Minneapolis Council Approves Two Affordable Housing Developments as State Considers ‘Yes to Homes’ Bill

The Minneapolis City Council has approved developers for two affordable housing projects, a 49-unit building on Penn Avenue and a 119-unit development at the former Kmart site, as city and state policymakers scramble to close a persistent gap in housing production. The approvals mark a concrete step toward adding to the city's stock of income-restricted units, even as broader legislative efforts to ease zoning rules remain under debate at the state Capitol.

The Twin Cities region averaged 16,918 new housing units per year from 2021 to 2025, falling short of the 18,000-unit annual target, according to state housing data. The shortfall is especially acute in the affordable segment, where the number of new units has lagged behind demand. The council-approved projects, one in the Penn Avenue corridor and another at the former Kmart lot, are expected to help chip away at that deficit, though officials acknowledge that many more units are needed to keep pace with population growth and rising rents.

Statewide zoning reform returns to the Legislature

The Minnesota Legislature's 2026 session has revived the 'Yes to Homes' bill, a package of zoning mandates that would require all residential districts in the state to allow accessory dwelling units (ADUs), small secondary homes on single-family lots, and limit minimum lot-size requirements. The legislation would also give larger municipalities like Minneapolis the flexibility to expand multifamily capacity and reduce parking minimums, potentially unlocking thousands of additional units in existing neighborhoods.

For Minneapolis residents, the bill could accelerate the changes already underway under the city's 2040 comprehensive plan, which permits duplex and triplex construction on all residential lots, including those previously zoned exclusively for single-family homes. The plan also establishes building height minimums in high-density zones, signaling a long-term shift toward a more compact, transit-oriented urban form. If the state bill passes, it would effectively codify some of those local reforms into state law, making them harder to reverse in future city council votes.

Meanwhile, the Minneapolis Public Housing Authority (MPHA) is preparing to take over administration of emergency housing vouchers, a move that officials say will streamline assistance for households at risk of homelessness. The transfer is part of a broader effort to consolidate rental subsidies under one agency, potentially reducing wait times and administrative delays for tenants.

Construction boom continues, but housing remains tight

Minneapolis construction value exceeded $1 billion for the 15th consecutive year in 2025, according to city figures, with much of that activity concentrated in medical clinics, office renovations and multifamily housing. The sustained building cycle has added thousands of units to the rental and for-sale markets, yet the city's vacancy rate remains low, and rents continue to climb in many neighborhoods.

Housing advocates point to the missed production targets as evidence that the region needs a more aggressive approach, not just in Minneapolis, but across the entire metro area. The 2040 plan and the pending 'Yes to Homes' bill both aim to shift the regulatory framework that, for decades, limited most residential land to detached single-family homes. The result, supporters argue, has been a structural shortage of housing in the price ranges that teachers, retail workers and young families can afford.

The council's actions this week, approving developers for two specific sites and handing MPHA a bigger role in voucher management, are immediate, tangible steps. The broader timeline for residents feeling the impact of those changes will depend on how quickly construction crews can break ground on the Penn Avenue and Kmart projects, and whether the Legislature sends the 'Yes to Homes' bill to the governor's desk before the session ends.