Commentary: Minnesota’s PUD Problem – Zoning Preempts Housing Affordability and Access 

August marks five years since the Minnesota Supreme Court handed down the Harstad v. Woodbury decision, a case in which the state’s top court waded into the murky subdivision approval process. This landmark case in Minnesota illustrated the supposed “voluntary” concession made in order to get a new subdivision approved via Planned Unit Developments (PUD).

This case started a few years earlier when developer Martin Harstad sought to develop market-rate townhomes in Woodbury, Minn., a Twin Cities suburb. The city of Woodbury sought to condition the approval of the project on payment of an unlawful impact fee while also conditioning approval on Harstad’s waiver of his statutory right to contest the fee. Harstad sued the city of Woodbury, and in August 2018, the Minnesota Supreme Court issued its unanimous decision in favor of Harstad. 

In its Harstad ruling, the Minnesota Supreme Court looked beyond the illegal tax, and dove into how this happens. In the court’s opinion, Justice G. Barry Anderson wrote:

Put another way, the pearl of great price here is approval of the subdivision agreement. A developer who fails to make a ‘voluntary’ payment in an amount Woodbury finds acceptable faces the prospect of denial of the subdivision application. The infrastructure charge is thus a requirement and Harstad is correct that there is nothing voluntary about it.”

Justice Anderson in Harstad v. Woodbury

Essentially, Justice Anderson said there is nothing voluntary about the development approval process when the controlling municipality holds all the cards. The options are:

  • Consent to any unlawful or illegal terms imposed by a municipality
  • Not build in that municipality 

So, what does this have to do with PUDs?

The original intent of PUDs was to allow developers and municipalities to collaborate on unique and innovative projects. But in Minnesota, they are becoming the majority of new housing approvals. 

Salim Furth of the Mercatus Center at George Mason University told the Minnesota Legislature in 2022 that local officials are overly reliant on Planned Unit Developments:

Mounting evidence suggests that the institutions of development in suburban Minnesota are broken. An increasing number of suburbs are abandoning traditional zoning in favor of PUDs. PUDs are appropriate for unique or innovative projects, but they are an invitation to opaque policymaking and favoritism. In addition, the creation of a PUD agreement involves up-front administrative costs, making it uneconomical for small-scale builders.

PUDs used for routine subdivisions are a warning that something is not working as it should.”

Salim Furth, Rights, Responsibilities, and Preemption in Minnesota.

The Harstad case illustrated what developers in the Twin Cities had long said: greater density is available, as long as developers open their wallets. This dynamic ends up making homes more expensive and less attainable.

As Furth said, Minnesota is the land of 10,000 PUDs, and I would guess it is far from the only one in which housing prices were raised by locally imposed conditions. 

The truth is that Minnesota has a PUD problem. Opposition to zoning modernization is coming mainly from local governments. Minnesota’s myriad of issues with PUDs in Minnesota begs a question:

If straight zoning is no longer the norm, why are local officials fighting so hard to keep it?

Nick Erickson is the executive director of Housing Affordability InstituteFollow him on Twitter LinkedIn.