Developers praise court ruling restoring Minneapolis 2040 Plan

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Footprint Development received some good news on Sept. 5, 2023, when the Minneapolis Planning Commission approved the developer’s proposed 32-unit mixed-use project at the intersection of 37th Street and Minnehaha Avenue in Minneapolis.

But the celebration was short-lived.

That same day, a district court judge issued an injunction that put the project — and others like it — in limbo. Specifically, the judge ruled in favor of groups that challenged on environmental grounds a city plan that opens the door for multifamily housing in traditionally single-family neighborhoods.

“Our intention was to start construction in April 2024, but the injunction put the project on hold,” Footprint Development President Cody Fischer said Tuesday.

The project is back on track now that an appeals court panel has reversed the district court decision and lifted the injunction. Even so, the initial decision delayed the start of construction and created a ripple effect that could push groundbreaking into next year, according to Fischer.

“We are now moving forward again with the goal of starting construction late this summer, but the legal delay substantially compressed our design and fundraising timeline, so it is possible we won’t be able to start work until spring 2025,” said Fischer, who added that the latest court ruling is “great news” for the city overall.

Like other cities, Minneapolis has seen a big decline in multifamily housing starts this year. Through April, the city has issued permits for 32 new housing units, down from 741 at the same point in 2023, according to the Keystone Report, which tracks homebuilding permits in the 13-county metro area.

But permits are expected to flow more freely in Minneapolis as a result of the recent court ruling.

Greta Bergstrom, the city’s communications director, said in an email that the city has “resumed issuing building permits for projects that had received land use approvals before the September 5, 2023, injunction. However, the city has not been able to proceed on projects that were still in the process of receiving approvals at the time the injunction was issued.

“Because of the uncertain nature of projects in this phase of development it is not possible to know with any certainty how many would have moved forward to construction without the injunction. Additionally, some projects have made significant alterations to their initial plans to avoid being impacted by the court order.

“Moving forward, affected projects must decide whether to continue with their current plans or alter their plans once again. City staff are actively reaching out to projects affected by the court order, offering guidance and options for how they might proceed if and when they are ready.”

At issue is the Minneapolis 2040 Plan, which allows for higher-density development in areas traditionally set aside for single-family housing. The Minneapolis City Council approved the 2040 Plan in December 2018 and the Metropolitan Council signed off on it in October 2019.

Last year, Smart Growth Minnesota and other plaintiffs successfully challenged the plan in district court on the grounds that it harms the environment, reduces green space and violates the Minnesota Environmental Rights Act.

The city of Minneapolis appealed the district court’s decision and the appellate panel ruled in the city’s favor this week. In the ruling, written by Judge Keala C. Ede, the panel found that the district court ruling is “unsupported by the evidence in the record” and that it “imposes unnecessary hardship on appellant.”

Nick Erickson, senior director of housing policy for Housing First Minnesota, praised the appellate court decision. In short, the Minneapolis 2040 Plan has had a “positive impact on addressing housing access in Minneapolis,” Erickson said in an interview.

The ruling shows that the burden of proof in such cases is on the plaintiff, Erickson said, adding that it’s not enough to speculate on hypothetical impacts.

“You have to prove that there is an impact. You can’t just say there might be [an impact]. … This was a very big win, not just for Minneapolis, but for development as a whole,” Erickson said.

Last fall, after the district court’s decision, multifamily housing experts said the ruling would bring more uncertainty to Minneapolis, where issues of rent control and public safety concerns have already muddied the residential development waters.

Despite the builder-friendly court decision, at least one other developer plans to stay away from Minneapolis.

“We’re not currently doing any new projects in Minneapolis nor are we looking at any new opportunities,” Nick Walton, president and CEO of Reuter Walton Development, said in a text message. “Until more people return to work downtown and the city gets a better handle on the crime, we are only looking at suburban and out-of-state projects.”

For his part, Fischer said he’s bullish on Minneapolis and will continue to seek opportunities there now that the court of appeals has spoken.

Though Fischer emphasized that he’s “fully focused now on getting this Minnehaha project off the ground,” he added that Footprint Development has “site control on a number of other locations in Minneapolis that I’m now preparing to start design development and entitlements on.”

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