Naturally Occurring Affordable Housing Shortage Rooted in Downzoning of 1970s

Efforts are underway to preserve existing “naturally occurring affordable housing” (NOAH) in Minneapolis. A $25 million loan program created by the Greater Minnesota Housing Fund (GMHF) will provide non-profit housing organizations with low-interest loans in order to purchase and preserve existing NOAH properties.

What is a NOAH property? The GMHF site puts it this way:

NOAH stands for Naturally Occurring Affordable Housing. It refers to residential rental properties that are affordable, but are unsubsidized by any federal program. Their rents are relatively low compared to the regional housing market.

NOAH properties are typically Class B and Class C rental buildings or complexes with 50+ units, built between 1940 and 1990. Rents are lower-ranging, generally between $550 and $1,200 per month, affordable to low- and moderate-income households.

A vast majority of current NOAH properties in Minneapolis were not built to provide affordable housing. They were built as market-rate apartments, and have gradually become less expensive as time passes. As a building ages, it becomes more affordable, meaning that “a 50-year-old home is typically occupied by someone whose income is about 60 percent lower than that home’s first occupant.“ I’ve rented in Minneapolis for over 15 years, and the newest building I’ve been able to afford was built in 1968.

Graph demonstrating increase of housing affordability over time

Graph demonstrating increase of housing affordability over time

If aging housing stock is the key to affordability, why aren’t we seeing more multi-family buildings age and become affordable? In the mid-1970’s, the city stopped allowing them to be built. Around this time, neighborhood organizations in Minneapolis lobbied to change zoning rules in order to prevent the construction of 2.5 story walkup apartments. These efforts were largely successful. From the October 11, 1975 Star Tribune, under the headline “Anti-apartment zoning approved”:

Extensive zoning changes to prevent the spread of apartment-building areas in four south Minneapolis neighborhoods were approved unanimously by the Minneapolis City Council.

How extensive were these changes? Zoning maps from the 1970’s provide some insight into where zoning changes were made.

Zoning map of Lowry Hill East and Whittier neighborhoods from 1972

1972 zoning map of the Whittier and Lowry Hill East neighborhoods on the right. R6 zoning allows for apartments to be built as the highest potential land use (though less intensive uses, such as building a triplex or converting a single-family home into one, are also allowed)

Map of Lowry Hill East and Whittier neighborhoods from 1975

1975 zoning map of the same neighborhoods. Much of the R6 zoning has been replaced by more restrictive R2B zoning, which only allows for the construction of duplexes as the highest potential land use.

In the above, we see areas that were zoned R6 (apartment zoning) changed to R2B (single-family and duplex zoning). If the above zoning map looks like some diabolical jigsaw puzzle, it’s for a reason. Existing multi-family buildings were largely “carved out” in order to allow those buildings to be rebuilt in the event of a catastrophe. This means many areas zoned R6 already have existing apartment buildings on them, making them poor candidates for new construction. (It rarely makes financial sense to tear down an apartment to build a new one.) Further changes in the zoning of this area since 1975 has further diminished even medium-density land use possibilities (such as fourplexes), and has restricted high and medium-density zoning to very small areas, many of them also already occupied by existing apartments.

Map of Lowry Hill East and Whittier neighborhoods from 2016

2016 zoning map of Lowry Hill East and Whittier. Note most R6 zoning has been pushed into a very small section of these neighborhoods, and has largely been replaced by R2B.

This downzoning was not just limited to the Lowry Hill East and Whittier neighborhoods. Large swaths of south Minneapolis nearest to downtown underwent similar changes in order to prevent the construction of apartments. The area that was downzoned is closest to the downtown core, bounded by Hennepin to the west, Hiawatha to the east, 36th Street to the south, and I-94 to the north.

What impact does this have on the future of NOAH in Minneapolis? By artificially limiting multi-family housing construction over 40 years ago, the decisions of city leaders and neighborhood homeowners  has directly contributed to our current and ongoing affordable housing shortage. The lack of housing constructed since 1975 means very few additional NOAH units will be coming online anytime soon.

The negative impacts of these zoning changes are amplified by our rapid population growth. Minneapolis has added roughly 40,000 residents in the last 7 years, which has made our affordable housing shortage even worse. With limited areas where new apartments are allowed, property management companies have turned to renovating existing NOAH buildings and raising rents, hence the need for a NOAH preservation fund. While preserving these existing NOAH buildings is important, Minneapolis cannot preserve its way out of a housing shortage.

Current zoning that limits the construction of new housing has encouraged property management companies to snap up the limited supply of older apartment buildings. A 20-unit brownstone, where I once rented, sold for $450,000 in 2010, and now has an estimated worth of $1.5 million–all without any major renovations! No new apartments have been built nearby, forcing renters who wish to live in the area to choose between only a few available buildings. This massive spike in value is also shared by other nearby housing; due to scarcity of available housing, the value of single-family homes and apartment buildings nearby have risen in a similar fashion.

Naturally Occurring Affordable Housing (NOAH) apartments in Whittier

Two small examples of NOAH buildings, constructed 100 years ago but which are largely prohibited today due to zoning restrictions (and parking requirements).

While the misguided downzoning of the 1970s may have been done with good intentions, such as preventing teardowns, the effects of these downzoning efforts have created a housing shortage across the city. Property values are soaring in areas like Lowry Hill East and Whittier, where high demand combined with restrictive zoning has made it difficult and expensive for those who want to live in these desirable areas. These neighborhoods have access to amenities like high-frequency bus lines, walkable neighborhood interiors, nearby lakes, shopping, etc. Restrictive zoning means that instead of allowing more residents to enjoy the benefits of city living, these benefits are only available to those who either purchased property decades ago, or those who can afford to pay a premium for access to these increasingly desirable amenities.

Moving forward, we need to assess how the downzoning craze of the 1970s has contributed to the housing shortage that exists today. It’s time to re-examine these changes in the context of our current housing crisis and come up with a compromise that allows more housing to be built.

To quote an old Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.” The same applies to housing. If we want future generations to have access to naturally occurring affordable housing (NOAH), we need to build housing now, and we need zoning that allows for it.


Additional maps:

Minneapolis Zoning Plate #24 from 1972

Minneapolis Zoning Plate #24 from 1972

Minneapolis Zoning Plate #24 from 1975. High-to-medium density (R3 to R6) areas removed in favor of more restrictive R2B zoning.

Minneapolis Zoning Plate #24 from 1975. High-to-medium density (R3 to R6) areas removed in favor of more restrictive R2B zoning.

Minneapolis Zoning Plate #25 from 1972

Minneapolis Zoning Plate #25 from 1972

Minneapolis Zoning Plate #25 from 1975. Again, we see areas where apartments were previously allowed changed to prevent their construction, replaced with R2B zoning.

Minneapolis Zoning Plate #25 from 1975. Again, we see areas where apartments were previously allowed changed to prevent their construction, replaced with R2B zoning.

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.