Effects of the Minneapolis 2040 Plan on House Prices

ABSTRACT The Minneapolis 2040 Plan, which came into effect in January 2020, introduced sweeping reforms to housing regulations. One of the most significant aspects of the Plan is the relaxation of zoning regulations, especially the first single‐family zoning ban in any major US city. The effects of the Plan on house prices remain understudied. Exploiting a rich set of house price data from Zillow.com, we find a significant reduction in house price increases in Minneapolis following the Plan. Our baseline estimates suggest a 15%−23% reduction in mid‐tier house price growth. The credibility of our identification could be compromised by contemporaneous shocks in 2020, including the George Floyd protests and the changes in housing demand driven by the shift to work‐from‐home arrangements. We further adopt falsification tests examining these effects. Combining our results, we demonstrate credible evidence that the Plan improves housing affordability. However, we remain cautious in attributing the entirety of this effect solely to upzoning, as we find mixed evidence on the quantity of new housing construction. The increase in new housing density is ubiquitous, suggesting higher density likely lead to a reduction in housing value growth. Our primary findings are robust to a range of alternative assumptions, including using alternative data, adopting alternative functional forms, varying trend assumptions, and the inclusion of city‐specific time trends.