Economic Development and Real Estate

Downtown livin' is easy — and expensive

As average rents surge past $1,000, city and developers are turning to alternative solutions.

February 26, 2016
| By Pat Evans |
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Small, adaptable spaces for living and working, such as this one designed by Urbaneer, are showing up in downtown projects. Courtesy Rockford Construction

Bruce Thompson knows the way people think about the space they live in is changing.

As founder of Urbaneer Spaces, Thompson is attempting to be part of a new wave of innovation in living spaces, which haven’t changed much in the last 100 years. Urbaneer designs small, adaptable spaces for living and working in urban environments.

Thompson moved from a career in technology to a career that combines living spaces with technology, after more than 30 years living in 15 cities across the globe.

The innovative living spaces that Thompson and other entrepreneurs across the country are coming up with might help solve the equation of how to live more affordably in an urban center.

“We have a housing crisis in every city in the United States, and there are people driving change,” Thompson said in regard to rising urban housing costs.

“We haven’t had a huge surge in innovation in more than 100 years, when electricity, plumbing, automobiles and communications came together in a 10- to 15-year period and changed the way we live. It took advantage of technological innovation, and we’re headed into another period like that where people are going to solve the problem.”

A study by Enterprise Community Partners and the Harvard Joint Center for Housing Studies found the number of American households that spend at least half of their income on rent will reach nearly 15 percent in the next decade.

With rental rates in downtown Grand Rapids — either “rent controlled” through government tax credits or “market rate” — driven upward by a high occupancy rate, people who desire to live downtown but who make in the $22,000 to $44,000 range can’t afford it.

Within the downtown limits, 35 percent of apartments are Low Income Housing Tax Credit for certain lower-income brackets, said Kris Larson CEO of Downtown Grand Rapids Inc.

Lowering the cost to live downtown, however, isn’t as simple as building more apartments, even though higher housing density is beneficial to those who are moving downtown, a trend seen nationwide, said Monica Steimle, director of community relations at 616 Development.

“It’s much more than a supply-and-demand deal, although more supply will help for stabilization,” Steimle said. “The most important thing to note is we have a housing shortage of all types, which includes homes for sale and rentals.”

New construction and renovation costs are a big part of why apartments coming on line in downtown Grand Rapids and adjacent neighborhoods are usually more than $1,000 a month, Third Coast Development principal Max Benedict told the Business Journal in December.

Since rents often are calculated by square footage, one way to bring down the rates is to shrink the size of apartments, a model Third Coast is experimenting with and which Orion Construction is implementing with 24 “micro” apartments of the 88 apartments in its new Venue Tower project.

We’re diversifying the options within the Arena District and hopefully bringing in a new demographic that wants to live a highly social and active lifestyle,” said John Wheeler, Orion Construction director of development. “It’s about efficiency and the impact of everything from the physical space to the utilities to the lifestyle it encourages.”

One of the goals of DGRI’s GR Forward plan is to see a diverse array of earners living downtown. For that to happen, there needs to be a variety of housing levels available for renters, Larson said.

“Nobody asked Orion to develop those micro units; they just saw an untapped potential,” Larson said. “They can appeal to a wider array of would-be renters, and diversifying the product mix is a way to accomplish affordability. Orion is betting enough people will recognize it’s an affordable way for them to live a lifestyle they desire.”

That lifestyle, Thompson said, will require some sacrifices and tradeoffs. For starters, a resident shouldn’t expect to translate a suburban living experience to an urban environment.

A main component of that is learning to live in a much smaller space, Thompson said, explaining that downtown amenities can replace having a backyard or large living room.

Another component of downtown living is doing without a car. Thompson said two years ago he couldn’t imagine living without one, and then he moved downtown, sold his car, and now has learned to utilize Uber, walking and taking a bus.

Larson said developers nationwide recognize that Generations X and Y value location more than a large living space — a difference from past generations who moved to the suburbs. With younger generations willing to trade higher rents for shorter commutes, Larson said he wouldn’t be surprised to see employers begin to offer living incentives much like they do health insurance and transportation costs, such as company cars and garage spaces.

Larson said there is a role for the public sector to play in helping developers. The city collects income tax and therefore knows per household earnings and can help developers understand what people can afford.

“We can see how that corresponds with our housing supply and gives us a basis of what we need, and that can be a greater signal to the development community,” Larson said. “That’s one of the most important pieces of the public sector — to become the keeper of good and reliable information. The developer will know how to develop the product that fits that information.”

Steimle said such data will be the main driver in determining what type of housing to provide for missing income ranges, and there is a certain focus on making housing more affordable at all levels.

“We need to identify what types of housing we’re missing, and what income levels … and what price ranges we’re missing,” she said. “The most important thing is to understand where the gaps are so we can understand the types of housing we need to focus on.”

Grand Rapids residents could better afford the available housing inventory if they made more money: Grand Rapids ranks 49th in net employment earnings out of 52 metro areas with a population of 1 million or more, according to Lou Glazer, president of Michigan Future Inc.

Whether or not West Michigan has an income issue, high rental costs near the center of the city are not an unsolvable issue, but it will take some time and ingenuity to solve, Thompson said.

“If we think of it as a challenge, not a problem, then we can start innovating to get affordable,” Thompson said. “We can say ‘drive innovation’ instead of saying ‘it’s impossible and people shouldn’t expect to live downtown.’

“That should go away.”

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