Upzoning and Single-Family Housing Prices

Abstract

Problem, research strategy, and findings In December 2018, the Minneapolis (MN) city council approved a new comprehensive plan that proposed eliminating single-family zoning restrictions throughout the city. In this project, I study the initial impact of this change on the sales prices of affected housing units. I estimate a series of difference-in-differences models comparing the sales price of houses within 3 km of the Minneapolis border in the year before and year after the city adopted the plan. I find that compared with similar unaffected properties in surrounding cities, the Minneapolis plan change was associated with a 3% and 5% increase in the price of affected housing units. In addition, there is some evidence that this price increase is due to the new development option it offers property owners. I find that the plan-related price increases are larger in inexpensive neighborhoods and for properties that are small relative to their immediate neighbors. Takeaway for practice By examining the short-term effect of the Minneapolis 2040 Plan’s elimination of single-family zoning, my study is useful for planners working in cities considering similar reforms. My analysis, though preliminary, suggests that there is indeed demand for denser development in the city. But the price increases associated with the upzoning redounds most directly to relatively small properties and those in inexpensive neighborhoods. Planners should thus be sensitive to how this type of change can affect housing affordability and housing stock diversity.