Bloomington's ordinance requiring affordable housing in multi-unit developments has brought mixed results

Bloomington has one of the strongest affordable housing statutes in the state, and it's working — to a point.

Housing is considered affordable if its cost represents 30% or less of the area median income, which in the Twin Cities is calculated at $124,000 for a family of four.

Bloomington is exceeding goals for those at the higher end of the affordable-housing scale.

But like cities throughout the metro area, Bloomington still falls far short of supplying enough homes for the city's lowest-income residents, according to the Metropolitan Council, which has set goals for all cities in the metro based on projected need.

"Bloomington has one of the most flexible and incentive-based inclusionary zoning policies that we have seen in the metro area, and it's because of that they got the results they've achieved," said Cecil Smith, CEO of Minnesota Multi Housing Association.

Six years ago, Bloomington's City Council passed an ordinance requiring developers of new housing to designate a percentage for lower-income residents.

Bloomington's ordinance uses an approach generally called inclusionary zoning, requiring developers to include affordable homes in new construction. In Bloomington, new developments of 20 or more homes must include at least 9% at affordable rates.

Alternatively, developers can contribute land or money to an affordable-housing trust fund in lieu of building the units themselves. Subsidies from the fund support other construction of affordable homes.

In exchange for complying with the requirement, developers can choose from various incentives — including reduced parking-space requirements, alternative exterior building materials and various public financing options — to help trim their building costs.

Although several other cities have since passed similar laws with differing structures, Bloomington's is one of the most specific and detailed, said John Schadl of the Metropolitan Council.

That's why experts call it one of the strongest in the state.

Since 2021, Bloomington has been working toward a goal the Metropolitan Council has given the city for construction of new affordable housing units by 2030. Altogether, the goal is to create 842 new homes, of which 743 have been built.

Except almost all of those new homes are for those in the higher end of qualified incomes, which represents less than half of the council's total goal. The city has fallen far short of the council's goal for homes at the lowest price level.

"Bloomington has definitely made an effort to take a bite out of the need," said Kim Berggren, the city's community development director. "It's a heavy lift, and there's a long way to go for Bloomington and the rest of the region to close the gap between the need and the availability."

The goal in Bloomington in the lower end of the income scale is 445 homes by 2030. So far, the city has produced 40.

Income at that level — 30% of median income — is just over $37,000 for a family of four. At that level, rents considered affordable range from $650 to about $1,100.

Many experts, developers and affordable-housing advocates say more public funding is needed to make the construction of homes at the "deeply affordable" level financially feasible.

Cities across the metro are facing the same problem, said Sarah Berke, the Met Council's senior manager for housing and livable communities. In fact, a 2024 council report showed most cities produced no deeply affordable homes in the previous three years.

"We're doing a great job of meeting the need at higher levels," Berke said. But "the region is not on track to meet the need" for lower-rent homes.

The barriers to building deeply affordable housing include cost and regulations, she said.

Currently, 27% of households in the metro area are paying more than 30% of their income for housing, she said.

In Bloomington and elsewhere, building homes priced low enough for people at the lowest income levels is not financially feasible without sufficient public funding, said Smith, whose Multi Housing Association represents those who build and manage complexes.

"The profound struggle to afford safe and attainable housing is tragically real for far too many Minnesotans," said Dan Collison, a former pastor and civic leader who has worked on affordable-housing projects in the Twin Cities.

"Those who face extreme poverty and homelessness should be everybody's concern," he said. "The profound struggle to afford safe and attainable housing is tragically real for far too many Minnesotans."

However, as senior director of business development and public affairs for Minneapolis-based Sherman Associates, Collison said it has become even more challenging to develop affordable housing.

Financial obstacles include dwindling public resources in forms such as grants and rent assistance, higher interest rates, and higher costs for property operations and insurance. President Donald Trump's tariff plans could add even more costs by disrupting supply chains, he said.

Collison said more financial incentives need to be in place because of the associated risks.

"The key to policy success is always maintaining requirements and incentives," Collison said. "If this gets out of balance, development will stall out."

Communities select their own mix of tools, requirements and incentives to encourage construction of affordable housing. The Legislature is also considering several bills with bipartisan backing intended to increase the supply.

Nicholas Julian, director of land use for the National Association of Home Builders, agreed that revenue from affordable homes can't cover the cost of building them, at least at deeply affordable levels.

In addition to rising costs for land, materials and labor, developers also pay fees to local government, Julian said, primarily for new schools, road construction and other infrastructure needed to serve more residents.

"I think right now, the private builder industry and the public mayors and city council officials are on the same team," Julian said.

Affordable rent also doesn't cover the costs of operating the housing once it's built, such as insurance, security and building maintenance, Smith said.

"If we're going to have this as part of our housing stock into the future, we're going to have to think about not just construction subsidies to create it but also operating subsidies," he said.

Another way to help lessen the problem would be changing zoning laws to allow more densely spaced homes, Julian said. Called "upzoning," it means allowing smaller lawns and construction of multi-family units in areas previously limited to single-family houses. But residents often oppose those strategies.

"Upzoning is framed, a lot of times, as like the city is destroying the character of your neighborhood and destroying single-family zoning," Julian said.

But upzoning still permits single-family houses, albeit interspersed with multi-unit dwellings, a pattern that was once common in residential areas, he said.

Ed Goetz, a professor of urban and regional planning at the University of Minnesota, agreed on the value of upzoning, saying the current situation "calls for an all-hands-on-deck" response to housing shortages, both affordable and market-rate.

"The diagnosis there is that we have simply too much land that is set aside for very low-density housing," he said.

Berke sees cause for optimism, in Bloomington and other communities.

"It's really not hopeless, because although we're not meeting our needs, we've gotten better at doing this over the years," she said. "Cities are adopting better policies, like inclusionary zoning, to support affordability, and also just making it easier to build housing of different types in a more market-responsive way."