Zoning modernization stalls as legislature and governor unable to reach final deal

Without any substantial housing policy changes signed into law this year, Minnesota homebuyers will continue to face one of the worst available for-sale inventories in the country.

With one week remaining in the 2022 legislative session, Gov. Tim Walz, House Speaker Melissa Hortman and Senate Majority Leader Jeremy Miller announced a framework agreement on the front lawn of the State Capitol. The agreement was to utilize the largest state surplus in history with a combination of $4 billion toward a tax bill and a $1.4 billion capital investment bill. It also includes additional spending of $1 billion in education, $1 billion for health care and human services, and $450 million for public safety. Additional investments are to come from a $1.32 billion pot. Left on the bottom line is $4 billion to help the state manage future economic uncertainty. The three leaders then asked the chairs of committees and commissioners to work on the finer details of the legislative language.

The final week of session included many long nights and tough negotiations from these legislative leaders. But the Senate GOP and House DFL were unable to bridge the rather large gaps between their respective omnibus bills, only finding agreement on a handful of subjects, before the clock struck midnight on the constitutionally mandated final day of session. With very few items reaching a final consensus, much of the record $9.2 billion surplus will remain unutilized, unless a special session is called by Walz to try to finish the negotiations.

Ultimately, the housing legislative language and funding proposals that were in play had a similar fate as other subject matter with no final agreement. Throughout the course of the legislative session, each chamber had a radically different focus with the GOP-led Senate identifying homeownership opportunities as their priority and DFL-controlled House spending a majority of their committee time and efforts on state government funding and landlord/tenant legislation.

“The legislature had a good opportunity to begin the modernization of our housing approval process, so the collapse of a global deal is disappointing,” said James Vagle, vice president of advocacy at Housing First Minnesota. “On the issue of housing supply and homeownership access, the challenges won’t resolve themselves; regulatory roadblocks have to get lifted.”

Without any substantial policy changes getting signed into law this year, Minnesota homebuyers will now continue to face one of the worst available for-sale inventories in the country, the largest homeownership gap in the country and the most expensive new housing in the Midwest.

The median new single-family home in Minnesota is nearly $475,000, which is over $100,000 more than the median in neighboring Wisconsin, according to data from Zonda. Industry experts point to increased material and labor costs which impact home prices across the Midwest. Adding to those challenges are inventory woes and, in Minnesota, land and regulatory costs unique to the region.

A special session could be called to revisit the major legislative issues but the likelihood of one in an election year is low. Whether in special session or in the next session January, industry leaders believe this issue will again be a top issue.

What was accomplished at the Capitol?

Since this legislative session was a supplemental year, rather than a budget year, the legislature was not required to do much. However, they were able to find agreement on a few major ticket items that Walz signed into law.

• $2.7 billion was authorized to pay back the federal government and replenish the unemployment insurance trust fund. Large and small businesses across the state saw a temporary increase in what they owed starting on March 15. However, applicants were able to apply for either a refund or a credit toward their next bill.

• As part of a package deal with the unemployment trust fund replenishing, $500 million in “hero pay” was allocated to frontline workers that continued in-person work during the beginning stages of the pandemic. More details on who qualifies and how to apply can be found at frontlinepay.mn.gov.

• The omnibus liquor bill included expanded growler sales.

• Drought relief and broadband dollars for communities across the state were allocated.

• Approximately $300 million will be distributed as part of an opioid settlement