GRAND RAPIDS — A study released Monday shows the housing shortage in greater Grand Rapids soared during the pandemic as more young people moved to West Michigan amid sluggish new housing starts.
The 2023 Kent County Housing Needs Assessment, published Monday, determined 34,699 more housing units will be needed in the county by 2027, a gap that increased by 59 percent since the last study on the subject was released in 2020. That’s according to Bowen National Research, an Ohio-based real estate market analyst hired by the Grand Rapids Area Chamber of Commerce to conduct the study.
The gap is being driven by factors that are common across the state, including a dearth of new construction due to skyrocketing costs, supply chain problems, inflation and higher interest rates.
But it's also being driven by a decade-long population boom in the Grand Rapids metro area of roughly 1 million people. According to U.S. Census data, from 2010 to 2020, Kent County grew by 9.2 percent (55,000 residents), with Grand Rapids gaining 11,000 of those residents. Meanwhile, the state grew by just 1.9 percent.
Brooke Oosterman is director of policy and communications for Housing Next, a group that works with local governments, developers and nonprofits in Kent and Ottawa counties to address housing barriers. Her group worked with the Chamber and Bowen National Research to facilitate the study.
“The good news is that what we know about this number is that it is really stemming from population growth, household growth (and) a lot of really exciting things happening,” Oosterman said at a media briefing Monday on the report. “What’s exciting is that we’ve already made huge strides forward to making sure that we can accommodate this demand over the next few years with our partners in the community.”
Oosterman said Kent County created 5,000 new housing units in the past two years.
Millennials, seniors among fast-growing populations
According to the study, between 2022 and 2027, Grand Rapids’ population is expected to grow 1.1 percent while the rest of Kent County grows by 1.3 percent and Michigan sees a population decline of 0.2 percent.
In 2022, people ages 25 to 34 made up the largest share of all heads of households in Grand Rapids — 21.6 percent. Older millennials ages 35 to 44 were a close second at 18 percent.
The city’s population of older millennials is expected to grow by an additional 2.7 percent by 2027, with its population of those under 25 growing by 1.7 percent. Meanwhile, its population of those aged 65 to 74 is expected to jump by 8 percent, and households headed by the 75 and older bracket is expected to grow by 15.4 percent, the study said.
The housing need gap spans all price points, according to the study. But with the percentage of young workers and retirees growing at such a quick clip, lower- and middle-income buyers will represent over half of the for-sale housing need, and the greatest gap in rental units also will fall into these income brackets.
The first Kent County Housing Needs Assessment in 2020 determined 22,000 units would be needed by 2025 to accommodate population growth. This update was completed to assess current demand. The study found there will be a shortage of 14,106 units in the city of Grand Rapids by 2027, and an additional 20,593 units will be needed in the rest of Kent County, largely due to increased population and household growth.
A ‘solvable’ shortage
In a release about the report, Oosterman said the gains are good news, as Kent County has a large population of younger people who are looking for opportunities to call the community home. She called the housing shortage a “solvable” problem if leaders come together.
“Efforts that drive supply solutions forward are already underway,” she said. “This new data amplifies the importance of accelerating this work.”
Examples she cited include the city of Grand Rapids and Kent County setting aside a combined $23 million from their American Rescue Plan Act allocations to create affordable and workforce housing funds. The county also awarded $500,000 to Housing Next to assist the group’s work with municipalities in identifying zoning barriers to new construction.
Oosterman also pointed to the Michigan Legislature’s recently created residential development incentives for workforce housing via a bipartisan package of bills signed by Gov. Gretchen Whitmer at the end of 2022.
The state is also chipping in via a new Housing and Community Development Fund and the Missing Middle Housing Program that leverages ARPA funding to help nonprofits construct and rehabilitate single-family and rental housing.
In West Michigan, Dwelling Place of Grand Rapids and Lakeshore Habitat for Humanity split $3.2 million from the first round of Missing Middle grants announced in December to help them build 54 units in Kent and Ottawa counties.
But if the Kent County housing gap is to be filled, much more new construction will be needed. The city of Grand Rapids is at near-zero vacancy in affordable rental options, according to the report.
Much of the recently announced new construction in the city is market-rate rental housing with rents starting at $1,000 for a studio and up to $2,800 for a two-bedroom, while the report said most of the expected growth in the rental market will be among households earning around $50,000 per year. After taxes, that take-home pay is closer to $40,000. Lower income households earning less than $30,000 will also comprise a large share of renter households, the report said.
Rapid growth also is occurring among owner-occupied households earning above $100,000, which is straining the market and putting added pressure on middle income households trying to buy a home.
The report found the median sale price of homes increased 99.2 percent in Grand Rapids and 74.8 percent in the rest of Kent County between 2016 and 2022. The largest increases (18.4 percent for Grand Rapids and 15.7 percent for Kent County) occurred in 2021 and 2022, respectively. Meanwhile, researchers found during the past two years, the for-sale housing stock priced below $200,000 diminished drastically, making homeownership by households earning less than $75,000 per year increasingly unlikely.
Ryan Kilpatrick is founding executive director of Housing Next who has since stepped into a consulting role for the group as he pursues other ventures. He said in a release that no amount of combined local, state and federal subsidies or incentives will be enough to combat the housing crisis without meaningful policy changes.
“The community will need every city, village, and township in the region to evaluate their local policies and explore how and where they might be able to support additional housing to serve the region and in balance with their local community’s desires,” he said. “We must tackle this challenge together, and there are no one-size-fits-all solutions.”
Grand Rapids Mayor Rosalynn Bliss said at the media briefing that the city of Grand Rapids is working with partners to increase the housing supply across the spectrum, which can be a challenge with no city land bank and so little undeveloped land available.
“We’re working on updating our master plan, we’ve already made changes to the zoning code, spurred additional residential development,” she said. “I’m really excited to see some of the proposals that we (solicited) for the Affordable Housing Fund. Right now we have that out, and we're hoping to get some really great proposals, and the deadline is Feb. 17. So we are going to try to work through those applications to identify which ones we can fund (and get) those dollars out the door as quickly as possible.”
Housing Next and the Grand Rapids Chamber will host a town hall at 1 p.m. Monday to give the public a chance to respond to the study.