In the Grand Traverse Region, there is a devastating gap in affordable housing for those who make more than 60 percent of the median income. This is a critical issue for the area because a worker who wants to live and work in Traverse City needs to earn about $17 per hour to afford the median rent price of $815 per month, whereas common positions including food service, maintenance, and manufacturing make a median wage less than $15.91 (Beggin). According to Executive Director Sarah Lucas of Housing North, “Grand Traverse County needs at least 1,160 more rental units and 260 new ownership units in 2020 to keep up with local demand” (Milligan). This is not a problem unique to Grand Traverse, either; citizens across the state and nation are finding themselves rent overburdened as housing development cannot keep pace with population growth (Aurand, Elliott). I propose three solutions to solve the housing shortage while still supporting economic growth. The first two relate to managing existing housing stock, while the third will work to create new houses at more affordable prices. They involve focusing on workforce housing, lessening competition between investors and buyers, and decreasing home-related costs.
To start, focus needs to shift from homeless to workforce housing. It may seem counterproductive to help those that have some economic power over those who have none and even Mayor Jim Carruthers asserts that “the city has long been working on solutions and has made it a priority for the City Commission to build more subsidized housing and broaden workforce housing if possible. But young workers who have trouble finding housing in Traverse City are not the ones that most need local government’s help…as mayor, if I’m going to subsidize housing for anybody it’s going to be the homeless,” (Beggin). If Traverse City builds homeless housing without workforce housing, it will be funneling money into a project that will not provide a significant return on investment and workers will be unable to move in because of unaffordable workforce housing; the city will lose a huge source of revenue. However, if the focus is shifted to workforce housing, more people will be able to move here and contribute to the Grand Traverse economy.
Although this solution only reallocates resources to another sector of affordable housing, the local government can use these funds to support more homeless housing projects in the future. Homeless housing is important; people in unfortunate situations need government assistance when they have no other options. However, if officials choose to focus only on homeless housing, they squander the opportunities for growth that workforce housing yields.
Competition is another issue. Investors crowd the market, buying up the supply of viable homes to create short-term rentals for tourists. According to Kathy Eagan of Networks Northwest, “investors purchased 11 percent of homes nationwide in 2018 – a rate almost double pre-recession investment levels. Nearly half of those homes were purchased for rental income.“ Sarah Lucas of Housing North addressed the problem locally, “a lot of our year-round housing stock is coming off the market and being converted into use as a seasonal housing unit,” (Milligan). This means homes that could otherwise satisfy the demand for affordable housing are instead competing with hotels for business. As this continues, the shortage will only worsen. However, if there is an incentive for investors to stop buying the houses and invest in affordable housing, investors will pursue the action with the highest reward.
Investors would argue that homes on the free market are anyone’s game; they would be right. However, if the local government incentivized affordable housing projects, investors would be simply responding to these new market forces and still profiting. The seasonal home issue would be lessened because even though the vacation homes would be a lucrative business and those homes would still be on the market, investors’ profit would translate to more capital for building new, affordable homes and a naturally decreased demand.
Finally, to decrease rent and ownership prices, homes in the region can model Habitat for Humanity Grand Traverse Region’s example for their Award-Winning Net Zero Energy Neighborhood. An average Net-Zero house yielded $900 in annual energy savings compared to a typical new home and the average monthly energy bill was only nine dollars (DOE Tour of Zero). These houses make use of sustainable energy to lower utility costs thereby lowering housing-related expenses and raising disposable income, which people can spend on other essentials. As more homes with lower utility costs enter the market, the supply curve of homes that are considered “affordable” will increase, meeting demand. This means that the market price will be decreased for future homes as more of these affordable, more efficient housing units are built.
The drawback is that Net Zero Energy homes cost $9.80 more to build per square foot. But luckily, the money lost can quickly be recovered in annual energy savings (“Cost to Build a Net-Zero Energy Home”). Additionally, companies like Habitat for Humanity benefit from volunteers and discounted materials which further decrease costs (Carr). Ultimately, these homes reduce the financial burden on the consumer, making housing affordable for lower-income families and individuals.
The goal of any of these proposed solutions is to manage existing resources intelligently while using other methods to increase affordable housing to meet demand. If the plans to increase workforce housing, incentivize investor competition, and lower home-related costs are implemented, Grand Traverse will become home to more of the people who fuel its tourism and other industries. The Grand Traverse Region deserves high quality, affordable homes for families and individuals who will help increase economic output and draw more people to the area. In the end, cities all over Michigan will deal with the same problems the Grand Traverse Area faces, and these same principles can be tested statewide and nationally. Put simply, the use of economic principles to lower market prices, increase supply at that lower market price, and facilitate economic growth will eliminate the affordable housing shortage.
Aurand, Andrew, et al. Out of Reach. National Low Income Housing Coalition, 2019, pp. 1–3, Out of Reach.
Beggin, Riley. “Traverse City Grows as Local Workers Search for a Place to Call Home.” Bridge Magazine, 15 Aug. 2019, www.bridgemi.com/quality-life/traverse-city-grows-local-workers-search-place-call-home.
Carr, Tom. “Depot Project To Make Living Affordable With Energy Savings.” interlochenpublicradio.org, 2014, www.interlochenpublicradio.org/post/depot-project-make-living-affordable-energy-savings.
“Cost to Build a Net-Zero Energy Home.” 24h Site Plans for Building Permits: Site Plan Drawing & Drafting Service, 24hplans.Com, 19 Feb. 2019, www.24hplans.com/cost-to-build-a-net-zero-energy-home/.
“DOE Tour of Zero: The Depot Neighborhood by Habitat for Humanity, Grand Traverse Region.” Energy.gov, Office of Energy Efficiency and Renewable Energy, www.energy.gov/eere/buildings/doe-tour-zero-depot-neighborhood-habitat-humanity-grand-traverse-region.
Elliott, Misty. “Post-Recession Demand for Affordable Homes in Michigan Outpaces Supply.” MSHDA – Post-Recession Demand for Affordable Homes in Michigan Outpaces Supply, 29 2019, www.michigan.gov/mshda/0,4641,7-141-7559_9637-496067–,00.html.
Milligan, Beth. “Local Experts Weigh In On Housing Crisis, Solutions.” The Ticker | Traverse City News & Events, 26 Nov. 2019, www.traverseticker.com/news/local-experts-weigh-in-on-housing-crisis-solutions/.