As the Minnesota Legislature convenes for its 2022 session, legislators find Minnesota’s housing market facing historic headwinds. The inventory of available homes is consistently at or among the worst in the United States, the homeownership equity gap measures the worst in the country and new-home housing affordability in our state is the worst in the Midwest.

These challenges merge with a broader legislative backdrop featuring an enormous state surplus and fierce debate on where to spend those dollars. With the state budget completed last year, the 2022 session is the second half of the biennium, traditionally known as a “bonding” year, in which capital project spending is the centerpiece of the debate.

Within this busy schedule, housing is expected to find a prominent place on the policy and fiscal calendars. “The state of Minnesota is staring down one of the most profound housing shortfalls in the country,” stated Rep. Jim Nash (R-Waconia), co-chair of the Legislative Commission on Housing Affordability. “The Legislature must act rapidly to address that crisis.”

The Legislative Commission on Housing Affordability’s activity throughout its fall meeting schedule foreshadowed a focus on increasing housing supply by boosting the construction of affordably priced homes. The testimony provided to the commission was heavily focused on policy changes that would lift roadblocks that are currently limiting the construction of affordably priced homes.

One of the leading efforts to address this problem has emerged from a collection of proposals authored by Rep. Steve Elkins (DFL-Bloomington). The Elkins proposal addresses many land use, permitting and public finance issues that inhibit housing construction. The bill also addresses the use of Planned Unit Developments (PUDs), which are frequently used by many municipalities to extract unique and costly development requirements in order to achieve approval of housing projects, thereby driving up the cost of homes.

The broad use of PUDs runs counter to the original legislative intent of creating PUD options, which was to provide a tool for local governments and property owners to navigate unique circumstances in a given project. However, over time, cities began using the PUD process almost exclusively to approve housing developments, according to housing industry leaders. Housing industry groups have focused on PUD reforms, along with other modernization efforts in zoning approvals and permitting.

“The urgency of the housing crisis can’t be overstated,” said David Siegel, executive director of Housing First Minnesota. “If we want Minnesota to remain competitive and to attract the brightest in today’s workforce, the legislature must work on substantive housing policy reform proposals. These will be challenging debates, but the moment calls for action. If we fail to act, the next generation of homeowners will stand on the sidelines and watch helplessly, and legacy wealth will disappear.”

Zoning and permitting proposals are not only being considered in Minnesota. States such as Colorado and Connecticut are working through similar proposals to lift housing construction roadblocks. California has passed the most sweeping housing policy reform, in response to its collapsed housing market. “It would certainly be regrettable if we had to reach the crisis levels seen today in California before we act,” said Siegel. Solving the issue in 2022 will be a major challenge for the Legislature and Gov. Walz, but housing leaders see an urgency that is expected to fuel this debate throughout the session. “The future of our state depends on our action. If our children and grandchildren hope to buy a home, we must remove obstacles that prevent the construction of stater homes,” Nash concluded.