In last month’s blog post, we explored the myriad reasons so many people in West Michigan – and across North America – are so leery of change in their neighborhoods. Yet, we’re going to need small changes everywhere if our regional housing economy is expected to keep up with the pace of growth.
Homeowners in traditionally single-family neighborhoods are often convinced that any type of home nearby that may be dissimilar to their current neighborhood may mean trouble. Understandably, but erroneously, many homeowners equate higher density with the social problems that plagued urban communities in the 1980s and ‘90s. Unpacking those deep-seeded assumptions about what makes a stable and prosperous community will take a lot of work over time.
Meanwhile, communities of color and lower-income renters can be highly skeptical of market-rate investments in their neighborhoods. They have seen the impacts of new private investment in their neighborhoods already, often resulting in higher rent and disruptions to the fabric of the community.
Are these groups correct in their assumptions and misgivings about change? If they are correct, how will we ever add enough housing to accommodate the additional 30,000+ households who are looking to move into Kent and Ottawa counties in the next five years? Just as importantly, how will we provide stable and affordable housing options for the 85,000 households who are already spending more on housing than they can afford?
West Michigan is reaching a tipping point
For the better part of two decades, we have offered very limited and narrow solutions to the lack of housing – and we’re seeing the result in today’s affordability crisis. We have mostly shied away from addressing the tensions embedded in this conversation. These tensions are rooted in a long history of urban disinvestment, neighborhood segregation and non-market forces that restrict the types of housing that can be created in any given neighborhood.
West Michigan is speeding toward a tipping point. Local developers, housing advocates and nonprofits have seen this on the horizon for a long time. Over half of all renters in the region are spending more than they can afford on rent. About 37% of homeowners are spending more than they can afford on housing. We need roughly 30,000 additional homes in our communities, and for every home that doesn’t get built, the prices of existing homes and vacant land tick up another notch due to the scarcity of supply.
If a majority of the communities and neighborhoods in the region are committed to a not-in-my-backyard approach to new housing options, this puts an outsized strain on the handful of communities that are willing to raise their hand and accept more homes at higher densities. Too often, these are the communities that have the largest share of Black and brown residents, as well as more low- and moderate-income residents than the rest of the region.
The strain put on these neighborhoods is not economic. Higher-density investments tend to produce much better fiscal outcomes relative to the cost of infrastructure than do low-density subdivisions. The strain is put on existing residents who are asked to accept swift and broad-scale change in their neighborhoods.
If the types of new housing supply that are in greatest demand – single-family homes, condos and townhouses selling for $150,000 to $250,000 – are only permitted in a handful of neighborhoods, the energy behind these new investments can easily overwhelm those places, especially when they have historically been home to a large share of low- and moderate-income households. Most concerning is that when these neighborhoods have relatively low-cost homes and residents keep supply low by limiting additional density, home prices in these neighborhoods escalate more quickly, which prices out the lower-income households many advocates hope to protect with density limits.
It’s all about stability and supply
The Bowen National Research studies for Kent and Ottawa counties indicate there will be more than 12,000 households looking to purchase homes priced at $250,000 or less in the next five years. If the private housing market is not permitted to build new homes that satisfy the demand for these price points, we will have created a funnel of new investment that is pointed directly at those neighborhoods that have historically offered less-expensive homes.
Yet, if history is any guide, it is unlikely there will be anywhere near enough existing supply to satisfy the new demand and home prices will quickly escalate beyond the reach of first-time homebuyers and middle-income households.
In response, we need to focus on two priorities simultaneously. First, we need to do whatever we can to protect and stabilize low-income households living in neighborhoods where additional residential density is coming or where demand vastly outstrips supply. Second, we need to work with every community in the region to identify opportunities to build more middle-income housing. We need those communities to understand what is required to make that middle-income price point work and we need to provide examples and case studies of where this is working in other markets to assuage fears about what belongs in their own backyard.
Over the next few months, we will focus on highlighting these two objectives: housing stability for households at serious risk of being priced out of the market and housing supply for all households who want to be in West Michigan. This two-pronged approach offers a significant opportunity to substantially grow our regional economy as we provide attractive and attainable housing at all price points.
Next month, we’ll share a new report from the Grand Valley State University Economics Department that outlines just how much our economy can grow if we make the right investments in housing stability and supply.