A recent report from the Housing Affordability Institute, Lot Sizes and the Supply Gap: Housing Production Constraints in Minnesota’s Growth Regions, analyzes zoning rules in three regions of Minnesota and how they prevent new housing production. The report argues that this underproduction cannot be overcome without underlying policy changes.

The report used data from American Enterprise Institute and the U.S. Chamber of Commerce, which suggest that housing production in St. Cloud, Minneapolis-St. Paul-Bloomington, and Rochester could be boosted by allowing smaller lots in greenfield areas.

However, the Minnesota Zoning Atlas shows that zoning rules in most St. Cloud and Minneapolis-St. Paul-Bloomington communities limit production by not allowing smaller, more affordable lots as a permitted use. Zoning in the Rochester area does allow for this.

The report also notes that many communities rely on planned unit development variances, or PUDs, rather than functional base zoning, which adds an additional hurdle to building smaller homes on smaller lots.

“Smaller lots allow housing development to become more efficient and better aligned with market demand,” said Nick Erickson, executive director of Housing Affordability Institute. “Housing production remains far below historic levels, with the state never recovering from the Great Recession. Adjusting lot size and width standards would go a long way toward restoring housing production and expanding homeownership opportunities.”

The report concludes that without wide-scale zoning changes in these growth areas, affordable, smaller lot homes will continue to be limited.