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Renderings from architectural firm Hooker DeJong Inc. show plans for Magnus Capital Partners’ HoM Flats at Maynard workforce housing project, a 240-unit, $51.5 million multifamily housing development along Lake Michigan Drive.  Renderings from architectural firm Hooker DeJong Inc. show plans for Magnus Capital Partners’ HoM Flats at Maynard workforce housing project, a 240-unit, $51.5 million multifamily housing development along Lake Michigan Drive. COURTESY RENDERING BY HOOKER DEJONG INC.

State invests $275M to create new tools for housing projects, blight elimination

BY Sunday, February 12, 2023 06:00pm

Advocates are awaiting details on how to access $275 million in new funding programs to address the state’s housing shortage.

The funding was included in a supplemental budget bill signed last month by Gov. Gretchen Whitmer that allocates resources to several different housing programs and initiatives. That includes $150 million for a new affordable housing tax credit gap financing program aimed at reducing housing costs for residents by increasing the supply of housing and preserving existing affordable housing stock. 

As well, the State Land Bank Authority will receive an additional $75 million for blight elimination grants, while the Missing Middle Housing Grant program will get a $50 million infusion to work to increase housing stock for households earning 185 percent to 300 percent of the federal poverty guideline levels.

While many developers want to build more housing options, they run into challenges as accelerating construction costs chip away at their ability to offer units at an affordable price point, said Brooke Oosterman, director of policy and communications at housing advocacy group Housing Next.

“We’re really excited because of the timing right now with the high market demand and high cost of construction,” Oosterman said. “I’m excited about the opportunity that exists to bring all these tools together.”

A 2020 Housing Next study predicted that by 2025, the city of Grand Rapids would need to add nearly 9,000 new housing units to satisfy market demand. However, the housing demand in the city has outpaced those earlier estimates, said Oosterman, who noted Housing Next plans to issue a new housing feasibility study this month.

Focusing on adding housing stock or preserving housing for the “missing middle” also allows for more mobility in the housing market. When people stay in cheaper houses even as their incomes grow, it prevents people on the lower end of the income spectrum from being able to access the market, Oosterman said. That’s why when “missing middle” housing stock comes online, it benefits lower earners that can move into the housing stock that gets freed up, she added. 

Four West Michigan housing nonprofits received $4.2 million in state grant funding in December through the Missing Middle Housing program, with Dwelling Place of Grand Rapids securing the largest award, $2.5 million, which it will use to fund 42 homes. Administered by the Michigan State Housing Development Authority (MSHDA), the program leveraged $50 million in funding from the American Rescue Plan Act (ARPA). 

Initially, only tax-exempt nonprofits were eligible to submit projects for the Missing Middle Housing Program, but the new spending bill amended the eligibility requirements to “better meet the housing need,” Katie Bach, MSHDA communications director, said in an email to MiBiz

In one major change, for-profit developers can now apply for the funding. The amendments also expanded the number of households that qualify to live in newly created units and increased the amount of gap funding allocated to projects to better cover the cost of construction. MSHDA also made administrative changes to increase the efficiency in how funds are allocated. 

“While MSHDA is still working out the timeline and amended program’s finer details, we’re pleased that the legislation allowed for an improvement that will help us award and distribute funds faster,” Bach said. “Michigan is in a housing crisis, so MSHDA is appreciative (that) the Legislature has recognized this challenge and entrusted MSHDA with more resources to help solve it.”

MSHDA also oversees the $150 million Housing and Community Development Fund, which is designed to help build and refurbish housing and revitalize downtown areas across the state. The agency continues to work out how it will allocate the new fund ahead of a public launch, which is coming soon, Bach said.

Yarrow Brown, executive director at Traverse City-based Housing North, thinks the new amendments and increased availability of missing middle funding will benefit Northern Michigan, which has fewer nonprofit housing developers compared to the rest of the state.

Projects in Alanson, Petoskey and Frankfort received Missing Middle funding in the last round, “but some projects weren’t quite ready,” she said. 

“We still have a long way to go, but I really do see our communities willing to step up more and see how they can participate in adding more housing,” Brown said. “Really, it comes down to what are the needs in your community and what fits, and what are you ready for.”

The additional $75 million going toward blight elimination could be beneficial to Northern Michigan towns where developers and municipal leaders have started turning their attention to rehabilitating housing units above storefronts, Brown said.

The State Land Bank Authority is awarding the $75 million in new blight elimination funds, which doubles an initial $75 million in funding from the end of 2022.

Four land banks in Detroit, Ionia, Marquette and Three Rivers received funding in the first round, with the remaining $21.55 million now available in a competitive statewide grant process, said Emily Doerr, executive director of the Michigan State Land Bank Authority. 

Grand Rapids submitted six housing-related projects for the competitive grant program, which is still being finalized, Doerr said. Demolition, stabilization for future rehabilitation of a building and environmental remediation initially were the only eligible projects for blight funding. The new supplemental budget bill also allows blight funding for “renovation” projects, in a move aimed at providing more gap financing for projects, Doerr said.

“I’m assuming there are quite a few housing developments that will be able to happen if these demolitions and related costs are covered,” Doerr said. “Blight is this thing we get used to seeing, but the impact on adjacent properties is just awful. If you have one blighted house, it could hurt the whole neighborhood.”

The new blight elimination funding will allow the agency to give $2.5 million each to the top 10 largest land banks or largest land bank agreements across the state, which includes the city of Grand Rapids, Doerr said.

Doerr is hopeful the authority will have allocated at least $100 million in blight elimination funding by the end of this year. 

“Every dollar invested in blight elimination raises property values and helps with new development,” Doerr said. 

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