As the statewide affordable housing shortage shows little signs of easing in the near term, different schools of thought have emerged on how to solve the issue. Those include supporting new housing at every price point, or focusing limited public resources on the lowest-income households.
Gov. Gretchen Whitmer announced in March that $150 million of the state’s American Rescue Plan Act (ARPA) funds are earmarked for building new housing and rehabilitating existing housing throughout the state. This would be split into three different grant programs: $50 million for the Housing and Community Development Fund to help low-income families; $50 million for gap financing to create “missing middle” housing; and $50 million for residential home improvements, including grants to incentivize energy efficient housing.
The “missing middle” refers to housing that is a step or two above affordability for the lowest earning households. The missing middle is also referred to as workforce housing, and can include market-rate housing.
“We’re excited these two allocations from the state are targeting both demographics that have been identified as needing support,” said Brooke Oosterman, director of policy and communications at housing advocacy group Housing Next. “These programs are targeting what we know as the up-front costs of construction. We know that labor shortages and the cost of construction make it very difficult to build new construction at either of these price points without a major subsidy, so we’re excited about these dollars reducing these costs.”
The Michigan State Housing Development Authority (MSHDA) plans to launch the $50 million missing middle housing program in September to renovate or build new workforce housing. Nonprofit developers, as well as partnerships between nonprofit and for-profit developers, can apply for the ARPA-funded program starting Sept. 19.
“After engaging stakeholders and the public, I believe we are setting up the program in a way that is productive and collaborative,” Chad Benson, MSHDA’s director of development, said in a statement. “There has been a lot of interest and feedback, and we anticipate this will be a key housing resource for those working to address the acute workforce housing needs of our state.”
Limited resources
However, public funding for potentially market-rate housing drew criticism recently from a national affordable housing advocate.
Diane Yentel, president and CEO of the National Low Income Housing Coalition, said during the Grand Rapids Area Chamber of Commerce’s Aug. 16 Policy Conference that state and federal relief funding should be directed to affordable housing projects for the most severe low-income households.
“Federal resources shouldn’t be used to subsidize market-rate housing,” Yentel said of Michigan’s $50 million missing-middle allocation. “Limited resources should be targeted where the greatest needs are.”
Yentel noted a shortage of 7 million homes nationwide for the lowest-income population.
“For every 10 of the lowest-income households, fewer than four apartments are available to them,” she said. “The shortage is pervasive. There is not a community that has a sufficient number of homes for the lowest-income residents.”
Michigan has 319,644 households that are considered extremely low-income renter households, according to Yentel’s organization. Extremely low-income renter households have incomes at or below the poverty level, or 30 percent of the area median income. The hourly wage needed to afford a modest apartment is $18.55 an hour in Michigan, which is “clearly more than the lowest-wage income workers earn,” Yentel said.
About 38 percent of all Grand Rapids jobs in 2019 were in low-paying industries where the estimated annual wage ranged from less than $20,000 to $35,000, according to data from the U.S. Census Bureau.
The private market alone can’t afford to build homes for the lowest earners, Yentel said.
“It’s a market failure that requires government intervention in the form of subsidies. The scale of challenges we face across the country require government intervention,” she said.
Construction costs
Developers often say that building new housing developments with any level of affordability for tenants is essentially impossible without multiple incentives. This has increasingly been the case with widespread rising construction costs. Construction input prices ticked down in August compared to July, but are still up 17 percent compared to 2021, according to a recent Associated Builders and Contractors analysis.
Meanwhile, rent increases to offset those costs will “result in increased homelessness,” Yentel said.
“Long-term solutions are simple even if they’re not easy, and pretty obvious when we recognize the private market alone can’t build and operate homes for the lowest-income people,” Yentel said.
Recent housing analyses have shown a need for tens of thousands of new housing units — across all price points — in Ottawa and Kent counties in the coming years to meet demand.
Investments in housing at all price points is important for making headway in the state’s housing crisis, Oosterman said.
“We know the needs are large in both segments, and we also know that providing more opportunities for housing at the missing middle mark will also increase opportunities for home ownership because of more mobility in the market,” Oosterman said.
— Managing Editor Andy Balaskovitz contributed reporting to this story.
