COMMENTS OF THE INSTITUTE ON METROPOLITAN …

COMMENTS OF THE INSTITUTE ON METROPOLITAN OPPORTUNITY

ON THE MINNEAPOLIS DRAFT 2040 PLAN

The City of Minneapolis professes to want to use the comprehensive planning process to attack long-

standing patterns of racial and economic exclusion and inequality within its borders.

If so, the city’s challenge is threefold:

• Improve access to exclusive, prosperous neighborhoods, ensuring that their opportunities are not only available to the white and affluent.

• Protect diverse neighborhoods, preserving their racial and economic integration and preventing any decline towards poverty and segregation.

• Revitalize segregated neighborhoods, finding ways to increase neighborhood investment, and eliminating discriminatory policies that continue to concentrate poverty in those areas.

The following comments on the Draft 2040 Plan are offered to assist the city towards that end. They

consist of three broad sections. In the first, we review the legal fair housing obligations faced by the city

– obligations that bind Minneapolis even during this planning process. In the second, we offer support

for the most integrative and forward-thinking component of the Draft 2040 Plan: the proposal to allow

up to four housing units on all residentially zoned lots. In the third, we discuss the plan’s greatest

deficiency, which is its failure to directly discuss or confront the absolutely critical issue of concentration

of poverty.

Following the comments is an appendix, which includes a number of tables showing the ways in which

Minneapolis residents and housing types are currently segregated by race and income. Although some

of these tables are referenced periodically throughout the comments, the full set is included as a

reference. They are also included as a reminder: whatever happens during the community comment

process, these undeniable geographic disparities remain. They will continue to remain, until the city

finally, fully, and forthrightly confronts them.

I. MINNEAPOLIS’S FAIR HOUSING OBLIGATIONS

Minneapolis is subject to several legal fair housing obligations. These must govern its policymaking

choices, including choices made during the comprehensive planning process. Those obligations include:

• Commitments made during the resolution of a HUD fair housing complaint against the city.

• The duty, under the Fair Housing Act, not to “perpetuate segregation” or “otherwise make

available” housing in fashion that creates a disparate impact on a protected class, including

racial groups.

• The duty, under the Fair Housing Act, to “affirmatively further fair housing,” by taking proactive

steps to overcome

Following is a more complete description of those obligations.

HISTORY OF THE HUD FAIR HOUSING COMPLAINT AND VOLUNTARY COMPLIANCE AGREEMENTS

In 2014, neighborhood organizations and a local fair housing group filed a HUD fair housing complaint

was filed against Minneapolis, Saint Paul, and the Minneapolis/Saint Paul Housing Finance Board. The

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complaint alleged in part that the cities’ policies had concentrated affordable housing in low-income and

segregated areas, in violation of various federal civil rights obligations. The complaint took special note

of the concentration of Low-Income Housing Tax Credit (LIHTC) units in segregated areas.

The complaint ended with both cities entering a compliance agreement with HUD, in which they

committed to revise an important civil rights document called an Analysis of Impediments to Fair

Housing. This document, developed on a regional basis by the Fair Housing Implementation Committee,

describes fair housing problems in the region and makes recommendations to address those problems.

The previous submission had been deeply deficient, completely ignoring the problem of segregation and

poverty concentration, and admitting no government role in these (or any other) problems.

In the agreement with HUD, the cities promised major revisions – effectively, a redo of the entire

document – which would “focus on integration and segregation in the region.” The new document

would specifically address “the extent to which . . . housing-related activities and policies affecting

affordable housing reinforces racial or ethnic concentrations of poverty or perpetuates racial or ethnic

segregation.” It would also address “[t]he extent to which the recipient’s administration of its Low

Income Housing Tax Credit (LIHTC) allocations reinforces existing racial or ethnic concentrations or

perpetuates racial or ethnic segregation.”

In the binding compliance agreement, the cities agreed to “undertak[e] actions necessary to overcome

the impediments identified in the analysis.”

FAIR HOUSING ISSUES IDENTIFIED IN THE REGIONAL ANALYSIS OF IMPEDIMENTS

The revised Analysis of Impediments was lengthy – 230 pages and incorporating a 1600-page appendix –

and identified a number of fair housing issues across the region. The reworked analysis made a number

of findings related to the scope of the voluntary compliance agreement. These include:

• “Residing in a high poverty community can have negative effects on physical and mental health

and often leads to poorer educational outcomes . . . Over generations, these sorts of

educational disparities reduce income potential and impede economic mobility.”1

• “Along with poorer school quality, living in a ACP50 tract [a racially concentrated area of

poverty] also tends to increase exposure of residents to crime.”2

• “There is a need for expanded distribution of affordable housing across the region.”3

• “Regulations, policies, and funding availability impact levels of publicly-subsidized and private-

market affordable housing development across the region.”4

The Analysis of Impediments also made specific findings related to the share of tax credit subsidized

units created or preserved in racially concentrated areas of poverty. Overall, 56 percent of Minneapolis

tax credit units were in concentrated areas.5 This compared to a total of 11.9 percent of units created in

concentrated areas by the state housing finance agency.6

1 FAIR HOUSING IMPLEMENTATION COUNCIL, ADDENDUM TO THE 2014 REGIONAL AI 205 (2016). 2 Id. 3 Id. at 211. 4 Id. at 212. 5 Id. at 152. 6 Id.

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The first broad recommendation made by the revised Analysis of Impediments was as follows:

Investment in construction of new affordable housing should prioritize expanding

affordability regionally and within jurisdictions, including in areas with access to

opportunity, as defined through a community engagement process, that may include,

but are not limited to, quality schools, transportation, economic opportunity, and other

public resources. Construction of new units in areas of concentrated poverty, and

particularly in areas of concentrated poverty where 50% or more of the residents are

people of color, should be considered only as part of a comprehensive community

investment strategy to address targeted community housing needs. Preservation of

existing affordable housing in these areas should be prioritized over new construction.7

The Analysis of Impediments also includes specific policy goals and recommendations. Notably, these

include:

Goal #6: Expand Locations of Affordable Housing

When affordable housing is limited to some communities and lacking in others, the effect

is decreased housing choice for residents of the region.

. . .

6B Amend zoning maps as appropriate to rezone large-lot single-family zones to higher

density/lower minimum lot area standards and allow for infill development or conversion

of large single-family dwellings to two-family and triplex units to allow more density on

the same footprint or minimum lot size.

. . .

6D Consider development incentives such as density bonuses and expedited permitting

processes or fee waivers for voluntary inclusion of affordable units or mandatory set

asides . . .8

In other words, as a result of the HUD complaint process, one impediment to fair housing recognized by

Minneapolis was the lack of affordable housing in areas of high opportunity. In addition, the same

analysis identified a historic tendency of Minneapolis to concentrate low-income units in segregated and

low-income areas. Increasing density, including in single-family zones, is repeatedly cited as a policy the

city could undertake to expand the location of affordable housing. Whichever recommendations the city

implements, it has committed to reducing and overcoming the impediments to fair housing recognized

as a result of the complaint.

OTHER CIVIL RIGHTS OBLIGATIONS

Beyond the obligations created by the HUD fair housing complaint and its resolution, Minneapolis and

Saint Paul face standing civil rights obligations rooted in federal law, and particularly, in the

requirements of the Fair Housing Act.

7 Id. at 221. 8 Id. at 227-28.

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First, §3604 of the Fair Housing Act forbids practices that “otherwise make [housing] unavailable” on the

basis of race.9 This phrase has a lengthy statutory history and has been held to forbid practices that

perpetuate racially segregated living patterns.10 This component of the law, known as the “perpetuation

of segregation” cause of action, has been reaffirmed by federal appellate courts.11 In 2013, this cause of

action was standardized in federal regulation, in a rule adopted by the Department of Housing and

Urban Development.12

Importantly, the perpetuation of segregation cause of action and other §3604 claims do not require a

showing of intent by plaintiffs. Instead, the Supreme Court has held they are only require a showing that

the offending policy has a racially disparate impact, or a disparate impact on another protected class.13

The other major requirement in the Fair Housing Act is §3608, which contains what has long been

known as the Fair Housing Act's “affirmatively furthering” requirements.14 This provision obligates

federal agencies, particularly HUD, to conduct their program activities in a way that promote fair

housing. In part because prior civil rights laws had already implemented antidiscrimination standards for

federal agencies, the Fair Housing Act's provision is understood to require that agencies affirmatively

pursue greater racial integration.15 Although these provisions are focused on the federal government,

they also require HUD to operate its various local funding programs in a way that “affirmatively

furthers” fair housing. Thus, this civil rights requirement is effectively passed down to local agencies

receiving federal housing funding. Minneapolis is one such entitlement jurisdiction.

A federal district court has held that a local entitlement jurisdiction’s failure to satisfy the “affirmatively

furthering” requirements of §3608 is sufficient to withhold federal HUD funding from the jurisdiction.16

And HUD itself has issued regulations formalizing the imputation of these requirements on state and

local governments receiving federal funding.17

9 42 U.S.C. § 3406(a). 10 See, e.g., Texas Dep’t of Hous. and Cmty. Affairs v. Inclusive Communities Project, 576 U.S. ___ (2015), slip op. at 18; Avenue 6E Invs. V. City of Yuma, 818 F.3d 493, 503 (9th Cir. 2016); Graoch Assocs. #33, L.P. v. Louisville/Jefferson Cnty. Metro Human Relations Comm’n, 508 F.3d 355, 378 (6th Cir. 2007); Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 937 (2d Cir. 1988); Metro. Hous. Dev. Corp. v. Vill. of Arlington Heights, 558 F.2d 1283, 1290 (7th Cir. 1977). 11 Id. 12 24 CFR §100.500; see also Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed. Reg. 11459 (2013). 13 Texas Dep’t of Hous. and Cmty. Affairs v. Inclusive Communities Project, 576 U.S. ___ (2015) (“The Court holds that disparate-impact claims are cognizable under the Fair Housing Act . . . .”). 14 42 U.S.C. § 3608. 15 See, e.g., NAACP, Boston Chapter v. Sec’y of Hous. and Urban Dev., 817 F.2d 149, 154 (1st Cir. 1987) (“[T]he history of Title VIII suggests that its framers meant to do more than simply restate HUD's existing legal obligations.”); Shannon v. U.S. Dep’t of Hous. and Urban Dev., 436 F.2d 809, 817 (3d Cir. 1970) (“Read together, the Housing Act of 1949 and the Civil Rights Acts of 1964 and 1968 show a progression in the thinking of Congress as to what factors significantly contributed to urban blight and what steps must be taken to reverse the trend or to prevent the recurrence of such blight.”). 16 United States of America ex rel. Anti-Discrimination Center v. Westchester County, 668 F.Supp 548 (2009). 17 Affirmatively Furthering Fair Housing, 80 Fed. Reg. 42272 (2014).

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II. THE FOURPLEX PLAN SHOULD BE ADOPTED

The most publicly remarked and controversial component of the 2040 Plan is also its single best

innovation: the proposal to allow up to four dwelling units on all residential lots.

This proposal, referred to below by its popular moniker the “fourplex plan,” has the potential to be a

tremendous step forward for fair housing and residential integration in Minneapolis. Reasons include:

• The fourplex plan is a simple way to leverage the market to provide greater housing

affordability, particularly for an income segment where public subsidy is insufficient.

• The fourplex plan erodes one of the major barriers to greater racial and economic integration in

Minneapolis.

• The most common community objections to the fourplex are rooted in an erroneous

understanding of the interactions of housing development and housing costs.

• Reducing the fourplex plan may raise legal fair housing questions.

Extended comments in favor of the fourplex plan follow.

SUBSIDY PROGRAMS ARE INSUFFICIENT TO MEET MINNEAPOLIS HOUSING DEMAND

When it comes to housing supply, Minneapolis has a “missing middle.” While the city has the region’s

largest number of housing units by a substantial margin, much of that housing comes at the two ends of

the income spectrum. At the high end, Minneapolis has a large number of expensive homes and housing

units only affordable to those making more than 80 percent of median income (and often, substantially

more). These are concentrated in the city’s whitest and most affluent neighborhoods.

At the other end of the spectrum, Minneapolis has a hugely disproportionate share of the region’s

lowest-income housing. Because much of this housing is subsidized and income-restricted, it is

inaccessible to those in the middle class. Moreover, many of the lowest-income units are in very poor

and segregated neighborhoods, where demand for new housing is extremely low. Forced to choose

between an affordable unit in a segregated neighborhood with limited amenities and inadequate

neighborhood schools, many families will opt to seek out a similarly affordable unit in a Twin Cities

suburb.

Minneapolis contains approximately 13.5 percent of regional population, and about 15 percent of

regional housing units. But it contains 23 percent of the region’s housing affordable at 30 percent of

area median income or less, and 33.5 percent of the region’s subsidized affordable housing units.

However, when it comes to housing affordable at working-class incomes, Minneapolis’s regional

overshare vanishes. It only contains 19 percent of regional housing affordable at 30-50 percent of area

median income, and 15 percent of housing affordable at 50-80 percent of area median income.

Moreover, because middle and working-class people vastly outnumber families in extreme poverty, a

shortfall of middle-income housing represents a far larger number of absolute units. For instance, while

Minneapolis’s approximately 20,000 very-low-income units represent a regional surplus, its

approximately 70,000 workforce units represent a shortfall compared to the rest of the region. In other

words, to fill this “missing middle,” Minneapolis would need to produce thousands or tens of thousands

of new units, affordable at lower-middle incomes.

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Although some sources refer to this shortfall as an “affordable housing shortage,” this description is

somewhat confusing.

Traditionally, “affordable housing” has been used interchangeably with “subsidized housing,” to mean

the very-low-income units, affordable at the poverty line or below, either publicly owned or constructed

at public expense. In order to create housing for very low incomes, subsidies are essentially required –

otherwise, developers will lose money on each unit and the housing will never be produced.

The other path to creating housing affordable at very low incomes is to allow demand for certain

existing units to fall precipitously, until market prices are so low that the housing can be acquired for a

pittance. But this approach is broadly unacceptable: the low price usually indicates that the unit is in a

state of severe disrepair, or is located in a neighborhood with extreme poverty and segregation.

Segregation, concentration, and ghettoization are not valid strategies for creating affordability.

Over time, however, the definition of “affordable housing” has expanded and become more ambiguous,

and begun to include units affordable up to 60 percent of area median income, or in some cases, up to

80 percent of area median income. In a comparatively affordable region such as the Twin Cities, these

definitions can be extremely broad. For instance, according to Met Council statistics, in 2015 over seven

out of every ten regional housing units was “affordable” at 80 percent of AMI.

Unlike housing for the very lowest incomes, this type of mid-range affordability can be produced at

market rates – and indeed, is often provided by the market. In fact, it would probably be impossible to

produce sufficient subsidized units to make even the smallest dent in the overall demand for mid-range

affordable housing. At present, the average construction cost for Minneapolis subsidized housing

projects is in the range of $250,000 per unit. Even if the city’s entire $10 million Affordable Housing

Trust Fund was redirected towards such projects, and leveraged at a 5-to-1 ratio for additional federal,

state, and private funding, the city could produce scarcely 200 units per year – a number lagging far

beyond private market production.

THE FOURPLEX PLAN AS AN AFFORDABILITY STRATEGY

A better approach for improving the availability of “missing middle” housing is to find ways to permit

the private market to produce many additional units, meeting rising housing demand with additional

construction.

At present, most private housing construction takes one of two forms. First, there is single-family

construction, in which an older unit is replaced by a new unit. However, this creates no net change in

housing units; in addition, the newly constructed dwelling is likely to cost considerably more than the

older dwelling. Second, there is larger-scale multifamily construction. These are major projects

containing dozens or hundreds of units. However, due to the scale, they require major, lengthy approval

processes, usually attract stubborn neighborhood opposition, and risk significantly altering their

immediate physical surroundings. There are also fears that, because so few new large buildings are

approved each year, developers only design such proposals when they can be especially profitable – i.e.,

when they can be rented for large sums as “luxury housing.”

Despite this, Minneapolis is still peppered with large numbers of small multiunit dwellings – duplexes,

triplexes, and fourplexes. These dwellings are distributed roughly evenly across the city in all

neighborhood types. (See Appendix, Table 14.) They fill roughly the same physical footprint as a mid-

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sized or large single-family home, and many were originally single-family homes that were eventually

converted to multiple units. When created by converting preexisting dwellings, these units also

represent a small-scale construction project, that can be undertaken by an owner and occupant or

landlord at relatively minor expense and in response to short-term increases in demand.

The 2040 Plan takes advantage of these dynamics by proposing to allow up to four units in all

residentially zoned lots. As preexisting patterns of duplex, triplex, and fourplex construction illustrate,

the result of such a change is unlikely to be the sudden conversion of whole swathes of the city to

multiunit housing. Instead, multiunit dwellings are likely to emerge invisibly, in places where demand is

high and existing owners see an economic opportunity in renting out more units.

Fourplexes will also very likely place downwards pressure on rents and home values compared to

existing trends. More units on the market mean more price competition between sellers and landlords,

and mean more housing demand can be met within the same geographic area. Beyond that, by renting

more units in a single building, a landlord is able to earn the same amount while charging everyone less,

making it easier to cover costs. Although residents are sometimes fearful that large-scale development

will increase housing costs by transforming an area into a high-amenity hub, restricting the proposal to

fourplexes avoids this issue – the addition of a handful of new neighbors is unlikely to have a noticeable

effect on an area’s overall demographic or economic characteristics.

The fourplex plan is not a panacea – there are areas of Minneapolis where it is unlikely to have any

effect at all. Most notably, in low-income and segregated areas where neighborhood housing demand is

already very low, the ability to place more units on a single site will likely have limited effect. The effects

of the plan are, instead, primarily likely to be concentrated in high-income areas where demand is high.

In this sense, the fourplex plan can be conceptualized as a “fair share” plan – it relies on the dynamics of

housing markets to ensure that the city’s wealthiest neighborhoods provide for their share of housing,

while doing little to disrupt lower-income neighborhoods.

THE FOURPLEX PLAN AS A FAIR HOUSING STRATEGY

Questions of housing affordability have a geographic dimension. Overall, Minneapolis is one of the

nation’s most affordable metropolitan areas. But that affordability is not evenly distributed. In the city’s

highest-opportunity neighborhoods, affordable units are hard to come by. As a consequence, low-

income residents have a difficult time accessing those neighborhoods, their amenities, and their high-

quality educational and economic opportunities.

The following tables illustrate this dynamic. Each table is a grid, with each square representing all the

city’s neighborhoods within a certain demographic range. The horizontal axis shows economic

demographics, while the vertical axis shows racial demographics. The percentages within the squares,

and the color coding of those squares, show the share of housing units located in neighborhoods with

the corresponding demographics. In general, the further towards the top left a square is, the whiter and

more affluent it is; the further towards the bottom right, the less white and less affluent.

Tables 1 and 2, below, show the distribution of single family detached housing units and family rental

housing with rent below $1,000. (In this instance, “family rental” is defined as housing with 2 or more

bedrooms.) As can be seen, the distribution of these two types of housing are dramatically different.

Over a third of single-family housing is in neighborhoods less than 20 percent nonwhite and 20 percent

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low-income. Nearly two-thirds is in neighborhoods less than 40 percent nonwhite and low-income.

Meanwhile, 55 percent of cheap family rental housing is in neighborhoods more than 40 percent

nonwhite and low-income.

These statistics suggest that predominantly white and affluent areas in Minneapolis suffer a severe lack

of affordable rental units. Because lower-income renters are disproportionately families of color, this

contributes to the high degree of racial segregation in the city. Lack of affordability effectively

constitutes a fence around certain areas of the city. (See the Appendix for more tables illustrating how

the city’s residents are concentrated geographically.)

The result of this affordability “fence” can be seen in Table 3, below, which shows the population share

of Minneapolis racial groups living in census tracts above and below the city’s median income. As can be

seen, a large majority of all nonwhite racial groups living in poorer-than-average tracts. This trend is

particularly severe for the city’s black residents – less than one person in four lives in a wealthier-than-

average area.

By contrast, over 60 percent of white city residents live in a tract that is above median income. For white

residents, Minneapolis is predominantly a city of prosperity; for nonwhite residents, it is predominantly

a lower-income city.

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Finally, Table 4, below, uses the same approach but shows the distribution of housing units by tenure

and type. Once again, there is a clear trend: rental housing, and especially lower-cost family rental

housing, is comparatively hard to come by in higher-income tracts. Meanwhile, owner units are

disproportionately sited in such tracts.

Because many of the units created by the fourplex plan are likely to be rental units, and because they

are likely to be relatively affordable compared to the preexisting units in the same neighborhoods, the

fourplex can be expected to help reverse these trends. By providing lower-income access to high-income

neighborhoods, the plan will likely erode some of the sharp racial and economic neighborhood

boundaries that define Minneapolis.

In other words, on top of being a strong housing affordability proposal, the fourplex plan represents a

major, practical, and easily-administered fair housing proposal. Its most likely effect will be to promote

integration, unwind segregation, and significantly improve housing choice and access to opportunity.

OBJECTIONS TO THE FOURPLEX PLAN SHOULD BE VIEWED SKEPTICALLY

Despite its many merits, detailed above, the fourplex plan appears to have attracted significant

community opposition. This opposition should not lead to the weakening of the plan.

Many misconceptions exist regarding the interaction of housing density and housing costs. Opposition

to greater density in current low-density or high-value neighborhoods often raises the specter of greater

costs, gentrification, and displacement. However, these fears, if genuine, are misguided. There is little

evidence that the addition of new units will increase housing costs or rents. Nationally, the trend has

been the opposite: cities that have increased the number of available housing units have tended to see

rents increase more slowly. (See Graph 1, below.)

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Local evidence points in the same direction. An examination of changing housing values in Minneapolis,

conducted by the Institute on Metropolitan Opportunity in 2016, showed that the highest median

housing values, by a very significant margin, were found in the Southwest and Calhoun-Isles areas, both

of which are residential areas that are fully built out and practically devoid of new development.18 In

fact, not only were the home values highest in these neighborhoods, they were growing faster than the

home values anywhere else in the city. (See Graph 2, below.)

This trend likely reflects two factors: high demand for housing in affluent, high-opportunity

neighborhoods served by high-performing schools, combined with an extremely scarce and unchanging

housing supply in these areas.

18 INSTITUTE ON METROPOLITAN OPPORTUNITY, ARE MINNEAPOLIS AND SAINT PAUL GENTRIFYING? DEBUNKING MYTHS ABOUT

NEIGHBORHOOD CHANGE IN THE TWIN CITIES 31 (2016), available at https://www.law.umn.edu/sites/law.umn.edu/files/imo_gentrification_study_final_january_2016.pdf.

MInneapolis

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Graph 1: Rental Costs and Housing Unit Growth, 2000-2016

(U.S. Central Cities, Top 50 Metros)

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Graph 2: Monthly Median Value of Family Homes (Zillow Value Index) Minneapolis, 2000-2015

Alongside fears of rising housing costs and displacement, residents have also expressed the opposite

fear: that large numbers of new housing units will somehow increase concentrations of poverty. There is

no reason to believe that new market-developed housing, without income restrictions, will cause

concentration of poverty in the surrounding neighborhood. Indeed, at present, small multiunit dwellings

– duplexes, triplexes, and fourplexes – are the dwelling type that most closely reflects the overall

distribution of population in the Twin Cities, and the type of multiunit dwelling least associated with a

high degree of poverty concentration and racial segregation.

Residents also frequently raise concerns about the impact of increased density on neighborhood

character, or otherwise suggest that denser development would somehow disrupt the existing

neighborhood.

The validity of such concerns, of course, vary in conjunction with the scale of the projects being

proposed. However, in the case of the fourplex plan, many such concerns cannot be valid. The increase

in the number of allowable units within each structure does not eliminate other zoning or built form

requirements. It does not change in any way restrictions that ensure new development is tailored to the

neighborhood scale or character. It simply alters the number of people who can live in a structure, and

in doing so, likely alters the income and demographic characteristics of those residents.

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III. THE FINAL PLAN SHOULD ADDRESS POVERTY CONCENTRATION

A defining feature of racial and economic inequality in Minneapolis is the city’s long history of

concentrating poor and low-income residents. The Draft 2040 Plan does not adequately address this

history. Omissions include:

• A failure to recognize that racial exclusion has historically paired with policies that confine

residents of color to a restricted set of low-opportunity neighborhoods.

• The absence of any acknowledgement of the costs to economic, educational, and physical

wellbeing, created by living in segregated areas of concentrated poverty.

• The absence of any discussion of present-day policies that have created or contributed to

concentrated poverty and segregation.

• Any attempt to weigh present day-gentrification or displacement against present-day

concentration of poverty.

Extended comments on the role of poverty concentration follow.

CONCENTRATION OF POVERTY AND RACIAL EXCLUSION ARE INTERTWINED

The Draft 2040 Plan repeatedly acknowledges Minneapolis’s legacy of segregation. The first paragraph

of the Plan’s preamble notes that “not everyone” has benefited from the city’s historic growth, and the

plan is “one opportunity to undo barriers and overcome inequities created by a history of policies in our

city that have prevented equitable access to housing, jobs, and investments.”

Unfortunately, the Plan adopts a somewhat blinkered view of racial segregation. It focuses almost

entirely on Minneapolis’s history of exclusion, but never on its history of concentration and

confinement. But the two go hand-and-hand. Indeed, in a region that has historically been

predominantly white, the primary purpose of segregation was not to preserve enclaves of affluence for

a select few, but to keep a relatively small nonwhite population confined to restricted geographic

quarters. While those areas have gone by many names over the years – racial ghettos, areas of

concentrated poverty, ACP50s or RCAPs –they persist to the present day and cannot be overlooked.

Poverty and segregation are still growing in Minneapolis, a trend that endangers the long-term stability

of many neighborhoods and puts the wellbeing of tens of thousands of residents at risk. In fact, poverty

concentration is an unusually severe problem in Minneapolis (and the Twin Cities region generally)

compared to many cities across the country.

CONCENTRATION OF POVERTY HAS NEGATIVE EFFECTS ON NEIGHBORHOOD RESIDENTS

Researchers and activists have long suspected that neighborhood characteristics have a strong impact

on the life trajectory of neighborhood residents, especially high poverty and racial segregation. This

observation was supported by anecdotal experience and eventually research data, and particularly by

positive outcomes associated with Chicago’s Gautreaux housing mobility program.

These outcomes led to large-scale, very statistically rigorous efforts to investigate neighborhood effects

and neighborhood mobility benefits. The most robust of these was the Moving to Opportunity (MTO)

experiment, conducted in five major cities in the mid-1990s. Although initial results seemed mixed,

contemporary evaluations of the experimental outcomes have revealed that young children who stayed

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in higher-poverty areas experienced significantly lower college attendance and adult earnings.19 As

adults, these children were also more likely to become single parents, and were less likely themselves to

live in more affluent neighborhoods.20

MTO families that moved to lower-poverty areas experienced major impacts on health and wellbeing,

particularly for women.21 These included reductions in diabetes and obesity by nearly 50 percent.22

Families also reported a much higher sense of personal wellbeing and physical safety, leading

researchers to speculate many of the improved health outcomes were related to significant reduction in

stress.23

Many of the benefits of housing mobility arise from the fact that neighborhoods have major effects on

income and wellbeing.24 For instance, Raj Chetty, Nathaniel Hendren, and Lawrence Katz have produced

robust research into these neighborhood effects, showing that adult income increases every year a child

is located in a “better” neighborhood during his or her youth. These studies identify the key predictors

of neighborhood quality as segregation, school quality, a larger share of two-parent families, income

inequality, and crimes rates.

Although the link between school and neighborhood integration is complex, in general, integrated

neighborhoods produce better-integrated schools. This is an important outcome, because a bevy of

research shows that school segregation has significant negative effects on children. Compared to

children in integrated schools, students in segregrated schools are less likely to score well on

standardized tests, less likely to graduate high school and college, have reduced access to social and

professional networks of opportunity, are less likely to avoid the juvenile or adult justice system.25

THE DRAFT PLAN’S VIEW OF PUBLIC POLICY’S SEGREGATIVE ROLE IS LIMITED

The Draft Plan clearly begins with the assumption that public policy has contributed to or caused

segregation in Minneapolis, and prevented many groups in the city from accessing opportunity.

19 Raj Chetty, Nathaniel Hendren and Lawrence Katz, The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Project, 106 AM. ECON. REV. 855 (2016). 20 Id. 21 See, e.g., Jens Ludwig, Greg J. Duncan, Lisa A. Gennetian, Lawrence F. Katz, Ronald C. Kessler, Jeffrey R. Kling, and Lisa Sanbonmatsu, Long-Term Neighborhood Effects on Low-Income Families: Evidence from Moving to Opportunity, 103 AM. ECON. REV. 226 (2013). 22 Id. 23 See, e.g., Jens Ludwig, Greg J. Duncan, Lisa A. Gennetian, Lawrence F. Katz, Ronald C. Kessler, Jeffrey R. Kling, and Lisa Sanbonmatsu, Neighborhood Effects on the Long-Term Well-Being of Low-Income Adults, 337 SCI. 1509 (2012). 24 Raj Chetty and Nathaniel Hendren, The Impacts of Neighborhoods on Intergenerational Mobility: Childhood Exposure Effects and County-Level Estimates (Harvard University and Nat’l Bureau of Econ. Research, Working Paper, 2015). 25 See, e.g., Eric Hanushek et al., New Evidence About Brown v. Board of Education: The Complex Effects of School Racial Composition on Achievement, 27 J. LAB. ECON. 349, 351 (2009); Roslyn Arlin Mickelson & Martha Bottia, Integrated Education and Mathematics Outcomes: A Synthesis of Social Science Research, 88 N.C. L. REV. 993, 1043 (2010); Orley Ashenfelter, William J. Collins, and Albert Yoon, Evaluating the Role of Brown v. Board of Education in School Equalization, Desegregation, and the Income of African Americans, 8 AMERICAN LAW AND ECONOMICS REV. 213 (2006); Michael A. Boozer et al., Race and School Quality Since Brown v. Board of Education, BROOKINGS PAPERS ON

ECONOMIC ACTIVITY: MICROECONOMICS 269 (1992).

13

However, its discussion of these public policies is extremely limited, and focused on two long-concluded

policies, both dating to the 1940s. The first of these are the Federal Housing Administration’s racial

redlining maps. These maps do reflect many present-day trends. In particular, a number of the areas

redlined as “Most Hazardous” were demolished for highway construction in the 1950s; the highest

income areas of the city from that period, in Southwest around the Chain of Lakes, are still are the

highest-income areas today; and many of the lower designations have become poorer and more

segregated since. However, the redlining maps alone are certainly not sufficient to explain present-day

trends, because the demographics of Minneapolis have changed dramatically. For instance, the

nonwhite population of the city in 1940 constituted about 3,000 people out of 492,000. Today, the

nonwhite population is 143,000 out of 405,000.

The second historic policy cited is the use of racially restrictive covenants to prevent people of color

from purchasing property in affluent neighborhoods. But racially restrictive covenants are, again,

insufficient to explain modern-day patterns of segregation. The use of such covenants was banned by

the Supreme Court 70 years ago, in the 1948 decision Shelley v. Kraemer.26 In addition, the best available

study of restrictive covenants in Minneapolis, the well-regarded Mapping Prejudice project conducted

by the University of Minnesota Department of Geography, has only discovered such restrictions in a

relatively limited number of affluent areas in the southwest and southeast of the city – a terrible legacy,

but again insufficient to explain modern-day segregation.

Understanding Minneapolis’s history of segregation requires looking at a broader range of policies,

including policies that persist until the present day, and policies that tend to confine low-income and

nonwhite residents as well as exclude them.

MODERN-DAY POLICIES HAVE CAUSED SEGREGATION AND CONCENTRATION OF POVERTY

Minneapolis has a long history of concentrating affordable housing, public housing, and subsidized

housing in segregated neighborhoods, ensuring that low-income residents have little choice but to seek

lodging in segregated areas. Because a disproportionate share of low-income residents are families of

color, these policies tend to create and perpetuate racial segregation.

According to data from HousingLink, Minneapolis contains slightly over a third of all the region’s current

subsidized housing. The city’s share of public housing is larger: over 49 percent of the regional total.

Since 1985, public housing construction has slowed nationally, and subsidized housing creation has

shifted towards publicly-funded, privately managed programs like the low-income housing tax credit.

City housing agencies have faced civil rights scrutiny for concentration of both public housing and tax

credit housing. In 1995, the Minneapolis Public Housing Authority settled the Hollman v. Cisneros

lawsuit, filed against the agency for concentrating public housing in high-poverty areas in North

Minneapolis. The settlement committed the agency to demolish certain housing projects and replace

them with a mobility program and new units in higher-opportunity area. The consensus view is that the

Hollman settlement was never satisfactorily resolved, in part due to the failure to ever create adequate

replacement units.

In 2014, the city again faced civil rights advocates in the legal arena, this time in the form of a HUD fair

housing complaint alleging that, among other things, it had disproportionately sited low-income housing

26 Shelley v. Kraemer, 334 U.S. 1 (1948).

14

tax credit projects in low-income neighborhoods, creating and perpetuating racial segregation. As

discussed above, that complaint ended in the city entering a voluntary compliance agreement with HUD.

The patterns of concentration that led to these complaints persist today. A disproportionate share of

the city’s subsidized units remain concentrated in the highest-poverty areas. For instance, 33 percent of

subsidized units are located in census tracts with poverty rates exceeding 42.5 percent, compared to

only 11 percent of occupied housing units. Meanwhile, while 39 percent of occupied housing is in areas

with poverty under 12 percent, only 5 percent of subsidized units are in such areas. (See Table 5, below)

This degree of concentration has helped create a handful of neighborhoods where a tremendously

disproportionate share of housing is subsidized and income-restricted. Map 1, below, classifies Twin

Cities neighborhoods by proportion of subsidized housing. While large swathes of the region, including

the bulk of affluent southwest Minneapolis, have no subsidized units at all, over a quarter of housing

units are subsidized in the downtown area, parts of Northeast Minneapolis, and parts of Near North. In

addition, at least four broad regions – including Cedar-Riverside, Elliot Park, East Franklin, and a section

of Near North contain concentrations of subsidized housing that exceed 50 percent of all units.

When subsidized housing concentration exceeds 50 percent, it becomes nearly impossible to avoid the

creation of segregation in a neighborhood. In such an instance, the majority of the neighborhood’s

residents are required to be lower-income, due to restrictions on units. In addition, with such an intense

concentration of poverty, disinvestment becomes likely, driving an exodus of middle-income residents.

The neighborhood risks entering a self-sustaining loop of poverty concentration and segregation.

Housing policy is not the only modern-day mechanism through which segregation has been created in

Minneapolis. Other factors, such as education and transit, can contribute to segregation. In particular,

high poverty and segregation in public schools have been demonstrated to be a major driver of

residential and neighborhood segregation.27 Notably, intense school segregation in Minneapolis is the

subject of a major pending lawsuit, currently being considered by the Minnesota Supreme Court.

27 See, e.g., Ann Owens, Inequality in Children’s Contexts: Income Segregation of Households With and Without Children, 81 AM. SOC. REV. 549 (2016).

15

May

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0 10

MVNBNSPPSRbbSASt.BSLSLPSPSSPShvwShwTBVHWdWBLWSP

Mounds ViewNew BrightonNorth Saint PaulPine SpringsRobinsdaleSaint AnthonySaint BonifaciusSunfish LakeSpring Lake ParkSpring ParkSouth Saint PaulShoreviewShorewoodTonka BayVadnais HeightsWoodlandWhite Bear LakeWest Saint Paul

------------------

Arden HillsBrooklyn CenterBirchwood VillageColumbia HeightsDeephavenExcelsiorFalcon HeightsGreenwoodGem LakeGray Cloud IslandLittle CanadaLauderdaleLexingtonLilydaleMahtomediMinnetonka BeachMendotaMedicine Lake

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------------------

MAP 1: MINNEAPOLIS - SAINT PAUL REGION Percentage of Occupied Housing That Are Affordable Subsidized Units by Census Tract, 2017

94

35E

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SAINT PAUL

Saint PaulInset

35W

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16

CONCENTRATED POVERTY IS NOT DIRECTLY ADDRESSED IN THE 2040 PLAN

Despite the role it plays in Minneapolis’s historic development, and its centrality to many of the

challenges the city currently faces, poverty concentration is not directly addressed by the 2040 Plan.

At the broadest level, none of the Draft Plan’s fourteen “2040 Goals,” eleven “2040 Topics,” or ninety-

seven “Plan Policies” directly address the subject of poverty concentration, concentrated

neighborhoods, or nonwhite segregation.

The plan approaches the concept of concentration of poverty delicately, only raising the issue directly a

handful of times:

• Action Step E in Policy 44 (“Comprehensive Investment”) states that the city will “[e]nsure that

housing investments in areas with concentrated poverty are part of a comprehensive

community investment strategy to benefit existing residents and improve opportunity.”28

• Action Step E in Policy 48 (“Data-Driven Decisions”) states that the city will “[r]eview capital

improvement planning models to ensure the process is guide by data on concentrated

poverty.”29

• The preamble of Policy 63 (“Food Access”) notes that “[m]any . . . food access priority areas are

also areas of concentrated poverty,” and provides a definition for “areas of concentrated

poverty.”30

• The Planning Process section notes that maps of concentrated poverty were provided for

“facilitated discussions” with residents, alongside other resources such as the 1930s FHA

redlining maps.31

These mentions, though brief, indicate that the drafters of the Draft 2040 Plan are well aware of the

significant concentrations of poverty in Minneapolis, and are aware how those concentrations impact

the other issues addressed in the Draft Plan. This, in turn, makes the omission of any direct discussion or

treatment of concentrated areas all the more glaring.

As discussed above, the Draft 2040 Plan’s proposals to reduce exclusion, and open up access to the city

for all, are an admirable and significant step. But it without any proposals to reduce racial and economic

concentration, or indeed, without any acknowledge of this problem, the Plan’s treatment of

Minneapolis’s historic inequality is, at best, half-baked.

CONCENTRATION OF POVERTY IS A MORE SEVERE ISSUE FOR MINNEAPOLIS THAN DISPLACEMENT

Although concentration of poverty is mostly avoided as a subject for the Draft 2040 Plan, its opposite,

housing displacement, is frequently mentioned, and is the subject of a dedicated policy (Policy 43,

“Housing Displacement”).

Displacement and concentration are logically paired. When displacement occurs, low-income residents

are forced to leave a neighborhood in which incomes are rising, and to which middle-income or higher-

income residents are returning. When concentration occurs, low-income residents are redirected to

28 Draft 2040 Plan at 157. 29 Id. at 161. 30 Id. at 176. 31 Id. at 236.

17

neighborhoods in which incomes are declining, and from which middle-income or higher-income

residents are departing.

Both trends are occurring within Minneapolis. However, virtually all available statistical evidence shows

that concentration of poverty is occurring far more frequently than displacement, across a broader

geographic range, and affecting far more individuals. Moreover, while displacement can be ameliorated

by building more housing in areas with rising incomes, it is exceptionally difficult to ameliorate poverty

concentration, once it has begun. Low demand for housing within a declining neighborhood means the

process of attracting middle-income residents once again is lengthy and uncertain, and likely entails a

great deal of public and private investment.

Nonetheless, displacement frequently attracts disproportionate attention from policymakers, because a

change in neighborhood economic trajectory is often more noticeable than an accelerating downward

trend. This appears to be the case in the Draft 2040 Plan.

The following table compares the prevalence of displacement and poverty concentration from 2000 to

2016 in central cities from the 50 largest metropolitan areas. A tract is defined as experiencing

displacement if it has experienced both a low-income population decline and a decline in the share of

low-income population. A tract is defined as experiencing concentration if it has experienced both a low-

income population increase and an increase in the share of low-income population. Although this is not

a fullproof measure of displacement or concentration, it is a reasonable approximation of the upper

bound of each trend.

Minneapolis has a notably low share of displacement compared to concentration. While a number of

central cities show displacement and concentration occurring at approximately the same rate, only

about 5,000 low-income Minneapolis residents left tracts on an upward economic trajectory. By

comparison, over 26,000 low-income Minneapolis residents entered a tract with a downward economic

trajectory.

Finally, Map 2, below, visualizes these trends on a regional level. It uses a somewhat modified

measures, which omits tracts in which the scale of population change is small enough to represent

sampling error or statistical noise. The map shows that poverty concentration is by far the predominant

trend in the Twin Cities region, and while several pockets of displacement may exist in Minneapolis,

they are nonetheless less frequent and less severe than major concentrations of poverty.

18

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20

APPENDIX: POPULATION DISTRIBUTION GRIDS

The following tables divide Minneapolis census tracts into a grid of 25 categories, determined by the

low-income population share and nonwhite population share of each tract. (Low-income is defined as

individuals in families below 200 percent of the poverty line.) Each table shows the share of that

population group living in each of the 25 categories, and is also color-coded to depict those

distributions. The tables were generated using data from the 2016 American Community Survey,

conducted by the U.S. Census.

A number of trends are obvious in these tables. First, Minneapolis’s white population and non-poor

families are concentrated in the top left corner of the grid – neighborhoods that are less than 20 percent

low-income and nonwhite. College graduates are especially likely to live in whiter and higher-income

areas.

By comparison, most nonwhite racial groups and lower-income groups are spread across a much

broader range of neighborhoods, and particularly concentrated in areas that are over 60 percent

nonwhite and 40 percent low-income. Two groups are particularly concentrated: families in poverty

with children, and black residents. For both groups, well over half the Minneapolis population is

concentrated in areas more than 60 percent nonwhite and 40 percent low-income.

Tables 11-16 break down the distribution of housing units in the city. The distribution of owner-occupied

housing and single-family detached housing closely tracks the distribution of white residents and college

graduates. By comparison, rental units appear in a wider variety of neighborhoods.

A somewhat more complex trend appears when examining housing by size of structure. While single-

family units are intensely concentrated in white and affluent areas, multifamily housing is spread across

a wide range of neighborhood types, with a respectable share in white and affluent areas but the largest

share in diverse, middle-income areas. Finally, there are small, multiple-unit dwellings like duplexes,

triplexes, and fourplexes – these are at present evenly distributed throughout the city, closely reflecting

overall population.

Overall Population Distribution in Minneapolis,

By Race and Income

Percent Low-Income in 2000

0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 23% 5% 0% 1% 0%

20 to 40

4% 13% 8% 2% 3%

40 to 60

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60 to 80

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80 to 100 0% 0% 0% 6% 0%

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21

TABLES 1-5: RACE

Table 1: Distribution of American Indian

Population in Minneapolis, By Race and Income


0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 14% 4% 0% 0% 0%

20 to 40

2% 9% 8% 2% 2%

40 to 60

0% 5% 8% 4% 0%

60 to 80

0% 0% 20% 4% 2%

80 to 100 0% 0% 0% 16% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

Table 2: Distribution of Asian Population in

Minneapolis, By Race and Income


0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 10% 3% 0% 2% 0%

20 to 40

3% 8% 7% 4% 9%

40 to 60

0% 4% 6% 1% 0%

60 to 80

0% 0% 14% 14% 0%

80 to 100 0% 0% 0% 15% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

Table 3: Distribution of Black Population in



0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 5% 1% 0% 0% 0%

20 to 40

1% 9% 6% 2% 2%

40 to 60

0% 3% 12% 3% 0%

60 to 80

0% 1% 19% 18% 2%

80 to 100 0% 0% 0% 17% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

Table 4: Distribution of Hispanic Population in



0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 7% 3% 0% 0% 0%

20 to 40

2% 11% 7% 1% 1%

40 to 60

0% 3% 17% 3% 0%

60 to 80

0% 1% 20% 9% 2%

80 to 100 0% 0% 0% 12% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

22

TABLES 6-8: INCOME AND FAMILY STATUS

Table 5: Distribution of White Population in



0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20

33% 7% 0% 2% 0%

20 to 40

5% 15% 9% 2% 4%

40 to 60

0% 3% 8% 1% 0%

60 to 80

0% 0% 5% 3% 0%

80 to 100 0% 0% 0% 1% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

Table 6: Distribution of Population in Poverty in



0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 6% 2% 0% 3% 0%

20 to 40

1% 10% 9% 4% 7%

40 to 60

0% 2% 11% 3% 0%

60 to 80

0% 0% 13% 14% 2%

80 to 100 0% 0% 0% 12% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

Table 7: Distribution of Families in Poverty with

Children in Minneapolis, By Race and Income


0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 3% 1% 0% 0% 0%

20 to 40

1% 12% 6% 2% 2%

40 to 60

0% 3% 12% 4% 0%

60 to 80

0% 1% 16% 18% 2%

80 to 100 0% 0% 0% 17% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

23

TABLES 9-11: SPECIAL POPULATIONS

Table 9: Distribution of College Graduate

Population in Minneapolis, By Race and Income


0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 37% 8% 0% 1% 0%

20 to 40

5% 16% 8% 2% 1%

40 to 60

0% 4% 8% 1% 0%

60 to 80

0% 0% 4% 3% 0%

80 to 100 0% 0% 0% 2% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

Table 10: Distribution of Immigrant Population

in Minneapolis, By Race and Income


0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 9% 2% 0% 1% 0%

20 to 40

2% 11% 8% 2% 4%

40 to 60

0% 4% 12% 3% 0%

60 to 80

0% 0% 14% 15% 2%

80 to 100 0% 0% 0% 11% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

24

TABLES 11-12: HOUSING BY TENURE

TABLES 13-16: HOUSING BY SIZE

Table 12: Distribution of Renter-Occupied Units



0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 15% 6% 0% 2% 0%

20 to 40

2% 12% 14% 2% 3%

40 to 60

0% 4% 13% 3% 0%

60 to 80

0% 0% 8% 9% 1%

80 to 100 0% 0% 0% 7% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

Table 14: Distribution of Duplex-Fourplex Units



0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 17% 8% 0% 1% 0%

20 to 40

3% 12% 11% 1% 1%

40 to 60

0% 1% 12% 3% 0%

60 to 80

0% 0% 11% 9% 1%

80 to 100 0% 0% 0% 7% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

25

Table 16: Distribution of Large Multi Housing

(20+ Units) in Minneapolis, By Race and Income


0 to 2

0

20 to

40

40 to

60

60 to

80

80 to

100

0 to 20 12% 4% 0% 2% 0%

20 to 40

2% 15% 19% 1% 4%

40 to 60

0% 8% 13% 3% 0%

60 to 80

0% 0% 3% 10% 1%

80 to 100 0% 0% 0% 5% 0%

Pe

rce

nt

No

nw

hit

e in

20

00

26

COMMENTS OF THE INSTITUTE ON METROPOLITAN …

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