Lakeshore housing initiatives focus on ‘missing middle’

Rosa Chaidez envisions the day when her family will own a home. She knows that aspiration will require the financial muscle of the dual income she and her husband, Arturo, earn to make it possible.

For now, she counts herself fortunate renting a four-bedroom home in Holland from her brother-in-law — a step up, she says, from the apartment they rented that initially cost $490 per month and later skyrocketed to $1,100.

“We’d really like to own a house someday,” says Chaidez, owner-operator of a landscaping startup business and mother to four children. “If everything starts getting normal, like it used to be (before the COVID-19 pandemic), that would help. We’re both working (to pay bills), and maybe we can come up with a plan to own a house in the future.”

Chaidez is not alone when it comes to crafting homeownership plans. Lakeshore nonprofits and trade associations also are spearheading initiatives to help “missing middle” wage earners sweep aside the roadblocks many have encountered.
Bob Filka
Reasons owning a home is out of their reach include the ripple effects of the Great Recession that still have a grip on the housing industry, which saw thousands of construction tradespeople migrate out of Michigan, says Bob Filka, CEO of Home Builders Association of Michigan. An uptick in costs for building supplies also looms over the new home construction. This includes the cost of lumber, for which the price increase was almost twice as much this spring as in early 2020.

Gap between wage and home price increases

Wages overall went up 5.2% over the past five years, while the average sale price for a single-family home shot up 64.5% during the same time, according to the Greater Regional Alliance of Realtors. Only 11% of that price increase can be attributed to inflation. Home sales costs in Ottawa County have risen from an average of $190,949 to $304,905 — a 59.7% increase.

All of this results in an inability to market housing stock to the “missing middle” — those who earn an average of $15 to $20 an hour, meaning their income is too high to qualify for subsidized Section 8 housing but who can’t afford top-tier market-rate prices of $400,000 and up for new homes.

The end result: Asking price for homes that are out of reach for many who, like Chaidez, rent but seemingly never can build enough savings for a down payment.

“In 2017, we were warning about this problem that was emerging across the state, and I think we’re reaching a real critical juncture,” Filka says. “Our guys (builders/contractors) are super busy and have never been busier than right now. My point is, we are going to lose a whole generation of customers in their 20s and 30s who shouldn’t be paying all this money in rent and are not building equity. (Builders’) customer base will dry up because they were unable to build the kind of equity.”

There are economic tools in the works in the Lakeshore region intended to enhance the chance of owning a home.
Ryan Kilpatrick, Executive Director of the Holland-based Housing Next.
This includes broadening the limited housing choices currently available — primarily single-family homes and suburban apartment complexes, with very few options in between, according to Ryan Kilpatrick, founding executive director of Holland-based Housing Next, a nonprofit that works closely with local municipalities, developers, and nonprofits to remove barriers that will increase the housing supply at all price points.

No one-size-fits-all solution

Single-family homes on large lots are not a one-size-fits-all solution to diverse housing needs and preferences, Kilpatrick says. This is true for Ottawa County, where roughly two-thirds of all households are comprised of just one or two adults with no children at home. That’s a compelling reason for thinking outside of the box, he says.

The city of Holland, for instance, is mulling a Unified Development Ordinance that would allow for more housing choices without changing the character of neighborhoods and positively impact the community for generations to come, according to Kilpatrick. 

A UDO creates more opportunities for townhomes, cottages, and attached condos or apartments within traditional neighborhoods and within walking distance to many of Holland’s amenities. Such options can be owner-occupied or rental units. 

And in Grand Haven, in partnership with Housing Next, the city adopted a Community Land Trust, which paves the way for permanently affordable housing via a community-controlled organization that retains ownership of the land and sells or rents the housing on that land to lower-income residents. This enables a greater variety of building types, sizes, and price points, including walkable downtown condos, nearby townhouses, and small cottages or accessory dwelling units in the first-ring suburban neighborhoods.

Comstock Street development

A concrete example of how this works in Grand Haven is what’s been dubbed the Comstock Street housing development, which will include approximately 32 single-family housing units on 7.58 acres of vacant land on the north side of Comstock Street. 

The land was owned by the city of Grand Haven and then transferred to the Ottawa County Land Bank Authority in fall 2020 to prepare the site for redevelopment. Michigan Community Capital will buy the property later this year. The project will serve households that earn between 60% and 100% of the area median income. In Ottawa County, that is between $35,160 and $83,600 a year.

“The benefit is the barriers to home-ownership are lowered through a community land trust model because you don’t have to come up with the extra cash to cover those land costs,” Kilpatrick says. “The downside is you don’t get to keep quite as much of your home appreciation value.”

Filka’s Home Builders Association of Michigan, along with a consortium of other trade associations and housing nonprofits, issued 15 recommendations to Gov. Gretchen Whitmer and the Michigan Legislature intended to bridge the housing gap. The report notes a disproportionate rate of homeownership by race and income levels across the state, making home appreciation/equity and greater wealth generation out of reach for an increasing number of Michiganders.

Recommendations

Among the report’s recommendations:
State assistance (particularly discretionary programs for economic development, housing, etc.) should only go to communities that have encouraged housing development at price points average Michiganders can afford.
Expand the entry-level housing point to increase the number of potential homeowners who are eligible for down payment assistance and financial education.
End the practice of using the cost of construction to determine permit fees across the state. This practice artificially inflates the cost of construction and renovation (and thus housing). It also pushes unscrupulous contractors to try and bypass permitting processes.

Direct the Michigan State Housing Development Authority to make “missing-middle” and “entry-level” housing an agency priority, including direction to make it a low-cost financing arm for these type of housing developments, including but not limited to projects that utilize tax increment financing.

Identify traditional economic development tools that could be modified (either legislatively or through Michigan Economic Development Corp. action) in attracting needed housing investment, including but not limited to amendments to the tax increment financing statute.

The full report can be read here: hbaofmichigan.com/media/7860/TUWNqQkVZNOY.pdf

For Rosa Chaidez, the dream of owning a home one day means, in part, paving her own way to upward mobility. She’s exchanged her years of working in restaurants for launching her own landscaping company. Since then, she’s gone to various banks to see what receiving a home mortgage loan would entail. She was told to see how her business is doing in two years. So, she remains patient and determined.

“It feels good that you’re making your own income,” she says. “This year, I can do good; next year, I can do better.”
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