New York fights over a rent freeze. Minneapolis has results

Weeks into New York’s rent freeze, the argument over it has moved to a Manhattan courtroom, where landlords and City Hall are fighting over text messages and whether the mayor leaned on the board that voted it through.The court will decide whether the freeze was approved properly. What no court can change is what a freeze does: It protects the tenants who already have a lease and adds not one home for the people who don’t. For them, the useful evidence is 1,000 miles west, in Minneapolis, six years into the country’s most closely watched zoning experiment.In January 2020, Minneapolis became the first large U.S. city to rid of single-family zoning. About 70% of its residential land allowed one house per lot. The 2040 Plan allowed three, let bigger apartment buildings rise along the main corridors, and a year later dropped parking minimums. None of it forced anyone to build. The city just stopped saying no. Both sides said what they expected, which means we can check. Mayor Jacob Frey, making the pitch in May 2018, noted that anyone could already knock down a modest ranch house and put up a mansion, and said the plan merely let the same lot hold “something more affordable.” Minneapolis for Everyone, the residents’ group that organized against the plan, predicted it would “make our city less affordable.”Six years is enough time to find out who was right. In a new study with two colleagues, we followed Zillow’s home values for every Minneapolis neighborhood from 2013 through 2024 and compared them with three yardsticks: The 50 cities most similar to Minneapolis, the big cities of the Midwest, and, since the plan’s first year was also the year of the George Floyd protests, the cities that had large protests of their own. Pick whichever yardstick you like, the answer barely moves.Over the plan’s first five years, a typical mid-priced Minneapolis home was worth, on average, something like 15% to 20% less than it would have been without it. The effect was larger for the cheapest third of homes, which grew every year instead of wearing off, and it spilled into the nearest suburbs. Zillow puts a typical Minneapolis home at around $330,000 today. Our estimates say the house would have run $60,000 to $80,000 more had the plan never passed, roughly what a 20% down payment would’ve cost.To be clear, prices in Minneapolis did not drop. They rose about 15% from 2019 to 2024, while the typical U.S. city saw them rise by roughly half. Homeowners kept the equity they had. What they didn’t get was the run-up most of the country got.How, when hardly anyone built a triplex? The Federal Reserve Bank of Minneapolis counted last week: About 300 homes in two- to four-unit buildings since 2020, around 2% of the apartment units the city permitted in those years. The homes came instead as apartments of the kind the same plan made easier to build: Nearly 21,000 homes permitted from 2017 to 2022, most in buildings of 20 units or more, enough to grow the city’s housing stock by 12%. Our own permit data are less clear on the total than on the shape: Fewer buildings, each holding about a third more homes. And since buyers shop across the city line, the suburbs next door, Edina and St. Louis Park, saw prices held down too.To be sure, 2020 was a strange year in Minneapolis, and the same Fed team argued last year that the city’s slow rent growth has more to do with a Minneapolis-specific drop in demand that year than with new supply. We tested the two obvious sources of such a shock. Had people been fleeing the unrest, the price damage should have shown up first around George Floyd Square; it didn’t. Population growth did slow by about a percentage point per year, not enough on its own to move prices this far. Weaker demand probably explains a slice of the gap; it is hard to see how it accounts for most of it.Building has slowed in Minneapolis since 2022, as it has nearly everywhere, with borrowing and construction costs where they are, and the Fed’s new report spends most of its pages on that. It also finds that Minneapolis rents have fallen nearly 20% after inflation since 2020, about twice the drop in comparable cities. Most of the lead the city built in the plan’s first years is still there.ABDUL EL SAYED’S MEDICARE FOR ALL NEEDS A BLACK BOX WARNINGFor other cities, three things in the record stand out. The price response came fast, about 5% in the plan’s first year, and grew from there. It did not hinge on the plan’s most famous provision; the triplexes were a footnote, and the apartments the plan also allowed did the work. And none of it stopped at the city line.Most of what sets the price of a house is beyond any city’s reach: Interest rates, lumber, wages, and how many people want to move there. The rulebook for what may be built is not, and Minneapolis is the first big city to have loosened it and then waited long enough to see what happened. It spent nothing. It built nothing itself. The result fits on one line of a mortgage application: $60,000 to $80,000 that the next family buying there will not have to borrow.Vitor Melo is a Regulatory Policy Fellow at the Archbridge Institute. He holds a PhD in economics from Clemson University and completed postdoctoral work at the University of Chicago.