Housing Affordability Is Slipping in Minnesota—State Policy Can Help

Housing affordability has become one of Minnesota’s biggest issues: A young family can’t buy its first home, a nurse or teacher must move farther from work, a business struggles to hire because workers can’t find a nearby place to live.

The cause is clear—Minnesota hasn’t built enough homes to keep up with demand. When supply falls behind, prices rise faster than wages—and waiting to address the problem makes it harder to solve.

The good news is that Minnesota can fix this, despite the urgent challenge.

A recent report from the Housing Affordability Institute shows Minnesota’s homeownership rate declined in 2024, and more than half of households can no longer afford the median cost of a previously occupied home, while roughly three-quarters can’t afford the median cost of a new home. That’s not a niche problem—it’s a middle-class squeeze.

The situation is straightforward: There are too few homes, with heavy competition for each of them. When regions don’t build enough, prices rise, rents increase, and it becomes harder for families to save for a down payment. One response is to make it easier to build by-right, especially when the state sets clear, consistent rules that empower communities to grow.

Based on Minnesota’s housing market, our best estimate is that modest changes such as making building easier—for apartments on commercial streets, small-lot starter homes, townhouses, homes such as duplexes or fourplexes, and accessory dwelling units—could enable the construction of about 11,000 additional homes per year. That pace would put Minnesota on track to close its housing shortage in less than a decade and improve affordability each year.

So what does that look like in practice?

First: allowing starter homes on smaller lots in new subdivisions. Large minimum lot sizes quietly push builders toward larger, pricier homes, because land is expensive and they have to spread that cost over each house they sell. When smaller lots are allowed, builders produce homes at 15-20% lower price points—without subsidies.

Second: allowing more housing options on existing lots. Clear rules that permit duplexes, townhomes, and accessory dwelling units add homes gradually, creating attainable ownership opportunities and easing pressure on rents.

Third: allowing homes near jobs and shopping. Minnesota has vast amounts of underused commercial land and is struggling with vacant offices and storefronts. Allowing housing in commercial areas helps workers live closer to their jobs and takes better advantage of existing infrastructure—15 states have enacted a version of this policy.

These are practical ideas—and they have appeal across the political spectrum. For conservatives, these policies are market-driven and respect property rights. For progressives, they expand access and reduce displacement pressure. For environmentalists, they reduce sprawl. For employers, they support a stable workforce.

That broad appeal is why housing reform has gained national momentum. States as different as Texas, California, Montana, Washington, and Oregon, as well as Midwestern neighbors such as Iowa, Wisconsin, and Ohio have already passed legislation allowing more homes. Minnesota has not.

City leaders often hesitate because the most vocal opponents dominate public meetings, even when their perspective doesn’t reflect the broader community. And because housing markets are regional, no town can solve affordability on its own. State action helps by setting clear standards and reasonable guardrails.

Some critics argue that allowing more housing won’t produce enough supply, often pointing to Minneapolis. But Minneapolis’ experience offers two lessons. The city legalized duplexes and triplexes, yet left key standards—like floor area limits—largely unchanged, so these light-touch projects remained difficult to build. But the city saw strong results in areas where rules were simple and predictable—especially along commercial corridors where apartments fit in. With clear standards that make additional homes possible, builders respond and affordability improves.

The cost of waiting is real. Minnesota’s housing shortage is associated with billions in lost economic activity and tens of thousands of jobs not created. It also shows up in everyday life: longer commutes, higher rents, and young families postponing major life decisions. Every year of delay compounds the shortage.

Minnesota hasn’t always faced today’s level of housing pressure. With tried-and-true reforms, housing affordability could be within reach and give thousands of Minnesotans a place to call home.

Tobias Peter is a senior fellow and co-director of the American Enterprise Institute's Housing Center. Alex Horowitz is a director with The Pew Charitable Trusts’ housing policy initiative.

This op-ed was first published by Minnesota Reformer on March 9, 2026.