The Fed has been aggressively trying to contain inflation for more than a year. Since March 2022, the central bank has raised the benchmark rate 11 times, all of which are expected to keep inflation below 2%.
While the effort has so far been unsuccessful (with national inflation at 3.2% as of last week’s figures), the city of Minneapolis has bucked the trend.
Inflation in the Minneapolis-St. Paul metropolitan area fell below 2% in May. By July, that percentage had fallen to just 1%, the lowest among all major U.S. cities.
How did the Twin Cities do it? It all comes down to housing.
Going against the NIMBY trend
Shelter accounts for one-third of the total consumer price index. House prices keep risingHousing has played a big role in boosting inflation in recent months, not to mention higher mortgage rates.
Minneapolis started from there. Back in 2018, the city stuck with its Not in My Backyard (NIMBY) supporters and passed the Minneapolis 2040 Plan to eliminate single-family housing lots in 70% of the city’s residential areas.
And the movement was loose. Called the Brookings Institution’s “greatest project of the year,” it led to an explosion of new development and, most importantly, higher density housing.
duplextriplex, and apartment It now pops left and right, and developers no longer have to jump through hoops. Zoning change Or you may face stiff opposition from your neighborhood. At one point last year, in just one month he had a whopping 1,500 condominium permits approved. For the whole of 2022? The city has approved about 16,000 new multi-family housing permits, an increase of about 3,000 from 2021 and even more than a few years ago.
The additional supply helped keep housing costs down for both buyers and renters. The median home price in the city is currently at $382,000, well below the national average of $426,000, according to Redfin.
The city has also invested more than $320 million in rent subsidies and subsidies over the past few years to further reduce local housing costs. In fact, according to Pew Charitable Trust, Minneapolis rent growth since 2017 is just 1%. Nationwide, it was 31%.
Minneapolis Mayor Jacob Frey recently told Bloomberg: “How many people have ridiculed themselves like this by thinking, ‘Oh, look at all these supplies, look at all these brand new buildings’.” Will lead to gentrification and rising rents. . Quite the opposite happened. ”
Could other cities copy Minneapolis’ strategy?
Judging by the latest inflation statistics, Minneapolis clearly did the right thing. But is it a strategy that can be replicated in other cities? I don’t know yet.
In recent years, the NIMBY movement has become popular.that New York Gov. Kathy Hochul’s housing plan was virtually destroyed Earlier this year, it set a goal of adding 800,000 new homes to the state over the next 10 years. It’s also causing challenges in California, Georgia, North Carolina, Texas, and other states across the United States.
The people involved in this movement have a lot of issues such as: Crime will skyrocket as housing density increases in the suburbs. Asset values go down. Traffic conditions get worse. It would dilute local services or change the character of the neighborhood.
Whether or not these arguments are true is debatable, but they are nonetheless controversial. And until each city actively engages in such a move, it will be nearly impossible to mimic Minneapolis’ approach.
That said, California has arguably the nation’s largest affordable housing shortage and is trying to tap into the market.of the country is actually suing The City of Huntington Beach has restricted certain development applications. Governor Gavin Newsom even called the city’s elected officials “symbols of NIMBY-ism.”
Given that Huntington Beach has filed its own lawsuit against the state, it will likely be a long game (and probably not the easiest path other regions take).
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