Arbor Update

Since hearing Bob Johnson’s comment about affordable housing during the Metro 202 proposal discussion I’ve had a nagging feeling about it. Several AU contributors and commenters have touched on the issue of affordable housing (AH) in the past, and I’d like to refocus the discussion here.

A common question to arise has been, does it make sense to try to build or otherwise provide AH downtown where the property values are the highest in the city?

I think that many of us would agree that in many ways it doesn’t, and yet we still have council members wanting an AH “component” in new developments like Metro 202 and several other recently approved proposals.

The current AH inducement (practically a requirement, currently)—actual units or cash in lieu—for PUDs and planned projects results in more expensive units and artificially larger developments, (i.e., taller buildings) not to mention delays that further increase the costs of units. Is that fair to say?

What I’m wondering is, if AH wasn’t pushed for in new downtown residential developments, would the demand for more expensive condo units result in higher property taxes (collected annually, not just once, as the cash-in-lieu payment is) that the city could then use (possibly combined with a citywide/countywide assessment) to build AH elsewhere in the city/county? (Just where that might occur is another important subject.)

Also, there’s more to making housing affordable than building small units and putting a low price tag on them. As was demonstrated on last night’s PBS documentary, “Waging a Living”, low-income households have certain needs, like childcare, transportation, and social services. Why scatter individuals around the city in isolated units rather than group people together where they can live as a community, sharing resources and expenses? Shouldn’t our affordable housing be more like co-housing rather than high-rise, empty-nester condos?

I have more thoughts on how this relates to transportation and other issues, but I’d like to hear your thoughts first.

Steve,

I thought one of the reasons that the downtown location was preferred was because of access to transportation, employment, services, etc. You can build really cheap housing out in farm fields. There’s a lot of developers of mobile home parks who do just that. But getting a cheap home out in the sticks saddles you with the cost of transportation and no access to services. I know that’s not what your suggesting but just making the point that I think that those issues have been driving the location for AH.

Scholars indicate that concentrated poverty leads to a number of other problems, such as a lack of public and private investment in impoverished areas, stigmatization of an area, as well as problems of crime and educational underachievement. (Note that the concentration [often estimated at about 40% in a census tract] does not cause the problems, other things do).

A few thoughts …

First, the idea of capturing the tax revenue and using it for affordable housing is a great one … but not that clear cut. The downtown area (officially the DDA district) is also a TIF district … that means that the city gets the base property tax on the property, but any increased value from property improvements (ie. redevelopment of the site) goes to the DDA. The DDA does set aside some money in their budget to contribute to affordable housing projects.

Second, there are different definitions of affordability. The city code requires that projects with PUD zoning that are building a number of residential units in excess of the underlying zoning need to provide affordable (80% AMI, I think) units onsite or pay cash-in-lieu. Projects applying under regular zoning (like Metro 202) aren’t required … however that doesn’t mean that the units won’t be “affordable”. Metro 202 claims to offer workforce housing … this isn’t defined in our code, but believed to be missing downtown and an important demographic component in need of “affordable” housing.

My personal opinion is that all levels of affordable housing need to be provided in all areas of the community, including downtown. I don’t necessarily think that each site needs to contain a mix of housing. It’s hard for developers who are primarily offering large, luxury apartments to provide affordable units onsite (or for the cash in lieu fee to be used to offset the cost of some other project downtown). But, when developers offer smaller units (like at William Street Station), these units often end up more affordable or are easier subsidized to be affordable.

BTW, I also realize that one of the drivers for AH downtown may be that no one else wants it in their neighborhood (yet another issue.) But what I’m talking about, John Q., is the desire to milk every new development for all they’re worth in order to get AH included, in spite of the fact(?) that it may not be the most efficient way to generate AH overall.

By “elsewhere in the city/county”, I’m not talking about “out in the sticks” or in greenfields, but in (re)developing urban areas, along transit (or possible transit) lines. West Stadium, Plymouth Rd., N. Main, Jackson Rd.—there must be a number of areas in the city, as well as Ypsi and some of the villages, that could have (re)development where people could live together, share a car, and maybe even have services come to them if there’s a critical mass.

Even if we really want AH downtown, I think it would make more sense to put it all in a single building set up for more shared space and without the parking requirements. The savings could cover the cost of annual bus passes for residents, bike storage, etc.

The downtown focus of the Calthorpe process may have gotten us to think too narrowly about AH along the way.

Thanks, Dale. I understand that concern. I wonder if the stigma and other problems are less of an issue when a single building is involved rather than many or a whole neighborhood. (Another example of the value of decentralization, maybe?) In any case, I’d rather face and solve those problems than use them as a reason/excuse to not try new approaches. I’m also not focusing solely on those living in poverty, but anyone who needs more-affordable housing. It’s going to become more of an issue as energy prices rise, so we’d be wise to start working on it now.

Julie: nice job on the post title.

Send your royalty check to:

AAIO
367 Easy Street
Ann Arbor, MI 48104

I’m wondering if the units in the North Quad will qualify as ‘affordable’?

Anyone know how much those things will run?

Steve, I’m with you on this,

Shouldn’t our affordable housing be more like co-housing rather than high-rise, empty-nester condos?

And I certainly don’t think that grouping a half-dozen households in a co-operation-supportive environment is going to lead to the concentration of poverty effects that Dale mentions. (No, that’s what happens when you say, “Oh, Ypsi is Ann Arbor’s affordable housing!”)

As you note, the discussion has as of late (but well pre-Calthorpe) often been about individual units of affordable housing in new development, or, with the payments in lieu of units, about generating money from new development to build scattered site affordable housing elsewhere in town. As you note, there are downsides to this – it pushes up the cost of every other unit in the project, and, when your only tool is a PUD…

(To present the notable exception, the plans for William Street Station, aka The Old Y Site, include almost exactly what you propose – a block of affordable units with some design features included that take advantage of the clustering to provide savings and create access to services. It’s hardly co-housing, but it’s part of what you’re suggesting.)

I think the one good reason to use the PUD requirement for affordable housing is that it’s easy to do. It’s clear-cut, and it’s in place. As Jennifer notes, downtown’s tax yield is already spoken for. What you’re proposing would require not only creating new mechanisms, but peeling apart old ones. Not to say that inertia is a great reason to not think about change (circular much?), but it’s to be considered.

Lower Town historic district went down, Metro 202 passed.

A common question to arise has been, does it make sense to try to build or otherwise provide AH downtown where the property values are the highest in the city?

No, it doesn’t. Not a bit. And not only because of property values but also because of services which are a function of property values.

I’d say that, for example, ‘The Village’ (and nearby neighborhoods) is a much better area for somebody with a limited income who doesn’t rely on a car. To the north on Washtenaw is Arborland, and to the south and east are various strips that include Kroger, Meijer, Home Depot, etc, and lots of smaller shops. Nothing like this is available downtown. There’s also County Farm Park and the county rec building right there. And, of course, the bus lines run by on Washtenaw, Packard, and Huron Parkway.

Because of high-property values, space-hungry retail businesses (like grocery and big box stores) are not going to locate downtown. Nor are businesses like ethnic groceries who want low rents. Somebody living downtown in a high-rise has greater need for a car than somebody living in ‘The Village’—and that is not likely to change.

But, why not collect the $90 K per unit not built, in lieu of building the affordable housing downtown, and spend it somewhere else where it is less expensive to build AH? Isn’t this a good reason for PUD’s? Why shouldn’t developers have to contribute to the community in the form of affordable housing money when they are building units for those who can pay $400 to $600 K? Where else will affordable housing money come from?

This was just about the fastest council meeting ever, starting with a closed session and ending with the quick disposal of two controversial issues.

Rapundalo acknowledged that he still had concerns about Metro 202, but had done some more investigating and fact-checking on the project and changed his vote to a yes. Johnson again spoke forcefully against the project, arguing that the pedestrian orientation measures of the project was not satisfactory for a planned project. With the inclusion of Wendy Woods, the project passed with ease. Hieftje again voted no (without explanation).

Carlberg moved to postpone the LowerTown HD for another 6 months while they worked on legal issues. Roberts and Hieftje said that the people were overwhelmingly against it, while Johnson said there was support. Rapundalo and Greden said they would not support postponement (which was implied they did not support the HD), and Greden suggested that the study area and proposed district was too big. Hieftje said the postponed proposal was hanging over homeowners’ heads and they wouldn’t know if they should make some home improvements now or if they would be able to later. The postponement failed and the ordinance failed 5-6 by my count.

There is certainly utility in locating AH in/establishing a satellite node of mixed-activity, which a number of people have advocated (I’d LOVE to see Calthorpe-style zoning overlays scattered in a few likely areas outside downtown to facilitate this), but I disagree, mw, that there is more need for a car downtown than in the location you suggest. People certainly need more than just shopping near them (though it is an important factor). Downtown has a greater concentration of employment and recreation as well, both of which low- and moderate-income people need and which I don’t think is well-served out on Washtenaw, not least because it is so unfriendly to pedestrians.

Low income people who need buses either way are better served by being walking distance to downtown and its jobs, activities, and amenities and busing out to Arborland, I think, rather than being walking distance to Arborland and busing downtown. I say this as a low-income person.

Dale: I was watching too and the mayor clearly said he agreed with Johnson’s comments and again stated it should have been a PUD. He did not vote no without explanation. What’s up? Would you rather he had repeated what had already been said?

This meeting illuminated the diversity of thought and the independance of council members as illustrated by the votes on 202 and the Northside Historic District. On 202 there were nine votes for and two against, Johnson and the mayor. On the other, five council members joined the mayor in voting no while Johnson voted yes. Seems like the way it should be.

The handling of the Lower Town HIstoric District is the second time in two meetings in which Council engaged in last-minute decision making. Do I prefer chaos to \aut\ bar conspiracy? Yes. But this latest round of chaos was rather disturbing.

My wife Sabra was the chair of the Council-appointed study committee on the proposed district. At the Democratic Party picnic on Labor Day, she asked a variety of Council members what was going to happen at Council.

The issue was never “shall the district be approved or not?” The issue was “shall the decision be postponed or not?” The reason for a postponement was that City staff wanted to receive the report from the historic preservation consultant on straightening out the language governing all historic districts before approving this new historic district.

At the picnic, Joan Lowenstein said “we have six votes”, and she did not want the vote postponed. Jean Carlberg said that she and others had decided to postpone it, and that a resolution was being prepared for Tuesday’s meeting explaining the reason for the postponement. Woods and Hieftje said to ask Carlberg what was going on.

There was no Council caucus. Bob Johnson called Sabra yesterday evening shortly before 6:00 and left her a message saying he had just gotten back in town, but that he understood the vote would be postponed.

So Sabra did not go to the meeting.

Shortly after 9:00 p.m. Bob called Sabra and told her that the district itself had been defeated. He said he was surprised.

Then, Tom Gantert from the AA News called, and Sabra gave him a lengthy interview. So we can expect some coverage on this today.

Downtown has a greater concentration of employment and recreation as well, both of which low- and moderate-income people need and which I don’t think is well-served out on Washtenaw, not least because it is so unfriendly to pedestrians.

How does downtown have a greater concentration of employment and recreation? (Unless, by recreation, you mean restaurants and bars—which are recreation facilities more suited for the well-off than low-income folks). And employement? All those businesses I mentioned also employ lots of people—it’s far from clear to me that there’s a greater concentration of jobs for low-income people downtown than in the vicinity of: Kroger, Hillers, Whole Foods, Barnes & Noble, Borders, Walgreens, Target, Bed Bath & Beyond, Meijers, Home Depot, Lowes, Circuit City, Staples (and many smaller stores and restaurants besides).

Here is Gantert’s historic district article.

I don’t understand why we singularly burden developers with subsidizing housing. If the city government wants citizens of certain income levels to afford housing in certain areas, it should allow the real market value of the housing in those areas to bear out. Then it can raise property taxes and cut a few folks rent checks. We’d get cheaper housing downtown and more of it. Am I wrong? I’m relatively ignorant of this topic, but the current mode seems inefficent and unfair to developers.

That’s my sense too, Patrick. I think mw made some valid points about (inexpensive necessity) services as well. My concern is that the general mindset is that AH comes from developers of new buildings and we can be satisfied when we get it. I don’t want to be satisfied with that.

Our mayor is on top of the need to move to new energy sources. Otherwise our city government seems distracted from the serious need to strengthen our community in the areas of equity and economy. Sadly, we wait on the greenway task force report before wrapping up the Calthorpe process for downtown and moving on to other important issues.

You might have missed it but over the summer council approved work plans for Calthourpe implementation. The mayor and Johnson were successful in getting design guidelines and “green” building moved to the top of the list and all of it was given to staff to work on ASAP. There is also a steering committee to keep things moving. I don’t think they can do rezoning overnight but apparently they are working at capacity on the Calthourpe implementation. I don’t think anyone is waiting on the greednway task force for anything other than their report but nothing is being held up.

On AH, we may be fooling ourselves if we think simply adding more units will result in lower prices and rents. The cost of new construction is just too high. More units might force owners of older rental housing to remodel but if they have a campus location they will not be reducing rents by much if anything. Without some sort of subsidy housing will not be affordable to those at the bottom of the economic ladder. Where the subsidy comes from is the question and so far no one has come up with a better model than requiring it from developers. That is what they do in other cities that have an AH problem.

1. To claim that Ann Arbor has “an AH problem” is to make a value judgment of the fact that Ann Arbor is a wealthy city with a prized downtown. I wonder how many citizens agree with that judgement. Certainly their elected represntatives do, but I wonder if it’s an issue people vote on. Why shouldn’t property values be high? It’s a high rent area. That’s how money works.

2. If the city took the direct responsibility of subsidizing housing, the cost of developing a piece of property into dense housing would fall, causing a subsequent fall in the risk associated with a development. Developers would build on sites that currently equate to only marginal opportunities for profit. It seems to me that those are the properties with more affordable market prices, anyway. Instead we’re squeezing affordable housing into luxury condos.

3. Dustin, how is the model of direct subsidy from the city not a better model than developer subsidy? If affordability is a community priority, then shouldn’t the burden fall on the community?

Patrick: How are you proposing for the city government to subsidize housing costs? The council couldn’t even get rent controls past the voters in the past.

I would argue that the community does already suffer the burden of unequal affordability (and that it’s a cost that developers are currently allowed to externalize). Developers are often allowed to design projects which go after the cream of the crop (the people who can pay exorbitant mortgages/rents), which ends up pushing other people geographically further out into areas where public services aren’t as concentrated (many of whom are more dependant upon these services than the cream people). The community is then stuck with the costs of getting these people back to the services or extending those services out to the people…neither of which is efficient or cheap.

The current real estate market structures discriminate against poorer people, so why shouldn’t developers and their future occupants who benefit from these types of projects have to shoulder some of the community’s burden by helping to provide affordable housing in the downtown area?

Developers are often allowed to design projects which go after the cream of the crop (the people who can pay exorbitant mortgages/rents), which ends up pushing other people geographically further out

How is that happening? The projects that come to mind immediately put a ton of new units in places where previously there wasn’t any residential space at all.

On AH, we may be fooling ourselves if we think simply adding more units will result in lower prices and rents. The cost of new construction is just too high.

Well, I only see one way to get more old construction, and driving up the cost of new construction isn’t it….

I’m not sure what areas of the city you are referring to. We have been to the point for awhile now where every area of the city has some sort of residential development in relatively close proximity to it. There is no development in the downtown area that is breaking into virgin territory. Since we have been at that point, developers have been choosing projects that are relatively easy to build because they focus on a very limited type of lifestyle (lofty, condo-y, etc.).

What I mean by this is that I have yet to see a proposed project in Ann Arbor which attempts to produce mixed styles of residential development in the way the Lafayette Park area in Detroit does. That project mixes apartment-style towers (which contain condos and apartments) in combination with bi-and single-level condominiums. It also includes a neighborhood school, parks, and a shopping center. Obviously its scale is inappropriate for Ann Arbor (as this was an urban redevelopment project), but its mix of residential styles has helped to attract a wider range of incomes than most recent Ann Arbor projects do. The underlying principles of this project could be applied to projects in Ann Arbor, but we seem to be caught up in developer-driven attitudes of building single-income bracket targeted buildings/complexes with some “affordable” units thrown in because they are forced to (see Ashley Mews for an excellent example).

Why when we throw up new condos out by Briarwood do they all have to be almost exactly the same (even from complex to complex)? Why do we build house farm after house farm next to each other? This type of uniform exclusionary zoning doesn’t help produce economically (or racially) integrated neighborhoods. The same thing is happening in downtown right now…it’s just being played out with taller buildings filled with lofts, condos, offices, and retail spaces which are becoming increasingly unaffordable to the average person.

Kena,

I think that as we progress through the Calthorpe reforms, you’ll start to see projects like what you are describing in non-DDA areas of the City.

Or, at least I hope so.

I do beg to differ about your idea that sticking it to the developer is warranted because they are getting some special benefit. The developer is just going to pass these costs on to the new tenants. This is something that you just said that you were against…..exclusionary zoning. Or, in most cases now, exclusionary PUD’s.

Adding abitrary costs to the cost of building new residences is not the solution to making new residences cost less (that’s a mouthful). I would think that this is self-evident.

Dustin, I’m glad to hear that progress is being made. As for building our way out of the problem, it can’t be done by building the same type of housing as market-rate units, and (kena) it would need to be done with government or some other form of community involvement. Otherwise, you make a good point about prices and rents not dropping as a direct result of new construction. The emphasis may need to be on making existing housing more affordable.

Maybe if we think in terms of affordable living (AL) instead of AH, we’d come up with better improvements. (I don’t think “solutions” are within reach yet.) That thinking would have the added benefit of applying to all of us. Of course, no one likes to have their government tell them how to live, so broader community involvement—as well as broader applicability, to avoid stigmatizing recipients—would be more likely to succeed. Make it open and available to all rather than direct it at a subpopulation. And, finally, I would present it in the context of sustainability and the coming challenges of dealing with declining fossil fuel supplies.

I’d start with the Community Foundation and local banks, the city, the county, and interested individuals—start a (community, not government) fund and an educational program. Well, as I write that I remember that the Energy Commission passed a resolution to set up a no-interest, revolving loan fund for energy improvements for residents. That could be a key component.

I could go on but I’d really like to hear more from you all. What other considerations and opportunities do you see?

Kena, why do people buy a house in a house farm? If no one wanted it, no one would build it. But for many people, new construction is better than existing housing because of room size, quality of appliances, etc. And if it’s cheaper to get that in a house farm, so be it. I don’t get it either, but there it is.

Also, if you want an example of what affordable housing looks like when mandated by courts, etc. look at New Jersey’s Mount Laurel Acts. A disaster in many respects because it encouraged more house farms, but now with cheaper homes in the middle of more expensive ones.

“Why when we throw up new condos out by Briarwood do they all have to be almost exactly the same (even from complex to complex)?”

They don’t need to be but if you leave it to developers alone to choose, that’s what you’ll get. Developers are notoriously conservative and even when they want to be innovative (a very small minority of developers), their lenders and financiers often won’t let them be. That’s why we get cookie-cutter developments, even in a city like Ann Arbor where “the market” might be more inclined to support something different. If the city really wants something different, most developers will insist on some kind of financial off-set through increased density or other benefit that can help them justify the risk.

Steve, in regards to AL, transportation is the second highest expense category for Americans after housing. Personal vehicles are the greatest expense by a long shot in this category. All things considered, cars cost about $500/more than non-car transportation. By improving non-car access to goods and services, both by improving and expanding non-car transportation options and through reducing work-food-home distances, the city make it possible to greatly reduce living expenses.
Location Efficient Mortgages (LEMs) are designed to account for this savings in calculating loans. Unfortunately, they are not currently available in Michigan.

If John Q’s assertion that lenders inhibit creative housing solutions is correct, would some sort of lending facility that promotes certain types of development (like AH) offer improvement?

As long as we’re brainstorming, HD’s recent totteree offers up this teetering proposal

“Confiscating the property of landlords who don’t keep their property up to code is just a transitional demand. Ultimately, we’d like to confiscate it, whether they keep it up to code or not.”

and later

“I believe that housing is a fundamental right. Homes should be either owned by the people who live in them or they should be publicly owned, one or the other.”

Kena, if the city can’t get public support for squeezing landlords with rent controls, maybe they don’t currently have public support for squeezing developers with subsidizing housing for the poor. Again, if this is a community priority, then its cost should be shouldered by the entire community. Medicare is a federal priority, and we support it federally. We don’t ask the doctors to subsidize it themselves.

Across the country, and here in the Midwest, in places like Chicago and Madison, affordable housing is funded in the same way as in A2. In some places they require a percentage of affordable housing in nearly all developments, not just the rare PUD. (Not possible in Michigan.) So what’s different about A2? Why can’t most local developers cope with doing business the same way as in other places? Are they just unwilling to part with a few percentage points of profit? Why not rewrite the zoning so strictly so as to make everything a PUD, thus meeting a community goal on every development?

“if this is a community priority, then its cost should be shouldered by the entire community.”

Patrick, AH is required as part of the PUD process, which is an optional development process that developers can use when they want the zoning standards relaxed in some way that benefits them. When a developer uses the PUD process, almost 100% of the time, the development is more intense than what would be allowed by the standard zoning standards. By allowing that more intense development in exchange for the AH, the community as a whole is already taken on additional costs. Requiring developers to provide AH is one way of off-setting that cost.

“Why not rewrite the zoning so strictly so as to make everything a PUD, thus meeting a community goal on every development?”

There’s two problems with this approach. One, if you wrote the zoning code so tightly that developers preferred (forced?) to do a PUD over the “by-right” zoning, you would eventually get sued (and lose) for exclusionary zoning. Two, although the legislation for PUDs is pretty lenient, I don’t think you can require PUDs. It’s supposed to be an optional development approach. I don’t recall any court cases on this but I’m guessing that you can’t require all developments to go the PUD route. On the other hand, after I wrote that, I found this. I haven’t read the case but it seems to state that municipalities can require most developments to go through a PUD process:

http://www.mmbjlaw.com/CM/LawBulletin/RecentOpinionsin7.asp