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How one Minneapolis apartment project encapsulates many of the complexities of urban development

Rex 26
City of Minneapolis
Above: A July 2017 rendering of Rex 26. Below: A January 2018 rendering.

It isn’t very often that the Minneapolis Planning Commission rejects a developer’s request for a variance from the zoning code. It is even more rare that it does so over the recommendation of city planners.

But that’s what happened last month when a request by a Minneapolis-based developer for a mixed use project at 26th and Lyndale Avenue South known as Rex 26 for a variance to increase the height and density of the project was denied — despite the fact that the project is already under construction.

The denial could put the project at some risk, at least financially, and a decision on appeal to the city council has not been announced.

But beyond the particulars, the process provides a glimpse into the complexities of urban infill development and what happens when general planning goals meet neighborhood-level objections — and how a city policy aimed at helping developers present projects for approval can sometimes inadvertently end up working against them.

Not a NIMBY story?

Rex 26 isn’t a story of Nimbys vs. developers. While there were some concerns raised early in the the life of the project, they were eventually lessened by changes to the height, mass and materials proposed by its developers. The fact that the project would include an ALDI grocery store helped too.

It all began in the spring of 2016, when Master Properties managing Partner Don Gerberding brought the project to city planning staff and commission as part of an informal process by which developers meet with staff and commissioners before filing formal application for land use approvals. That process gives developers realistic expectations for dealing with the city, and persuades many to not make applications that are likely to be rejected.

After getting feedback from the city, Master Properties changed its preliminary plan, reducing the number of apartments from 102 to 77 and scaling back the total size of the building from 116,100 square feet to just under 90,000 square feet. Even then, however, Master needed variances from the zoning code.

The height of the building wasn’t as much of an issue as the floor-area-ratio, aka FAR. The city’s zoning rules govern not just building heights but also much square footage is contained within. The FAR, a measure of how much usable space can be built in relation to the total area of the building’s lot, is the tool to accomplish that.

Yes, it’s math, but it’s simple enough to know that the larger the number, the more usable space there is and the taller the building. For example, a single story building that takes up the entire building lot would have a FAR of 1, while a two story building that takes up half of the same lot would also have a Far of 1.

What difference does it make? Design goals for what are zoned as neighborhood commercial districts, such as the one where Rex 26 is located, envision more-intense development on commercial corridors like Lyndale Avenue. But the city also wants to keep new buildings within scale to the existing neighborhood.

A bridge too FAR

Under city code, the allowable FAR for the site of Rex 26 was 1.7. But the code gives developers the chance to win more density, and Master Properties did that by including pedestrian-oriented features, which boosted the project’s allowed floor area ratio to 2.55.  

But Master wanted more, and the plans approved by the planning commission in 2016 for the project involved four stories, including a commercial space on street level for ALDI and three levels of apartments, and a variance that would let the FAR go to 2.8.

Then in July of 2017, Master returned to the commission to ask for another variance, this one to allow it to build nine more apartments, taking the project from 77 to 86, by adding an additional floor. By code, though, the project would still technically be four-stories, because the height of the ALDI space had been reduced from 23 feet to 20 feet, which meant it would now count as a single story rather than two. The changes once again increased the FAR, from 2.8 to 3.1.

Then, in December — after construction had begun on Rex 26 — Gerberding returned again to the planning commission. In a letter to planning staff, he wrote that structural changes in the building required by ALDI were costly. As a result, Master Properties wanted an additional 11 rental units on what would be a fifth floor to compensate for the added expense. Without them, the changes required by ALDI would make the project “not feasible.”

“Construction of the proposed 11 additional units allow the project to offset the significant increased structural costs with increased rental revenues to make the project again economically viable,” Gerberding wrote to Lowry Hill East Neighborhood Association.

The request would increase the FAR once again, this time to 3.4.

The latest version of Rex 26: a lot like the first version of Rex 26

During the lastest go-round, Gerberding acknowledged that commissioners might be suffering “appeal fatigue,” though he also argued that the additional story would still keep the building within the height limits permitted in that part of the city. He also called the project a poster child for the complexities of developing a good mixed-use building in an urban area.

As a sweetener for the planning commission, Gerberding offered to pursue funding to set aside 20 percent of the project’s units as affordable housing. The proposal would would mean a family of four with up to $68,000 in income — 80 percent of the area’s median — would be eligible for a unit there; a two-bedroom apartment would cost no more than $1,627.

Planning staff recommended approval of the variance request along with other changes Gerberding sought. “Although the building would exceed the floor area ratio maximum, the applicant has taken measures to reduce the building’s impact by being only six feet taller than the zoning district height allowance and having a u-shaped building which provides building relief along Lyndale Avenue South,” wrote senior city planner Aaron Hanauer in a report on the request.

An aerial view of the proposed Rex 26 project.
City of Minneapolis
An aerial view of the proposed Rex 26 project.

Unlike some other projects in the city (at the same meeting, a proposed development at the Sons of Norway property in Uptown generated two hours of testimony opposing it) only one person spoke against the changes: Danny Schwartzman, who operates Common Roots Cafe in the building kitty corner to Rex 26.

Schwartzman noted that if the latest changes are approved, Rex 26 would be back to the size that was rebuffed by the commission and city staff almost two years earlier. Moreover, the latest changes were proposed only for economic reasons — which are not usually sufficient for the commission to approve variances from the zoning code.

Schwartzman said that variances should come only if the community benefits and suggested a more meaningful affordable housing program for families at lower income levels than 80 percent of the area’s median income. He’d also like to see better outreach to the neighborhood than he’s seen so far by Master Properties.

When it was the officials’ turn to speak at the meeting, Commissioner Amy Sweasy said she had opposed the previous approvals because she thought they allowed a building that is too large. Therefore, she would oppose the latest — and even larger — iteration.

Others who had been supportive before were concerned that it appeared that Master Properties was trying to back into its initial proposal for the project — by taking multiple steps upward in density.

“You have been coming to the commission for a long time with this project and literally this project — when you just look at the metrics of it — goes all the way back to when we first started,” said planning commissioner John Slack. “And we had a lot of issues with it and we worked to get the building to where we could approve it. And now I feel like we’re just stepping back two years to where we were. This looks like the first concept we reviewed two years ago.”

In support of Master Properties’ variance application was commissioner Ryan Kronzer, who said he thinks the building is much better than what the staff and commission saw in early 2016: the exterior materials are better, the building massing is less-intrusive from the street and streetscaping is improved. “So I can hold my nose and vote to approve this project,” Kronzer said.

Commissioner Nick Magrino said that while he too was weary of the reconsiderations, he would have approved the original plan from 2016 and said the grocery store would be an important public amenity.

The vote on the variance was 4-2 against, with Kronzer and Magrino voting in support. The key vote was that of commissioner and new city council member Jeremy Schroeder who joined Slack, Sweasy and Commissioner Sam Rockwell in opposing the variance. (Commission President Matthew Brown, by tradition, votes only to break ties).

Schroeder not only provided the majority margin but serves on the commission because he is chair of the city council’s zoning and planning committee. Any appeal of the commission decision would go to that committee. In the past, the council has given great weight to decisions by its zoning committee.

How rarely does the Planning Commission reject a variance request? While a tally for 2017 hasn’t been completed, just 3 percent of variance requests were denied in 2016.

But the matter isn't over. Last Thursday, Gerberding appealed the variance denial to the Minneapolis City Council. It will go before the zoning committee on Feb. 15.

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Comments (21)

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You cannot have an efficient, high or higher-density city and maintain a streetscape of buildings no more than three stories high. You must make a choice and commit to it, and adjust to the results. There will necessarily be an awkward period when there is a mix of building types, which really doesn't harm a neighborhood. It is normal to have large buildings on main streets.

The quality of architecture should be the biggest issue. This is a mediocre building that will be hard to appreciate. It could be much worse, but it could be much better. The issue really is that the old housing stock between Lake Street and Franklin Avenue is of well-designed, attractive houses and apartment buildings, and this design does not fit in with its modernist lack of grace and decorative elements. It could be an office building as easily as an apartment building. Little about it says this is a home to people.

The developers guidelines should be more focused on esthetics than size, and quality of materials. These houses were built to last, but buildings like this are not, which makes them wasteful. Esthetic design does not have to be costly. But it takes some talent to produce it.

No, that's subjective

"Quality of the architecture" cannot be the biggest issue. It's subjective and variable. The old housing stock you like wasn't necessarily popular at the time (see the condo across the alley). The ones that are gone were just as "built to last" and the ones that are left were not inherently better.

Styles change over time. It's inevitable.

Good point

When do I get to vote on the architectural quality of *your* house? There are plenty around the neighborhood that are hideous and ought to be razed in my opinion. Or perhaps housing is primarily a *place for people to live* and not every building needs to be an architectural gem? I don't know.

Wrong

"You cannot have an efficient, high or higher-density city and maintain a streetscape of buildings no more than three stories high. "

The idea that we have to build high rises to accommodate population is just another "principle" that urbanists have made up. The city of MPLS had a populatoion of 550k in the 1950s with very few apartment buildings higher than three stories.

The esthetics of the building itself is not the only concern. Obviously the over-all esthetics of the surrounding environment are a valid concern. Dropping five story aluminum clad cookie cutter apartments in the middle of three story brick apartments can clearly be disruptive to the esthetic nature of the city and it's neighborhoods.

Lack of Planning and Sincerity by Developers is the Issue

As someone who has put in over 30 years on a (much smaller city’s) planning commission, I can say that the most frustrating part of the job is to get a proposal from a developer, work really hard to make it compatible with ordinance, community standards, and the developer’s stated needs, and reach a well-defined agreement on how the project can proceed, only to have that same developer return repeatedly during the course of the project to complain that the concessions the city made, which he agreed to in writing, are no longer sufficient to complete the project.

In my experience, if that developer comes back with a legitimate discovery, or even a sincere mea culpa, the commission will almost always flex again, if possible. Unfortunately, developers in recent years seem to have learned somewhere that if they agree to almost anything to get the initial go-ahead, then argue and brow beat repeatedly over amendments to the approval, they are fairly likely to find a weak link somewhere in the process. And too often, they are able to convince the gullible in the public that it was the unreasonable commission members that caused them all this grief.

Wrong

The villians in these stories aren’t the developers. Its the planning commissions. Its a constant battle for developers to manuever through arcane rules to move viable projects forward. Its the reason we have an affordable housing shortage in the cities. Zoning laws need to be loosened to allow for denser development.

It's all of us

Indeed, the entire process is Byzantine in its complexity, and it sometimes seems a minor miracle that **anything** gets built.

I agree that planning commissions often should share the blame for the difficulty of the process. Many planning commissioners are…um…parochially-minded, and tend to view development projects exclusively from a particular viewpoint, whether that's the construction industry, neighborhood opponents, an eye for city-wide office, etc.

Some of the blame also belongs with developers, who are often less-than-honest about what they have in mind, and why. I watched a developer blatantly lie about including affordable housing in his project to get it approved by the planning commission I was on (in another city), then get caught in his lie in a public meeting in front of the city council. He even admitted to the lie, and said he'd promised nonexistent affordable housing in order to get the commission to approve the project.

The City Council ignored his admission and approved the project anyway.

A third share of the blame, as others have noted, should fall on zoning ordinances. Too often, they're an attempt to somehow preserve (or inject) suburbanization (lower density, more open space, more parking) into areas that really need higher density to maintain affordability and make mass transit feasible. Too much zoning is exclusionary rather than inclusionary, and prices reflect that.

And sometimes the neighbors and general public deserve a share of the blame, as well. The alphabet soup of syndromes fixated on one kind of development or another – BANANA, NIMBY, YIMBY, etc. – distort both market forces and the welfare of the general public, usually to the detriment of both.

Finally – and they can't be left out of the process – some blame has to go to the local politicians who have the power (and the responsibility) to approve or disapprove a project. Like everyone else, they tend to view development through their own parochial lens, and will sometimes vote for a bad idea if they think that bad idea will benefit their ward or neighborhood (or their uncle's plumbing business). In the example I provided above, the city council in question ignored the admitted dishonesty of the developer because, as a group, they wanted the high-end part of the project, and didn't care about affordable housing, a reflection of local prejudice if nothing else.

As an amateur, with no formal training in urban planning myself, I did a lot of reading to try to catch up with the professional planning staff in the cities where I was a commissioner. My favorite remains Jane Jacobs' work, and the overriding principle I got from her was "Mixed-use, Mixed-income." But even that, which seems pretty widely applicable to me, can be viewed as simply bringing my own set of prejudices to the table.

Housing

Ok, clearly there are bad developers and bad projects. No one is ever completely to blame or blameless.

In the case of reneging on affordable housing promises, though, its not always that simple. Have you followed the saga of the St. Anthony development at the former mobile home park? The city cut the density way back, so the developer couldn’t make the affordable housing component work and now the project won’t happen. Building affordable housing is not profitable. Developers can only include it if there is enough market-rate housing to cover the cost, and that requires density. If we want to see affordable housing get built, we can’t zone/commission/legislate away the only path to get it done.

It is really hard to get housing built. And that is why there is an affordable housing crises. Year after year the demand for housing risea but the supply doesn’t keep up.

Ugh

Why is this so hard? The way you get developers to include affordable housing is to let them add density and height. Its people like Schwarzman who are adding to the housing shortage, not helping it.

Really dissappointed to see Jeremy Schroeder voting no. I guess all his talk about housing was just talk.

Zoning is the key

Having sat through many a planning commission meeting in another state – as one of the commissioners – I agree with Peter that this is a project encapsulating many of the complexities of urban development. Developers want to make money – that’s the way our society is constructed – public officials are wary, and understandably so, of proposals that raise the ire of neighbors, and neighbors generally don’t much care for significant change in their neighborhoods. It’s not a great combination if relatively brief and to-the-point planning commission meetings are what you’d prefer.

The whole development process is far too complicated, and the larger the city, the more complicated it is, with opportunities for gridlock multiplying almost exponentially. Every regulation makes development that much more difficult and that much more expensive. The more expensive it is to build the building, the more difficult it is to make any of the living spaces “affordable.” Developers can’t stay in business if they lose money building the housing, and the more it costs, the fewer people can afford it. The 2-bedroom apartment mentioned has a monthly rent that’s twice – twice – my house payment, and my house payment includes homeowner’s insurance and real estate taxes. Few people in my current Minneapolis neighborhood could afford to live there at that stated rent.

Meanwhile, Mr. Gerberding is doing his best to game the system. Much like a car dealer, who makes little or nothing on the “base” model vehicle, and always prefers that customers opt for more features or a more luxurious model, housing developers also make little or nothing on “affordable” or low-end housing. Occasionally, I’ve come across a developer with an actual social conscience, who genuinely tries to work with neighbors and planners to produce a project that will enhance dilapidated property without “gilding the lily” by making it exclusively upscale, but they’re few and far-between, and getting more rare by the minute.

At the same time, neighbors and the general public have a right to basic safety and other considerations being taken into account, since new development inevitably affects their lives, as well. This is where zoning and planning come into play, and the general public is largely completely uneducated about both the process and its details. I’m pretty familiar with the various types of development opponents – there’s a long list of acronyms to describe them, NIMBY simply being the most commonly-used – but opposition is sometimes based on nothing more substantive than a resistance to change of any kind, and in a culture as dynamic as ours, that objection won’t hold up for very long.

An aside or two: Planning commissions are misnamed. The ones I’ve been on do virtually no urban planning, either short or long-term, and some of their members hardly know what urban planning is. They ought to be called “Development Review Commissions,” since that’s essentially what their assigned task usually involves.

Conflicts of interest among planning commissioners are common, and often not reported or paid attention to by the public. I can’t speak for Minneapolis in this regard, but the rules I’ve read online for planning commissioners in the city do not strike me as especially strict, and I wouldn’t be surprised if more commissioners found themselves with those kinds of conflicts than they’re willing to admit.

Finally, my bias is that no planning commission should **ever** have as one of its members a member of the city council. The opportunity for conflict of interest, political as well as economic, in that situation outweighs – at least in my mind – any potential benefits. But that's a charter issue, I think, and unlikely to change any time soon.

Two infill grocery stores--both on the 2600 block.

Nicollet (Good Grocer) and Aldi on Lyndale (if it gets built).

Does anyone remember the Trader Joe's application ??

The COOP down the street fought tooth & nail against it, howling like a slaughter was to ensue if another store were to provide competition.

Now only one person objects to a plan which would bring an Aldi - on top of this other one mentioned above, right down the block ??

Unless someone can give a better explanation, it appears that the COOP was concerned about losing upscale customers of it's boutique pricing rather than any other factors it cited at the time. It seemed obvious at the time that a whole lot of COOP customers were going to go to Trader Joe's for at least part of their COOP shopping lists.

Sometimes the issues under debate in a public body are not the REAL issues at all.

Neither new store sells to the same market as TJ

Good Grocer employs worker labor and gives them a big discount on the groceries they buy.

Aldi is a low-cost limited-selection grocery retailer somewhat similar to Costco (limited selection, many of their own brands, etc).

Trader Joe's is a higher-end yuppified retailer with a much narrower target market.

It will be interesting to see what retail goes into the new retail blocks when Kmart is moved and Nicollet re-opens as a through street to downtown.

Spot on

There is no better explanation.

Rex/26

While it is true that approval for most anything is complicated and subject to various kinds of bias and graft it is also true that there exist ordinances and codes and planning commissions to map out a future for a given neighborhood. The difficulties arise mostly when attempts are made to obtain "variances" to the existing rules. The attempts here were and are attempts to circumvent the existing "rules". To apply again and again and appeal again and again for the same changes that were already denied is a form of simple dishonesty. We should not forget that Trader Joe's and Aldi's have the same owners. To appeal after the building process has begun is to attempt to force an acceptance by threatening to abandon a project leaving a very large and ugly hole. Those of us who live on the same block have been subjected to now months of daily pile driving from 7:00 A.M. to 6:00 P.M. that has shaken each of our houses to the very foundations and ruined or cracked walls, floors, ceilings and the foundations. The houses that were torn down to build this project all were affordable units. Once a project has begun there should be no possibility of an appeal. The statement that "now" Aldi's is asking for changes is at best disingenuous as they clearly have been involved since the very beginning. The only honest thing to do is to withdraw the appeal. In the absence of that the commission should flatly reject it.

Nope

The codes and ordinances - the zoning laws - are the underlying problem. The developers seek repeated variances because the restrictive zoning makes it difficult, if not impossible to build. The NIMBYism is written right into the zoning laws. That’s why there is an affordable housing shortage in Minneapolis.

I don't why you keep saying this?

Dude, look around... huge apartment complexes have gone up all over MPLS, and THIS developer's variances were ALL authorized by the planning commission. Clearly developers are building, they're not being stymied by the city, codes, or zones. The only complaint here is that builders can't build whatever they want wherever they want, why would anyone assume that developers should be able to build whatever they want wherever they want?

Codes and Ordinances

Mr. Callaghan does a good job of citing some of the complexities of urban, infill, multifamily housing development. Rex 26 is nearly halfway between downtown and Richfield and on a main arterial corridor. Some of the housing stock is older than World War II and there were no lots open for development. This is not like taking 5 acres in the suburbs and designing a 300 unit apartment. The developer (or someone else) took the old Rex Hardware and a couple of houses to build something. But the codes and ordinances, along with any small area plans, are not unknown. I've never understood why a developer, looking at a site, doesn't first look at the rules and see if they can economically design a project that fits the rules; if no one can build something economically new rules will be proposed. It's happened time and again during the current boom: the projects near Calhoun Beach Club wanted all sorts of variances; someone wants to develop a multistory apartment on Lake Mde Bka Ska (?) contrary to the shoreline plan; the Sons of Norway developer (from the Pacific Northwest) wants to change the zoning for the site from R4 to R6. It may be that all of these requests make sense and are good for the city but they should not be changed temporarily and piecemeal. If people believe the rules should change they should propose those changes, have hearings, and have our elected representatives vote on them. And we should expect our elected representatives to play by, and demand others play by, those rules. I couldn't change the rules of kickball or Pom Pom on the playground growing up to make it easier for me to win. Developers shouldn't be able to change the rules of the game to suit their own needs either.

Planning guides and zoning

Planning guides and zoning codes are good. I give you Houston and its years of libertarian build-whatever-you-want, no-zoning restrictions ambiance with its resulting repetitions of flooding, now multiply disastrous and expensive to U.S. taxpayers. There are no rules in Houston about construction on flood plains and bayous. And Houston is not ready to have zonoing laws and planning commissions any time soon.

What no one is considering in all this development strugging is a questioning the mantra of "it's not economically feasible if we don't get variances." How big a profit margin is the developer demanding? How high into the double digits, or triple digits? That profit margin is never proposed for reduction, if it's even known or admitted to planners. I find a lot of duplicity in that reluctance to build affordable residences because of "economic" inviability.

Wait what?

"the process provides a glimpse into the complexities of urban infill development and what happens when general planning goals meet neighborhood-level objections — and how a city policy aimed at helping developers present projects for approval can sometimes inadvertently end up working against them."

There seems to be an assumption here that developers are entitled to variances, they are not. There also seems to be an assumption here that the city is responsible for the developers financial success ... they are not. City policy is obviously not designed to guarantee profits for developers, the assumption that developers are entitled to change plans at will after they've been approved is a weird assumption.

There's nothing in this article that indicates that the planning process actually works against the developers, rather what we see here is a developer that's not working the system properly. The developer won approval with for the design, and then changed the design; they're not entitled to do that.

There's nothing "inadvertent" going on here, the city is doing what it's supposed to do. The develop is trying to do something they are NOT supposed to... hence the variance.

And yes, one of the lessons here is that you can't trust developers because they "promise" things they can't or won't deliver... such as Aldi's. So now they want their variance, and the neighborhood gets a building they rejected, minus the Aldi's they were promised.

By the way...

What kind of developer tells a neighborhood that they're bringing in an Aldi's... without getting the specs from Aldi's BEFORE submitting the plans?