In the next five years, more than 6,000 new and rehabilitated dwelling units could be supported in the city of Grand Rapids, according to a recent in-depth report.
The more than 150-page report, which was prepared by Zimmerman/Volk Associates Inc., a New Jersey-based residential market analysis and implementation strategies firm, was presented before city officials, developers, landlords, shareholders, residents and community members late last month at Great Housing Strategies, a city of Grand Rapids-hosted conference to have a community conversation about the future of housing in Grand Rapids.
Laurie Volk, co-managing director of Zimmerman/Volk Associates, called the report an analysis of market potential.
“The purpose of this study is to determine the annual market potential for new housing units — created through adaptive re-use of existing non-residential buildings and rehabilitation of existing single-family detached houses as well as through new construction — that could be developed over the next several years within the city of Grand Rapids,” read the report.
“This study also determines the annual market potential for new urban housing units within several neighborhood business corridors located within the Neighborhood Stabilization Program boundaries (the Target Market Study Area) and the city of Grand Rapids.”
Volk began by offering key demographics about the city relating to income and median value housing. In Grand Rapids, 56 percent of residents own housing units and 44 percent are renters, she said. Nationally, about 64 percent own and 36 percent rent.
“Median household income within the city is about $41,000 in 2015. The median housing value is $120,100,” she said.
“Nationally, the median household income is just under $54,000, so you can see Grand Rapids’ median income is well below that. However, for a city, it is actually a pretty high-median income. … The median income in the city of Detroit is $23,000.”
Volk’s report looked at six target market study areas of neighborhood business corridors: Northeast (Creston business district, Census Tract 9), Westside (West Leonard, Stockbridge, and West Fulton business districts, Census Tracts 8, 15, 16, 19 and 27), Downtown (including Monroe North and Heartside business districts, Census Tracts 14, 20 and 21), Uptown (East Fulton, Cherry/Lake/Diamond, Wealthy Street and Eastown business districts, Census Tracts 24 and 25), Southwest (Grandville Avenue business district, Census Tracts 26 and 39), and Southeast (South Division, Madison Square, Burton Heights, Franklin/Eastern and Boston Square business districts, Census Tracts 28, 30-32, 36-38 and 40).
In the report’s study area, there are slightly less than 74,000 people and slightly less than 27,000 households, she said. The median household income is $32,000 and 42 percent of the households have incomes below $25,000. The median housing value is slightly less than $89,000.
“The core — like so many cores in so many cities — is lagging behind the city as a whole. Again, looking at who are living in the households in the target area, we have families overwhelmingly dominating the current housing market (71 percent). Now please note: This includes traditional and non-traditional families.”
Looking at that target market area, the report found that, in next five years, up to 6,250 new and rehabilitated dwelling units could be supported within the neighborhood business corridors of the target market study area, Volk said, and it’s an almost 50/50 split between rental and ownership. Approximately 72 percent would be market rate and 28 percent would be affordable housing units, she said. Nearly 47 percent of the market rate units would be rental; 53 percent would be for sale. About 55 percent of the affordable units would be rental and 45 percent for sale.
Defining “market rate” and “affordable” units can be tricky, she admitted. The report used the Housing and Urban Development formula delineating low income and very low income, which is calculated based on the area median income for a family of four, she said.
In the Grand Rapids MSA, the median family income for a family of four is $68,200. The region obviously contains more than just the city, but that’s how it’s been calculated by HUD, she said. When that is broken down to individual income levels to better understand what is affordable and what is market rate, it’s important to remember market rate does not necessarily mean all new construction. It’s households that can afford units when they have incomes above a certain level, which is 80 percent of the area median income.
“Based on those HUD standards in 2014, a one-person household at 80 percent of the area median income would have an annual income of $35,000; a two-person household would be $40,000; and a three-person would be $45,000,” she said.
“Affordable or workforce housing units are units that can be afforded by households with incomes starting at $13,150, which is 30 percent of the AMI, for a one-person household, on up to almost $28,000 for a five-person household. That range between 30 and 80 percent of AMI is what we’re calling the affordable workforce market potential.”
Once you get to market rate above 80 percent AMI, rent rises to $875 per month for a one-person household and up to $1,350 per month for a five-person household, she said.
Of the 6,250 units that can be supported in the neighborhood business corridors over the next five years, slightly fewer than 3,100 are rental units, 69 percent of which would be market rate rent and 31 percent affordable rent. About 85 percent would be absorbed in the Downtown, Uptown, Westside and Northeast, and the remaining 15 percent would be absorbed in the Southeast and Southwest.
Approximately 14 percent of the 6,250 units would be condominiums, 76 percent of which would be market rate and 24 percent affordable. Nearly 79 percent would be would be absorbed in the Uptown, Downtown, Westside and Northeast corridors, and 21 percent would be absorbed in the Southeast and Southwest corridors.
Single-family attached, townhouses and live/work units would make up about 16 percent of the 6,250 units. Seventy-one percent would be market rate and 29 percent affordable rent. Two-thirds of these units would be absorbed in the Uptown, Westside and Downtown corridors with the remaining 33 percent going to the Northeast, Southeast and Southwest districts.
The detached housing market for both new and rehabilitated single-family dwelling units would represent 20 percent of the market potential. These units would be limited to the Westside, Northeast, Southeast and Southwest, she said.
The methodology for these statistics is also based on the fact that households move every year, she said, and Michigan’s numbers are troubling.
Last year, Volk saw a migration analysis of Michigan that looked at the inflows and outflows of every state. Michigan was at the very bottom, the last state, in net positive migration, she said. Volk warned if the city does not proceed with fiscally diverse new developments, the community will suffer.
“Often people will leave a city because they cannot find dwelling units they want to live in at a price or rent they can afford or choose to pay. It is really important to understand people move within a city to retain those households because you can remain strong if you can keep your population here as well as attract new households here,” she said.
Volk estimated 47 percent of occupants will be people moving in from outside city limits.
In the next five to seven years, almost 23,000 households will be moving within or to the city, and about 13,000 of those households already live in the city and will be moving from one unit to another, she said. Furthermore, the majority of those coming in will be non-traditional families, and about half would choose to rent.
“Because Grand Rapids is becoming a much more attractive city to people from outside the city, and whenever a place is really attractive and people want to move there, we have seen over and over that values rise,” she said.
“What we see here is 19 percent of that annual potential market are households with incomes less than 30 percent of the AMI, and 38 percent of that annual market potential for the city are households with incomes above 100 percent, not 80 percent, of the area median income.”
To have a strong city foundation requires mixed income housing, Volk said, adding that cities and neighborhoods that work best are mixed-income neighborhoods with a variety of housing types and a variety of rents and prices. Michigan emphasizes capturing “middle” housing, and in Grand Rapids that type of housing does not exist in sufficient quantity to provide that choice for the potential market.
What Grand Rapids doesn’t want to do is allow a concentration of poverty or wealth; what the city needs and should work toward are neighborhoods that provide financial options and choices for everyone, she said.
“There’s often a great deal of concern about what kind of rental units need to be provided, and I think the analysis shows what we need to do is provide, on a continuing basis, a variety of housing types that are affordable to a range of incomes to maintain a diverse and livable city,” she said.
“One of the issues for us as market analysts is that this is where the market could go. But what we know over time is that what actually happens in a city is not only based on what market preferences are … but also what each neighborhood feels about their own neighborhood and about what city policies there are that encourage the development of all kinds and all ranges of housing.”