Study: Relaxing density restrictions has the biggest impact on reducing housing costs

Last week, 13 Minneapolis City Council members, as well as Mayor Jacob Frey, were sworn into their new term. Among other things, the new city council will be responsible for figuring out what kind of rent control policy to enact.

While five city council members have already shown support for a policy as strict as St. Paul’s, others are more cautious, and want to avoid a policy that will discourage housing supply.

As the American Experiment report published last October showed, evidence generally shows that rent control has a negative effect on housing supply regardless of provisions. So, whichever type of rent control policy the City Council adopts will most likely come with consequences.

The best way to improve access to affordable housing in the long-term without jeopardizing the housing market, as most research has shown, is to improve housing supply by addressing restrictive regulations.

The Minneapolis City Council has made some strides in loosening regulations. In 2018, for example, the council passed an ordinance relaxing single-family zoning rules.

New research, however, is shining a light on what regulations tend to have the biggest impact on reducing housing costs. And in a new study, the authors found that

relaxing minimum lot size and maximum dwelling unit restrictions, either alone or combined with relaxing height or allowing for multi-family homes, are the most fruitful policy reforms to increase the supply of multi-family units by between 28-58% and reduce both multi-family rents by 5-6% and single-family prices by 3-7%.

However, allowing multi-family zoning alone or relaxing height regulations does
not significantly impact increasing the number of units built or rental housing costs

So, while efforts to loosen single-family zoning rules are commendable, they need to be complemented by other changes that address density restrictions. So, instead of focusing on rent control –– a policy that will most likely make the housing crisis worse –– city council members would best serve Minneapolis residents by tackling other restrictive rules, like minimum lot size requirements.