Seven years after Minneapolis adopted its 2040 Plan, the city's rents look good for renters. For anyone who builds apartments for a living, the news is a lot tougher.
That's the takeaway from an Oct. 7 analysis by the Federal Reserve Bank of Minneapolis. Compared with a group of similar cities across the country, Minneapolis has seen lower rent growth. But new multifamily development has slowed more than it has in those comparison cities.
The numbers
Minneapolis saw a 91.6% drop in multifamily permitting from a recent peak in 2022 to a low in 2025, according to the Fed. The comparison group fell 64.3% from its 2021 high to a 2024 low, then picked up slightly in 2025. In 2025, multifamily permitting in the comparison group was five times higher than in Minneapolis.
That's a big fall from where the city was. From 2018 through 2022, Minneapolis permitted more than 18,000 new units in buildings with five or more units, more than in any five-year stretch in recent history. Permits peaked at 4,646 units in 2019. Then the city permitted 1,043 multifamily units in 2023, just 351 in 2024 and 300 in 2025. The last time Minneapolis permitted 300 or fewer multifamily units in a year was 2008, at the bottom of the Great Recession.
The plan's best-known change, allowing duplexes and triplexes where only single-family homes were allowed before, hasn't moved the needle much. From 2020 through 2025, the city permitted 317 units in duplexes, triplexes and fourplexes, about 2% of the 12,335 units permitted in multifamily buildings over the same years.
Rents have started to creep up. The median rent for new leases hit $1,469 in August 2026, up 3% from a year earlier and a new high. From January 2025 through August 2026, Minneapolis' median rent rose 8.9%, compared with 1.8% for the comparison group. But adjusted for inflation, overall rents in the city have fallen nearly 20% since January 2020.
What developers told the Fed
The Fed's team interviewed developers, owners and investors over the summer, and they didn't hold back.
"Construction costs have skyrocketed. A project we built in 2023 would cost 30 percent more to build today," one developer said. Others pointed to the cost of debt, taxes and insurance, and to Minneapolis-specific rules, such as inclusionary zoning, first-floor retail requirements, tougher eviction rules and height minimums that require more expensive building types.
One example in the report: a developer said rents affordable at 60% of the area median income support construction costs of about $150,000 to $175,000 per unit, while today's costs run closer to $325,000. That leaves a gap of at least $150,000 for each affordable unit.
The report also says existing buildings are selling for less than it would cost to build them new. Steel-framed towers are going for about $300,000 per unit against replacement costs of roughly $400,000 to $500,000, and wood-framed buildings of five to seven stories sell for around $250,000 per unit against about $300,000 to build.
Developers did praise the 2040 Plan's clear rules. One said it makes Minneapolis "one of the most developer-friendly cities in the country" because builders know exactly what they can build. Another said every extra month spent on land use approvals for a large building can add more than $100,000 in cost.
The Fed's bottom line: unless construction, operating and borrowing costs come down substantially, Minneapolis rents will stay too low for new development to work without extra financial support.
Why it matters for Contractors
This one hits home for anybody who builds apartments in the city. When a developer's numbers don't work, the project never reaches bid day, and that's what 300 units in a year looks like. The Fed's figures put cost front and center: $325,000 a unit to build, and existing buildings selling for less than replacement cost.
For contractors, that points to a few things. Value engineering, wood framing where codes allow and tight schedules will matter more than ever. Renovation and repositioning of older buildings, which buyers can pick up below replacement cost, may keep more crews busy in the near term than ground-up work. Subsidized and supportive housing will likely stay a big share of what does break ground; the report's own photo shows Aeon's $24 million Exodus project, which the Fed says pencils out only with help from nearly a dozen partners. And if rents keep rising, the market-rate pipeline could reopen, so it's worth staying close to developers now.