Focus, Economic Development, and Real Estate

GR housing rates create inequality gap

City and developers are addressing the affordability problem.

May 1, 2015
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The national foreclosure crisis is winding down, but some cities like Grand Rapids are still feeling the devastating effects.

“The hangover of the Great Recession is not yet over,” said Ruth Kelly, 2nd Ward commissioner for the city of Grand Rapids.

The city is currently experiencing a demand for housing that exceeds supply, Kelly said. Last month, Zillow.com rated Grand Rapids as having the lowest vacancy rate for rental property in the nation at 1.6 percent, compared to a national average of 7 percent, she said.

Another issue is the rise of rent levels. According to a 2014 report from Chicago-based Triad Real Estate Partners, rent in the Grand Rapids/Wyoming area rose “more than 5 percent over the past year, almost doubling the average increase nationally of 2.8 percent.”

“Asking rents increased across all unit types, with three-bedroom apartments achieving the largest bump at 7.22 percent,” the report read. “One-bedroom and two-bedroom units increased by 4.7 percent and 3.54 percent … for an average of $688 and $817.”

To millennials, who watched their parents go through housing hardships and whose credit and finances are buried under the highest level of student debt ever, renting seems to be more advantageous than buying, said Ryan Tobias, Triad co-founder and partner.

It’s currently a landlord’s market, he said, and although they’re riding the wave for now, it can’t last forever.

“There’s going to be a breaking point. Tenants won’t pay that, and then tenants will start buying homes and condos,” he said. “They certainly don’t need to raise the rents that high, but as long as we live in a capitalistic society, I’m sure they’re going to.”

The development community and city are trying to bring realistic definitions to words like “market rate,” “affordability” and “gentrification,” said Monica Steimle, 616 Development’s director of development, adding this progress gives her hope.

“There’s a gap people see. Either you make too much money or not enough to live in this area. You make too much to live in income-restricted, but you don’t make enough to move into market rate,” she said.

“I think by creating smaller units, you can charge less, but there’s also been research done about workforce housing, defining what that gap is between income-restricted units and higher rates to become a better community that is more inclusive.”

Rising rents might not be affordable for much longer, but overpaying for rent is a nationally growing trend.

“One significant change caused by the foreclosure crisis was a shift in home ownership to rental housing. (Former) United States Secretary of Housing and Urban Development Shaun Donovan refers to the current state of rental housing in America as a ‘silent crisis,’” Kelly said.

“According to a recent Harvard study, 50 percent of all renters in our nation are now spending more than the recommended threshold of 30 percent of their income on housing, up from 38 percent in 2000. Donovan said this is the worst rental affordability crisis this country has ever known.”

Kelly has been part of many Grand Rapids housing conversations lately and has heard a variety of fears over the issue. Some come from young professionals and students who want to live downtown but can’t afford it, from senior citizens who find it difficult to stay in their homes but can’t afford other housing, from residents in developing neighborhoods who fear displacement, from minorities concerned about economic and racial divides, and from developers who feel frustrated when certain zoning codes and city policies prohibit development.

“Although a variety of concerns abound, a common thread throughout these conversations that I’ve heard is the desire to create a balanced and sustainable housing market that provides quality housing choice: choice in location, choice in type, choice to be an owner or a renter,” she said.

“How we choose to address the future needs of the housing community is a reflection of our values in this city. Working together, we can provide housing choice and opportunity for everyone.”

On April 22, Kelly led off a conference hosted by the city of Grand Rapids in which an in-depth, 150-page report prepared by residential market analysis firm Zimmerman/Volk Associates Inc. was presented on what the city’s future housing demands could hold.

The report revealed troubling data about the cost of housing in Grand Rapids.

“As determined by the target market methodology, which accounts for household mobility within the city of Grand Rapids, as well as migration and mobility patterns for households currently living in all other counties, an annual average of 22,875 households represent the potential market for new and existing housing units within the city each year over the next five years,” the report read.

“Approximately 50.3 percent of these 22,875 households comprise the market for rental dwelling units — some are renters by choice; many, however, would prefer to own but cannot afford the type of housing they want in neighborhoods where they would consider living. Younger people in particular are challenged by the burden of significant education debt as well as lack of an adequate down payment.”

Rising rents and a growing renter population leads to another local concern: gentrification. A community conversation about this issue took place April 23, the day after the conference. The event was held at Rockford Construction, hosted by The Other Way Ministries, a Grand Rapids-based nonprofit development organization working in the Westown corridor.

Kurt Reppart, executive director at The Other Way Ministries, said gentrification in the city is a threat to minorities, who historically have lower incomes than Caucasians and would have a harder time affording rising rents.

In reality, about $587 per month is considered affordable housing for the average wage earner in Kent County, Reppart said.

Reppart was joined on stage by Steimle and Jamiel Robinson, founder of Grand Rapids Area Black Businesses. Both Steimle and Robinson agreed that city growth was leading to housing equity concerns, particularly for minorities.

It’s a systemic problem that has existed for years, Robinson said.

“We’ve all seen the Forbes article,” he said, referring to a report that lists Grand Rapids as among the least favorable cities for economic opportunity nationally for African-Americans.

“There is a huge divide and gap among the races in Grand Rapids … so you can’t have a conversation about economic equity without having a conversation about racial equity. … I say all the dust is in the air, and this is the best time, when systems are open and accessible, to make those changes in the systems before the dust is settled.”

Many of the city-wide fears about housing affordability have come from uncertainty about what the future holds, Steimle said. It’s part of a larger conversation that stakeholders and developers also are having, she said, adding she’s hopeful that, as everybody gets on the same page, the gaps can be closed.

“I think we’re at least all talking about it and we’re getting commitment on all levels because we’re all here to create that better community, to be inclusive and to understand what we want as a community,” she said.

“One of the greatest things about the city of Grand Rapids is that we all have an opportunity to have a voice, so if you feel like there is a void, whether it’s in housing or economic equity, I think we know we have an opportunity to talk about it, and we have people that care and want to figure it out so we can make this a better place.”

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