Arecently published study from Up for Growth, a national housing advocacy and research group, found housing underproduction in Michigan has reached 87,491 homes — a 311-percent increase since 2012.
Nationally, the underproduction of homes worsened from 1.6 million in 2012 to 3.8 million in 2019, according to the 2022 Housing Underproduction in the United States study. Michigan ranks 16th among states for the severity of its housing deficit, per the study, which measures the gap between the number of homes available and the number of homes needed.
Data in Up for Growth’s study confirm the housing underproduction trend that Home Builders Association of Michigan (HBAM) has been tracking for the last decade.
“There should be 25,000 to 30,000 homes built annually in Michigan to keep up with aging housing stock, said Dawn Crandall, HBAM’s executive vice president of government relations. “We were exceeding that in 2005 when a little under 55,000 single-family permits were pulled, but we really haven’t even been building to break even to alleviate older housing stock since then.”
The Up for Growth study examined housing underproduction levels in all 309 metropolitan statistical areas throughout the country, as well as all 505 non-metro regions using U.S. Census data. Estimates were calculated by using a target number of households to achieve affordability and a target vacancy rate and subtracting a designated community’s total housing units, including second homes and uninhabitable units.
A total of 6,356 single-family home permits were issued across Michigan from January through May of 2022, according to residential permit data compiled by HBAM. This is a 13-percent reduction over the same period in 2021. HBAM is forecasting a total of 17,114 permits being issued by the end of 2022.
Crandall points to a “trifecta” of problems exacerbating housing underproduction in Michigan: Construction companies struggling to find enough workers, high materials costs, and supply chain issues delaying projects.
“It’s a big circle — you can’t just solve one issue without having an impact on something else,” Crandall said.
The Up for Growth study found that nearly 75 percent of metropolitan areas in the U.S. are experiencing worsening levels of housing underproduction. Of the 309 metropolitan areas in the country, 169 have underproduction in housing while 75 are trending toward underproduction, but for different reasons in each community.
Up for Growth identified three main drivers in housing underproduction: Buying and renting becoming so expensive that more unrelated people are sharing a single residence; a lack of available housing for purchase or rent as a result of exclusionary zoning; and uninhabitable units because of chronic disinvestment.
Grand Rapids-based Honor Construction Inc. is currently working on four to six housing projects in the area, and the construction company has not slowed down its plans to build multifamily projects despite the various obstacles, said President and CEO Brad Laackman. Honor has been focusing on market-rate housing for all of its projects because it allows for a faster build and they do not have to involve other entities to wait on approvals for special plans or subsidies, Laackman said.
“We are behind the timing ball by five or 10 years in creating housing to keep up (with demand) and then COVID-19 really delayed the catch-up and inflamed the problem because the need definitely didn’t go away,” Laackman said. “As much as all of us developers are trying to catch up, it can’t happen fast enough. You can see it with all the apartments that are going up — they are 100-percent full, which pushes up the rents because there is no competition.”
Chris Bennett, director of housing and community development at nonprofit housing organization Dwelling Place, remarked at a recent groundbreaking for an affordable housing project that the development process has gotten “so much more complicated” in the past couple of years.
“It takes so much work from so many different people to make this work from concept to reality,” Bennett said at the July 19 groundbreaking for the Union Suites on Coit apartment project in Grand Rapids. “It takes advocacy from everyone. … The housing crisis we’re experiencing just needs constant attention.”
Laackman sees a need for municipalities to embrace more density for multifamily projects.
“Grand Rapids needs to move up vertically,” he said. “It’s not that the city is not listening, it’s turning the Titanic. It’s a systemic problem. Everyone is behind the bubble on housing.”
Crandall has seen some progress with more communities conducting housing feasibility studies to better understand their housing needs. Recent housing analyses have surveyed Grand Rapids and Kent County, Ottawa County and Muskegon Heights. As well, the city of Muskegon is pursuing a comprehensive study of its housing stock and needs.
A study conducted by market analyst LandUse USA and coordinated by Networks Northwest and Housing North also shows the market could support an additional 15,540 housing units through 2025 across 10 counties in the northwest region of the state.
In the Grand Rapids area, 658 residential units were constructed in the city in 2021, while an additional 1,115 residential units were constructed in 11 surrounding communities, as MiBiz previously reported. A 2020 housing study conducted by the city, the Grand Rapids Area Chamber of Commerce, the Frey Foundation, K-Connect and Housing Next found that Grand Rapids will need at least 5,340 additional rental units and 3,548 owner-occupied units to satisfy housing demand and affordability by 2025.
A coalition of business and housing advocacy groups are still pushing a legislative package to help address the state’s housing shortfall by making it easier for developers to build new projects across various price points. The “Housing Michigan” coalition is pushing the four-bill package — which cleared the Senate and awaits a full House vote — that calls for expanding Neighborhood Enterprise Zones, property tax abatements for housing, and tax benefits for rural workforce housing.
“We have a critical housing shortage in our state,” Jennifer Rigterink, assistant director of state and federal affairs at the Michigan Municipal League, recently told MiBiz. “In some areas, it’s an affordability issue and in other areas there is simply a lack of stock. We’re trying to help communities that are in dire straits for housing and give them more tools to attract developers to these projects.”
Meanwhile, advocates have been shifting gears to stress the strong connection between housing and economic development.
A Grand Rapids Chamber representative said in a statement following the Up for Growth report that “without adequate housing the region is likely to face slower economic growth, more difficulty attracting high quality jobs, and greater housing instability for those earning too little to compete for scarce housing.”
Crandall said that connection can start between economic development organizations and the companies they seek to attract.
“We’ve started kind of changing our messaging a little bit and stressing that if Michigan is going to talk about attracting economic development to the state, they really need to attach housing to that in initial conversations with companies looking to move here,” Crandall said.