction financing closing on the off site units.
4 Cash-in-lieu payments will be deposited into the City’s Affordable Housing Trust Fund (rental projects) and to the Minneapolis Homes Program Fund for the purposes of perpetual affordability (for-sale projects).
ii. For completed land use applications submitted on or after June 1, 2020, the Provision of affordable units off-site must be approved by the City Council and meet all of the following criteria5:
• Off-site affordable units must be provided within ½ mile of the market-rate project.
• Partnership with an experienced affordable housing developer and NOAH preservation projects acceptable to the CPED Director are permitted.
• The off-site affordable units must provide at least the level of public benefit (number of affordable units (rounded up to the next whole unit); comparable or larger unit bedroom sizes; income levels served; term of affordability) as would have been provided through on-site compliance.
• The market-rate developer must make a meaningful contribution to the off-site affordable units.
• The market-rate developer provides the City with a cash deposit or equivalent guarantee of the amount the project would be required to contribute through a cash in-lieu contribution until there is a construction financing closing on the off-site units.
3. Donation of land to the City: This provision is available to completed land-use applications submitted June 1, 2020 or later. The CPED Director may choose to accept the donation of land to the City as a means of alternative compliance with this policy if, after appropriate due diligence, it is determined that the land is desirable for the production of affordable housing and all of the following criteria as determined by the City’s Director of Community Planning and Economic Development are met:
i. The land is appraised by the City at a value equal to or greater than the in-lieu fee in effect at the date of land use application. If the appraised value is less than the in-lieu fee, developers may contribute the remaining requirement in a cash fee.
ii. Located in an area where there is high need for sites for affordable housing. (i.e., areas where the City does not control sufficient development sites)
iii. Reasonably developable for affordable housing (including zoned for residential development).
Administrative Implementation: The CPED Director may develop administrative compliance manuals and regulations to administer the Inclusionary Zoning Requirements.
City Council Review: CPED will provide the City Council with a comprehensive review of the Inclusionary Zoning Requirements and whether any changes should be considered within 18 months of its effective date and every 3-5 years thereafter.
5 The CPED Director may, under extraordinary circumstances, recommend an off-site compliance outside these defined parameters.
IV. Housing policy standards (apply to inclusionary zoning projects, projects receiving City financial assistance and City land sales)
A. Design/unit comparability standards
The affordable units required by this Policy must meet the following design/unit comparability standards:
- In buildings with both market rate and affordable units, the affordable units must be located proportionally throughout the floors of the building compared to any market rate units. In buildings of more than 10 stories, affordable units may be distributed throughout only the bottom 2/3 of the building. Affordable units may not be master leased to a short-term rental provider or on floors master-leased to a short-term rental provider.
- Externally and from all shared spaces, affordable units should not be distinguishable from any market rate units in the building and should be architecturally equivalent. Interior layouts, designs, materials, and finishes should be functionally equivalent but do not have to be identical.
- Unit types (size and # of bedrooms) for affordable units should be proportional to market rate units; provided, however, that the developer is encouraged to provide more family/large household affordable units (3 and 4 bedrooms).
- Affordable units must share the same entrances, common areas and amenities as market rate units, if there are market rate units in the building.
B. Fair housing
The City requires owners of rental housing projects subject to this Policy to accept tenant based rental housing assistance, including, but not limited to, Section 8 Housing Choice Vouchers, HOME tenant-based assistance, and Minnesota Department of Human Services (DHS) Housing Supports. This requirement will be enforced through a contract between the City and project owner, pursuant to which the owner will be required to adopt business practices that promote fair housing and provide documentation of compliance with these requirements to the City. This requirement will be further enforced through the City’s monitoring policies and procedures. The City requires owners of housing projects subject to this policy to affirmatively market affordable housing opportunities.
Inclusionary zoning phase-in table
|Total units in building||Units exempt from IZ requirements||Units subject to IZ requirements||Affordable units required|