Is it time for Minnesota to give up on PUDs? Some developers and city officials think so

In the often contentious give-and-take between developers and cities, the specialized zoning designation known as a planned unit development, or PUD, is a kind of safe zone that allows for unusual or envelope-pushing projects while providing tangible benefits to both sides.

For instance, without the flexibility provided by the PUD option, it's doubtful that visionary mixed-use efforts such as the upcoming Market Street redevelopment near 50th & France in Edina could get off the ground.

With the PUD designation — which has been on the Minnesota law books since the early 1970s — cities are able to carve out small areas in which traditional zoning codes separating commercial and residential uses can be laid aside to accomplish a unique project.

The PUD has proved to be such a useful tool that some now say it is being overused. Instead of continually forcing builders to obtain the "special" zoning designation, they say cities should instead update their zoning codes to reflect market realities.

PUDs began being employed with regularity in the 1980s when metro cities began encouraging developers to mix land uses such as residential, retail and office to create signature projects. After only spotty successes in those early days, the popularity of PUDs picked up again in the early 2000s with the "new urbanism" wave that emphasized walkable, transit-oriented development in suburban settings.

Following the lull of the 2008-2009 recession, those types of mixed-use projects have exploded in popularity as homeowners and renters have continued to demonstrate they want to live near, or even right on top of, commercial uses.

Such market dynamics led Edina officials to create 13 PUDs since 2010. Cary Teague, the city's community development director, told a meeting of the Sensible Land Use Coalition last week that PUDs remain an essential tool for projects such as Market Street. In that effort, developers Saturday Properties and Buhl Investors are redeveloping an underused area of city-owned parking ramps into a mixed-use project with 110 new residential units and 35,000 square feet of new retail.

"The PUD process allowed both sides to negotiate benefits and trade-offs," Teague said. "For instance, in exchange for allowing them to have increased density and building heights, the city is gaining nearly an acre of public space with a new plaza, new indoor parking, as well as some affordable housing units."

While still operating as intended for big mixed-use projects, the PUD option is being relied on too heavily by suburban cities when it comes to changing tastes in the single-family residential market, said Ben Schmidt, a vice president with the Excelsior Group, one of the Twin Cities' most active homebuilders.

The problem, he told the land-use group, is the burgeoning popularity of the new "detached townhome" or "villa-style" housing product. These are single-family homes built on their own lots, but are different from traditional suburban homes in that they are smaller and have just one level, thus appealing to retiring baby boomers who don't want to climb stairs.

Their lots are small, sometimes only 40 feet in width, which is far narrower than allowed in most city zoning codes. This is requiring nearly every new residential development, such as Excelsior Group's 319-lot Adelaide Landing in Hugo, to go through the sometimes-lengthy process of obtaining a PUD zoning designation.

"In Hugo, for example, we're including a variety of housing types, which would be very difficult to accomplish with 'straight' zoning," Schmidt said. "But the PUD requirements raise costs to the homebuilder, who is already operating at very thin margins and is seeing the cost benefits of building on smaller lots being offset."

Instead, he urged city officials in the group to consider updating their underlying zoning codes to allow for the now-in-demand narrower lots, rather than having to continually resort to the PUD process.

Don Jacobson is a freelance writer based in St. Paul. He is the former editor of the Minneapolis-St. Paul Real Estate Journal.