Lot Sizes and the Supply Gap: Production Constraints in Minnesota’s Growth Regions
Analysis
Executive Summary
Housing production in Minnesota remains below historic levels; the state has not recovered from the Great Recession. The North Star State’s underproduction of housing is a structural issue, something the market cannot overcome without underlying policy changes.
TOTAL SINGLE-FAMILY PERMITS ISSUED – MINNESOTA 1990-2024
Source: U.S. Census BPS
On the land use front, what is the major challenge to more housing at scale? Data from American Enterprise Institute and the U.S. Chamber of Commerce suggests that smaller lots in greenfield areas where new subdivision are most prevalent would boost housing production in St. Cloud, Minneapolis-St. Paul-Bloomington, and Rochester areas.
A review of zoning ordinances and data from the Minnesota Zoning Atlas shows that zoning controls in the highest production regions of Minnesota largely limit production opportunities at scale. Smaller, more affordable lots are not a permitted use across much of the developing communities in the St. Cloud and Minneapolis-St. Paul-Bloomington regions. They are, however, found in the Rochester area.
Additionally, in the Minneapolis-St. Paul-Bloomington region, discretionary approvals via a planned unit development variance have become a substitute for functional base zoning while also indicating strong market demand to deviate from base zoning.
Where demand exists and builders are most active, Minnesota communities’ prevailing lot size and width requirements prevent subdivisions from achieving the scale necessary to restore necessary historic production levels.
Addressing the supply challenge at scale requires zoning controls in these growing communities to adjust to existing market demands for smaller lots with modest setbacks.
HIGHLIGHTS
ISSUE
Single-Family Permitting Has Never Recovered From The Great Recession
MSP
Only Four Residential Zoning Districts in Greenfield Communities Reviewed Allow Smaller Lot, Entry-Level Homes
ST. CLOUD
None of the Residential Zoning Districts in Greenfield Communities Reviewed Allow Smaller Lot, Entry-Level Homes
ROCHESTER
All of the Four Residential Zoning Districts in Rochester, Minn. Allow Smaller Lot, Entry-Level Homes. One Zone May Need Lot Width Adjustments
FINDING 1:
Prevailing Zoning Controls in Growing Communities are Insufficient for the Scale Necessary for Increased Growth
FINDING 2:
Over-Reliance on Variances Demonstrate Strong Market Demand for Smaller Lots
