Article written for Concentrate. View online here. Photos by Doug Coombe.
Ann Arbor’s lack of affordable housing has been widely discussed in recent years, with few solutions put into action. But a University of Michigan (U-M) adjunct lecturer and his graduate students are envisioning a new approach: a student-driven development accelerator that would research potential public properties for development and then create affordable housing plans for them.
The plan comes from lecturer and longtime developer Peter Allen and students in his graduate course, Real Estate Essentials.
“There’s a kink in the pipeline,” Allen says. “We’re not supplying the demand for those people making around $30,000 to $60,000 (a year). I don’t think we’re providing at best 25% of the demand, and that’s why rents are so high.”
Allen’s proposed development accelerator would be a joint effort of the city, U-M students and faculty, and other public entities. Graduate students and faculty from U-M’s Ross School of Business, Taubman College of Architecture, and other invested departments would identify and research public properties suitable to redevelop into housing.
Allen’s Real Estate Essentials students would do the first round of research and identify potential development sites. Allen proposes further research be done in an additional course and summer internship, alongside U-M faculty and industry professionals. Once completed, the group would make recommendations to its government stakeholders to develop these public properties.
Graduate students in Allen’s course already study trends in urban revitalization and complete projects involving current development opportunities in real cities such as Ann Arbor, focusing on sustainability, mobility, affordability, and community.
Maggie Cease, a former student of Allen’s, says the majority of student projects also involve mixed-use buildings.
“We learned how to create a successful (development) proposal,” Cease says. “How can we bring community and stakeholder interests together and be financially viable?”
Doug Kelbaugh, dean emeritus at Taubman College, says Allen’s proposal is overdue and the students are ready for the challenge to be brought to life.
“It’s remarkably sophisticated work for students, which is a testament to Peter, his students, and the university,” Kelbaugh says.
Creating affordable housing might sound undesirable to investors on the surface, but Allen’s solution ensures public and private stakeholders are compensated and receive adequate benefits.
Because the U-M students and faculty consulting group would consider public properties to be redeveloped, the costs are significantly less than building on other land with land entitlement fees. Allen and his students have already created several site proposals in which they plan for retail spaces on the ground level of apartment buildings, bringing in additional income through leases.
Allen also proposes that housing in these new developments be split between affordable and market-rate prices, allowing public and private investors to profit while still increasing affordable housing options for the middle class.
“Getting public owners to continue to own their land has several benefits,” Allen says. “First, it allows the public to stay at the table to ensure long-term affordability. Second, the public owner earns a long-term land lease annuity income from the net rents of the development. Third, all the development is on the property tax rolls and generates new property taxes for all the public taxing agencies. Fourth, the market-rate rents subsidize the affordable units.”
Similar models of public and private development partnership have been done across the country in cities such as New York and Los Angeles. Allen’s development accelerator proposal combines elements of these partnerships to better fit Ann Arbor’s needs.
“It’s a novel idea that Ann Arbor hasn’t done before,” Allen says. “It will have a profound impact on the mixed use of spaces and affordability for people making $30,000 to $60,000 a year. As we study this economic model, we can not only solve affordability, we can address sustainability and mobility if these places are more walkable.”
Allen’s students have already already proposed one development to Washtenaw County and the city for the county-owned surface parking lot on the corner of Ann Street and North Main Street.
The proposal includes underground parking to replace the spaces in the current surface parking lot, with the first floor transformed into local retail facing the sidewalk. Above the retail space, the proposal suggests affordable rentals with market-rate one- and two-bedroom apartments. The apartments in the building would be broken into 80% market-rate rent and 20% affordable rent for the median tenant income range of $30,000 to $60,000.
According to Allen, this site could be a priority for affordable housing development in downtown Ann Arbor, in addition to the surface parking lot at Fifth and William Street across from the Ann Arbor District Library.
While no business initiative between U-M and the city has been confirmed yet, Allen’s proposal comes at a moment when the housing crisis has become particularly urgent. According to a 2015 report commissioned by the Washtenaw County Office of Community and Economic Development, 45% of Ann Arbor renters making $35,000-$49,999 a year paid more than 30% of their gross income on rent, the rate at which housing is considered unaffordable.
What’s more, the unaffordable housing rate is even higher among Ann Arbor renters with annual income below $35,000.
The study recommends that Ann Arbor build approximately 140 units of affordable housing every year until 2035 to meet the growing needs of a middle-class population. In the four years since the report, Ann Arbor has yet to come close to meeting these recommendations.
“We’re barely keeping up with what (affordable housing) is being lost,” Ann Arbor City Administrator Howard Lazarus says. “We clearly need to do something different. The growing university and students is what’s driving the lack of housing.”
Before officially coming to an agreement on how any new development initiative would work, Lazarus says logistics, such as funding and a set of guidelines, will need to be put in place by the collaborating parties. However, Lazarus is hopeful the university and other public agencies can come together to provide Ann Arbor with more affordable housing.
“(The city) has had this commitment to provide about 150 new affordable units a year and we haven’t met that,” Lazarus says. “We need to explore other choices.”