Michigan Homeownership Study

Produced by:

RKG Associates Inc. for MSHDA

March 2019

CONTENTS

ACKNOWLEDGEMENTS .................................................................................................................................................... 5

EXECUTIVE SUMMARY ...................................................................................................................................................... 9

Project Purpose ............................................................................................................................................................... 9

Key Themes .................................................................................................................................................................... 9

Key Findings ................................................................................................................................................................. 10

Recommendations to Advance Homeownership .................................................................................................... 11

INTRODUCTION ................................................................................................................................................................ 12

Project Purpose ............................................................................................................................................................. 12

Defining Affordability ................................................................................................................................................. 15

OVERARCHING THEMES ................................................................................................................................................ 16

Population, Wages and Purchasing Power .............................................................................................................. 16

Housing Inventory ....................................................................................................................................................... 19

Development Costs ...................................................................................................................................................... 22

Barriers to Homeownership ....................................................................................................................................... 24

CASE STUDIES .................................................................................................................................................................... 26

Urban Affordability – Grand Rapids ......................................................................................................................... 26

Urban with Economic Challenges - Saginaw ........................................................................................................... 33

Aging Suburb - Westland ........................................................................................................................................... 40

Small Town Rural - Alpena ........................................................................................................................................ 46

STRATEGIES TO ADVANCE HOMEOWNERSHIP OPPORTUNITIES ..................................................................... 52

Finance Tools ................................................................................................................................................................ 54

Rehabilitation and Preservation Tools ...................................................................................................................... 58

Land Use and Zoning Tools ....................................................................................................................................... 62

Economic Development Tools .................................................................................................................................... 65

DATA SOURCES AND METHODOLOGY...................................................................................................................... 69

ACKNOWLEDGEMENTS

Michigan State Housing Development Authority

Laurie Cummings, Project Manager

Gary Heidel, Acting Executive Director

Mary Townley, Director, Homeownership

David Allen, Manager, Office of Market Research

Michigan Homeownership Study Advisory Committee

Katharine Czarnecki, Michigan Economic Development Corporation

Shanna Draheim, Michigan Municipal League

Kathie Feldpausch, Michigan Realtors

Luke Forrest, Michigan Municipal League

Patricia Herndon, Michigan Bankers Association

Larry Merrill, Michigan Townships Association

Sandra Pearson, Habitat for Humanity of Michigan

Jamie Schriner, formerly of The Community and Economic Development Association of Michigan

Lee Schwartz, Michigan Homebuilders Association

Michael Selden, Michigan Townships Association

Charlotte Smith, Local Initiative Support Corporation

Troy Villanueva, The Community and Economic Development Association of Michigan

Special Thanks To:

The Michigan Realtors, particularly Kathie Feldpausch, who helped the research team connect with

the leaders of each regional MLS in Michigan to obtain sales data that was integral to this study. We

would also like to thank each of the MLS region leaders across the state of Michigan who provided

current and historic sales data to the team.

The staff in Grand Rapids, Saginaw, Westland, and Alpena who provided us with a wealth of

information on their communities and helped highlight specific housing and economic challenges for

our case studies.

Each of the 80+ interviewees that took time to speak with us and discuss the challenges and

opportunities facing the communities, businesses, and people of the State of Michigan.

FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

Laurie Cummings, Michigan State Housing Development Authority

CummingsL@michigan.gov, (517)-373-6744

735 E. Michigan Avenue, Lansing, Michigan 48909

A MESSAGE FROM THE ADVISORY COMMITTEE

Dear Reader,

The supply of affordable homes for sale in Michigan is not meeting demand, and the share of

Michigan citizens who own a home is falling as a result. The Michigan State Housing

Development Authority (MSHDA) commissioned the Michigan Homeownership Study to

investigate the scope and causes of the problem and suggest some ways to address it.

As members of the Advisory Committee for this effort, we are pleased to have helped create the

first-ever statewide affordable homeownership study of this type in Michigan. The Advisory

Committee provided guidance and input into the study and helped researchers access data and

information that could not have been accessed otherwise.

While the Michigan Homeownership Study Advisory Committee represents highly diverse interests

in the homeownership arena, all of us have a stake in finding solutions to the state’s lack of

affordable for-sale homes. Homeownership strengthens communities, enables families to build

equity, and makes important contributions to the economy. It is the sincere wish of the Advisory

Committee members that the information in this document will result in action from

policymakers, local governments, nonprofits, and others in the housing industry. This problem

will not go away on its own.

Sincerely,

Shanna Draheim, Michigan Municipal League

Luke Forrest, Michigan Municipal League

Kathie Feldpausch, Michigan Realtors®

Patricia Herndon, Michigan Bankers Association

Larry Merrill, Michigan Townships Association

Katharine Czarnecki, Michigan Economic Development Corporation

Sandra Pearson, Habitat for Humanity of Michigan

Jamie Schriner, formerly of The Community and Economic Development Association of Michigan

Lee Schwartz, Michigan Homebuilders Association

Michael Selden, Michigan Townships Association

Charlotte Smith, Local Initiative Support Corporation

Troy Villanueva, The Community and Economic Development Association of Michigan

MICHIGAN HOMEOWNERSHIP STUDY 9

EXECUTIVE SUMMARY

Project Purpose

Home prices across parts of Michigan have risen significantly over the last decade, and generally,

supply has not kept pace with demand. Housing affordability and price security are critical

components for creating places where residents can live comfortably without feeling stretched

financially. As housing prices rise alongside most other monthly expenses, more and more households

are having a tough time adjusting to the rising cost of living. The goal of the Michigan

Homeownership Study is to analyze and identify the needs and gaps in the homeownership market

across Michigan.

This report is organized in two complementary pieces: the Michigan Homeownership Study and its

companion document the Michigan Homeownership Study: Key Trends and Measures by Prosperity

Region. Used in tandem, these reports present a multi-level analysis that can help inform policy-

makers at the state, regional, and local levels about the historical, current, and future challenges in the

for-sale housing market. The companion document is a compilation of state and regional analyses

relating to demographics, socioeconomics, and the for-sale housing market. The Michigan

Homeownership Study document utilizes knowledge gained from the companion document and

investigates case study communities, categorizes challenges thematically, and provides

recommendations to advance homeownership opportunities.

Key Themes

Homeownership continues to be a goal of many Michigan residents, but the pathways of achieving

this goal are becoming more difficult. Michigan’s population is projected to increase, meaning new

homes will need to be built in hot markets and rehabilitation of older homes will need to be financed

to support the aggregate growth in households across the state. The cost of building or renovating

housing is a major driver of price increases as material costs, land values, and permitting times have

increased in many locations, making it more challenging for builders to offer an affordable product to

potential buyers.

Statewide sales prices for single-family homes rose by 71 percent between 2012 and 2017 with the

median sales price of a single-family home being $156,560. This is significantly less than the median

sales prices of a newly built home which is $307,970. Similarly, the statewide condominium market

experienced price increases of 73 percent over the last six years. In 2017, the median sales price of a

condominium statewide was $161,710 while the median sale price of a new condominium was

$276,550. That is a 71 percent price differential between existing and new units. The upward pricing

trend is one of the most significant barriers to entry for households across the state.

In addition to housing prices outpacing wage growth in some parts of the state, homebuyers are also

challenged by increasing levels of personal debt, diminished savings, and stricter lending

requirements by financial institutions due to the housing crisis. Purchasing power constraints limit

the ability of households to buy new homes or undertake major renovations to existing homes.

Younger householders who carry large student loan debt coupled with rapid price escalations in

MICHIGAN HOMEOWNERSHIP STUDY 10

housing markets located in urban job centers make homeownership difficult to attain and result in

greater numbers of renter households.

Michigan has a wide variety of community types each with their own challenges when it comes to

furthering homeownership opportunities. Growing urban communities face challenges of rising home

values and displacement while economically-challenged urban communities are dealing with

population decline and vacancy issues. Prospering suburbs are facing new growth pressures and

struggling with how best to repurpose land to meet today’s housing demands. Rural communities

struggle to retain younger residents to fill jobs and purchase homes, yet some see increases in seasonal

population and a loss of year-round housing stock to the second home market.

Key Findings

The following are some key findings from the homeownership study:

• Michigan’s ownership housing stock is older, and units may not have the layout, systems, or

amenities today’s homebuyers are looking for.

• Many vacant ownership units have not been maintained over time and will require substantial

rehabilitation.

• Communities with housing capacity may have declining population and fewer economic

opportunities that will attract new residents.

• Communities with housing demand as well as supply shortages are seeing prices escalate creating

an affordability issue for existing residents and those looking to locate there.

• Zoning and other regulatory barriers hold back or prolong the development process resulting in

fewer units created and higher price points.

• New employment opportunities or expansions may not be aligned with housing production or

rehabilitation to meet the demand from new employees.

• The combination of stricter lending practices due to the financial crisis of the early 2000’s, growing

debt loads from student loans and other borrowing, and wages not keeping pace with costs are

making it more difficult to purchase a home.

• Financial resources for housing programs are shrinking, forcing all levels of government to do

more with less.

MICHIGAN HOMEOWNERSHIP STUDY 11

Recommendations to Advance Homeownership

To address some of the identified issues related to homeownership, recommendations were crafted

based on the findings from the state, regional, and case study analysis. Recommendations are grouped

under four categories, each addressing a larger-scale issue impacting homeownership in Michigan.

• Finance Tools. Access to capital, whether for an individual buyer or a developer, is critical to

ensuring home construction and home purchases. Whether providing down payment

assistance for a first time homebuyers, or incentives to developers, different markets require

different finance tools. Recommendations found under this category offer ways to address

financing gaps and bolster existing programs.

• Rehabilitation & Preservation Tools. Across some parts of Michigan, communities and

regions are facing high vacancy rates, deferred maintenance, and homes that are not ready to

re-enter the market. Buyers in weaker market areas are finding it difficult to pull together

financing to both purchase a home and complete the necessary rehab due to lending criteria

and the difficulty of finding sales comps in the area. Oftentimes, the cost to rehab a unit may

be higher than the actual purchase price. Recommendations found in under this category

relate to rehabilitation funding and neighborhood stabilization/preservation tools.

• Land Use & Zoning Tools. Land use, zoning, and permitting are local tools that communities

have direct control over and impact the type of homeownership units that can be built, the

location of those units, and the time it takes to build them. Changes in regulations can help

with predictability of approvals, speed up delivery of units, and lower developer risk.

• Economic Development Tools. Housing and jobs are inextricably linked and aligning

employment opportunities with affordable housing is an important step to attracting and

retaining employees. The recommendations provide opportunities for the public sector and

private sector to act in unison to help businesses thrive and employees find housing they can

afford.

MICHIGAN HOMEOWNERSHIP STUDY 12

INTRODUCTION

Across Michigan, and nationally, home prices have risen significantly over the last decade. The

recovery from the Great Recession coupled with a low-interest rate environment has led to a general

uptick in homebuying. In many markets supply has not kept pace with demand, which is only

expected to increase over time. Circumstances have occurred in which home values have risen faster

rate than wages in many communities, leaving families and individuals priced out of the for-sale

marketplace.

Housing affordability and price security are critical components for creating places where residents

can live comfortably without feeling stretched financially. As housing prices rise alongside most other

monthly expenses, more and more households are having a tough time adjusting to the rising cost of

living. This creates a situation where households become cost burdened and are forced to spend more

than the recommended 30 percent of their monthly income on housing-related costs. For many

households, this can create a ripple effect where other monthly expenses are scaled back or cut out

completely. Food, healthcare and wellness, transportation, and child care are some of the basic

household needs that can go unmet in the face of rising housing costs.

Understanding the economic landscape both in the marketplace and across demographic groups can

help policymakers identify needs and align and direct the requisite resources towards priority areas.

Across Michigan, economic opportunity varies as do incomes; rural and urban communities may have

different needs, but a central commonality is that housing is a fundamental need which also defines a

community – a collection of households living area. Ensuring that housing is available and affordable

to all income levels is critical for growing and sustaining communities across the state.

This study, which was commissioned by MSHDA, provides information on homeownership

challenges statewide and by Michigan Prosperity Region. MSHDA has also provided directly a more

geographically detailed examination of Michigan Housing Markets through its ‘Statewide Housing

Needs Assessment.’ This data/mapping tool, which contains measures of local housing affordability

for 380+ specific housing markets in Michigan, will be available on the MSHDA web site in coming

months found at https://www.michigan.gov/mshda.

The Michigan Homeownership Study provides

context for this data tool, and can help the reader understand the larger issues that help drive the

small-area data and maps.

Project Purpose

Home prices across parts of Michigan have risen significantly over the last decade, and generally,

supply has not kept pace with demand. Additionally, new construction has trended toward rental

units at the upper end of the market segment to cover rising construction costs. Some of the supply of

for-sale housing is at risk of becoming subsumed into the rental market as investors are purchasing

single-family homes and converting them to rental units. The goal of the Michigan Homeownership

Study is to analyze, identify, and prioritize needs and gaps in the for-sale housing market. This study,

convened by MSHDA and conducted with the assistance of an Advisory Committee made up of key

stakeholders, aims to paint a regional and statewide picture of the housing landscape through

rigorous quantitative and qualitative data analysis and synthesis. The results will help affordable

MICHIGAN HOMEOWNERSHIP STUDY 13

housing industry decision makers adjust, add, or reconfigure existing housing programs to match the

needs of current and prospective home buyers across Michigan.

ROLE OF REPORT

This report is organized in two complementary pieces: the Michigan Homeownership Study and its

companion document the Michigan Homeownership Study: Key Trends and Measures by Prosperity

Region. The Michigan Homeownership Study document utilizes knowledge gained from extensive

data analysis and presents a series of thematic challenges, four municipal case studies, and a series of

strategies state, regional, and local leaders can use to advance homeownership opportunities.

Strategies are categorized by theme and identify potential challenges and opportunities for effecting

change. For each strategy we have identified which of the case study communities may benefit from

those policy changes and programs. The Michigan Homeownership Study document is intended to

be used by officials at all levels of government as an information and communication tool.

The companion document is a compilation of state and regional analyses relating to demographics,

socioeconomics, and housing. It identifies data points and highlights key findings by Prosperity

Region and statewide. The purpose of the companion document is to allow policy makers at the state

and regional level to understand the historical, current, and future challenges to the region related to

owner-occupied housing. The quantification of issues, especially those related to housing supply and

demand, are important for imparting regional change. The role of the companion document is to act

as a tool to educate leaders about the issues at the state and regional level. Please note that the terms

“affordable”, “obtainable” and “workforce” housing are generally used interchangeable throughout

the document to describe housing that is within the economic reach of households with about average

or below average incomes.

FRAMING OF THE ANALYSIS

Strategies in the document are

informed by a multi-level analysis of

demographic, socioeconomic, and

housing trends. The top-level

analysis involves looking at

Michigan in aggregate to understand

general trends and to provide a point

of reference for the regional analysis.

The second level of analysis is

conducted at the Prosperity Region

level. Prosperity Regions were

established and defined in 2013 to

foster greater regional cooperation

by leveraging existing resources and

opportunities. For this study, we

modified two of the Prosperity

Regions (Regions 2 and 10) to provide greater clarity on housing conditions in Detroit and Traverse

Figure 1: Map of Modified Prosperity Regions

MICHIGAN HOMEOWNERSHIP STUDY 14

City. The third level of analysis is the case studies which looks at four communities that could serve

as examples for other similar communities across the state.

PROSPERITY REGIONS

In 2013, Michigan defined ten Prosperity Regions which are made up of an agglomeration of counties.

For this study, modifications of two Prosperity Regions were made to provide greater clarity on

housing conditions. Prosperity Region Two was split into urban (Prosperity Region 2A) and rural

components (Prosperity Region 2B). Prosperity Region 10 was separated into the City of Detroit (10A)

and the rest of three county region (10B). This was done to ensure the uniqueness of the city’s housing

market was not lost amongst the regional story.

Conducting the analysis at the Prosperity Region level provided an understanding of the variety of

housing markets and conditions across the state. Regions are dynamic systems and are in part driven

by economic centers. Each region is different, some more urbanized with larger population and

employment centers and others more rural with less population and a different set of housing

challenges. Key takeaways were generated from each regional analysis which helped form the basis

for many of the strategies in this document. The accompanying Michigan Homeownership Study: Key

Trends and Measures by Prosperity Region Report contains the full analysis for each Prosperity

Region as well as a report for Michigan.

CASE STUDIES

To better understand how regional issues were manifesting in local communities, RKG presented the

Advisory Committee with a subset of cities from across Michigan that were representative of different

demographic, economic, and housing conditions. The Committee members selected by majority vote

four communities from this subset for these case studies. The resulting list of communities and their

respective community types chosen include:

• Urban Affordability – Grand Rapids

• Urban with Economic Challenges - Saginaw

• Aging Suburban - Westland

• Small Town Rural - Alpena

The case study analysis represents prototypical community typologies from across the state. The

Urban Affordability typology is applicable to urban communities experiencing significant

construction activity and price escalation, and where development or redevelopment is taking place.

The Urban with Economic Challenges case study highlights the challenges communities face when

the local economy declines, unemployment rises, local spending and tax revenues shrink, and

foreclosures, vacancy, and population loss take hold. The Aging Suburban case study looks at post-

war tract home subdivision communities with ranch-style homes built on a quarter acre lots, but have

not been modernized with upgraded systems or cosmetic changes that appeal to younger buyers in

today’s market. The Small Town Rural typology is intended to reflect geographically isolated

communities with small populations, fewer employment opportunities, and lower median household

MICHIGAN HOMEOWNERSHIP STUDY 15

incomes. Owner-occupied housing in these areas tend to be older and are primarily single-family or

manufactured homes.

Interviews with local officials, housing developers, and advocates, coupled with rigorous data

analysis allowed for an in-depth study. Lessons learned from the case studies were incorporated in

the strategies found at the end of this document.

Defining Affordability

Housing affordability can be defined as the relationship between household income and monthly

housing expenditures. A common measure of affordability is whether housing expenses exceed 30

percent of income. In that circumstance, a household is considered cost burdened and may be limiting

expenditures on other necessary purchases such as healthcare, childcare, education, or transportation.

Households in communities with escalating home prices face particularly acute challenges, as wages

are not keeping up with the rise in housing costs.

There are two common types of affordable housing in the marketplace today: deed restricted

affordable units and naturally-occurring affordable housing based on a community’s market prices.

Both types of affordable housing can serve a variety of needs. The crucial difference is that the market

determines the price of unrestricted affordable units, while a recorded legal instrument and strict

pricing guidelines determine the price of deed restricted units. This study does not differentiate

between deed restricted and unrestricted for-sale units, rather it looks at markets in totality to identify

needs and gaps that policymakers can choose to prioritize.

For this housing study, affordability is examined using Department of Housing and Urban

Development (HUD) Area Median Income (AMI) data which is based on specific geographies. For the

purposes of this study, we used AMI thresholds at the state, metropolitan region, and county levels.

The AMI data helps to inform purchase price affordability and is also used to compare existing supply

and future demand by price segment and household income. To understand the affordable/workforce

housing market, six AMI thresholds were analyzed for each study area:

• 30 percent of AMI

• 50 percent of AMI

• 80 percent of AMI

• 120 percent of AMI

• 200 percent of AMI

• Greater than 200 percent of AMI

The affordability gap between supply and demand is determined by comparing what is affordable at

each income threshold to what is available on the open market. Housing sales prices were collected

from across the state to determine median sales values by region.

MICHIGAN HOMEOWNERSHIP STUDY 16

OVERARCHING THEMES

Michigan’s homeownership market, much like the national market, constantly fluctuates. Ebbing and

flowing with the strength of the economy, shifting buyer preferences, and changes in the lending

environment. Since the Great Recession, many communities across Michigan have rebounded and are

seeing price increases that outpace what many potential homeowners can afford. In other

communities, challenging economic conditions, lower incomes, and a lack of investment in ownership

units have created a depression in the local market. In each community these issues surface in different

ways and require a wide range of tools that can be combined to stabilize the ownership market. Our

analysis of the homeownership market across Michigan and a scan of national trends in

homeownership revealed the following overarching themes.

Population, Wages and Purchasing Power

Homeownership continues to be a goal of many Michigan residents, but the pathways of achieving

this goal are becoming more difficult. Costs to build a new home or rehabilitate an older home

continue to rise, population and job growth in urban centers puts upward pressure on housing prices,

and households are saddled with more debt and fewer savings, making it more difficult to purchase

a home. Michigan’s population is projected to continue to increase, meaning new homes will need to

be built in hot markets and rehabilitation of older homes will need to be financed to support the

continued economic prosperity across the state.

POPULATION AND WAGES

Michigan’s population is projected to grow by 8 percent between now and the year 2045. Although

the trend line for growth over this time period is more stable than what may have been experienced

in previous decades, the state still needs to find ways of accommodating new residents in places they

want to live. The other challenge for Michigan is the ability to support more smaller households,

especially as the senior population continues to grow. More single-person households mean more

housing units, with the number of households projected to grow by 11 percent through the year 2045.

MICHIGAN HOMEOWNERSHIP STUDY 17

Like population and households, the number of jobs is projected to increase as well across Michigan.

Projections through the year 2045 show employment increasing by 4 percent, or 245,000 jobs.

Approximately one-third of those projected jobs are in sectors that tend to pay lower wages on

average. This includes food services, administration and support services, and local government. The

state’s median household income of $50,803 provides enough money to afford a house priced around

$175,000, yet the median sale price for a new single-family home in Michigan is just over $330,000.

New housing is not being built at price points that are affordable to the average Michigan household.

In 2018, food service and hospitality workers earned an average of $23,150 per year, which is enough

to purchase a home valued at $75,000. Not all projected jobs are lower wage earners, though. A third

of all employment growth is expected in the professional and technical services sector, which has an

average wage of more than $100,000.

A.L.I.C.E. POPULATION

Michigan has nearly 3.8 million households, of which 15 percent lived in

poverty and 25 percent are categorized as Asset Limited, Income

Constrained, Employed (ALICE), which refers to working households that

do not earn enough to cover all household needs. ALICE households are

those on the edge of poverty. These households have very little cushion in

their paycheck or savings to cover increases in costs, particularly housing

costs. Every day costs continue to rise, making it more difficult for ALICE

households to afford housing, transportation, food, education, and healthcare. According to a 2017

ALICE report for Michigan, nearly two-thirds of all jobs across the state paid less than $20 per hour,

which is not enough to support a family of four.

Over the next five to ten years, low-wage jobs are

2017 ALICE Update, United Ways of Michigan.

Figure 2: Michigan Historical and Projected Population, 1970 - 2045

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

1970 1980 1990 2000 2010 2016 2017 2018 2019 2020 2025 2030 2035 2040 2045

Michigan Historical and Projected Population, 1970 - 2045

Source: REMI

Michigan

MICHIGAN HOMEOWNERSHIP STUDY 18

projected to increase at a faster rate than high-wage jobs, making affordable housing for working

households even more critical. When we talk about the workforce and obtainable housing, it is

important to consider housing options for working households that are earning at or below 80

percent of the area median income. This is a very different economic situation than the more

traditional definition of workforce housing for households in the 100 to 140 percent of area median

income range.

LIMITATIONS TO PURCHASING POWER

In addition to housing prices outpacing wage growth across many sectors, home buyers are also

challenged by increased debt, fewer savings, and stricter lending requirements. This is particularly

true for younger households looking to enter the homeownership market. A recent study by

researchers at Apartment List estimated that millennial buyers are facing an uphill battle to save

enough money for a down payment with the added debt load of student loans. Since 1980, tuition

rates have grown 6.5 times faster than incomes with average undergraduate tuition rates increasing

160 percent since 1980.

The study estimates millennials with college debt will require an average of 12 years to save up for a

20 percent down payment compared to only 7.6 years for graduates without debt. This comes at a

time when tuition and housing prices continue to rise. This generation represents the next big wave

of potential homebuyers and provides a way out for senior households looking to down size. If

purchasing power is limited and renting becomes a longer-term trend, turnover in the ownership

market may be impacted. Finding ways to increase access to quality housing through financial

Student Debt and Millennial Homeownership. January 2018. https://www.apartmentlist.com/rentonomics/student-debt-

millennial-homeowership/

Figure 3: National Trend of Wages, Homes Prices, and Tuition

MICHIGAN HOMEOWNERSHIP STUDY 19

assistance, rehabilitation assistance, or deed restricted affordable housing will be important going

forward.

Housing Inventory

The ongoing maintenance and expansion of the housing stock is vital for maintaining healthy

neighborhoods and communities. Over the last seventy years, Michigan experienced both a rapid

growth and decline in households. During the immediate post-war period, job opportunities in the

manufacturing sector were a magnet for household growth. New suburbs were built in communities

across the state to house families leaving urban areas or relocating from other parts of the country.

This period of growth tapered off in the 1980’s, and a long-term decline soon followed due to

structural changes in the economy. During the downturn, losses in households resulted in excess

housing supply and rising vacancy rates. Today, a housing imbalance exists where some communities

are growing and seeing price appreciation, while others are experiencing population loss and declines

in home prices

PUSH TOWARD HIGHER END HOUSING PRODUCT

Housing market momentum tends to build in locations where developers can realize the greatest

financial return and experience minimal risk exposure. One of the findings from this housing study is

that new construction has pivoted towards the upper end of the income spectrum. Developers are

building homes (both single-family and condominiums) at price multiples much greater than what an

average household can afford. Amenities offered include larger sized units, luxury finishes, and

building amenities. Comparatively, the existing housing stock does not offer such features as much of

it was built for working class families at a time when these luxury features were less common.

From a pricing perspective, there is nearly a $100,000 sales price differential between existing and new

homes in Michigan. The price gap between existing and new homes has shrunk over time, as sales

prices for existing homes rose 70 percent since 2012. In many circumstances, purchasing a new home

makes more sense from a homebuyer’s perspective as new homes are move-in ready, require no

upfront rehab work, and come fully equipped with modern appliances and systems. The challenge in

Michigan is how to raise the quality of the existing housing stock to provide affordable

homeownership opportunities that are enticing to new buyers.

MICHIGAN HOMEOWNERSHIP STUDY 20

MISSING MIDDLE

Across Michigan there are three primary housing markets: those below 80 percent of AMI, those

between 80 percent and 120 percent of AMI, and those earning more than 120 percent of AMI. The

graph below presents affordable sales prices across all AMI thresholds in comparison to market

pricing. From the data, households below 80 percent of AMI cannot afford existing homes priced at

or above the median sales value. Conversely, for households with incomes above 120 percent of

AMI, housing choice exists. These households have the option to purchase existing housing units, or

new units, depending on what they can afford.

Figure 4: Sales Price of New Housing Units

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

2012 2013 2014 2015 2016 2017 2018

Sales Price

Median Sales Price Across Michigan, 2012 - 2018

Source: MLS

Existing Single Family New Single Family Existing Condo New Condo

MICHIGAN HOMEOWNERSHIP STUDY 21

Missing middle housing is a potential supply side solution for those households earning between 80

percent and 120 percent of AMI. In many parts of the state, the missing middle market is where

housing options are most limited. Households in this category have the financial means to purchase

existing housing units but not enough income to purchase new housing product. This disconnect

within the marketplace results in greater demand for quality housing product located in desirable

communities or neighborhoods. The increase in overall demand results in price escalations across the

entire housing stock and contributes to the lack of affordability. In many communities, zoning

regulations restrict residential density, particularly in single-family neighborhoods so that new

housing at greater densities are not built.

One way to address the gap in missing middle housing is to increase residential densities, product

diversity, and a range of price points in established neighborhoods. By facilitating the development

of infill developments, communities can add new product types such as duplexes, three-family, and

small multifamily (5-10 units) developments. These lower-priced units can offer an entry point for

households looking to purchase homes and establish roots within a community.

One of the methods to actualize change is to update local zoning ordinances to remove single-family

zoning. Minneapolis recently updated its zoning ordinance across the city to end single-family zoning.

The intent of the update is to allow for greater diversity of housing types within existing

neighborhoods.

The change was heralded as a step toward addressing housing affordability and

equity, with greater housing diversity augmenting the supply of housing to meet demand. Similarly,

https://www.nytimes.com/2018/12/13/us/minneapolis-single-family-zoning.html

Figure 5: Maximum Purchase Price Based on Median Income in Michigan

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

30% AMI 50% AMI 80% AMI 120% AMI 200% AMI

Sales Price

Maximum Purchase Price Based on Median Income in Michigan

Source: HUD, MLS

Affordable Single-Family Affordable Condo Existing Single-Family

Existing Condo New Single-Family New Condo

MICHIGAN HOMEOWNERSHIP STUDY 22

about ten years ago Grand Rapids implemented a form-based code across certain parts of the city

which increased housing diversity.

The results from Grand Rapids are promising and may offer a

pathway to communities facing issues of price escalation and limited developable land.

REHABILITATION

In aggregate, Michigan has large numbers of homes which are vacant or in need of repair. As a result

of population and household declines during the 1980’s, many communities were left with

neighborhoods or areas experiencing high levels of unemployment and underinvestment in the

housing stock. Over time, some communities were able to rebound from the decline and pivot to

towards revitalization, while others have turned the corner.

Large scale rehabilitation of the housing stock is difficult to execute because it requires a concerted

effort on the part of homeowners, the availability of financing, and coordinated efforts by municipal

officials. Rehabilitation is difficult from the homebuyer side because financial capital is not always

readily available for renovation projects. While some lenders offer construction financing, lending

terms may not be favorable to low- to moderate-income households who are unable to pay the loan

back on top of an existing mortgage. While there are state and local programs which help homeowners

finance rehabilitation costs, these funds are limited.

The location of properties also plays a significant role in home renovation financing. In rural areas

where comparable appraisals are fewer in number, lenders tend to be unwilling to provide funds for

acquisition and renovation. This is due to the risk associated with investing in properties which are

not located in active housing markets, and the general risk-averse nature of lenders today. In markets

with greater real estate activity, lenders are more willing to invest, but mostly with individuals who

can afford to undertake the rehab project. One of the key challenges for low-to moderate-income

households is accessing financing to undertake rehabilitation projects and open up housing choices

that are more affordable than purchasing new homes.

Development Costs

One of the themes that rose to the top during the interviews with housing experts across Michigan

was the cost of building as a driver of price increases. Challenges related to construction industry

jobs, labor shortage, rising wages, and material costs permeated our conversations. Availability of

skilled labor in the construction industry is a major issue in Michigan but also across our nation as

more young people attend college and enter more technical fields. At the same time, material costs,

land values, and permitting times have increased in many locations, adding to the builder’s hard

and soft costs making it more challenging to offer an affordable product to potential buyers.

LABOR AND CONSTRUCTION

One of the contributing factors to the rise in new home prices across parts of Michigan is the

shortage of construction labor. Between 2001 and 2010, Michigan lost just over 89,000 construction

sector jobs as a result of the Great Recession, a major slow down in construction activity, and a shift

of the workforce to other employment sectors. Interviews with housing experts revealed a

https://nextcity.org/daily/entry/a-decade-without-single-family-residential-zoning-in-grand-rapids

MICHIGAN HOMEOWNERSHIP STUDY 23

significant migration of construction workers to more prominent markets in the south and

southwest where labor was in-demand and construction was booming. Since 2010, the construction

labor market as started to come back, gaining back about half the jobs that were lost in the previous

decade. That trend is expected to continue, but labor shortages will still prevail as Michigan is not

projected to reach 2001 employment levels even by the year 2028.

In addition to rising labor costs, the National Association of Home Builders (NAHB) has noted

increasing permitting costs and extended approval time periods are also attributing to the rising cost

of housing. Nationally, 25 percent of the cost of a typical home can now be attributed to

development reviews, mitigation studies and reports, site plan revisions, architectural plans, and

permitting fees.

These delays flow down into the builders’ bottom line and eventually passed on to

the buyer.

Housing Challenges Threaten Our Economic Growth. Home Builders Association of Michigan, June 2017.

Figure 6: Construction Industry Job Change

MICHIGAN HOMEOWNERSHIP STUDY 24

PRODUCT DELIVERY

The increase in costs and challenges with

labor availability have created a situation for

many home builders where it is more cost

effective to build fewer homes per year but

make them larger and more expensive to

make up for losses in volume. In many of

Michigan’s prominent housing markets such

as Traverse City, Grand Rapids, Ann Arbor,

and parts of Downtown Detroit, prices for

new housing units continue to escalate at a

far faster rate than the existing housing stock

creating a situation where new units are no

longer available to most Michigan households.

For example, in Grand Rapids new single-family homes sold in 2018 had an average sales price of

$300,000 compared to existing homes that sold at an average of $153,000. The combination of rising

costs, scarcity of product, and demand to live in Grand Rapids are all causing new homes to sell for

nearly twice the price of an older existing home. The same trends can be seen in the new

condominium development and rehab projects in Downtown Detroit. Condominiums built between

2010 and 2018 had an average sales price of $444,400, which compares to condos built between 1990

and 2010 which sold for an average of $178,500. That equates to a 150 percent higher selling price for

newer condo units. With sales prices for new product continuing to rise, the focus for more

affordable housing options lies within the existing housing stock, which in many cases needs

rehabilitation and upgrades to be saleable in today’s homeownership market.

Barriers to Homeownership

Accessing the home ownership market offers a pathway to building longer-term equity and wealth,

but entering the world of home ownership and finding an asset that has appreciating value is

becoming more challenging. Local regulations, market conditions, and the ability to afford a quality

home are challenges not only in Michigan’s market but in many places across the country.

REGULATORY

Local zoning regulations and permitting processes can add time and risk to the approval and

construction of residential units. Zoning restrictions that limit density, create large lot subdivisions,

and limit product type can upset the supply and demand balance particularly in a market where

housing demand is high. Continued layering of building code regulations, while good practice, can

also lead to increased construction costs that are eventually passed on to the buyer through higher

sale prices. Municipalities should look at their local market, understand their current housing supply,

and tailor zoning regulations to meet the market for both ownership and rental housing options.

LENDING REQUIREMENTS

As a response to the housing market crash and Great Recession, lending requirements for mortgages

were tightened to ensure that lenders were not providing mortgages to buyers who could not afford

New condo building in Detroit. Source: Redfin

MICHIGAN HOMEOWNERSHIP STUDY 25

it. This meant increased down payment amounts, enhanced credit scores, and ensuring loan-to-value

ratios were in line. As we have seen nationally, first time home buyers are coming in with more debt

than ever before between student loans, credit cards, and other accumulated debt obligations. Paying

down debt obligations has led to fewer households with adequate savings to meet down payment

requirements, and challenges with maintaining a qualifying credit score. A 2018 report from the

Federal Reserve showed that 40 percent of adults could not cover a $400 unexpected expense if one

arose.

As student loans and housing prices continue to rise, saving more money for a home purchase

will become more difficult.

The other challenge for home buyers in Michigan is the ability to obtain financing for acquisition and

rehabilitation for older homes that need work either due to deferred maintenance or changes to make

the home more livable. In some markets across Michigan it can be challenging for the lender to find

comparable properties that justify an appraisal value that covers both the sale price and rehabilitation

costs for the home. For example, if a buyer purchases a home for $75,000 and must put another $40,000

into rehabilitation, the home may not appraise for $115,000 if there are not comparable properties in

the area. The loan-to-value ratio ends up being too high and leaves the buyer with a financing gap

typically on the rehabilitation side of the loan. If the buyer cannot come up with another source of

financing, it can be very difficult to get a loan. This issue is particularly pertinent to Michigan as there

are many existing homes across the state that could serve as affordable and obtainable ownership

options but need rehabilitation to make them livable and/or marketable to buyers.

MARKET STRENGTH

Investment in new ownership construction and rehabilitation projects are not evenly disbursed across

Michigan. There are markets where construction is booming, and buyers are competing to find

ownership units. There are also markets where home values are declining, and vacancy grows. There

are many factors driving the decisions of developers and buyers which include access to jobs,

transportation connectivity, quality schools and services, natural features, and amenities. There is also

a desire, particularly for younger and older residents, to be in or near activity centers and major cities.

These places offer greater economic opportunity, cultural activity, diversity, housing choice, and retail

and restaurant amenities. Communities that can put forward a competitive package of attributes will

do well, those that cannot may continue to decline. Finding the right strategies to incentivize

investment in softer markets will be important in stemming the loss of population in some markets

and providing employers with the support they need to attract workers.

Fed Survey Shows 40 Percent of Adults Still Can’t Cover a $400 Expense. CNBC, May 22, 2018.

https://www.cnbc.com/2018/05/22/fed-survey-40-percent-of-adults-cant-cover-400-emergency-expense.html

MICHIGAN HOMEOWNERSHIP STUDY 26

CASE STUDIES

Opportunities and challenges within the homeownership market are impacted by broader trends that

occur at the national and state level, but it is at the municipal level where change is seen and felt.

Michigan has a wide variety of community types each with their own challenges when it comes to

furthering obtainable homeownership opportunities. Growing urban communities face challenges of

rising home values and displacement while economically-challenged urban communities are dealing

with population decline and vacancy issues. Prospering suburbs are facing new growth pressures and

struggling with how best to repurpose land to meet today’s housing demands. Rural communities

struggle to retain younger residents to fill jobs and purchase homes, yet some see increases in seasonal

population and a loss of year-round housing stock to the second home market.

While each of Michigan’s 1,773 cities, villages, and townships are unique, this document uses a case

study approach to communicate potential challenges and solutions that may be applicable to a broader

range of communities. For example, the City of Ann Arbor may fall into the Urban Affordability

category based on similar demographic, economic, and market trends to that of Grand Rapids. The

same could be said for the City of Royal Oak which could fall into the Aging Suburban category with

similar characteristics to the case study community of Westland. The four case studies highlight trends

and market considerations for each place type and offer some insights on the opportunities and

challenges in the homeownership market.

Urban Affordability – Grand Rapids

In many urban communities across the country, housing affordability has become a major challenge

and is impacting residents and businesses alike. In some locations, the cost of renting or owning a

home far out paces incomes. The mismatch in the marketplace between prices and affordability has

been exacerbated by low costs to borrow money and a building cycle which has pushed developers

to build more units with top of market price points. The Urban Affordability typology is applicable to

urban communities experiencing significant construction activity and price escalation, where

development or redevelopment is taking place along commercial corridors, in areas served by public

transportation, and neighborhoods that provided opportunities for low- and middle-income

households to live affordably.

Credit: Experience Grand Rapids

MICHIGAN HOMEOWNERSHIP STUDY 27

DEMOGRAPHICS

Grand Rapids is a growing city. Over the last ten years, total population grew by 2 percent as

compared to the state’s overall population which did not increase at all.

However, what is

particularly telling is that residents ages 25-34 increased by 15 percent over the same period. Driving

some of this change is the fact that Grand Rapids is home to fifteen higher education institutions in

the metro area with a combined 40,000 students. Some of these students may be staying in the city

after school for job opportunities. This population has drawn the interest of developers and investors

and created a market for the new development across the city. Neighborhoods like Downtown and

the West Side have seen new apartments, condos, and mixed-use developments which include stores,

restaurants, and other amenities catering to young professionals and retirees alike.

At the same time, the number of residents ages 55 and older is growing. Between 2011 and 2016, the

City saw an increase of 11 percent in this population cohort. The population changes and economic

opportunities in Grand Rapids have provided the impetus for developers to invest in new multi-

family rental and condo buildings. Market preferences for both younger and older residents are

aligning with interest in managed buildings, no maintenance, elevator access, covered parking, and

neighborhood amenities in walking distance.

INCOMES AND EMPLOYMENT

American Community Survey 2007-2011, 2012-2016, Table B01001, 2018

Figure 7: Change in Population by Age

-3%

15%

-3%

-13%

16%

-3%

-5%

-6%

16%

17%

-6%

-10%

-8%

12%

14%

-15%

-10%

-5%

10%

15%

20%

Under 18 18 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65+ years

Percent

Change in Population, 2011-2016

Source: ACS

Grand Rapids Prosperity Region Four Michigan

MICHIGAN HOMEOWNERSHIP STUDY 28

Even though employment has increased in Grand Rapids, median household income continues to fall

behind the state’s median. In Grand Rapids, the median household income is $42,019 compared to the

state median of $50,803.

Since 2011, there has been a shift toward higher income households with

incomes between $75,000 and $100,000 growing by 10 percent. There has also been a decline in the

number of households earning less than $50,000. This could be a combination of upward mobility and

potential displacement of lower-income households from Grand Rapids.

Grand Rapids is a large employment center within Prosperity Region Four with three industry sectors

comprising nearly 50 percent of the total jobs in the city. These industry sectors include: Health Care

and Social Assistance (26 percent), Manufacturing (13 percent), and Administration & Support (10

percent).

The largest employer in the area is Spectrum Health with nearly 25,000 employees. This

health system employs a variety of medical professionals and offers competitive wages. Local

manufacturing firms include companies like Steelcase which employs 2,000 workers.

Additionally,

there are large manufacturers outside of the city in the nearby communities of Zeeland, Holland, and

Muskegon with corporate headquarters for Herman Miller and Gentex.

American Community Survey 2007-2011, 2012-2016, Table B19013, 2018

OTM, 2018

https://www.steelcase.com/find-us/locations/americas/grand-rapids-michigan/

Figure 8: Change in Household Income

-11%

-4%

-9%

-3%

10%

16%

36%

-8%

-4%

-3%

17%

36%

-3%

-2%

24%

-20%

-10%

10%

20%

30%

40%

Less than

$15,000

$15,000 -

$24,999

$25,000 -

$34,999

$35,000 -

$49,999

$50,000 -

$74,999

$75,000 -

$99,999

$100,000 -

$149,999

$150,000 or

Percent

Change in Household Income, 2011-2016

Source: ACS

Grand Rapids Prosperity Region 4 Michigan

MICHIGAN HOMEOWNERSHIP STUDY 29

HOUSING MARKET

Since 2011, the housing market in Grand Rapids has seen a shift in ownership patterns with the share

of owner-occupied homes declining by 6 percent, compared to the region and state at 1 and 3 percent,

respectively.

At the same time, renter-occupied housing has increased by 8 percent. Vacant

properties experienced a dramatic decline over the last decade with a decrease of 21 percent. This drop

in vacancy speaks the desirability and strength of the city’s housing market. The overall increase in

rental units a result of a combination of new apartment construction around Grand Rapids, and the

ever-increasing occurrence of single-family homes which were once ownership units being converted

to rental units.

Table 1. Housing Units

Tenure

Grand Rapids Grand Rapids Prosperity Region Four Michigan

2011

2016

Change

% Change

Owner-Occupied 42,025 39,655 -2,370 -6% -1% -3%

Renter-Occupied

31,064

33,413

2,349

10%

11%

Vacant

8,471

6,651

-1,820

-21%

-5%

-3%

Total 81,560 79,719 -1,841 -2% 1% 0%

Source: American Community Survey 2007-2011, 2012-2016, Table B25003, 2018

AGE OF STRUCTURE

Grand Rapids has an older housing stock when it comes to ownership units. Nearly 68 percent of

owner-occupied structures were built before 1959, and only 5 percent were built after the year 2000.

However, recent trends show that between 2007 and 2016 there was a 25 percent increase in the

number of homes built after 2000. This far outpaces the change experienced across both the region

and state, which had growth of 17 percent and 14 percent, respectively.

OWNER-OCCUPIED HOME PRICES

The median price of a single-family home in Grand Rapids increased 114 percent between 2012 and

2018. This drastic price escalation has had an impact on affordability for existing residents, particularly

for those with incomes below the median. Figure 9 compares the price of new single-family homes

and condominums to those that already existed in the market by year sold. Between 2011 and 2016,

the median sale price for existing owner-occupied units increased to the point where a household

earning the median income could not longer afford a home selling at the city’s median value. New

ownership units entering the market substantially exceed what a household earning the median

income could afford. For example, sale prices for new condominiums jumped 67 percent from 2011 to

2016.

American Community Survey 2007-2011, 2012-2016, Table B25003, 2018

American Community Survey 2007-2011, 2012-2016, Table B25036, 2018

MICHIGAN HOMEOWNERSHIP STUDY 30

PRICING BY YEAR BUILT

Between 2012 and 2018 there were 19,700 sales with a median price of $145,142.

Home sales of

structures built between 1900-1950 were the most numerous, and offer housing at a price point that is

more affordable to homebuyers in Grand Rapids. Although the units may need improvements, the

relatively low price point allows buyers with low to moderate incomes an entry point for

homeownership. Not surprisingly, home prices increase as the age of the home decreases. For

example, the difference in price between a single-family home built between 1990-2010 compared to

one built between 2010-2018 is about 28 percent. Newer homes have updated heating and cooling

systems, modern insulation, and friendler layouts that are generally more attractive than older homes.

The condominum market in Grand Rapids has seen a sharp escalation in pricing, particularly for units

built after 1990. The difference in price between a condomium built between a condominum built

between 1990-2010 and one built between 2010-2018 is about 30 percent.

Multiple Listing Service (MLS) Data, Michigan Board of Realtors, RKG Associates, 2018

Figure 9: Median Owner-Occupied Sales Price

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

2012 2013 2014 2015 2016 2017 2018

Sales Price

Grand Rapids Median Sales Prices, 2012 - 2018

Source: MLS

Existing Single Family New Single Family Existing Condo New Condo

Home price

affordable to

household at

median income

MICHIGAN HOMEOWNERSHIP STUDY 31

DEVELOPMENT PIPELINE

As was noted earlier, Grand Rapids is seeing a lot of new residential and mixed-use development in

certain neighborhoods across the city. Currently, a majority of the new residential projects are rental

and not homeownership although some new condominiums are going up. In 2018, a new mixed-use

development was completed on the West Side that included a food market concept. Bridge Street

Market is a new 37,000 square foot store that offers fresh and locally sourced artisanal products and

anchors a new mixed-use development. The Hendrik, a new mixed-use building contains 116

apartments and nearly 56,000 square feet of office space.

On the homeownership side, the Viridian Place condominium development was recently approved

in Northeast Grand Rapids. This development will include 130 condominium units spread across

twenty-five two-story buildings. Each building will consist of 2, 4, 6 or 8 dwelling units.

HOMEOWNERSHIP CHALLENGES IN GRAND RAPIDS

DEMAND FOR RENTAL UNITS

Demand for housing in Grand Rapids has been strong over the last decade, however developers are

building many more rental units than ownership units. Trends in homeownership, affordability, and

the general economics of housing development are driving preferences to build more rental housing.

https://www.mlive.com/news/grand-rapids/index.ssf/2018/08/shoppers_thrilled_as_meijer_un.html

https://www.mlive.com/news/grand-rapids/index.ssf/2018/04/134-unit_condominium_proposal.html

Figure 10: Median Owner-Occupied Sales Price by Year Built

$68,900

$97,699

$136,500

$158,560

$164,247

$210,304

$205,563

$181,475

$86,920

$108,675

$217,250

$283,350

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

Before 1900 1900 - 1950 1950 - 1970 1970 - 1990 1990 - 2010 2010 - 2018

Sales Price

Grand Rapids Median Sales Price by Year Built, 2011-2016

Source: MLS

Single Family Condo

MICHIGAN HOMEOWNERSHIP STUDY 32

Condominiums can be more difficult for developers to finance in today’s lending market and can be

more challenging for owners to obtain a mortgage to purchase due to criteria imposed by lenders.

With the development focus shifted toward redevelopment and infill projects, the market for new

homeownership units in Grand Rapids may trail behind rental units for some time.

LACK OF SMALL-SCALE DEVELOPMENT

Incentives for smaller-scale condo and townhome-style units are harder to come by in Grand Rapids.

Housing for the so-called “missing middle”, smaller-scale multi-unit housing types such as duplexes,

fourplexes, bungalow courts, and converted single-family homes, are not being built at the same pace

as larger multi-family structures.

In order to encourage this type of development, simplifying the

review process and modifying current site layout and building placement standards has been

proposed. Changes to residential zoning districts in Grand Rapids has provided some opportunities

for developers to build multi-family style housing in existing single-family neighborhoods. While this

proposal would increase overall density within neighborhoods, it would help address housing supply

issues for smaller-scale homeownership opportunities.

FHA APPROVED CONDOMINIUM ASSOCIATIONS

The FHA Spot Loan Approval Process was eliminated in 2010 which restricted lenders from offering

FHA loans on individual condominiums. New regulations require condominium associations to

become certified by HUD for buyers to utilize FHA backed loans. The certification must be renewed

every two years. The result of this process has been a lack of FHA approved condominium complexes

which accept FHA loans. Of all the condominium developments in Grand Rapids, there are only five

complexes totaling 715 units which are currently approved for FHA loans.

https://www.grandrapidsmi.gov/Directory/Programs-and-Initiatives/Housing-NOW

MICHIGAN HOMEOWNERSHIP STUDY 33

Urban with Economic Challenges - Saginaw

Communities experience economic ebbs and flows resulting in periods of growth and decline. In some

cases, national trends such as recessions have short-term implications which limit local growth and

cause hardship for the population, but these downturns tend to be temporary and communities

ultimately recover to varying degrees. However, there cases in which communities experience

prolonged economic downturns as a result of structural changes in the local and regional economy.

This situation is more likely to occur in communities centered around a single industry sector that is

declining or a large employer that leaves the area.

The Urban with Economic Challenges case study highlights the challenges communities face when

the local economy declines, unemployment rises, local spending and tax revenues shrink, and

foreclosures, vacancy, and population loss take hold.

DEMOGRAPHICS

The City of Saginaw serves as the case study for an urban community with economic challenges.

Saginaw’s economy relied on the manufacturing industry for decades, but the shift of production to

offshore locations created a period of rapid decline with the City’s population cut in half between 1960

and 2016. A city with a population of nearly 50,000 is facing the challenges of population loss,

economic decline, and a housing stock where one in five units sits vacant.

Demographic trends in Saginaw show the population shrinking and getting older. Between 2011 and

2016, population has declined another 5 percent or 2,633 people.

The city experienced a decline

across nearly all age cohorts, except for those ages 55 years and older which saw an increase of 8

percent. The growing senior population is a concern for the City as they have limited housing choices,

may not be able to maintain their single-family home, and do not have much equity in their home as

Saginaw home prices are relatively low.

American Community Survey 2007-2011, 2012-2016, Table B01001, 2018

Credit: Saginaw Art Museum

MICHIGAN HOMEOWNERSHIP STUDY 34

One of the most striking findings is that the population between 25 and 34 decreased by 12 percent

versus the region and state which saw increases. Younger residents in Saginaw who leave for college

or job opportunities elsewhere are not returning to the City later in life. The decline in this age cohort

can also make it difficult to attract new employers to the area or retail and service-based businesses

looking for households with expendable income.

INCOMES AND EMPLOYMENT

The median household income in Saginaw is $28,871 which is about half as much as the state’s

median.

Between 2011 and 2016, median income fell by 3 percent. Figure 12 shows the change in

household income by category from 2011 to 2016. Households in the highest income bracket decreased

by 39 percent, yet at the same time there was a 39 percent increase in the percent of households within

incomes between $75,000 and $99,999 raisin from 972 households to 1,351 households.

Some of the

shifts in income are the result of higher income households leaving the area, while new job

opportunities in the healthcare sector have brought in new upper middle-income households.

American Community Survey 2007-2011, 2012-2016, Table B19013, 2018

American Community Survey 2007-2011, 2012-2016, Table B19001, 2018

Figure 11: Change in Population by Age

-14%

-12%

-4%

-5%

-8%

-3%

-11%

-10%

12%

-6%

-10%

-8%

12%

14%

-20%

-15%

-10%

-5%

10%

15%

20%

Under 18 18 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65+ years

Percent

Change in Population, 2011-2016

Source: ACS

Saginaw Prosperity Region 5 Michigan

MICHIGAN HOMEOWNERSHIP STUDY 35

The healthcare and manufacturing sectors continue to dominate Saginaw’s market comprising 59

percent of all jobs.

Major employers in the area include Nexteer Automotive, Covenant Healthcare,

St. Mary’s of Michigan, and Morley Companies. These companies alone employ over 12,000.

nearby Midland, Dow Chemical has its headquarters which serves the region as a major employment

hub.

HOUSING MARKET

Since 2011, the housing market in Saginaw has experienced 2 percent decline in the number of owner-

occupied units, which is similar to that of the region and state. At the same time, the number of renter

households increased by 4 percent. The city’s ownership housing stock is dominated by single-family

structures, comprising nearly 98 percent of all ownership units. Vacant properties are a major issue in

Saginaw, with 20 percent of all housing units listed as vacant. The City has focused its efforts on

reducing vacant and blighted structures through a systematic demolition program which helped

remove 860 vacant homes between 2013 and 2015.

OTM, 2018

https://saginawfuture.com/data-demographics/primary-employers/

https://www.mlive.com/news/saginaw/index.ssf/2016/10/saginaw_gets_22_million_to_con.html

Figure 12: Change in Household Income

-4%

-6%

13%

-14%

39%

-39%

-3%

-5%

-3%

-2%

18%

-3%

-2%

24%

-50%

-40%

-30%

-20%

-10%

10%

20%

30%

40%

50%

Less than

$15,000

$15,000 -

$24,999

$25,000 -

$34,999

$35,000 -

$49,999

$50,000 -

$74,999

$75,000 -

$99,999

$100,000 -

$149,999

$150,000 or

Percent

Change in Household Income, 2011-2016

Source: ACS

Saginaw Prosperity Region 5 Michigan

MICHIGAN HOMEOWNERSHIP STUDY 36

Table 2. Housing Units

Tenure

Saginaw Saginaw Prosperity Region Five Michigan

2011 2016 Change % Change % Change % Change

Owner-Occupied

12,025

11,790

-235

-2%

-3%

Renter-Occupied 7,378 7,639 261 4% 5% 11%

Vacant

5,357

4,888

-469

-9%

-1%

-3%

Total 24,760 24,317 -443 -2% 0% 0%

Source: American Community Survey 2007-2011, 2012-2016, Table B25003, 2018

AGE OF STRUCTURE

Saginaw has an older housing stock when it comes to ownership units. Nearly 77 percent of owner-

occupied structures were built before 1959, and only 1 percent were built after the year 2000.

Between 2011 and 2016 there was a 20 percent decrease in the number of new homes built. The local

market in Saginaw fell far below the region and state, which had growth of 18 percent and 14 percent,

respectively.

OWNER-OCCUPIED HOME PRICES

The median price of a single-family home in Saginaw decreased by 14 percent between 2012 and 2018.

In 2012, the median sales price of a single-family homes was $40,700 and in 2018 the median sales

price decreased to $35,000. Condominium prices also experienced a drop in median sales price, falling

18 percent over the same period. Figure 13 compares the price of new single-family homes and

condominums to those that already existed in the market by year sold.

PRICING BY YEAR BUILT

Between 2012 and 2018 there were 7,700 home sales with a median price of $37,732.

Homes sales of

structures built between 1900-1950 were the most numerous with 3,153 and a very low median sales

price of $20,505. This compares to sales of homes built between 1990 and 2010 where the median sales

price was $151,465. While the newer homes built after 1990 are selling for nearly 6.5 times are much

as homes built before 1950, the older units likely need substantial structural and cosmetic upgrades.

The condominum market in Sagniaw has seen a continuation in price escalation, however very few

units are changing hands as compared to single-family homes. In each of the respective year built

categories, prices have nearly doubled as time progressed.

American Community Survey 2007-2011, 2012-2016, Table B25036, 2018

Multiple Listing Service (MLS) Data, Michigan Board of Realtors, RKG Associates, 2018

MICHIGAN HOMEOWNERSHIP STUDY 37

Figure 13: Median Owner-Occupied Sales Price

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

2012 2013 2014 2015 2016 2017 2018

Sales Price

Saginaw Median Sales Prices, 2012 - 2018

Source: MLS

Existing Single Family New Single Family Existing Condo New Condo

Home price

affordable to

household at

median income

Figure 14: Median Owner-Occupied Sales Price by Year Built

$12,875

$19,810

$45,540

$86,900

$154,980

$58,300

$15,408

$21,200

$37,800

$65,880

$147,950

$227,277

$50,000

$100,000

$150,000

$200,000

$250,000

Before 1900 1900 - 1950 1950 - 1970 1970 - 1990 1990 - 2010 2010 - 2018

Sales Price

Saginaw Median Sales Price by Year Built, 2011-2016

Source: MLS

Single Family Condo

MICHIGAN HOMEOWNERSHIP STUDY 38

HOMEOWNERSHIP CHALLENGES IN SAGINAW

SHRINKING POPULATION

The city’s loss of residents over time has had a significant impact on the ownership housing market.

Housing vacancy rose rapidly, and the structural integrity of vacant homes declined. Without new

residents moving in, the existing population continues to age in place making it more difficult to

maintain homes and provide city services. Younger residents also help replenish schools, drive

activity, lend more support to local businesses, and can help revitalize the existing housing stock

through rehabilitation and on-going maintenance. The lack of turnover in the ownership market

suggests that the city’s housing stock will continue to decline until a point in time where the number

of units is right-sized for the population.

EXISTING VACANT STRUCTURES AND LOTS

The steady decline in population has resulted in many vacant housing units across Saginaw. As

property taxes go unpaid, the homes eventually become property of the City. Since the housing

market is relatively weak, the City ends up with assets it cannot dispose of. As a result, over the last

five years the city has demolished more than 1,000 housing units which were acquired for delinquent

property tax payments.

Parcels in the City’s possession are typically transferred to the Saginaw County Land Bank for

holding, developing, or disposing/selling. The land bank offers an opportunity for residents or

developers looking for land assemblage. The Land Bank is quite nimble regarding foreclosing and

taking possession of properties on which there are delinquent taxes. Generally, it takes about two and

a half years for the process to complete, with four notices given to the property owner, before legal

action results in a court judgement assigning title to the land bank.

The land bank then puts up the

land for public auction to recover delinquent taxes, and if the property is not bought, it then resides

with the land bank. While a useful tool, the land bank owns several parcels of land that do not yet

have an intended use.

LACK OF PRICE APPRECIATION

The general absence of demand for owner-occupied housing and population/employment decline has

resulted in housing units not retaining their values. Saginaw has experienced a prolonged period of

decline where the employment base shrunk, and incomes remained low. As an example, the median

price of a single-family home in Saginaw declined by $5,700 between 2012 and 2018, while sales over

the same period dropped from 1,261 to 825. With demand for housing tapering off, and an already

abundant supply of existing homes, this city is having a difficult time attracting new buyers and

stabilizing the market.

The decline in real estate values also impacts the willingness of homeowners to make structural and

cosmetic updates to their homes. Unless the owner is planning to stay long-term, they may not see

any return on their investment from rehabbing the home. Over time, deferring maintenance and

general cosmetic improvements create a situation where homes are less desirable or worth less on the

http://www.saginawcounty.com/Treasurer/PropertyForeclosureTimeLine.aspx

MICHIGAN HOMEOWNERSHIP STUDY 39

market. This cycle repeats itself and creates a downward spiral that can be difficult for current owners

to escape.

NEW CONSTRUCTION OF OWNERSHIP HOUSING INFEASIBLE

Interviews with people familiar with the Saginaw housing market revealed a very limited

development pipeline, particularly on the ownership side. A few new condominium units have been

constructed recently but were priced at the top of the market unaffordable to most Saginaw residents.

The decrease in population, coupled with an oversupply of existing housing has depressed home

values and demand. This has created a situation where constructing and selling new ownership

product is financially infeasible. The cost of acquiring land and building housing has exceeded the

price points at which the market will bear, and the population can afford. Developers have shifted to

building rental units (both market-rate and affordable) and some investors are purchasing single-

family homes and converting them to rental properties.

MICHIGAN HOMEOWNERSHIP STUDY 40

Aging Suburb - Westland

In today’s market, many larger urban cities are seeing redevelopment and revitalization that are

pushing housing prices upward to the point of pricing out many who wish to live there. On the edges

of these urban areas lie post-war suburbs that have an older, more affordable housing stock and are

benefitting from the spillover effects of the urban markets. Households looking for homeownership

opportunities view these suburban locations as an opportunity to gain more space, a yard, off-street

parking, better schools, yet still have access to the jobs and amenities the city offers. In many cases,

the housing stock in these suburban locations may provide more moderately priced housing that

could be improved over time with rising values as the market continues to improve.

Aging Suburbs are often characterized by post-war tract home subdivisions with three bedroom

homes of 1,000 square feet on a quarter acre lot. Many of these ranch-style homes are approaching

sixty years of age and have not been modernized with upgrades systems or cosmetic changes that

appeal to younger buyers in today’s market. This offers an opportunity to purchase a home at a lower

price and renovate over time. There are however challenges in the suburban market that can place

constraints on the for-sale market. These include an aging population with limited downsizing

options, zoning that restricts higher density housing options, and rising affordability challenges as

new construction price points are substantially higher than existing home prices.

DEMOGRAPHICS

The City of Westland serves as a case study for the Aging Suburban community type, as it sits about

thirty miles from Detroit to the east and Ann Arbor to the west. Westland is Michigan’s 10

largest

city and home to 82,218 residents. The city was closely associated to the industrial economy of Detroit,

particularly during the Second World War. Many residents of Westland worked on assembly lines

and manufacturing facilities during the War. Westland became a community for which workers from

Detroit could move to, purchase a house, start a family, and still commute to work. Today, Westland

is an affordable option for households looking for a single-family home in a community with good

schools and suburban amenities.

Credit: Wikimedia Commons

MICHIGAN HOMEOWNERSHIP STUDY 41

Demographic trends in Westland show the population is shrinking and getting older. Between 2011

and 2016, population declined by 2 percent or 2,048 people.

The city experienced a decline across

nearly all age cohorts, except for those ages 55 years and older which saw an increase of 14 percent.

As a city with an aging population issues around aging in place, downsizing, and on-going home

maintenance will continue to grow. Despite its location and relative affordability, Westland’s

population ages 18-34 declined at a time when both the region and state increased their share. This

indicates younger residents are leaving for post-secondary education, jobs, or moving to a more urban

location.

INCOMES AND EMPLOYMENT

The median household income in Westland is $44,808, as compared to the state median of $50,803.

Between 2011 and 2016, the median income fell by 7 percent. There has been a decrease in nearly all

income cohorts under $100,000 per year. One striking data point is that there was a 68 percent increase

in the number of households making over $150,000 per year. This change may correlate with the high

sales prices for new homes being built in Westland, indicating higher income households are moving

into the city and purchasing new higher-value homes.

American Community Survey 2007-2011, 2012-2016, Table B01001, 2018

American Community Survey 2007-2011, 2012-2016, Table B19013, 2018

American Community Survey 2007-2011, 2012-2016, Table B19001, 2018

Figure 15: Change in Population by Age

-10%

-3%

-10%

-13%

26%

-5%

-10%

-4%

13%

-6%

-10%

-8%

12%

14%

-20%

-15%

-10%

-5%

10%

15%

20%

25%

30%

Under 18 18 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65+ years

Percent

Change in Population, 2011-2016

Source: ACS

Westland Prosperity Region 10B Michigan

MICHIGAN HOMEOWNERSHIP STUDY 42

Westland is primarily a bedroom community with a small local economy. Most residents commute

out for work, with only 7 percent of Westland residents working in the city.

Westland’s proximity

to nearby manufacturing jobs and the cities of Detroit and Ann Arbor provide ample employment

opportunities within a thirty minute commute distance. Major employment hubs include Ford Motor

Company in Dearborn, General Motors in Detroit, and the University of Michigan in Ann Arbor.

Within Westland itself, the largest three industries make up nearly 60 percent of the total jobs. These

industries are: Retail Trade (26 percent); Health Care and Social Assistance (23 percent), and

Accommodation and Food Services (12 percent).

These industry sectors tend to have lower wages

and less benefits.

HOUSING MARKET

Since 2011, the housing market in Westland has shifted from ownership to rental at a faster rate than

that of the region and state. Over this period, the ownership stock in the city shrunk by 10 percent

while renter households increased by 11 percent.

The increase in rental units is the result of a

combination of new apartment construction in Westland, as well as the conversion of owner-occupied

units to rentals. The number of vacant units decreased by 41 percent, indicating a tightening of the

market as vacant units are rented or sold.

American Community Survey 2007-2011, 2012-2016, Table B08303, 2018

OTM, 2018

American Community Survey 2007-2011, 2012-2016, Table B25003, 2018

Figure 16: Change in Household Income

-11%

-5%

-2%

-13%

-2%

68%

-1%

-3%

-4%

-1%

-3%

21%

-3%

-2%

24%

-20%

-10%

10%

20%

30%

40%

50%

60%

70%

80%

Less than

$15,000

$15,000 -

$24,999

$25,000 -

$34,999

$35,000 -

$49,999

$50,000 -

$74,999

$75,000 -

$99,999

$100,000 -

$149,999

$150,000 or

Percent

Change in Household Income, 2011-2016

Source: ACS

Westland Prosperity Region 10b Michigan

MICHIGAN HOMEOWNERSHIP STUDY 43

AGE OF STRUCTURE

Being a first ring post-war suburb of Detroit, much of Westland’s housing stock is older. Nearly 42

percent of all owner-occupied structures in the city were built before 1959 and only 7 percent were

built after the year 2000.

In Westland, the construction of new housing has not kept pace with that

of the Detroit Metro Region. Between 2011 and 2016 there was a 1 percent increase in the number of

new homes built. Westland fell far below the region and state, which had growth of 18 percent and 14

percent, respectively.

OWNER-OCCUPIED HOME PRICES

Between 2012 and 2018, the median price of a single-family home in Westland increased 141 percent

from $58,187 to $140,000.

At the same time, the average days on the market dropped from a median

of forty-three days to seven days. The median sale price for a condominium experienced a similar

price increase of 137 percent, and a decrease in days on market from forty-four to seven. Figure 17

compares the price of new single-family homes and condominums to those that already existed in the

market by year sold. In the Westland market there is a price premium of 126 percent placed on the

median sale price for new homes versus existing.

PRICING BY YEAR BUILT

Between 2012 and 2018 there were 8,312 home sales with a median price of $96,995.

Homes sales of

structures built between 1950-1970 were by far the most numerous with 4,640 sales and a median sales

price of $87,000. This compares to sales of homes built between 2010 and 2018 where the median sales

price was $218,500. While the number of sales of homes constructed after 2010 are more limited, the

prices are considerably higher.

The condominum market in Westland has seen a sharp escalation in pricing as well, particularly for

units built after 1990. The difference in price between a condomium built between 1970-1990 and that

of a condimium built between 1990-2010 is about 107 percent; and the difference in price between a

condominum built between 1990-2010 and 2010-2018 is about 53 percent.

American Community Survey 2007-2011, 2012-2016, Table B25036, 2018

MLS, 2018

Multiple Listing Service (MLS) Data, Michigan Board of Realtors, RKG Associates, 2018

Table 3. Housing Units

Tenure

Westland

Prosperity Region 10B

Michigan

2011 2016 Change % Change % Change % Change

Owner-Occupied

22,202

20,065

-2,137

-10%

-4%

-3%

Renter-Occupied 12,753 14,123 1,365 11% 17% 11%

Vacant

4,298

2,545

-1,753

-41%

-16%

-3%

Total

39,258

36,733

-2,525

-6%

Source: American Community Survey 2007-2011, 2012-2016, Table B25003, 2018

MICHIGAN HOMEOWNERSHIP STUDY 44

Figure 17: Median Owner-Occupied Sales Price

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

2012 2013 2014 2015 2016 2017 2018

Sales Price

Westland Median Sales Prices, 2012 - 2018

Source: MLS

Existing Single Family New Single Family Existing Condo New Condo

Home price

affordable to

household at

median income

Figure 18: Median Owner-Occupied Sales Price by Year Built

$84,335

$48,000

$102,820

$116,494

$167,508

$254,611

$42,000

$36,045

$57,750

$119,340

$182,385

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

Before 1900 1900 - 1950 1950 - 1970 1970 - 1990 1990 - 2010 2010 - 2018

Sales Price

Westland Median Sales Price by Year Built, 2011-2016

Source: MLS

Single-Family Condo

MICHIGAN HOMEOWNERSHIP STUDY 45

DEVELOPMENT PIPELINE

Keeping with the theme of redevelopment and repurposing, the City is looking to encourage the

redevelopment of a 100-acre site which includes the site that held their former city hall. The City is

targeting the site for a mix of uses including up to 700 single-family homes and pads for retail and

restaurants. New homes in this area would likely be priced at the top of the market like the homes

built after 2010 selling in the $250,000 range.

HOMEOWNERSHIP CHALLENGES IN WESTLAND

NEW SINGLE-FAMILY CONSTRUCTION

Westland is a mature suburb growing out of the post-war period with very little greenfield land

available for development. In surrounding communities like Canton and Livonia, tract building

continues to take place with new subdivisions commanding prices well over $300,000 per unit. The

City of Westland has shifted from a focus on built-out and greenfield development to one of infill and

redevelopment. There is also a focus on rehabilitation of the older housing stock to prepare it for the

next generation of homebuyers. As older residents age out of their homes, structural and cosmetic

renovations are needed to make the home attractive to buyers in today’s market.

FHA CERTIFIED CONDOMINIUM DEVELOPMENTS

The FHA Spot Loan Approval Process was eliminated in 2010 which restricted lenders from offering

FHA loans on individual condominiums. New regulations require condominium associations to

become certified by HUD for buyers to utilize FHA backed loans. The certification must be renewed

every two years. The result of this process has been a lack of FHA approved condominium complexes

which accept FHA loans.

NAVIGATING POLITICAL AND REGULATORY CHALLENGES

In addition to financial barriers, political and regulatory challenges can also be difficult to overcome

in suburban communities where concerns over density, traffic, and schools can thwart best efforts to

develop housing and mixed-use projects. Zoning regulations have been set up to purposefully limit

density and separate uses making it difficult to redevelop older buildings and properties that have

exceeded their useful life. Multi-family housing options are ideal for young professionals and seniors

who are not looking for a single-family home but want to live in or remain in the community. Looking

at ways to redevelop or repurpose older shopping centers, publicly-owned buildings or lands, or

integrating additional uses in an office park are examples of where housing options can be expanded

in a largely built-out suburban community.

MICHIGAN HOMEOWNERSHIP STUDY 46

Small Town Rural - Alpena

Large swaths of Michigan are comprised of undeveloped rural lands with small towns and villages

dotting the landscape. To capture the housing challenges and opportunities in these places, the Small

Town Rural typology is intended to reflect geographically isolated communities with small

populations, fewer employment opportunities, and lower median household incomes. Owner-

occupied housing in these areas tend to be older and are primarily single-family or manufactured

homes. Multi-family condominiums are less common in these communities. As part of a larger

national shift towards urban places, many rural communities have not seen population growth, with

some experiencing population decline. The combination of population declines, and few employment

opportunities has created a housing market with affordable prices but homes that need rehabilitation

and renovation.

DEMOGRAPHICS

Alpena is a rural community of about 10,000 residents located on the northeast tip of Michigan along

the shores of Lake Huron. The city is geographically isolated with the nearest interstate connection to

I-75 seventy miles away. Alpena has a long history of manufacturing dating back to the 1800s with

logging and continuing today at its working waterfront. Small businesses, a regional medical center,

and a community college provide much of the employment base in Alpena and the surrounding

region. The city has several parks, trails, and rivers making it an attractive destination during the

summer, especially for those traveling towards Mackinac Island.

Demographic trends in Alpena show the population is shrinking and getting older. Between 2011 and

2016, population declined by 3 percent.

Most age cohorts declined over this period except for

residents ages 18 to 24 and 55 to 64. Presently, about 33 percent of the population is over 55 years old.

Part of the challenge for older residents in rural areas is access to transportation and services, and the

ability to find a variety of housing choices that meet your needs financially and are accessible as

mobility becomes more of a challenge over time.

American Community Survey 2007-2011, 2012-2016, Table B01001, 2018

Credit: Downtown Alpena Michigan, www.alpenadda.com

MICHIGAN HOMEOWNERSHIP STUDY 47

INCOMES AND EMPLOYMENT

The median household income in Alpena is $35,490, as compared to the state median of $50,803.

The

lower household incomes can be attributed to the rural nature of the economy which tends to have

lower average wages for workers. Interestingly, households earning $35,000 to $100,000 increased

across the board in Alpena following the same trend as Prosperity Region 3. The city saw a very large

percentage decrease in the number of households earning at or above $150,000 a year, which

translated into a loss of only forty households.

Alpena is the primary population and employment center Prosperity Region 3 and has a large

employment base relative to its size. Employees come from many surrounding townships, cities, and

counties for work each day. The largest employers in the area are the City of Alpena and Alpena

Medical Center. The hospital was recently acquired by the University of Michigan and an investment

program of nearly $60 million is expected to elevate the hospital to a regional hub.

American Community Survey 2007-2011, 2012-2016, Table B19013, 2018

https://www.mlive.com/news/saginaw/index.ssf/2018/01/59_million_expansion_planned_f.html

Figure 19: Change in Population by Age

-14%

10%

-10%

-9%

11%

-8%

-13%

-11%

10%

16%

-6%

-10%

-8%

12%

14%

-15%

-10%

-5%

10%

15%

20%

Under 18 18 to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65+ years

Percent

Change in Population, 2011-2016

Source: ACS

Alpena Prosperity Region 3 Michigan

MICHIGAN HOMEOWNERSHIP STUDY 48

HOUSING MARKET

Since 2011, the housing market in Alpena has shifted from ownership to rental at a rate twice as fast

as that of the region and state. Over this period, the ownership stock in the city shrunk by 17 percent

while renter households increased by 31 percent.

The number of vacant units increased by 57

percent, driven by an increase in units for rent and more seasonal housing added to the market. While

a smaller second home market than places like Traverse City or Holland, Alpena has seen an uptick

in seasonal housing where price points are substantially lower than in other lake front communities.

AGE OF STRUCTURE

Owner-occupied housing in Alpena is skewed toward the older end of the spectrum with 72 percent

of all owner units constructed before 1959. Only 2 percent of owner units were constructed after the

American Community Survey 2007-2011, 2012-2016, Table B25003, 2018

Table 4. Housing Units

Tenure

Alpena

Prosperity Region 3

Michigan

2011

2016

Change

% Change

Owner-Occupied 3,294 2,737 -557 -17% -2% -3%

Renter-Occupied

1,340

1,756

416

31%

15%

11%

Vacant 348 548 200 57% -2% -3%

Total

4,982

5,041

Source: American Community Survey 2007-2011, 2012-2016, Table B25003, 2018

Figure 20: Change in Household Income

-17%

-32%

16%

-51%

-5%

-10%

-3%

11%

16%

10%

-3%

-2%

24%

-60%

-50%

-40%

-30%

-20%

-10%

10%

20%

30%

Less than

$15,000

$15,000 -

$24,999

$25,000 -

$34,999

$35,000 -

$49,999

$50,000 -

$74,999

$75,000 -

$99,999

$100,000 -

$149,999

$150,000 or

Percent

Change in Household Income, 2011-2016

Source: ACS

Alpena Prosperity Region 3 Michigan

MICHIGAN HOMEOWNERSHIP STUDY 49

year 2000.

With population decline and a rise in vacancy, older structures may become less desirable

in Alpena and fall into disrepair if owners fail to maintain them over time.

OWNER-OCCUPIED HOME PRICES

The median sale price for owner-occupied homes in Alpena remained relatively stable between 2012

and 2018, increasing only 12 percent over a period of six years to $89,500. Unlike the other case study

communities, Alpena had very few (if any) sales of new homes to use as a comparison to existing

single-family and condominiums. The lack of new owner-occupied housing was confirmed through

conversations with City staff who indicated much of the new housing construction has taken place

outside the city limits in the surrounding townships. There is a soft market for new construction of

ownership units in the city limits, rather what exists are opportuntites for rehabilitation of older

existing structures.

PRICING BY YEAR BUILT

Between 2012 and 2018 there were 2,050 home sales with a median price of $96,808.

Homes sales of

structures built between 1950-1970 were the most numerous with 345 sales and a median sales price

of $82,500. Home prices escalate quickly with newer homes as the median sale price for homes built

between 1990 and 2010 doubles to $166,750. While only six homes built after 2010 sold over the last

six years, the median price point of those sales was nearly $208,000.

The condominum market in Alpena had very few sales between 2012 and 2018, with an average of

eleven sales per year. However, prices for newer condos built between 1990 and 2010 are commanding

an 85 percent price premium over condos built in earlier decades. Interestingly, condos in the Alpena

market on average are selling for $10,000 more than single-family homes. This is due to the fact that

most of the condos are newer than the average single-family home, and tend to be located in structures

with two to four units. The condo units tend to be larger and include newer amenities and layouts

than some of the older single-family homes in Alpena.

American Community Survey 2007-2011, 2012-2016, Table B25036, 2018

Multiple Listing Service (MLS) Data, Michigan Board of Realtors, RKG Associates, 2018

MICHIGAN HOMEOWNERSHIP STUDY 50

Figure 21: Median Owner-Occupied Sales Price

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

2012 2013 2014 2015 2016 2017 2018

Sales Price

Alpena Median Sales Prices, 2012 - 2018

Source: MLS

Existing Single Family New Single Family Existing Condo New Condo

Home price

affordable to

household at

median income

Figure 22: Median Owner-Occupied Sales Price by Year Built

$101,661

$60,420

$82,500

$102,225

$159,650

$207,925

$0 $0

$94,000

$173,850

$50,000

$100,000

$150,000

$200,000

$250,000

Before 1900 1900 - 1950 1950 - 1970 1970 - 1990 1990 - 2010 2010 - 2018

Sales Price

Alpena Median Sales Price by Year Built, 2011-2016

Source: MLS

Single Family Condo

MICHIGAN HOMEOWNERSHIP STUDY 51

HOMEOWNERSHIP CHALLENGES IN ALPENA

OLDER HOUSING STOCK

Based on the median household income of $35,490 and a median sales price of $89,500, owner-

occupied housing in Alpena is generally affordable to those households earning at or above median

income. The biggest issue Alpena faces is the abundance of older homes and the long-term

maintenance and potential rehabilitation associated with them. As was noted earlier, 72 percent of

owner-occupied units in Alpena were constructed more than sixty years ago. Depending on the

condition of the property, some renovations can be bank financed, while others require capital from

the homeowners themselves. Rehabilitation dollars are available from organizations such as MSHDA,

but only a finite amount of funding is available.

LACK OF AFFORDABLE NEW PRODUCT

Housing development in Alpena is centered more around rehabilitation of existing structures rather

than building new. New housing that is being constructed in the Alpena area tends to occur in the

township surrounding the city. These areas have large tracts of land for developers to build larger

homes on larger lots. As a result, the city is not seeing much in the way of new housing and those that

are constructed tend to be listed at price points well above what would be affordable to the those at

or below the median household income. Recent new housing construction has trended toward rental

developments with some utilizing tax credit financing and funding from state partners such as MEDC.

MICHIGAN HOMEOWNERSHIP STUDY 52

STRATEGIES TO ADVANCE HOMEOWNERSHIP OPPORTUNITIES

The challenges Michigan faces in providing residents with affordable homeownership opportunities

are varied and complex depending on the location and the strength and depth of the market. Based

on RKG’s assessment of Michigan’s existing homeownership stock, the state does not have enough

units today to support the future growth in households through the year 2045. The existing housing

stock faces the following challenges:

• Michigan’s ownership housing stock is older, and units may not have the layout, systems, or

amenities today’s homebuyers are looking for.

• Many vacant ownership units have not been maintained over time and will require

substantial rehabilitation.

• Communities with housing capacity may have declining population and fewer economic

opportunities that will attract new residents.

• Communities with housing demand as well as supply shortages are seeing prices escalate,

thereby creating an affordability issue for existing residents and those looking to locate there.

• Zoning and other regulatory barriers hold back or prolong the development process resulting

in fewer units created and higher price points.

• New employment opportunities or expansions may not be aligned with housing production

or rehabilitation to meet the demand from new employees.

• The combination of stricter lending practices necessitated by the housing crisis, growing debt

loads from student loans and other borrowing, and wages not keeping pace with costs are

making it more difficult to purchase a home.

• Financial resources for housing programs are shrinking, forcing all levels of government to

do more with less.

To address housing issues today and into the future, RKG has compiled a set of strategies, each

informed by the data analysis performed at the state and Prosperity Region levels, the more than

eighty individual interviews with housing professionals across Michigan, four local case studies, and

an assessment of existing housing programs. The strategies presented are a mix of tools and actions

that span geographies from the state down to local municipalities. These strategies are intended to be

a toolkit which can be mixed and matched based on market conditions, available funding, and the

overall goals of the organization or municipality implementing them. For ease of use, we have

identified the case study community type(s) that could benefit from each strategy. In some instances,

a strategy may be applicable to all four community types and could be applied state-wide.

The strategies and actions are grouped under four categories, each addressing a larger-scale issue

impacting homeownership in Michigan:

• Finance Tools. Access to capital, whether for an individual buyer or a developer, is critical to

ensuring home starts and home purchases can happen. Whether it is providing down payment

MICHIGAN HOMEOWNERSHIP STUDY 53

assistance for a first-time home buyer or tax credits to help with a development’s capital

stack

, different markets require different finance tools. These strategies address gaps in

financing and ways to enhance or restructure existing programs.

• Rehabilitation & Preservation Tools. Across parts of Michigan, communities and regions are

facing high vacancy rates, deferred maintenance, and homes that are not ready to re-enter the

market. Buyers in weaker market areas are finding it difficult to pull together financing to both

purchase a home and complete the necessary rehab due to lending criteria and the difficulty

of finding sales comps in the area. Oftentimes, the cost to rehab a unit may be higher than the

actual purchase price. Strategies that provide rehabilitation funding and neighborhood

stabilization/preservation tools can help bring existing ownership units back on the market.

• Land Use & Zoning Tools. Land use, zoning, and permitting are local tools that communities

have direct control over and impact the type of homeownership units that can be built, the

location of those units, and the time it takes to build them. Adjusting these regulations can

help with predictability of approvals, speedup delivery of units, and lower developer risk.

• Economic Development Tools. Housing and jobs are inextricably linked and aligning

employment opportunities with affordable housing is an important step to attracting and

retaining employees. These strategies provide opportunities for the public sector and private

sector to act in unison to help businesses thrive and employees find housing they can afford.

To increase the effectiveness of the tools, we suggest a layering of programs and funding sources to

provide a maximum level of benefit to homeowners. In additional to financial tools, the layered

approach could also incorporate additional programs such as economic development and

infrastructure grants, rehabilitation assistance, and demolition programs to increase the impact in

more challenging markets across Michigan. The layering of programs and subsidies could also be

structured in a way that helps low- to moderate-income households access high-opportunity areas

across the state where homeownership prices have far outpaced affordability. In these cases, financial

assistance programs may be most effective and layering down payment assistance, low-interest rate

loans, and/or rehabilitation assistance to qualified homebuyers could help to open access to a wider

range of communities for low- to moderate-income households.

Finally, homeownership tools must be selected in the context of the entire housing market to be

effective. Homeownership is not the best housing option for all households, so a local housing strategy

must pair these tools with options for safe and adequate rental housing. In some communities,

targeted increases in the supply of rental housing may be an effective tool for increasing affordable

homeownership opportunities, such as by creating neighborhood-based senior apartments that allow

residents to age-in-place within their communities, freeing up larger homes for new homeowners.

Capital stack refers to the variety of funding and finance sources used by a developer to fund a project.

MICHIGAN HOMEOWNERSHIP STUDY 54

FINANCE TOOLS

Access to capital, whether for an individual buyer or a developer, is critical to ensuring

home starts and home purchases can happen. Whether it is providing down payment

assistance for a first time home buyer or tax credits to help with a development’s capital

stack, different markets require different finance tools. These strategies address gaps in

financing and ways to enhance or restructure existing programs.

Strategy 1: Down Payment Assistance

Strategy

Down payment assistance programs are one of the best ways to

provide financial assistance to first time homebuyers. Organizations

involved in assisting homebuyers, non-profits, and municipalities

should look for ways to create new down payment assistance

programs in locations that are not currently well-served, expand

existing programs, and look for ways to increase assistance amounts

for buyers in higher priced markets. Down payment amounts should

be tailored to the market being served and tied back to the goals of the

organization offering the assistance. It may be necessary to provide

higher down payment amounts in locations where housing costs are

much higher.

Advantages

Saving for a down payment can be a major obstacle for first time

homebuyers looking to purchase a home. Down payment assistance

provides the financial boost for buyers in communities facing high

housing prices and to lower-income households needing more

assistance.

Challenges

Identify funding sources to support new programs, expand existing

programs, or offer higher down payment amounts in more expensive

markets. Potentially setting someone up for failure if other services

like credit counseling, budgeting, and home maintenance assistance

are not included. It is important to recognize that some households

may not be in a financial position for homeownership.

Action Steps

Help organizations that work across the housing spectrum and

municipalities identify down payment assistance needs in their

markets. Ensure asset limitations are appropriately set so

householders have enough savings to cover basic maintenance if an

issue occurs. Identify ways down payment assistance programs could

be created or expanded to provide additional resources to first time

homebuyers across Michigan.

Applicability

All Community Types.

MICHIGAN HOMEOWNERSHIP STUDY 55

Strategy 2: Low Interest Rate Mortgage

Strategy

It is important to recognize that low interest rate mortgages are a tool

to help homebuyers secure a mortgage at rates below the market

average, thereby allowing the buyer to afford more house or have a

lower monthly payment. Policymakers and funders should look for

ways to expand these programs where possible and find additional

outlets for marketing these products to potential homebuyers who

qualify.

Advantages

Provides a mortgage financing tool for homebuyers with a favorable

interest rate to lower monthly costs or provide more purchasing

power. This tool is helpful in communities with escalating housing

prices, and households not experiencing similar wage growth.

Enables more households to become homebuyers.

Challenges

Awareness of the program among lenders and participation in the

program among homebuyers across Michigan.

Action Steps

Organizations involved in encouraging homeownership should look

for ways to encourage additional low interest rate programs to

expand the availability for qualified buyers.

Applicability

All

ommunity Types and Qualified Borrowers.

MICHIGAN HOMEOWNERSHIP STUDY 56

Strategy 3: Land Disposition Strategy

Strategy

Vacant lots and structures are major issues in economically-

challenged municipalities. In some cases, land banks exist but are

unsure of best practices for disposition of assets. In other cases, a

land bank may not exist but could be helpful. Organizations involved in

helping with the disposition of land should look for ways to provide

direct technical assistance to municipalities and land banks to help

them understand market potential, development feasibility, and

creation of disposition strategy.

Advantages

Provides communities funding for technical assistance on landbank

asset disposition to increase neighborhood development and expand

tax base. Help landbanks reduce holdings.

Challenges

Land disposition plans and local market realities may be at odds.

Technical assistance would be most helpful in communities where the

market has begun to turn the corner.

Action Steps

Identifying communities with concentrations of landbank holdings.

Look for experts in the area who could provide technical assistance.

Coordinate with Michigan Land Bank Fast Track Authority. Secure

funding source(s) to pay for technical assistance.

Applicability

Targeted to low-income communities with significant landbank

holdings.

MICHIGAN HOMEOWNERSHIP STUDY 57

Strategy 4: Infrastructure Grants

Strategy

In markets where homeownership projects are on the cusp of being

financially-feasible, it can be important to look for ways to provide

funding to help offset infrastructure costs for transportation projects,

site work, utilities, soft cost loans/grants, etc. Funding assistance for

these types of expenditures can sometimes mean the difference

between a project that gets out of the ground and one that does not.

Organizations involved in funding homeownership projects,

foundations, and municipalities should find ways to assist or share in

the cost of these expenditures where possible to increase financial

feasibility.

Advantages

Upgrades in infrastructure and neighborhood amenities adds value to

homes. Upgrades could also help spark reinvestment in the larger

homeownership market. Helps developers and builders offset

development costs.

Challenges

Funding limitations. Infrastructure development is long-term and

requires strategic planning.

Action Steps

Identify potential funding sources or new programs that could be used

to assist with these development expenditures.

Applicability

All Community Types.

MICHIGAN HOMEOWNERSHIP STUDY 58

REHABILITATION AND PRESERVATION TOOLS

Across parts of Michigan, communities and regions are facing high vacancy rates,

deferred maintenance, and homes that are not ready to re-enter the market. Buyers in

weaker market areas are finding it difficult to pull together financing to both purchase a

home and complete the necessary rehab, due to lending criteria and the difficulty of

finding sales comps in the area. Oftentimes, the cost to rehab a unit may be higher than

the actual purchase price. Strategies that provide rehabilitation funding and

neighborhood stabilization/preservation tools can help bring existing ownership units

back on the market.

Strategy 1: Rehabilitation Loan Program

Strategy

Accessing rehabilitation funding for existing homeowners can be

challenging, especially in markets where the cost of home repairs may

exceed the value of the home. These funds are needed to ensure the existing

housing stock does not fall further into a state of disrepair. Funding for these

repairs is critical and housing organizations, non-profits, and municipalities

should identify ways to create programs and pathways for existing

homeowners who need rehab dollars.

Advantages

Rehabilitation loans allow homeowners to reinvest in their homes to ensure

long-term value of the home. Program fills funding gap for low-income

homeowners who lack capital to finance upgrades.

Challenges

Requires long-term deployment of capital on the part of the funding entity.

Increases portfolio risk for the lender.

Action Steps

Identify new programs and resources that could be deployed by non-profits,

organizations engaged in furthering homeownership, foundations, or

municipalities. Identify target areas or neighborhoods where rehabilitation

is most needed to stabilize the market.

Applicability

Concentrate program in neighborhoods/areas with most need. Use program

to boost comparables and help stabilize values.

Rehab Loan Program Example

Minnesota Housing offers a rehab loan program to

existing homeowners that provides up to $27,000 on a

15 year loan for safety, habitability, energy efficiency,

or accessibility improvements. The owner must

occupy the unit and be current on their taxes and

mortgage. Loans are forgiven if the owner does not

sell, transfer title, or cease to occupy the property

during the loan term.

For more information visit Minnesota Housing

Image: cob.org

MICHIGAN HOMEOWNERSHIP STUDY 59

Strategy 2: Rehabilitation Gap Financing

Strategy

A primary challenge in some of Michigan’s housing markets is the inability to

obtain financing for both the purchase and rehabilitation of an existing home.

Homes that are affordable to low- and moderate-income households may

need rehabilitation, but the cost of rehab and acquisition together could

greater than the home is worth. In these cases, lenders are reluctant to fund

both acquisition and rehab. Gap financing solutions should be identified to

provide capital to homebuyers willing to purchase and rehabilitate homes in

locations where comparable properties do not exist today. Organizations

involved in furthering homeownership, non-profits, foundations, and

lenders should identify sources of flexible funding that could be used in

combination with a mortgage to help close the funding gap.

Advantages

Consolidates financing to a single loan, rather than having both a traditional

loan and separate construction loan, minimizing fees. Directs rehabilitation

dollars to areas where rehabilitation of the existing housing stock can open

up opportunities for more affordable homes.

Challenges

Loan guarantees increase portfolio risk. Lenders may not be amenable to

such an arrangement without additional financial subsidy. Finding a funding

source flexible enough to protect lenders from risks. Also, the availability of

skilled trades to complete the rehab work within program guidelines can be

an obstacle; this has proven to be a challenge for the Detroit Home Mortgage

program, which helps address the appraisal gap in purchase/rehab

financing.

Action Steps

Housing organizations and non-profits should work with lenders to identify

funding gaps in target areas. Identify a variety of funding sources that could

be used to bridge the gap between the value of the home and the cost of

acquisition and rehabilitation.

Applicability

All Communities.

Rehabilitation Gap Financing Program

One of the challenges and barriers in Michigan’s homeownership market is the fact that many older

homes have not been consistently maintained over time and require rehabilitation before a new owner

can move in. The difficulty with acquisition and rehab in some areas of Michigan is there are a lack of

comparable properties that provide lenders with the confidence that the cost of rehabbing the home

will result in an appraisal at or above the combined cost of the acquisition and rehab loan. To assist

homebuyers who are willing to take on the challenges of rehabilitation, organizations involved in

furthering homeownership, non-profits, foundations, and lenders should identify sources of flexible

funding that could be used in combination with a mortgage to help close the funding gap. This could

come in the form of a grant through a philanthropic organization with a mission of investing in

neighborhoods with high levels of vacancy or dilapidation. The grant could be used to finance the

funding gap between what the lender can provide and the cost of acquisition/rehab.

MICHIGAN HOMEOWNERSHIP STUDY 60

Strategy 3: Neighborhood Development Program

Strategy

Foundations or other housing organizations could work closely with

municipalities to identify key neighborhood improvements that could help

stabilize or increase homeownership prices. Through a neighborhood

development program, matching funds could be made available for creating

more livable communities through investment in neighborhood amenities

such as sidewalks, schools, and public facilities. The program could be

competitive across municipalities, and may encourage municipalities to put

more funding in as a match for local projects..

Advantages

Communities lead by investing in particular neighborhoods. Funding from

this program augments total dollars spent in each community. Communities

are accountable for planning and delivering projects. Investment in

neighborhoods increases local property values and local interest in the

community.

Challenges

Equitable distribution of funding across all areas of need. Some of the

hardest-hit communities may receive a disproportionate share of funding.

Action Steps

Create programmatic language and neighborhood development evaluation

criteria. Secure funding source(s) to implement the program.

Applicability

All Community Types.

Community Infrastructure Program Example

Maryland’s Sustainable Communities Act of

2010 established a shared geographic

designation to promote efficient use of scarce

State resources based on local sustainability

and revitalization strategies. The Sustainable

Communities program consolidated

geographically targeted resources for historic

preservation, housing and economic

development under a single designation. The

designation places special emphasis on

infrastructure improvements, multimodal

transportation and development that

strengthens existing communities.

For more information visit Maryland

Sustainable Communities Act.

Image: dhcd.maryland.gov

MICHIGAN HOMEOWNERSHIP STUDY 61

Strategy 4: Demolition Fund

Strategy

In economically-challenged locations across Michigan, municipalities

face vacant homes and blighted structures which drive down property

values. Selective demolition has been underway in many places, but

more work is needed. Demolition funds or programs would provide

added financial assistance to municipalities to implement specific

blight remediation initiatives. Funding for these types of programs

could be provided to municipalities on a matching basis to stretch

funds further.

Advantages

Enables local communities to determine and prioritize areas needing

blight remediation through demolition. Helps address immediate

solution of vacant and abandoned homes that are beyond repair.

Removal of blighted properties increases remaining home values.

Challenges

Safe demolition of properties has significant monetary and

environmental costs. Demolition is first step towards redevelopment,

which is a long-term process. Would require long-term funding

sources to guarantee availability of program and funding.

Action Steps

Organizations engaged in advancing homeownership, non-profits,

foundations, and municipalities should work together to create new

demolition funding programs. These entities should work together to

understand funding needs and best sources for the programs.

Applicability

Urban with Economic Challenges, Small Town Rural.

MICHIGAN HOMEOWNERSHIP STUDY 62

LAND USE AND ZONING TOOLS

Land use, zoning, and permitting are local tools that communities have direct control over

and impact the type of homeownership units that can be built, the location of those units,

and the time it takes to build them. Adjusting these regulations can help with predictability

of approvals, speed up delivery of units, and lower developer risk.

Strategy 1: Diversifying Product Types

Strategy

Offering a variety of homeownership product types in a city or

township provides options for households with various needs,

desires, and income levels. Organizations engaged in advancing

homeownership should work to encourage municipalities to

update/change zoning to allow for a wider range of housing types that

could include duplexes, 3-4 unit buildings, multi-family

condominiums.

Advantages

Provides a variety of housing types at different price points. Offers a

housing product to residents in different life stages. Provides denser

housing options to help offset land costs.

Challenges

Density could be met with resident opposition. Introducing different

product types into single-family zones could be challenging. Doesn’t

necessarily address affordability issues.

Action Steps

Identify products that would be appropriate in different community

types. Offer model zoning language that could be modified and

adopted locally, particularly for housing types not common in every

community, such as fee-simple townhomes. Provide financial

incentives or a robust technical assistance fund to help offset cost of

writing/adopting zoning. This could take the form of a state sponsored

technical assistance program to support these types of changes at the

local level.

Applicability

All Community Types.

MICHIGAN HOMEOWNERSHIP STUDY 63

Strategy 2: Zoning Code Reform

Strategy

Encourage municipalities to update/change zoning to focus on

allowable uses and design that is context-sensitive instead of use and

density measures.

Advantages

Integrates a variety of housing types into the community’s

development fabric and neighborhoods. Provides developers with

flexibility to meet market demands. Creates a more predictable

process for developer and municipality.

Challenges

Requires re-education on zoning. Residents may not want other

housing types in traditional single-family districts. Can be expensive

to create new zoning codes.

Action Steps

Organizations engaged in helping municipalities understand zoning

changes could produce educational material on zoning code reforms.

Sponsor an educational conference or speaker tour around the state

on high-impact incremental changes to zoning codes. Create a

technical assistance fund for municipalities to help offset costs of

production and adoption of code reforms.

Applicability

All Community Types.

Zoning Code Reform Example

Recognizing that many Michigan communities have

unique qualities and challenges, yet similar economic

and cultural forces. The Michigan Municipal League,

Congress for the New Urbanism, and MEDC developed

this guide to help communities implement

incremental changes to their local codes. The areas of

reform cover form, use, frontage, parking, and

streetscape and are intended to help with challenges

related to downtowns, main streets, and

neighborhoods adjacent to these two commercial

districts. The suggested code reforms are intended to

help reduce or remove barriers to development while

ensuring the character of the place remains intact.

These low-cost high-impact code reforms are the first

steps in revamping old and outdated zoning codes in

Michigan.

For more information on the code reforms refer to The

Project for Code Reform.

Image: MML

MICHIGAN HOMEOWNERSHIP STUDY 64

Cluster zoning is a zoning method in which development density is determined for a specified area, rather than on a lot-

by-lot basis. Cluster zoning is specifically enabled in the Michigan Zoning Enabling Act, under MCL 125.3503.

Incentive zoning is a relaxation of zoning restrictions on developers in exchange for public benefits like building a desired

public improvement or building in a low-income area.

Strategy 3: Cluster/Reduced Minimum Lot Sizes

Strategy

Encourage municipalities to adopt cluster zoning or reduce minimum lot

sizes for subdivisions.

Advantages

More efficient use of land. Reduces infrastructure costs. Promotes open

space. Could include small density bonus for developer.

Challenges

Fears of density and homes “too close together”. Ensuring minimum

acreage for cluster development matches availability of land.

Action Steps

Organizations engaged in helping municipalities change zoning could

produce educational material on benefits of cluster development and/or

reduced minimum lot sizes. Create a funding pool to help municipalities

develop and adopt cluster zoning tools. Prioritize places that layer cluster

zoning with expedited permitting.

Applicability

Focus on Aging Suburban and Small Town Rural.

Strategy 4: Incentive Zoning and Density Bonus

Strategy

Encourage municipalities to adopt incentive zoning provisions in return for

affordable housing or amenities.

Advantages

Provides additional housing units to spread development costs across.

Gives municipalities incentive to negotiate for affordable housing.

Challenges

Fears of density and traffic. Ensuring density bonus could actually be

accommodated on the parcel of land.

Action Steps

Produce educational materials on best practices and examples of incentive

zoning and density bonus programs. Show how these tools can help with

financial feasibility of development.

Applicability

Urban Affordability and Aging Suburban.

MICHIGAN HOMEOWNERSHIP STUDY 65

ECONOMIC DEVELOPMENT TOOLS

Housing and jobs are inextricably linked and aligning employment opportunities with

obtainable workforce housing is an important step to attracting and retaining employees.

These strategies provide opportunities for the public sector and private sector to act in

unison to help businesses thrive and employees find housing they can afford.

Housing and jobs are inextricably linked and aligning employment opportunities with

Strategy 1: Employer-Funded Housing Fund

Strategy

It can be challenging for smaller employers, particularly those

engaged in seasonal work or tourism to cover housing costs for

employees. One option could be to create a housing fund paid into by a

group of smaller employers that could be used to help offset some

portion of housing costs for employees. This fund could possibly be

matched by a housing organization, non-profit, or foundation working

to advance homeownership opportunities.

Advantages

Provides housing subsidy for workers who most need it. Allows

workers to live closer to jobs, thereby reducing transportation costs.

Challenges

Getting employers to levy a fee on themselves.

Action Steps

Bring smaller businesses together to create a pool of capital that

would help fund an employee housing program. This could be

particularly effective in tourism-based economies where housing

costs quickly outpace wages for hospitality workers. This program

could be evaluated for serving both seasonal and year-round

workers.

Applicability

All Communities.

MICHIGAN HOMEOWNERSHIP STUDY 66

Strategy 2: Employer Location Incentives

Strategy

Where employers choose to locate can bring positive impacts to a

community, particularly if employees live and do business in the

community. If housing options are not available for employees, it can

force longer commutes or serve as a disincentive for business

investment. Incentivizing employers to locate in areas where housing

is available is a strategy that could help revitalize older

neighborhoods and bring economic benefits to more challenged

markets.

Advantages

Incent employers to locate where housing is available, and jobs are

needed. New investment from employees can bolster neighborhoods,

potentially encourage others to invest in the housing stock as well.

Challenges

Employers make location decisions based on a wide range of factors.

Some employers may not pay their employees enough for them to

afford homeownership.

Action Steps

Organizations focused on advancing homeownership, non-profits,

municipalities, foundations, and economic development organizations

could partner to design a program that would offer financial

assistance to employees locating in targeted areas where housing is

available. Funding sources would need to be identified for these

programs. A broad marketing program would be needed and shared

with potential employers looking to locate or expand in Michigan.

Applicability

Focused on Urban with Economic Challenges and Small Town Rural.

MICHIGAN HOMEOWNERSHIP STUDY 67

Strategy 3: Trade Worker Training Program

Strategy

Many construction trade jobs became vacated in Michigan after the Great

Recession making it difficult for builders and homeowners to find qualified

trade workers for residential projects. A trade worker training program

could help encourage residents to enter the profession, receive training, and

provide an incentive bonus for remaining in the profession for a set amount

of time.

Advantages

Helps to fill a critical need in the construction industry. Offers job

opportunities for those not pursuing a college education, or who are

unemployed/underemployed. Builds a workforce to help create more

homeownership opportunities.

Challenges

Finding enough people to go into trade programs. Creating the connections

between trainers and employers.

Action Steps

Organizations focused on economic development, education, and workforce

development could partner to create a program that partners schools and

training facilities with employers and offers students incentives such as free

or reduced tuition, a bonus that kicks in after five years of work, or an

account set up to help subsidize down payment on a home.

Applicability

All Communities.

Trade Worker Training Example

WorkSource DeKalb, in DeKalb County, Georgia provides workforce investment activities to

increase employment, retention and earnings of participants. Employment and trainings are

targeted at filling industry-specific needs which currently includes building trades and

construction. Residents seeking enhanced skills and training can gain access to education

programs through WorkSource, but only for the occupations in need. As the economy shifts,

WorkSource also changes industry sector trainings and eligibilities to keep the workforce

current and marketable in today’s economy.

For more information on DeKalb County’s workforce programs visit WorkSource DeKalb.

Images: mantec.org

MICHIGAN HOMEOWNERSHIP STUDY 68

Strategy 4: Anchor Institution Partnership Program

Strategy

Anchor institutions such as colleges, universities, and hospitals play an

important role in bringing jobs and people to communities. Recognizing that

not all workers can afford housing where their employer is located, a

program could be established that provides housing assistance to

employees who qualify. A partnership could be formed between economic

development organizations, housing organizations, and anchor institutions

to develop a program that provides some form of housing subsidy for lower

wage workers.

Advantages

Provides housing cost subsidy for workers who most need it. Provides

incentives for employees to invest in neighborhoods close to anchor

institutions.

Challenges

Finding anchor institutions that are willing to participate and administer the

program.

Action Steps

A partnership would need to be identified between various economic

development and housing organizations where anchor institutions exist. A

program could be developed that offers a housing subsidy to employees that

fall below the prevailing wage for the industry’s Standard Occupation Code

(SOC). If an employee falls below the wage line, he or she is eligible for the

subsidy. Funding sources would need to be identified to capitalize the

program.

Applicability

All Communities.

Employer Assisted Housing Example

The Employer-Assisted Housing Program assists full-

time benefits-eligible University of Chicago and

University of Chicago Medicine employees with their

home purchase in the neighboring communities. The

program provides up to $10,000 in down payment

assistance. Rental reimbursement up to $2,400 is also

available for new renters in portions of nearby

neighborhoods. Through this program, the University

strengthens its connections to surrounding

neighborhoods, retains valuable employees, and

helps staff optimize their work-life balance. Income

restrictions do apply to households earning over a

certain amount.

For more information on the program visit the

University’s website.

Image: University of Chicago, and NPR.

MICHIGAN HOMEOWNERSHIP STUDY 69

DATA SOURCES AND METHODOLOGY

The data used for the housing analysis comes from a variety of both public and private sources. Basic

demographic data comes sources such as the U.S. Census Bureau American Community Survey

(ACS). This resource is publicly available data that is both transparent and reproducible. Housing data

used for the study includes data from the ACS, U.S. Department of Housing and Urban Development

(HUD), Regional Economic Models Inc. (REMI), and the Michigan Association of Realtors. The

housing data is used in the analysis to understand the baseline conditions of the State and Prosperity

Regions, and to provide context for understanding needs and gaps.

Information about employment and wages was obtained from the Census Bureau data resource

Longitudinal Employer-Household Dynamics Quarter Workforce Indicators, which provides data

related to wages and employment sectors. This data is helpful in framing the socioeconomic

circumstances of the State and Prosperity Regions.

Projections data comes from the industry standard proprietary source REMI. This data provides

projection data to the year 2045 in five-year increments. The projections provide a reasonable forecast

of population, household, and employment. This information can help the State match future

demographic changes with policy goals.

To supplement hard data and provide a better understanding of the nuances found across the state,

qualitative data was obtained. This information was obtained via interviews with stakeholders and

officials. The individuals interviewed included state officials and policy makers, developers, real

estate brokers, affordable housing advocates, and community groups. These interviews are a method

of obtaining data that is real-time and hyper-local to Michigan and is critical for understanding the

greatest needs.

Aside from a rigorous quantitative analysis, thematic mapping was conducted to visualize existing

demographic and housing conditions for specific variables. The visual representation of the data

provides the necessary context to understand the Prosperity Regions.