by Lee Adams
As is true in many places throughout the country, communities across west Michigan have felt the impact of limited housing supply, coupled with increased demand spurred by the large millennial generation aging into homeownership. Extensive demolition of nearly worthless homes during the Great Recession, the prolonged recovery by home builders after the Great Recession, and construction slowdowns caused by the COVID-19 pandemic all have caused supply to lag behind demand. This mismatch has led to dramatic price increases in many markets. Further, wage growth has lagged behind housing costs, which has resulted in widespread and growing housing insecurity.
Recognizing the severity of this problem, many community leaders have responded by developing comprehensive housing plans to examine their housing ecosystems. These plans typically work by cataloging existing conditions, documenting the current and future needs of the population, creating goals and objectives to meet those needs, and developing strategies that will accomplish those goals. The planning process also works to accomplish a crucial step in enacting meaningful improvements to the housing ecosystem: building alignment. Successful alignment requires multiple partners from diverse sectors working together in pursuit of common goals and holding each other accountable through shared data and ongoing communication. This planning process should also identify implementation strategies that help to address housing issues, including ones that use a minimal amount of community resources. For example, improving zoning ordinances to allow for more efficient housing developments is an example of a low-cost strategy.
Local leaders have the opportunity to prime their communities for better development, and to do so with minimal costs. Creating a housing plan that incorporates the lessons described can give a community a sense of what is needed and what is accomplishable. Nonetheless, developers are primarily driven by their bottom line, and no amount of planning will compel them to build in areas that are not profitable. Infrastructure and zoning improvements will help make more projects feasible, but financial incentives are often needed to encourage developers to build housing in the areas where it is most needed, and those incentives often need to come from the broader community. Communities will need to employ a range of tactics to help improve their housing situation. Regardless, while none of these approaches is a panacea for all housing problems, together they will help address a significant portion of local housing challenges.
A housing ecosystem should function as a complete system and provide a continuum of housing options for residents.
Many residents in a community will need different types of housing throughout their lives; for example, the loss of stable income or a medical issue might force someone into a temporary residence, while graduation from college or a promotion may allow someone to move into more stable, market-rate housing. These transitions are a natural part of life, and a healthy housing ecosystem provides housing options as these transitions happen.
Maintaining homes is typically far more cost-effective than building new ones.
Ensuring homes do not fall into disrepair and out of usable condition can have the same net impact on housing supply as building a new house, and at far less expense. Regardless of these points, community leaders tend to focus on highly visible new construction rather than maintaining homes. Communities should celebrate the maintenance of homes as much as the construction of new homes to ensure that more efficient work is undertaken.
Housing planning requires a coordinated approach.
In most communities, different stakeholders work in various segments of the housing ecosystem. Nonprofits typically support the most housing insecure, while for-profit developers often focus on market-rate housing. Successful communities work to coordinate housing stakeholders to ensure that housing options exist at all levels of the housing continuum and to effectively deploy resources when there are gaps.
Local governments have several tools to support housing development.
Local governments can allow higher levels of density, reduce permitting time and zoning barriers, and improve built infrastructure like roads, transit, sewer, and other utilities. Amending zoning codes to allow for higher levels of density, for instance, can help reduce the cost per unit for developers and make more projects economically feasible. When done correctly, increases in density can occur without changing the character of a neighborhood; accessory dwelling units, for example, are a great way to achieve higher density without significantly altering the look and feel of a community. Likewise, reducing the permitting time and simplifying the process can decrease development costs and speed up development. Expanding the types and density of housing units that developers can build on given parcels of land can also reduce uncertainty and development time. Finally, many developers cite the lack of suitable building sites as one of the biggest hindrances to new housing development. Having to install water and sewer infrastructure increases the cost of development, especially when done piecemeal rather than systematically, and these cost increases are typically passed on to home purchasers. Furthermore, wells and septic systems are expensive and require larger lots, which increases both development costs and the costs to home buyers. While some of these policy recommendations require significant budget investments, other reforms are administrative and therefore require political will more than budget resources.
State-level tools to support housing need to reflect current conditions and needs.
Community partners in multiple counties have noted the need for updated supports and incentives to encourage housing development. In many places, housing developments will not turn a profit without financial contributions from state or local partners; this is especially true in rural areas where rents or home prices are generally lower and sometimes insufficient to cover the materials and labor costs of new construction. Likewise, applications for Low-Income Housing Tax Credits, which developers can use to offset some of their costs when building units intended for low-income residents, are typically less competitive in rural areas because of the way scoring criteria are designed in Michigan. Reforming these criteria could help, as could the expansion of tax increment financing, which would set aside some of the increased property tax revenue from new market housing development to provide the requisite funding to encourage developers to build in less-profitable areas. A pool of funding to directly incentivize housing development more generally is also needed, as is indirect funding through infrastructure expansion grants.
To find more tools for how communities can implement effective housing plans visit https://www.plan4housing.org/.