Minneapolis will resume permitting multifamily housing developments under its 2040 Comprehensive Plan, the Minnesota Court of Appeals having again reversed a District Court order that ground the plan to a halt.

The ruling, issued Monday, found that the decision to suspend the plan last fall had been "based on legal error," was unsupported by evidence and imposes "unnecessary hardship" on the city of Minneapolis.

The order is the latest of several reversals in the environmental lawsuit brought by Smart Growth Minneapolis, Minnesota Citizens for the Protection of Migratory Birds and the Audubon Chapter of Minneapolis in 2018. It means housing projects stalled as a result of the litigation may resume — for now.

"The city is thankful for today's ruling by the Court of Appeals reversing the injunction on the Minneapolis 2040 Plan," said city spokeswoman Greta Bergstrom.

But Bergstrom noted the Court of Appeals ruling is not the end of the 2040 lawsuit, and that it's possible that permitting may stop and restart again.

"It is critical that the state continue the path toward legislative clarification to ensure local jurisdictions across Minnesota, including Minneapolis, are able to move forward with much-needed affordable housing projects, focus on undoing racial barriers and the crucial work to address the climate crisis without the threat of costly litigation," she said.

Smart Growth has vowed to appeal Monday's ruling to the state Supreme Court while the Legislature considers whether to intervene in the case, which has snarled housing development across Minneapolis.

Legal wrangling over Minneapolis' historic liberalization of zoning laws to end single-family exclusive neighborhoods and permit denser housing has dragged on for the past five years. Smart Growth argued that the densification permitted under the plan risked polluting natural resources, paving over green space and displacing low-income residents, which the city should have studied before approving the plan. But the city has long resisted, saying environmental reviews are for individual projects with known specifications, rather than comprehensive plans with theoretical parameters.

In 2022 the Minnesota Supreme Court sided with the plaintiffs by finding that citizens were entitled, under the Minnesota Environmental Rights Act, to challenge municipal comprehensive plans. District Judge Joseph Klein then ordered the city of Minneapolis to conduct the requested environmental review or throw out the 2040 Plan. Multifamily housing projects across the city were suspended as the city of Minneapolis appealed the injunction and lobbied the Legislature to change MERA in order to exclude comprehensive plans from environmental challenges.

The Court of Appeals order, written by Judge Keala Ede, said the citizen groups seeking injunctive relief — not the city — should bear the burden of providing evidence that it is necessary, and will not impose unnecessary hardship for Minneapolis, to cease implementation of the 2040 Plan pending environmental review.

"Although summary judgement in favor of Smart Growth's MERA claim was based on the theory that a full build-out of the 2040 Plan would materially adversely affect the environment, the district court also noted during this litigation that there is no evidence of environmental harm resulting from the 2040 Plan while it was in effect," wrote Ede. "Thus, viewing the evidence in the light most favorable to the district court's finding that anything less than a complete injunction against ongoing implementation of the residential development portions of the 2040 Plan would be inadequate to safeguard the environment, we are left with a definite and firm conviction that a mistake has been committed because that finding is not reasonably supported the evidence as a whole."

Smart Growth's lawyer Jack Perry called the Court of Appeals ruling "upside down."

He said that while the Supreme Court has already ruled that citizens may challenge comprehensive plans under MERA, which both district and appeals courts have concluded that Minneapolis has violated, environmental review must be conducted to establish evidence of how the environment has been harmed. Otherwise, any citizen group that challenged a city's comprehensive plan would have to first conduct an environmental review on behalf of the city in order to produce enough evidence to satisfy their demand for the city to conduct environmental review, which "no one can afford."

"No one knows what the impact is of the 2040 Plan because you need to do an environmental review to find out," Perry said. "How could any plaintiff come forward and do that research?"

A bill to end the 2040 lawsuit passed the Minnesota House of Representatives last week. Two amendments added to the Omnibus State and Local Government Bill would shield other cities from facing similar environmental challenges initiated by citizens.

"We are appreciative of legislative efforts to act in providing clarity for not only Minneapolis but for cities across Minnesota," said Minneapolis Mayor Jacob Frey in a statement.