The Michigan State Housing Development Authority’s Housing and Community Development Fund has never been adequately capitalized, according to MSHDA’s interim leader, but all that may change if Gov. Gretchen Whitmer succeeds in getting a cluster of proposed investments pushed through the state Legislature.
Whitmer in late August proposed using Michigan’s $2.1 billion in funding from the federal American Rescue Plan (ARP) Act of 2021 to make critical, long-term investments in families, small businesses and communities, including an historic, approximately $550 million investment in affordable housing.
Now that the Michigan Legislature has approved and signed the governor’s executive budget for fiscal year 2022, it is turning its focus to considering her proposal for the ARP funding — a process that is expected to take several weeks.
Although Michigan’s economic recovery is underway — the state had the fastest-growing economy in the Midwest over the first three months of the year; a lower unemployment rate than the national average; a $3.5 billion surplus, up from a projected $3 billion deficit; and two boosted credit rating outlooks — the state faces several economic challenges, including a lack of affordable, attainable housing.
Whitmer’s proposed plan — in addition to allocating $722 million to grow the middle class and educate more workers and $651 million to support small businesses and create better jobs — allocates about $550 million to investments in housing.
Whitmer’s ARP proposal expands on her previous recommendation to put $100 million toward building 2,000 units, creating 1,600 jobs and housing 6,000 Michiganders (a sum that would go into MSHDA’s Housing and Community Development Fund); proposes a further $50 million to create healthier, cleaner and more energy efficient homes ($15 million of which would be administered by MSHDA); allocates $100 million to rehabilitate vacant buildings; and allots $200 million to redevelop brownfield sites. She also proposed $100 million to build development-ready sites conducive to business investment.
Gary Heidel, acting director of MSHDA, said the agency’s Housing and Community Development Fund has existed for around 15 years, but he believes it has never been sufficiently funded.
“The last time was several years ago, when the Legislature — led by Sen. Mark Jansen, a Republican from the west side of the state, and Rep. Steve Tobocman, a Democrat from the east side of the state — was able to put $3.5 million into the fund (in 2008-09), and so we operated on that,” he said. “The Housing and Community Development Fund is referred to as a trust fund. Forty-seven states have such a trust fund. Every state in the Midwest has one, but the Michigan trust fund, which is the Housing and Community Development Fund, has just never been adequately funded. So, this is a great opportunity for us — if the Legislature approves the funding — to really catch up to the unique kinds of things that are done with these flexible funds by other states. It’s so critically important, especially considering we have such an affordable housing crisis in Michigan right now.”
Even before Whitmer proposed using ARP funds for affordable housing investments, MSHDA was in the process of creating a statewide housing plan drawing on public input; insights from a partnership council of 18 organizations involved in affordable and workforce housing, including nonprofits, for-profit developers, senior citizen groups, organizations that serve individuals with disabilities, and local governments; and a coalition of state agencies including the Michigan Department of Environment, Great Lakes & Energy, the Michigan Economic Development Corporation, the Michigan Department of Transportation and the State Land Bank Authority inside the Department of Labor and Economic Opportunity.
To obtain the legally required public input, MSHDA surveyed about 7,000 residents on the housing crisis, receiving feedback on their specific needs, Heidel said.
That feedback will help MSHDA decide how to allocate whatever funds come through from ARP, he said.
“We’ve been working with solutions groups — which are work groups around 17 major issues about affordable and workforce housing — and digging a little deeper into some of those priorities. We will also, as we move out of the solution groups, do much more penetration in getting down to people who normally don’t get an opportunity to provide input on what housing needs are,” Heidel said.
Although the work is not done, Heidel said data collected during the past couple of years give MSHDA a strong sense of what needs already exist, including more rental housing for extremely low-income people, significantly more homeowner rehab funds, more senior housing and more homeownership opportunities for people of color.
To that last point, MSHDA has ensured community and economic development nonprofits are at the table from under resourced, under invested in and diverse neighborhoods to ensure those voices are being heard, and it also is working on creating a legal formula based on housing needs, poverty and economic distress to determine how housing funds will be distributed.
MSHDA implemented a similar formula when, earlier this year, it added a program called the MI 10K DPA Loan that provides Michigan residents in 236 ZIP codes up to $10,000 in down payment assistance.
The areas eligible for the MI 10K DPA Loan — including parts of Kent, Ottawa, Muskegon and Allegan counties — were identified by analyzing census data, Home Mortgage Disclosure Acts (HMDA) data and historical data of MSHDA activity. With these data points, MSHDA created an overlay to identify opportunities available for employment, income, housing stability, value, education and other related factors, leading to the identification of areas with greater access to quality, affordable housing and areas with less.
Heidel said a significant percentage of the targeted ZIP codes have high concentrations of residents of color — a fact which is no coincidence, given historic government-sanctioned redlining.
“It’s been a very successful program so far,” he said. “About 67% of the down payment assistance and mortgage finance we have been doing over the last few months has been in those targeted areas.”
Heidel said he believes the governor’s plan is taking a “people-centered economic development approach,” and he is hopeful the investments will make an impact.
When it comes to applying the funds for affordable housing, he said he believes the most important step will be to increase supply.
“What we saw coming out of the Great Recession 10 years ago is the amount of disinvestment that went into our housing production, and that’s one of the reasons why you’re seeing housing prices increase, is because there’s just not enough supply. Or why there are not many opportunities for people of color, or why homes are in such disrepair, or why as new factories move in, especially in certain rural areas, they can’t find housing for their workers. We’ve got to increase production, and that’s what the housing development fund is all about,” he said.
“And I think the other big part of what we have to do is create equity in housing also. We’ve got to make sure that there’s access for everyone and that everyone has opportunities to have a (home).”