Exclusionary Land Use Regulations and Income Segregation

Advocates for fair housing policies received a boost recently, thanks to a UCLA study which demonstrates a link between restrictive land use policies and income segregation within cities. Instead of focusing on the issue of “concentration of poverty,” the study identifies the primary problem as a geographic concentration of affluence brought about by overly restrictive, exclusionary housing regulations.

We find that particular types of regulation, such as density restrictions, more independent reviews for project approval and zoning changes, and a greater level of involvement by local government and citizenry in the permitting process, are significantly associated with segregation overall and of the affluent.

Strategies for combatting this problem include:

1) Density restrictions exacerbate segregation, and we recommend that cities relax them strategically.

2) We also urge a more extensive implementation of inclusionary housing in the wealthier areas of cities. Such policies have a much greater potential to reduce segregation than the alternative approach of incentivizing affluent households to move into lower income parts of the city.

Regarding the second point, a more inclusionary housing policy is scheduled to be addressed by the Minneapolis City Council in 2016, at the prompting of council member Lisa Bender. This policy might allow the city to require developers to set more affordable rents for a portion of a new building’s units.

But the first point about relaxing density restrictions is likely to be a more contentious issue, at least for some neighborhood organizations. Neighborhood boards in more desirable areas of the city have traditionally opposed new higher density developments. Some neighborhood associations such as the Lowry Hill East Neighborhood Association (LHENA) were even founded for the very purpose of stopping new developments. LHENA’s first-ever President, Dennis Tuthill, stated, “We finally stopped the developers by buying homes to prevent their destruction. The LHENA Board convinced the City to down-zone the Wedge from R-6 to R-2B, and saved the rest of the neighborhood.”

Wedge Newspaper celebrates victories over developers in early 1970s

Wedge Newspaper celebrates victories over developers in 1970s

While the neighborhood may have been “saved” from the advances of developers, the long-term result of this action has been an increase in the cost of rent in this and other Minneapolis neighborhoods. Due to the difficulty of development in popular areas like Lowry Hill East, Minneapolis currently has one of the tightest rental markets in the nation, and average rent for a 1-bedroom apartment has soared above $1000. This has been the legacy of LHENA’s success, felt almost exclusively by renters in the years since.

More recently, the goal of historic preservation has been abandoned in order to justify opposition to development. In 2014, LHENA opposed a development on a parking lot at the intersection of Franklin and Lyndale, which are two major traffic corridors. Last year the Whittier Alliance, whose board consists of zero renters in a neighborhood where 83 percent of residents rent, opposed a 5-story apartment building proposed for a long-vacant superfund site at 26th and Stevens. (previous coverage of neighborhood organizations)

So it is unsurprising, yet unfortunate, that recently the CARAG neighborhood association voted to reject the developer’s need for the variance and re-zoning required to build a six-story hotel on a nearly-empty corner of Lake and Emerson. This location is in the heart of two thriving economic areas (Uptown and Lyn-Lake), and is along a heavily-used transit corridor, making this project seem like a slam dunk. A hotel would add new customers for existing businesses, provide local jobs, and remove another empty parking lot on Lake Street in the process.

If this is built, expect airbnb income to plummet

If this is built, will local Airbnb income plummet?

The CARAG residents who object to this development point to the Small Area Plan (SAP) as the basis for their opposition to the hotel. SAPs are often cited by neighborhood groups who oppose development, as they provide a degree of city-backed legitimacy because they are signed off on by Minneapolis’ Department of Community Planning and Economic Development (CPED). According to the SAP for this area, larger buildings should only be on the north side of Lake Street, not the south side (this alleviates a potential inferiority complex for the single-family homes on the south side). SAPs are just one example of how micro-level oversight by a very small group of residents can lead to negative outcomes for an entire city.

Minneapolis has been dealing with local neighborhood groups attempting to halt increasing density for several decades, and to many who follow urban issues the recent study outlining the negative outcomes that follow these organizations comes as no surprise. These groups are so opposed to new development that they will go out of their way to vote on projects outside of the area they represent.

One key finding from the study puts it more bluntly:

Three measures of local involvement in the regulatory process are associated with higher levels of segregation: (1) local political pressure, (2) local zoning approval, and (3) local project approval. Cities that have more separate regulatory oversight mechanisms are more segregated.

Of course, neighborhood groups wish they had veto power over projects, but fortunately for Minneapolis, these local oversight processes carry no official weight beyond offering the city an advisory opinion. But the leadership of these groups are typically the most politically active property owners in the city, giving them an outsized voice in the process, and a stake in restricting the supply of housing that keeps their property values high.

The big difference between a neighborhood like the Wedge and parts of neighborhoods to the west like East Isles and Lowry Hill, are the number of 2.5 story walkups made possible by higher density zoning in the 60s and 70s. These buildings are criticized by some longtime homeowners, but they provide a huge chunk of the housing that makes it affordable for so many Minneapolis residents to live in a nice neighborhood like the Wedge.

In order to create a more equitable city, Minneapolis must realize that neighborhood groups in desirable areas may not have the entire city’s best interests in mind. No city would have infrastructure projects, such as light rail or an airport, if they let local opposition thwart large-scale projects. Minneapolis should stay focused on the larger picture and lay the foundation and infrastructure which will make more of our city a desirable place to live.

If you’d like to show your support for the hotel in uptown, you can do so here.

Anton Schieffer

About Anton Schieffer

Anton lives in Minneapolis and writes about information technology, government transparency, and local housing issues. He mostly wants to build enough housing so that everyone has a place to live.

39 thoughts on “Exclusionary Land Use Regulations and Income Segregation

  1. Eric AnondsonEric Anondson

    We get nothing but reports of complaints that dense development encroaches on homes. But we should as much be bothered that single family homes encroach on major regional commercial centers smothering it from growth.

    People moved next to Uptown. Uptown didn’t move next to them.

    1. Steven Prince

      No Eric, Uptown moved next to low and medium density neighborhoods in the 1980s because of the high disposable income in the area and the high traffic counts at Lake and Hennepin.

      1. Eric AnondsonEric Anondson

        We are clearly talking about greatly different things that can only be cleared only after we have maps of Uptown’s borders to refer to. To me, this plot is “Uptown” since at least your benchmark of the 80s.

        1. Steven Prince

          Eric, When I say “Uptown” I mean the trendy national chains and pricey restaurants that have become an amenity for many in the area, Ground Zero is the Hennepin/Lake intersection, just like in the 1980s. The trendy shops of Calhoun Square “Uptown” in the 80’s did not extend as far east from Hennepin and Lake as this site. There was a modest 2 story restaurant (with street parking (a good Chinese place) that was later replaced by the Indian restaurant in the same building. It was a structure built to the scale of Lake Street’s automobile strip.

  2. Steven Prince

    How exactly does building a Graves (do non-luxury hotels have valet parking?) make for a more “equitable” city? And why does every rant on this site about neighborhoods supposedly opposing density focus on LHENA? What neighborhood in Uptown has higher density than LHENA?

    This is not just a function of 1960s construction, has any neighborhood in the City (except perhaps the North Loop and around the University Campus)) added more housing density in the last twenty years than LHENA? I doubt it. For those of you recently moved here from a suburb, almost all of the apartments between Lake and 28th Street were constructed in the last fifteen years.

    This density was added at LHENA insistence and over the objections of developers and City Planners who wanted to build 1-2 story big box retail in that location. So pointing to 1972 motives to “prove” your antidevelopment meme is little more than a straw man exercise.

    The reason City zoning and planning calls for taller buildings on the north of Lake Street is because Lake St North to the Greenway was industrial; LHENA wanted it redeveloped as dense multifamily housing (with transitional medium density from the Greenway to 28th St) and CARAG wanted development along Lake Street that would fit with the existing R2B housing abutting Lake Street.

    As for affordability, building apartments in LHENA (or CARAG, East Isles or Kenwood) is not going to yield affordable housing without government regulation that requires it as the price of development. Tearing down high priced houses (compared to City averages) means you will get even higher priced rentals. The building at 24th and Colfax accomplished exactly that – replacing low income housing with much more expensive housing.

    A few more points:

    1) Neighborhoods have zero say in permitting decisions if the projects meet zoning requirements. It is only when developers like the Graves Hotel project want to take a lower density zoned parcel and convert it to a higher density use (a way of increasing value through the granting of a government monopoly in a particular place) that neighborhoods get to weigh in. That is because, in part, the increase value given to the up-zone parcel often involves taking value from adjoining parcels. Building a 6 or 5 story hotel next to a single family home lowers the value of the single family home.

    2) That LHENA weighs in on a development across the street from their neighborhood proves nothing accept they have an opinion about what happens across the street, something neighborhood groups have done for at least 30 years.

    Its a shame that so many posts on this site create straw man arguments to attack those that don’t agree that every development, wherever proposed, is good and opposing any new development means you are a racist NIMBY anti-development luddite.

    1. Adam MillerAdam Miller

      You lose me when you say things like this:

      “The building at 24th and Colfax accomplished exactly that – replacing low income housing with much more expensive housing.”

      While that’s literally true, you know how misleading it is.

      And this:

      “That is because, in part, the increase value given to the up-zone parcel often involves taking value from adjoining parcels”

      That accurately describes (part of) what motivates incumbents from objecting to development, but it doesn’t necessarily describe reality. I think you know that real estate is not such a simple zero-sum game.

      But you’re right, there no issue if everything is done according to the existing zoning. The problem is the existing zoning is terrible, for many of the same reasons why neighborhood groups can lean anti-development.

    2. Eric AnondsonEric Anondson

      “That is because, in part, the increase value given to the up-zone parcel often involves taking value from adjoining parcels.”

      Isn’t it equally the other way, that the adjacent single family home is taking value from this parcel on the major commercial street?

      1. Steve Prince

        No Eric, your approach is a-historic. If all the parcels are vacant, and a new zoning scheme limits development, then yes, each parcel gives up the potential for maximum development to allow everyone else to make investment decisions based on those limitations.

        But in this case the developer purchased a property (or an option) based on the site’s existing 2-story use and zoning limitations. The market priced the property based on these regulations.

        Allowing the developer to “break the rules” means the taking is from the neighbors, not from the developer. If you extend this analysis further you would probably also conclude that there are not likely to be many (if any) six-story hotels built in Uptown soon. So allowing the developer to buy a lower priced parcel and develop it as a parcel already zoned for higher density problaby grants him a monopoly on this use – the owners of the more densely zoned parcels (with their higher market prices) cannot compete with this developer who gets to break the rules.

        1. Joseph TottenJoseph Totten

          My internet is being silly, so in short, from before, PLEASE WRITE A FULL POST ON THIS! Why is San Francisco’s actions of not expanding housing supply not applicable to MSP, Minneapolis, Uptown? Why should neighborhood associations be taken as speaking for the neighborhood when the neighborhoods they represent are majority renter and outreach from neighborhood associations seem to be ineffective in reaching renters? Why is maintaining owner’s property values better than reducing my rent? Etc?

          If you can answer these questions please write a post for streets.mn!

        2. helsinki

          A ‘taking’? No; this is a term of art, and it means that an adjacent use has deprived the parcel you own of all economic value. Fluctuations in market value influenced by adjacent uses are not ‘takings’. If, for instance, a neo-nazi tattoo parlor opens up next door, it may lower the value of your house, but neither the tattoo parlor nor the city owe you anything. You don’t have a property interest in your neighbor’s property, just your own property. There are nuisance laws, but these are highly specific and largely inapplicable here.

        3. Adam MillerAdam Miller

          No, it does not mean that. It’s patently false to assert that building something with a variance inherently reduces the value of neighboring properties. In fact, it could actually enhance them.

          And your assertion that market prices can’t account for the potential for a variance is laughable.

        4. Thatcher

          I have to agree in part with Steve that the developer is likely pursuing this property because it is more affordable to his project than some of the other properties. The site has had another development proposal for it years ago that went no where, likely because there wasn’t a market for the project. This for many years was a fringe property for redevelopment, as there were far better properties to develop in size, access, and location.

          Graves has been looking at Uptown hotels for many years and presumably, they haven’t made financial sense until this point. Land price plays a decent role in making or breaking a project, so finding a property like this one, which is not a slam dunk to rezone, likely means he could get a better price on the land than if there was plenty of precedent and the requests for rezoning, CUPs, and variances seemed more like a given. Not for sure, but certainly a reasonable assumption.

          While this would benefit Graves, it also likely benefits the property owner as they may share on the upside of Grave’s entitlement attempts. Other developers have agreed to pay land owners based upon a certain dollar amount of approved density with a price floor.

          In my opinion, the city really ought to re-examine how it regulates height and bulk so that there is greater clarity to developers and the community on what type of development is possible where. While I’m not thrilled by the Seattle process, its rigidity on height and FAR seems to enable development just fine. It places the density/height “fight” in planning and rezoning processes, which is where it should be. This sort of thing may have merit here.

          1. Alex CecchiniAlex Cecchini

            Graves may have a purchase option at a lower amount per square foot than a site with by-right zoning to allow the hotel as proposed, but we don’t know that. We do know that in the 2320 case, Lander offered an option at a significantly higher amount accounting for its value post-variances than the market was willing to offer for the house as a single family home.

            And in any case, whether or not they’re getting a good deal on the lot due to an eventual up-zoning is kinda beside the point. If a developer gets their re-zone, variances, and/or CUPs, they’ll ultimately be building a structure worth much more than previous zoning allowed, and they’ll be paying property taxes accordingly. The idea that the city grants value to a property without getting anything in return isn’t reality, at least in the case of an up-zone with construction quickly after (as compared to a landowner who requests an upzone then leaves the lot vacant and simply sells at a higher price after basically adding no value to the property or neighborhood).

            And, Steven’s argument that an up-zone derives value by taking from its neighbor is false as well. It may very well de-value its immediate neighbor (though not always), but these type of developments tend to also improve the greater area’s value on average, even if slightly. I’ve read enough research papers to show that single family home value appreciation in areas near large apartment complexes saw either no negative impact or appreciated at a faster rate than average. As you (and many other commenters) already know, this is typically because the development itself offers a new amenity, or if purely residential, the demand for more amenities that benefit everyone (plus, as Minneapolis has shown, all this new construction has lowered the average tax bill for existing residents).

            Further, even if we do assume a negative impact to neighbors, in these cases we’re talking about a project that is only XX% denser than what zoning already allowed (as we saw with the home teardowns in SW Minneapolis, by-right house sizes, even other single family homes, didn’t sit well with neighbors). So we’d need to make the case that a 6 story building with 2.5 FAR would de-value their neighbors appreciably more than a 4-story 1.7 FAR one (or whatever), as is often allowed by-right. And once we’ve calculated that, it should be weighed against the city’s broader goals of sustainability, etc.

    3. Debra Wagner


      I specifically want to reply to the comment you made about a 5 story plus building diminishing the value of the single family home next to it and indeed other near neighbors. As a Realtor, I know this to be true. In the planning of such projects, the developer should be required to build in compensation to the homeowners affected if it is deemed that the project serves the greater good of the city and area. Just a thought!

      I respect the points you made in your post. The polarization here is no different than the general atmosphere in the country. 🙁

      1. Joseph TottenJoseph Totten


        Willing to write a rebuttal on these grounds? That maybe some compensation for reducing neighboring property values would be a way to speed approvals or reduce neighborhood resistance.

        The conversation here in the comments really could use a fully fleshed out idea on this idea!

  3. Steve Prince


    Saying something is “literally true” but “misleading” is pretty ironic given the content of the original post – trotting out documents from 40 years ago to assign motives to a recent neighborhood decision.

    And no, I don’t think its misleading to point out that homeowners (like myself) in LHENA have a much more nuanced view of development than as we are usually portrayed on this site. A significant part of the opposition to the Colfax/24th Street Project had to do with concerns about rewarding a property owner for disinvesting in his property as well as eliminating the only rooming house units left in the neighborhood. Readers of this site would never know that from reading posts here.

    As for zoning, are you really arguing that if you provide spot zoning in a single location it does not impact nearby property values?

    In this case previous investment decisions made by property owners (to purchase, mantain and improve 2-story residences) were based on an assumption that their neighbors would be of the same scale and type. When you throw those assumptions out to allow a developer to maximize profits from a particular parcel you are taking a little value from many to concentrate value for one.

    That is why LHENA has always advocated for additional density and development, but at scales and locations that work for a diverse neighborhood by age, income, household type and size.

    1. Anton SchiefferAnton Schieffer Post author

      I’m “trotting out” documents which support the theory suggested by the researchers at UCLA – that neighborhood organizations have traditionally attempted, and continue to attempt, to stop new developments from happening in their neighborhood, and that this is bad for the city. Those statements above also seem to contradict your opinion that “LHENA has always advocated for density and development.” I suggest reading the first link if you’d like to know more about how neighborhood organizations’ actions create inequitable cities.

      1. Peter Kim

        If you compare SAP and LHENA’s support, you will see exact match.

        If development did not match with SAP, LHENA did not. Very fair organization.

        1. Anton SchiefferAnton Schieffer Post author

          Uptown has excellent amenities and infrastructure, such as a vibrant commercial node, access to lakes, low crime, and good cycling and transit options. Neighborhood boards, who helped write the SAP, want to limit access to those things to the people who already live here.

  4. Peter Kim

    Few corrections.
    Uptown Small Area Plan was led/funded by city. It is an official guideline developed by professional consultants and all stake holders had input.

    LHENA supported very tall, high-density development when SAP shows high density. City/Developers are going against zoning and SAP in this hotel case.

    Don’t get me wrong, I want to see hotel in uptown but Lisa Bender’s favoriate neighborhood organization(CARAG) is against it and we need to respect it.

    Look at new building at Hennepin and Lake ( North East corner). LHENA would have supported 6-9 story hotel/ retail but as you see, city/developer put two story restaurant. Very poor decision.

  5. Peter Kim

    Another point I want to address here:

    I heard Wedge was not very desirable place in 1970’s. It was much like current North Minneapolis.

    Home owners and neighborhood organization have improved safety and livability gradually. You can find out all evidences in older Wedge newspaper.

    Let’s give them a credit if you agree that Wedge is a desirable place to live.

    1. Reilly

      But has this improvement truly been attributable to a lack of higher-density development? Many areas of North that some would currently regard as “undesirable” due to high crime rates are significantly less dense and far heavier on SFHs than is the modern-day Wedge.

    2. Adam MillerAdam Miller

      You don’t need old papers. Just go for a walk and look at the state of the housing stock. It was neglected for a long time.

      Now, it’s not. Is that because the people who lived there kept more renters out? Or are other factors do finally overtaking that insularity? Seems obviously the latter to me.

  6. Joe ScottJoe Scott

    I’d recommend people unhappy with the effects of neighborhood organizations go ahead and try to get on theirs. (I know a few people involved with this site have already done so, including myself). Just be warned, a neighborhood association tends to be as effectual as the amount of free time its members have, which could help explain the preponderance of older, wealthier homeowners, and lack of younger renters. (Not to mention the motivator of having some sort of financial stake in the outcome of decisions). On my board, some of the other younger members who were elected along with me have since resigned, citing a lack of free time.

    Fortunately the longer-serving, more experienced members of the Midtown board aren’t reflexively anti-density. I’m happy to report our board successfully advised a developer to upgrade from building one-story to two-story houses on some CPED-owned lots, as well as refraining from building a SFH on a greenway-adjacent lot to reserve it for higher density development.

  7. Thatcher

    Segregation and income inequality are serious issues that need attention and I’m struggling to see how focusing on and supporting a hotel are addressing those issues.

    1. Bill LindekeBill Lindeke

      I’m with Thatcher here. This whole conversation seems really polarized. “Zoning and land use regulations” is a very broad catch-all term, and being much more specific would be helpful. The study does point out that the way we segregate our cities (by race and class) is now not legalistic exclusion, but zoning exclusion. That’s a real thing, and “show me a hero” is a good case study as are many other examples. I think that many neighborhood groups fail to take seriously the equity impacts of their desires and decisions. One of the reasons neighborhood groups should try to be more inclusive, reach out to renters, POC, young people, etc., is a matter of justice. Saint Paul’s larger neighborhood group system (13 vs. 72) helps with this, though similar problems arise.

      That said, Anton’s actual example of zoning in one particular neighborhood, or the Small Area Plan in question and whether this one hotel is a good idea or not, should be considered on their own, in my opinion. Case-by-case, whether a hotel is a good idea or not depends on what is there already and what the alternatives might be. I just wish the conversation could focus on that specific question.

    2. Alex CecchiniAlex Cecchini

      You’re right, of course. A hotel doesn’t have the strong connection to segregation and access to opportunity that housing does. While a hotel does provide a decent number of jobs in a great spot, that’s about all you can say on the equity side.

      At the same time, would the response have been any different if this were 6 stories of housing above a small restaurant? While there wouldn’t be a re-zone request to C3A (required for the hotel use), the bulk, height, etc requirements would have been there.

    3. Anton SchiefferAnton Schieffer Post author

      I was debating whether to even include the hotel as an example or whether to stick with neighborhood opposition to housing projects (like the one at 26th and Stevens, or Franklin and Lyndale, or Famous Dave’s in Linden Hills). Ultimately I decided to include it since it’s been in the news recently, and feels to me like an example of opposing something for its own sake. If I had known people would be so focused on the hotel, I’d probably have picked a different example – there’s certainly no shortage of housing projects that are opposed by neighborhood groups – but I don’t like to re-hash conversations that have already been had.

      The bigger point is that n’hood groups in areas with high-quality amenities and infrastructure often do things to restrict new housing supply, so we should take their opinions (and SAPs) with the bigger picture in mind.

  8. GlowBoy

    We are talking about Lake Street here, right? A major commercial arterial that cuts all the way across the city? I don’t have a problem with a 6-story building *anywhere* on Lake Street. This is exactly the kind of density we need to see. If there are adjacent SFHs that will be impacted by a mid rise building next door, well yeah that’s kind of what you expect living next to a big commercial street. Which Lake has been for at least a century.

    And look, these buildings aren’t being put up on quiet side streets – it’s not like we’re talking about 34th and Emerson here – so if you have an SFH a block or two away from a busy street you shouldn’t have anything to worry about. There’s still plenty of room along the arterials to put up midrise apartments and accommodate tens of thousands of new residents in Minneapolis without ripping out the SFH neighborhoods.

  9. Scott

    This post is based on a series of inaccurate assumptions about neighborhood associations. CARAG, for example, supported the Walkway and Cheapo site developments and opposed the CB2 because it is a one-story, single-use building. So, it is odd to claim the organization opposes density based on one hotel project and somehow responsible for higher rents.

    I also find the negative tone towards neighborhood associations on this forum discouraging. These neighbors are donating their time and skills to improve the community, which mostly has nothing to do with development. In fact these organizations often work on projects that most urbanists would love like improving bike & pedestrian routes, park improvements, neighborhood clean ups, etc.

  10. Wayne

    This is the second time I’ve had all of my comments disappeared by someone here. You either have an extremely broken spam filter or a rogue admin that likes to completely block people they disagree with from taking part in a discussion.

    1. Wayne

      And it’s not just this post, it’s every post across the site. Way to engage in ridiculous censorship instead of fostering an open discussion, streets team. I don’t see anyone else having their entire commenting history made to disappear by a spam filter.

      1. Bill LindekeBill Lindeke

        Hi Wayne:

        We’re working on a specific commenting policy that lays out how and why we make decisions about comment moderation, as well some of the reasoning behind it and that we’re trying to shoot for with our comments section.

        My goal is to be transparent about how this is done, and I hope we’ll get there quite soon. That said, some of your comments have been over the admittedly-grey-area line that our volunteers have drawn, so it is what it is. Apologies if that rubs you the wrong way, but for the vast majority of comments on this site (99%+) we do not moderate or delete anything at all.

        1. Wayne

          Fair enough, although I get the impression it may be more of a personal grudge considering the way certain people feel about me in other forums. If the idea is to exclude my input wholesale then so be it, but that doesn’t seem like a good way to foster discussion. If there are well defined rules I can stay within them, but having an entire body of posting history erased because someone doesn’t like something I said or the tone I said it in is a bit draconian.

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