State makes it harder for cities to downzone

Law protects property rights at the expense of land-use planning

A new state law will restrict cities' ability to shape development patterns through zoning changes, strengthening property owners' ability to preserve their "grandfather" rights.

The new law limits the effect of "downzoning," a tool cities use to phase out certain high-intensity land uses.

For example, a city may downzone an area that allows 10-unit apartment buildings, limiting future uses to duplexes or single-family homes. A city may downzone an area to limit new commercial uses near a residential area.

Existing structures can remain, grandfathered in.

However, downzoning creates a classic conflict between city planners and property owners. As cities change, city leaders change zoning to encourage housing, commerce and industry in different parts of the city.

Those zoning changes affect how property owners can use their land -- and ultimately, the land value.

To Blake Graham, Minneapolis' manager of development and zoning controls, the new legislation is a "real blow" to land-use planning.

To Alyssa Schlander, director of government affairs for the Minnesota Automobile Dealers Association, who lobbied for the change, it is a matter of fairness. Cities shouldn't be able to rezone and limit future uses without compensating property owners for the lost value, she said.

The old law limited property owners' ability to improve downzoned properties. For instance, Schlander said a "grandfathered" property could not be rebuilt if it had 50 percent damage or greater.

Further, the owner could make necessary repairs and maintenance but could not improve the property, she said.

Graham said the old law helped phase out nonconforming uses, prohibiting improvements that would significantly extend the structure's life.

Schlander and a coalition calling itself the Alliance for Reasonable Municipal Regulation (ARMR) successfully pressed to change the law. Starting Aug. 1, a property owner with a nonconforming use may tear down the building and rebuild it. If structures are 100 percent destroyed, the owners may rebuild them if they apply for permits within 180 days.

The new law may have "a slight upside" because owners would fix up properties, Graham said, but he did not support the change. It means all grandfathered properties "are a permanent monopoly."

Said Graham, "They will never be extinguished through destruction and deterioration … because you can repair them and rebuild them."

ARMR included the auto dealers, outdoor advertisers, the state and Twin Cities builders associations, the Minnesota Realtors Association, the Minnesota Petroleum Marketing Council, Marathon Ashland Oil, Super America, the Minnesota Grocers Association, and the National Association of Office and Industrial Properties, Schlander said.

Laura Offerdahl, intergovernmental relations representative for the League of Minnesota Cities, lobbied against the change. "We would have preferred no change at all," she said.

Graham said Minneapolis leaders recognized that nonconforming properties might need some improvements. In 1995, Minneapolis created a process to allow owners to seek approvals for alterations and even expansions to nonconforming uses, including a public hearing before the Minneapolis Planning Commission.

The new state law allows the property owners to completely rebuild, without any public hearing, Graham said.

Schlander said the old law was "set up to force people's property to deteriorate."

She said if the city wants something else on a piece of property, it could still condemn it -- and pay the property owner fair compensation for taking the land for a public good.

"The issue of downzoning we felt was so unfair," she said.

ARMR passed two other pieces of legislation last session, including one that will limit the length of city-imposed building moratoriums, Schlander said.

Under the old law, cities could impose a one-year moratorium with an 18-month extension, she said. The new law limits moratoriums to one year, unless the city is resolving an issue outside of its control, such as an environmental impact statement.