Minnesota Cities Lead the Way in Housing Innovation

Housing is a pressing issue in Minnesota, and cities across the state are stepping up with innovative solutions to meet growing needs. From incentive programs to partnerships with developers, local leaders are driving efforts to expand affordable and market-rate housing options in their communities. These efforts highlight the important role cities play in addressing the housing challenge — and the opportunity for strong state-local collaboration to support these initiatives.

With the 2025 legislative session underway, the League of Minnesota Cities continues to prioritize working with state lawmakers and other stakeholders to advance policies that empower local efforts while achieving shared housing goals.

Cities understand the unique needs of their communities and have implemented creative strategies tailored to their circumstances, from updating zoning ordinances to investing in workforce housing. These local successes provide valuable insights that can inform broader efforts across the state.

A collaborative approach is essential for success. By respecting local expertise and providing funding, technical assistance, and adaptable frameworks, the state can help amplify city-led efforts and ensure housing solutions work for urban, suburban, and rural communities alike.

Here are seven examples of cities using tailored, innovative strategies to attract housing development that meet local needs.

Albert Lea

POPULATION: 18,396

After sitting vacant for 20 years due to contamination from a fire at a meatpacking plant, part of a 35-acre site in Albert Lea is now home to 48 rental units. Supported by $944,000 in funding from the Minnesota Department of Employment and Economic Development (DEED), the city cleaned up 3.4 acres to prepare for apartment development. The city is also contributing $474,000 in tax increment financing (TIF) over 26 years.

This development, located along the Blazing Star State Trail, provides affordable housing close to the Albert Lea Aquatic Center, Frank Hall Park, and the historic downtown area. The site remediation cost $1.26 million, while the housing complex cost $5.9 million. Before the project, the site was valued at $52,200; today, it’s worth $2.99 million. The city plans further development with additional support from DEED.

Balaton

POPULATION: 595

In 2019, the Balaton Economic Development Authority began a strategic planning process with input from residents and community leaders that identified housing rehabilitation as a top priority. Further community engagement in 2021 showed strong interest from homeowners and rental property owners in accessing resources for housing updates.

As a result, in 2023, the City of Balaton was awarded $646,205 through the Small Cities Development Program to address housing issues, including health and safety hazards, energy efficiency improvements, and accessibility upgrades. The program targets 20 owner-occupied homes and three single-family rental units, all serving low- to moderate-income households. This initiative ensures the community maintains sustainable, affordable housing for its residents.

East Grand Forks

POPULATION: 9,176

East Grand Forks implemented two home construction incentive programs to promote new construction development on its unsold residential lots. The builder incentive programs offer a $1,000 down payment for land, with the balance due upon closing the home sale. Additionally, the city provides contractors with a $100,000 interest-free loan for building materials. Special assessments are factored into the land’s total cost.

Since the programs launched, 54 of 68 lots have been sold. The city has also partnered with Polk County and the local school district to offer a two-year property tax reimbursement on all newly constructed homes once they reach full taxable value. These efforts, in collaboration with local builders, have created quality, affordable housing; boosted the tax base; and supported community growth.

Edina

POPULATION: 53,494

Edina is addressing affordable housing needs for low- and moderate-income seniors by developing 118 age-restricted rental units. The project is a collaboration between the Edina Housing and Redevelopment Authority (HRA), a local nonprofit, and a partnership of for-profit and nonprofit developers.

Initially, Edina’s HRA provided a forgivable loan to a nonprofit to acquire the land and find a suitable developer. The nonprofit retained land ownership and contributed it through a 99-year ground lease, ensuring long-term affordability while reducing development costs.

The HRA also awarded the developer TIF funds and established a new TIF district. Income averaging allows rents to range from 30% to 70% of the area median income. Additional funding sources include housing revenue bonds, low-income housing tax credits, and loans from Hennepin County and the Metropolitan Council.

Kasson

POPULATION: 7,200

To address its limited stock of multifamily housing options, Kasson acquired 64 acres in the southwest part of the community, designating 10 acres for development and the rest for parkland and wetlands. Phase 1, completed in 2023, brought a 47-unit market-rate apartment complex. Phase 2, completed in 2024, added a 50-unit workforce housing apartment complex, a six-unit townhouse, and a 2.5-acre lot for future development.

The city supported these projects with TIF and tax abatement programs and by providing land at reduced costs. Collaborative efforts with local developers, like the recent Vail project, are increasing housing options, growing the tax base, and fostering sustainable development.

Milaca

POPULATION: 3,021

Milaca has prioritized creating new apartments and senior housing to meet the needs of older residents and attract new families. A private developer has acquired land to build two apartment buildings, each with 36 units of varying sizes. Ground-floor units will accommodate seniors, but won’t be age-restricted.

The development includes amenities like a workout facility, garages, and plans for a community building and sales office. Phase 3 will add a senior living facility. The city supports the project, and is working with the developer on tax abatement programs and other available resources to ensure its success.

Ottertail

POPULATION: 680

The City of Ottertail offers affordable housing through its $1 Lots program, selling city-owned residential lots for just $1. “The idea is to grow our community,” according to Mayor Ron Grobeck.

Each lot is just under an acre, re-platted to proper size, and soil tested to ensure septic readiness. Buyers must provide a lender’s letter of good intent for construction financing, and complete and occupy their homes within 12 months.

The program is designed to promote the development of single-family housing by prioritizing primary residences, giving buyers instant equity and leaving funds for construction. Qualified buyers may also receive a $10,000 tax abatement through a partnership with Otter Tail County. For details, visit cityofottertail.com/building-big.

Rachel Kats is publications and web editor at the League of Minnesota Cities. Contact: rkats@lmc.org or (651) 215-4032.