The Effects of the Minneapolis 2040 Plan in 2020 and Beyond

The irony of the new 2040 Plan in Minneapolis is that land prices will go up even faster.  More Investors are going to enter the market because of the zoning change and will be looking to demo starter homes to make way for new triplexes.  There will be transactions all over Minneapolis with this purpose.  This is good for the city because a new triplex is valued at $800,000, versus a small starter single family home that would be worth around $200,000.  So the 2040 plan is going to generate a lot more tax revenue for the city, but it's not so good for the first time home buyer that wanted to buy a $200,000 starter home because now it doesn't even exist.  

I don't think there will be a massive increase in these types of transactions in 2020, but more of them will happen that wouldn't have without the zoning change.  So prices for the small starter homes will get squeezed up.  The strong economy and low inventory would push prices up anyways, but this change will accelerate price increases. Once you demo the small cheap house and build a big one you lose the small house forever.  So rental units will slowly increase in the missing middle market, but at the expensive of cheaper starter homes for sale.  As a result, there will be fewer starter home available and that will push prices up for the ones that are left.  So this change is going to have a big effect on the market.

Despite the price increases, I still like the zoning change.  The change gives the market more flexibility to create creative housing units. Owning a duplex or triplex if the numbers work isn't a bad idea.  It's a pretty safe investment if you get a good property and maintain it well.  I have long been an advocate of duplexes for my clients, not many end buying duplexes, but some do.  If you have been reading my blog you know I built and remodeled a duplex this last year so I know about them all too well.  Owning a home takes work and money so it is really important to work with an experienced realtor when buying.  It also helps to work with an experienced builder or general contractor if you are interested in converting your home into a duplex or triplex some day.