Developers would pay for displaced GR residents under proposed policy

BY Sunday, April 28, 2019 06:10pm

GRAND RAPIDS — As Michigan’s second-largest city continues to grow and developers scoop up the remaining developable vacant land, it’s likely that some Grand Rapids residents who rent homes in desirable neighborhoods could face being displaced.

In response to a directive from the Grand Rapids City Commission, city staffers are working to create a policy that protects renters from displacement when their homes are sold to developers to make room for new development. The policy would apply only in cases when the developer seeks various financial incentives from the city.

Kara Wood, economic development director of Grand Rapids

“What’s happening is we’re running out of vacant lots to develop on, and we’re seeing existing property being developed,” said Kara Wood, the city’s economic development director. “As a result, we want to make sure that we get out in front of it, so we’re not faced with a situation where we’re being asked to assist in projects where people are being displaced out of homes.”

The city lacks specific data on how often this type of displacement occurs, although leaders are concerned the problem will only grow in the future.

“I wouldn’t say it happens often, but it could be a more frequent issue we face going forward because of the significant development activities within the city,” Wood said.

For the policy to move forward, it must first clear the city’s Economic Development Project Team, be discussed in a public hearing and then pass the City Commission, according to Wood, who notes staff has been working on the issue for several months.

The policy would apply to residents who could no longer remain in their residences because the property is being redeveloped, or residents who are required to relocate within the 12-month period prior to a developer submitting an incentive application to the city.

It would not apply to homeowners who voluntarily agree to sell their property to developers, or in instances when state or federal displacement protections are enforced.

Once a developer submits an application for one of the city’s financial incentives, city staff would review it to see if the policy applies. If it does, the developer would need to comply with notification requirements for residents and deposit necessary funds in an escrow account equal to three times the median monthly housing cost for Kent County, as published in the most recent Census.

The policy also would require the developer to deposit moving expenses the equivalent of $500 in 2019 dollars, an amount adjusted annually by the Consumer Price Index for urban areas.

If the policy were enacted, a developer of a qualifying project this year would need to deposit a total of $3,221 into escrow for the displaced household before the city would process any applications for financial incentives.

“Throughout the process, the tenants that are being displaced are identified, they seek and receive the financial assistance, and then we report the outcomes back to the commission,” Wood said. “It’s quite an involved process, and it’s intentionally trying to eliminate the displacement of individuals, or at least financially support those that are being displaced as a result of development.”

Wood also noted the concern about displacement did not come directly from the community. Rather, the Grand Rapids City Commission directed staff to research the policy because it felt giving affordable housing incentives to support a project in which residents were displaced runs counter to the intent of the incentives, she said.

None of the current incentive applications before the city involve displacement, according to Wood.

'Do the right thing'

There are 2,300 acres of land classified as “vacant” in the city of Grand Rapids. Some property is not suitable for development, but other parcels are in use for other purposes, like recreation. The figure does not include land that could be redeveloped for a more intensive use, according to the city.

Despite the lack of clear data on the practice, displacement has occurred with some prior developments in Grand Rapids, including in the Belknap Lookout neighborhood when Grand Valley State University built the new Raleigh J. Finkelstein Hall on Lafayette Avenue, near I-196. The project did not receive a financial incentive from the city, but GVSU helped about 35 displaced residents find new housing, according to estimates from Brian Copeland, the school’s associate vice president for business and finance.

The university worked to relocate the tenants to GVSU-owned properties in the neighborhood or provided financial resources to help the residents find other housing.

“We were always motivated to do the right thing for the tenants,” Copeland said, adding it was also important to Neighbors of Belknap Lookout (NOBL) and the city that the tenants received assistance.

Elianna Bootzin, executive director of NOBL, said a citywide displacement policy would improve the level of benefits for displaced residents.

“The displacement policy is a really good way to build on (GVSU’s), and it gives us leverage to go back in and say, ‘Here’s what the whole city is doing,’” she said. “I think it’s a great step up.”

Jeremy DeRoo, executive director of LINC UP, a Grand Rapids-based nonprofit real estate developer, agrees that the policy could help with the displacement that happens within the city.

“If we look at other cities that have undergone similar changes in the housing market, we are at the point where that is likely going to be an increasing occurrence for Grand Rapids,” DeRoo said.

Risk rising

A report from the American Enterprise Institute detailing housing market indicators for Grand Rapids and other major housing markets indicated the city in 2018 had the second-highest annual housing price appreciation (6 percent) when compared to other major metro areas in Ohio, Indiana, Illinois, Wisconsin and Minnesota.

The report also showed Grand Rapids had a 53-percent increase in single-family home values over the last six years, second only to Detroit in the Great Lakes region.

“That tells us that prices are going up significantly in Grand Rapids, which increases the risk of displacement because as housing prices go up, the viability of development goes up with it,” DeRoo said. “The removal of cheaper, more affordable housing to replace it with upper-income housing becomes a more financially viable project possibility.”

As a nonprofit developer, LINC UP generally tries to avoid displacing people with new housing, and if people are displaced, the organization works directly with families to find similar housing, DeRoo said. Typically with projects, previous tenants are not “at the forefront of anyone’s thoughts as they think about development opportunities,” he added.

“I think (the tenants) should at least be compensated for the losses they incur as a result of these changes,” DeRoo said. “Developers, it makes sense (to have them pay) because they are the ones incurring benefits of those changes and using some of those benefits to offset the loss that other people are sustaining.”

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