Market-rate housing saturation compels a new plan
One year ago, public discussion in Grand Rapids seemed to have enough momentum to portend promise of affordable housing problem solving, but as the new year begins, developers, lenders and brokers told the Business Journal they’re treading lightly into future — with market rate developments. Mercantile Bank commercial lender Justin Karl notes in the Business Journal story that developers are stuck in the middle, that hesitancy on the part of banks to continue lending for such projects will continue. Karl said, “We need to see: one, more units absorbed; and, two, we see a wage inflation and rent appreciation before we’re more gung-ho again.”
The Business Journal opined last fall, the city’s prideful boasting and pretty packages of new projects ignore the facts of the city’s reality and of the millennial generation, one graduating from college at the height of recession, joblessness and stagnant wage growth. Their recruitment has been necessary in a manufacturing region cited for more than a decade for its low percentage of college-educated workers. Now, it is a region cited as among the worst for worker compensation.
A Forbes/Payscale study reported by the Business Journal placed Grand Rapids among the worst regions for worker compensation among the 100 largest metro areas in the U.S., and like every other metropolitan community in the country, pay rates are flat — not up — for employees who hold at least a bachelor’s degree. The compensation report measured not just early career pay but mid-career and median pay for those holding at least a bachelor’s degree. Add to that dismal — though likely unsurprising — report the fact the Grand Rapids region continues to show much lower education rates than other regions, even in comparison to other Michigan cities, such as Detroit and Ann Arbor.
Two years ago, there was at least mention in development circles of probable market rate housing development saturation. Now, absorption of apartment units currently preparing to open has slowed. Hundreds of new units still are under construction, and the Business Journal most recently reported on yet another new development of 86 apartments in Heritage Hill, south of Fulton Street. The developer, Orion Construction, also is beginning preparation to build a proposed 15-story, two-tower building. One of the towers is reserved for a housing component with preliminary plans of 123 one- and two-bedroom units. The second is an office tower offering the new home of Warner Norcross & Judd.
Orion spokesperson Jason Wheeler told the Business Journal that the firm may evaluate the freeze in urban core market rate housing and noted options for a hotel instead of apartments, or reducing the size of the structure. This also is likely to be the case for the Celebration! Cinema/housing/retail complex currently sited behind the Van Andel Arena.
As for the affordable housing discussion: Developer Max Benedict, a Third Coast principal, noted in the report, “It’s hard to justify the land cost to build big buildings with the high cost of steel and concrete. You really have to charge at least those prices, so transitively there is that market saturation.”
The plans made of optimistic visions must be balanced with real money and real facts.