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Legislature OKs Affordable Housing Fund

Program to boost home ownership also helps cities

December 21, 2004 | By Charlene Crowell
Great Lakes Bulletin News Service

MLUI/Bruce Giffen

Even though older Michigan cities like Detroit, pictured here, have a large stock of good housing, many fully employed residents cannot afford to buy them.

LANSING — Concerned that rising housing costs are harming state residents and the cities they live in, the Michigan Legislature earlier this month approved two bills that expand home-owning opportunities for low- and moderate-income families. Support for the new laws was so strong that the Legislature also appropriated an initial $2 million for the program despite the state’s severe budget problems.

Passage of the two-bill package on December 9 capped a long drive by housing activists and some state legislators to establish a state-funded affordable housing trust fund. It also marked another victory for a bipartisan group of Lansing lawmakers intent on enacting recommendations made by the Michigan Land Use Leadership Council. The council, established in 2003 by Governor Jennifer M Granholm, formally urged the Legislature to enact and fund an affordable housing trust program as one way to revive the state’s ailing cities, curb sprawl, and boost economic development.

“This legislation has been a long time coming,” Grand Rapids state Representative Jerry Kooiman, a Republican and one of the package’s chief sponsors, said after its final passage. Noting that his legislative predecessors began work on the bills six years ago, Rep. Kooiman added: “Whenever we can do something to make homeownership within reach of more of our residents, it is an easy vote to take and I’m glad the Senate has seen fit to send this to the governor.”

Rep. Triette Reeves, the term-limited Detroit Democrat who was the package’s other chief sponsor, added, “In light of the economic challenges we currently face at the federal, state, and local levels, this bill acknowledges the continued need to focus on affordable housing as a basic right, not merely a privilege.”

For affordable housing advocates, the legislative victory is particularly sweet. They have long maintained that Michigan has a great need for an affordable housing program, given both the cost of housing and the economic difficulties many state residents face. Many of the program’s proponents say it will not only provide access to the housing market for the working poor, it will also stabilize distressed neighborhoods in many Michigan cities, most of which are losing population. They say that the fund will increase home ownership rates, encourage the renovation of run-down properties, boost property values, and, ultimately, encourage middle-class residents to stay in, or return to, urban communities.

As with other sprawl-busting laws passed by the Legislature and signed by Governor Granholm, the affordable housing legislation was a bipartisan effort. Besides Representatives Kooiman and Reeves, the new laws were co-sponsored by 11 other Republicans and 17 other Democrats who collectively represent both urban and suburban constituents.

The Fine Print
Final approval of the two-bill package by the state Senate came in the closing hours of the state Legislature’s lame-duck session; Governor Grahnolm is expected to sign it before the end of the year. Working alongside the lawmakers to push the bill through before the closing gavel was the Michigan Housing Future Coalition, which includes the Community Economic Development Association of Michigan (CEDAM), Habitat for Humanity of Michigan, and the Michigan Community Action Agency Association.

“This legislation is significant,” CEDAM Executive Director Mr. Tony Lentych said, “because the State of Michigan has now decided that affordable housing and community development are important to the rebuilding and revitalization of our neighborhoods and communities. We now have a vehicle in place that eventually will be able to address these needs. And while the resources are currently limited, we now have something to work with and build upon.”

The program’s first money will become available in FY 2005; it will come from federal funds awarded to Michigan for poverty block grant assistance by the Family Independence Agency through a program known as Temporary Assistance for Needy Families. The trust fund will finance both grants and mortgage loans for financially eligible families. The loans could be at or below market interest rates, or even in some instances, at zero interest, and could be used for, among other things, land and building acquisition, rehabilitation, new construction, down payment assistance, housing preservation, predevelopment financing, and supportive services.

The legislation dedicates a portion of available funds to people with special needs, including the mentally or physically challenged, the homeless, and people living in rural or distressed areas. It also earmarks a minimum of 30 percent of available funds for low-income households.

The median incomes of Michigan housing markets will serve as the baseline guide to determine applicants’ financial eligibility. Family earnings must fall within established percentages of a given median income level to be eligible. “Low income” families must have combined earnings of no more than 50 to 60 percent of the median of the market they live in. “Very low income” families will have an adjusted household income ranging from 25 to 50 percent of the market median. Families earning less than 25 percent will be classified as “extremely low income.”

Plenty of Applicants
Research indicates that Michigan has many families who quality for the new program. For example, although Governing magazine in 2000 and 2001 found that housing is less expensive in Michigan -- the state ranked Michigan 48th in per-capita spending for housing -- the magazine also reported that the price of home ownership is still beyond the earnings of many working class families. In fact, just as in other states many steadily employed families cannot afford to buy houses in the communities where they work every day; they can only afford to rent them.

Paycheck to Paycheck, a report on affordable housing published in 2003 by the Center for Housing Policy, the research affiliate of the National Housing Conference, found that in Detroit, Grand Rapids, Kalamazoo, Lansing, and Saginaw, market-rate rentals were barely affordable. It also found that home ownership was almost always beyond the annual earnings for a list of 64 occupations. 

For example, the study found that buying a median-priced, $130,000 home in Grand Rapids requires an annual income of $40,518. This excludes firefighters, licensed practical nurses, paralegals, long-haul truck drivers, and bank tellers from owning such a dwelling in that solidly middle-class community. People in four of those occupations could afford market-rate rental for a two-bedroom apartment, but bank tellers, whose average hourly wage is $9.74, could not. In fact, tellers could only barely afford a one-bedroom apartment, currently priced at $636 in Grand Rapids, according to an update issued earlier this year by Grand Rapids’ Emergency Needs Task Force.

People in these occupations have even a harder time buying a home in Lansing, where a median-priced home is slightly more expensive, at $138,000. As in Grand Rapids, four of the five occupations could afford market-rate rental for a two-bedroom apartment and all could afford a one-bedroom place at median market rates. 

An annual study by Harvard University’s Joint Center for Housing Studies, entitled State of the Nation’s Housing, reinforced the findings of Paycheck to Paycheck. According to the Harvard study, in 2001:

  • Thirty percent of all American households spent 30 percent or more of their income on housing. Thirty percent of income is a widely accepted limit for rent or mortgage payments that are “affordable.” Another 13 percent spent 50 percent or more — well above that limit.
  • Eighteen percent of elderly homeowners and 38 percent of elderly renters spent half or more of their incomes on housing.
  • Approximately two million single-mother households spent half or more of their incomes on housing; 200,000 households headed by single fathers did the same.

An article entitled “Putting the Force in Workforce Housing,” which appeared in the November 2004 issue of Planning, published by the American Planning Association, summarized such statistics:

“Across the country, including Michigan, there is a growing mismatch between the wages people are earning and the rising cost of housing. This gap is being felt by teachers, day-care workers, service industry workers, firefighters, and police. When affordable housing is not available, these occupations, which are the building blocks of a community, are forced to endure long commutes. Some have referred to this situation as the ‘workforce housing problem.’”

A Next Step
The problem is serious enough that it has attracted increasing attention from the business community. Gil White, president of the Michigan Association of Realtors, welcomed passage of the two bills.

“The passage of House bills 4787 and 4788 are an encouraging step towards addressing the pressing issue of affordable housing in Michigan,” said Mr. White, who served on the governor’s land use leadership council last year. “I applaud the creation of these two bills.”

Mr. White also indicated that the Legislature and local governments still have more work to do on the leadership council’s recommendations if the state and its cities are to enjoy not only the full benefits of funding affordable housing, but also more private-sector interest in and support for expanding the affordable housing market.

“The challenge for such projects,” Mr. White said, “will involve finding land that is zoned for the densities necessary to deliver this type of product to the consumer.”

Charlene Crowell is the Institute’s Lansing policy specialist. Reach her at charlene@mlui.org.

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