Grand Rapids City Commission outlines possible uses for affordable housing trust fund

GRAND RAPIDS — City commissioners laid out early plans today to begin to “push the needle” on increasing affordable housing in Grand Rapids.

All six commissioners, Mayor Rosalynn Bliss and several city staffers gathered for a two-hour work session to discuss ways to use a newly-created $50,000 trust fund aimed at growing affordable housing in a city that’s facing significant rent increases.

While officials’ opinions differed, they all seemed to agree that more affordable housing is a necessity, and that it needs to be accomplished quickly.

“We have a crisis,” Third Ward City Commissioner David Allen said of the current state of the city’s housing market.

He pointed to the Michigan State Housing Development Authority allocation of Low Income Housing Tax Credits (LIHTC) to just one applicant out of five in the city of Grand Rapids, as MiBiz reported last week.

“In a crisis, you need to act, but you need to divide and conquer,” he said, adding that any actions taken by the city would also require greater assistance from the state.

While today’s initial meeting didn’t offer any clear outcomes, commissioners discussed a number of different options to ease the burden in a city where average rent has risen to north of $1,100 per month on an annual basis, according to recent data from real estate research firm Zillow.

“We can’t solve housing affordability, so it’s about where can we have the greatest impact,” said First Ward City Commissioner Jon O’Connor, who noted many cities around the country face similar affordability issues.

As the commissioners outlined their different ideas for deploying and growing the trust fund, O’Connor said he believed creating a voucher system aimed at subsidizing individuals — rather than developers — could have the greatest impact in the shortest amount of time. Rather than waiting for affordable housing developments to come online, the city could act almost immediately to fund a system that subsidizes end users.

Elected officials and staff also touched on multiple options they will focus on in future meetings.

The commission also discussed a contentious mandate that would subject developments of $5 million or more that seek tax incentives to subject their pro formas to third-party review.

That review process could add an upfront cost of $10,000 to $15,000 to a project.

Commissioners were somewhat split on the matter, with some noting the cost could drive away developers and others saying that $15,000 isn’t much in the scope of a $5 million investment.

Mayor Bliss noted that a number of other cities, as well as the Michigan Economic Development Corp., make certain projects go through similar third-party reviews.

Additionally, commissioners talked about earmarking future income tax growth to grow the trust fund by utilizing revenue from projects that use tax incentives.

The commissioners also discussed expanding the use of Neighborhood Enterprise Zones (NEZs), an economic development tool that gives tax exemptions to qualifying residential real estate projects. One option presented to commissioners would be to make affordable housing a requirement for NEZ status.

But Kara Wood, the city’s economic development director, said enforcement of such a move could prove difficult.

The city will also consider extending a project or neighborhood’s tax-exempt NEZ status if developers add certain amenities to projects, such as constructing a bus stop nearby or offering a variety of housing types.

Going forward, Bliss said she plans to convene a committee of interested commissioners, as well as stakeholders from the real estate development community, to better flesh out the ideas.

That news was welcome to Commissioner Allen.

“We need to create things that don’t exist to solve this problem,” he said.