Organization addresses need for affordable housing

Housing Next is working with nonprofits, builders and municipalities to replenish residential stock.
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Higher income earners have been winning the homebuying battle in West Michigan, as they have the resources to purchase homes above asking price. Courtesy iStock

A West Michigan organization has formed a new partnership with the Greater Grand Rapids Chamber Foundation (GGRCF) to address the housing needs in Kent County. 

Ryan Kilpatrick, executive director for Housing Next, an organization that works with local government, developers and nonprofits to make housing affordable, said the partnership with GGRCF is an effort to increase the production of housing at all price points to meet the demand for housing and housing needs in the county.

Housing Next originated in Ottawa County with the funding and support of the Community Foundation of the Holland /Zeeland Area and the Grand Haven Area Community Foundation with the same goal of meeting the housing needs of individuals.

West Michigan, Kilpatrick said, needs more than 37,000 additional housing units over the next five years due to population growth. He said Ottawa and Kent counties are the two fastest-growing counties in the state over the past 15 years, and both counties have underproduced in terms of housing production by less than half of what they were producing each decade prior to the recession in the late 2000s.

The growth in population stems from many things, including the economic opportunities that now are available.

“We have had very strong job growth,” Kilpatrick said. “We’ve got a very diverse economy in West Michigan that still includes a fair amount of manufacturing, but also includes the medical sector and service industry. We have a bunch of outstanding educational institutions, and all of those things are drawing talent into the region from across Michigan and, frankly, across the country.”

Along with the job opportunities in West Michigan, the region also provides affordable housing compared to other cities throughout the country.

“West Michigan, relative to a lot of communities, provides a very high standard of quality of life and is still relatively affordable compared to most major metropolitan areas across the country,” he said.

“So, as we think about what happened during the pandemic, we saw a lot of households where one or maybe both income earners in a household suddenly had the opportunity to work remotely, and where they used to be based in Denver or San Francisco or Seattle or Boston or Chicago in a very strong housing market where they were spending maybe as much as double on housing as they would have to spend in the Grand Rapids or West Michigan market, they recognize that they could do the same job that they’ve been doing in that larger metropolitan market but do it in a smaller market like Grand Rapids with half the living costs and, frankly, an improved quality of life.

“As a result, we have lots of these folks who are relatively higher earners who are moving into the region at a faster clip and, frankly, our housing production isn’t keeping up.”

The increase in population, coupled with the slow production of housing, is forcing competition in the housing market for potential homeowners and renters.

Higher income earners have been winning the battle, as they have the resources to purchase homes above asking price, said Kilpatrick, who will moderate a panel discussion on affordable housing on April 13 as part of the Business Journal’s Breakfast Series at Frederik Meijer Gardens and Sculpture Park.

“Many people are experiencing dozens of offers on a house, offers that are going $30,000 and $40,000 over asking price and oftentimes all-cash offers,” he said. “So, for those of us who are trying to buy homes for the first time, we need an 80% or 90% mortgage, and we can only afford so much. It’s very, very difficult to compete in that kind of a constrained market. That’s creating this cascading effect throughout the rest of the housing market. Folks who are able to compete for the scarce supply of housing are driving prices up, which is pushing out more and more middle-income households that otherwise would be homeowners who are forced to continue to rent.

“Relatively speaking, those folks who would be homeowners except for the dramatic increase in price are still relatively well off compared to other renters. So now that’s creating this extraordinary competition within the rental market. We have higher-income households who would like to own but can’t afford it, so they continue to rent.

“And they’re competing for a scarcity of rental supply, and so, once again, it’s the lowest income renters in that group who are getting pushed out of the market where they’re forced to double up and share housing with another family, or they’re getting pushed out of the region altogether.”

To address that issue, Kilpatrick and Housing Next are focusing on helping others find affordable residences by working in partnership with nonprofits, for-profit developers, municipalities and employers to generate data that outline the specific needs of a community, which include rentals and/or homeownership.

Depending on the data, the collaboration with the different entities can result in regulatory reforms, package incentives that local municipalities can offer, matching developers with other funding sources either from the state or federal government, or rethinking the methods that are being used to solve specific housing issues related to affordable housing, such as homelessness, all with the end goal of providing affordable housing for low-income earners in the region.

The top issues that have become barriers for providing affordable housing, Kilpatrick said, are zoning and the lack of trade labor.

“When we plan and zone for residential neighborhoods, we’re mostly zoning for larger lots where primarily single-family homes can be built,” he said. “The cost of constructing a single-family home is pretty high. Typically, the cost to build a new single-family house is somewhere between $225 and $250 a square foot, and so, when you have to spend that amount per square foot what we get typically is single-family homes that cost at least $350,000 to build.

“There are only so many households in West Michigan that can afford the cost of a $350,000 house. If we’re not regulating to allow for smaller homes on smaller lots — sometimes attached homes like townhouses or condominiums — if we’re not allowing those kinds of housing, then builders and developers can’t build them.

“Primarily what we get is one of two products: either large-lot, single-family homes or a big multiunit apartment complexes that are sort of isolated from the rest of the community. While those are both good choices for folks, they’re not the right choices for everybody.”

Kilpatrick said a lot of the cost for new housing comes from the lot and the minimum home size the municipality requires a person to build.

“We’re requiring some people to build twice as much home as they actually need, which in effect, roughly doubles the cost of the house,” he said. “Other things like the size of the lot, if it costs roughly $75,000 to $100,000 for an individual lot, that’s 10,000 square feet. If you’re only allowed to build on a lot that is 10,000 square feet or larger, then you have to pay that full $75,000 for the lot.

“But if the municipality allows you to divide that lot into three, suddenly you can cut your land costs by two-thirds and so now, you only have to spend $25,000 on your lot. And if you can also build a smaller home, suddenly you can save almost half of your construction costs. It’s really about working with local municipalities to recognize that not every household in West Michigan has the exact same needs, and we have to be allowing for more choices in more places.”

More information on Housing Next is at housingnext.org.

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