June 24, 2021

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Beauty Made Perfect

New nonprofit group aims to bring ‘equitable housing’ to Ann Arbor

ANN ARBOR, MI — Peter Allen estimates Ann Arbor has a shortage of at least 5,000 to 10,000 housing units.

With supply low and prices high and rising, many people who are priced out of this expensive housing market drive an hour just to get to their jobs in the city, he said.

“If you work in Ann Arbor, you should be able to live in Ann Arbor,” Allen maintains. “The idea that you have to commute for an hour is wrong for a lot of reasons, not just to the individual — to society and to climate change.”

Allen, a local real estate developer who has spent many years lecturing about such topics at the University of Michigan, has formed a new nonprofit group in hopes of helping the city tackle its housing shortage and affordability challenges.

It’s called the Equitable Ann Arbor Land Trust, or EA2 for short, and its mission is to catalyze development of “equitable housing” with a focus on affordability, creative placemaking, environmental sustainability and mixed uses.

“My goal is to be the head of this nonprofit for five years and to make substantial progress on that over the next five years and then I’ll turn this over to somebody else, but I hope the EA2 board will be around forever,” said Allen, who plans to retire from UM next year after 40 years of teaching.

“This is my swan song,” he said.

Whereas local economic development group Ann Arbor SPARK is a jobs generator, EA2 will be a housing generator, Allen said.

“It’ll be a complement to SPARK, which has worked very, very well,” he said. “In fact, it’s worked so well, it’s helped exacerbate the housing problem.”

The missing middle

Allen teamed up with Sarah Lorenz, one of his former students, to launch EA2 last year.

They’ve assembled a volunteer board of directors made up of about a dozen local experts in real estate development, finance, architecture, urban planning and sustainability.

“It’s a group of people who are rooted in the community and have a lot of expertise around development and housing and nonprofit work,” Lorenz said.

They hope to stem the rising tide of unaffordable housing and help facilitate the development of “missing-middle housing,” something between the affordable units the city’s Housing Commission and Avalon Housing are building and the luxury units the private sector is building, she said.

“There’s a lot of effort right now that’s bearing fruit on affordable housing, and we’re looking at a niche that’s a little bit above that, sort of your average homeowner from around the area median income or below — you know, teachers and other civil servants who are now having a really hard time finding housing they can afford to buy,” Lorenz said.

A five-story condominium development under construction at 309 S. Ashley at the corner of Ashley and Miller Streets in Ann Arbor on Friday, April 30, 2021.Jacob Hamilton | The Ann Arbor News

The Ann Arbor housing market has become so gentrified it’s pricing out many demographic groups, Allen said.

According to Zillow.com, the typical Ann Arbor-area home value was $411,196 in March, up from about $339,000 five years ago, and up from less than $250,000 a decade ago.

“The rule of thumb is you can afford a house two and a half times your salary,” Allen said. “If you’re not making over $100,000, you’re cut off from buying anything in Ann Arbor.”

The first house Allen and his wife bought in Ann Arbor for $37,000 many years ago just sold for $650,000, he said.

“It’s wrong,” he said.

‘Low-hanging fruit’

Local job growth is the No. 1 driver of the EA2 agenda. There seemed to be about seven to 10 jobs for every new housing unit before the COVID-19 pandemic, Allen said, noting tens of thousands of people commute into the city for work.

“We think the job market will come back as strong or maybe even stronger than it was pre-COVID,” he said. “And therefore, the problem is going to be as bad.”

So, what’s the solution?

Allen and his group are looking across Ann Arbor for possible sites to add more reasonably priced housing.

The city is already doing some great work with plans to expand affordable housing using a new millage, but even more housing is needed, Allen said.

EA2 can help make sure private developments include about 20-25% affordable housing for people earning up to 60-80% of the area median income, with the remaining 75-80% of units being market-rate, he said.

EA2 would be a facilitator of developments, not the actual developer, Allen said. He envisions the group helping to get sites pre-approved for development, serving as a catalyst to bring in developers to then build already-approved projects.

While the nonprofit may collect fees from developers to fund its work, Allen said he and EA2′s board members are unpaid and will not receive any financial return.

He considers parking lots owned by the city, county, university, schools and Washtenaw Community College the “low-hanging fruit” in terms of potential development sites. Predicting “we could see the demise of the automobile over time,” he suggests reducing parking to the minimum necessary.

Allen points to the “huge parking lots” at Wines Elementary and Forsyth Middle School as examples of underutilized property he thinks could welcome mixed-use development, including housing and retail. If that happened across the city, Allen suggests it could help Ann Arbor achieve its “20-minute neighborhoods” goal to ensure convenient access to basic needs.

“And we’re not asking the schools or the city or the county or the U to sell their land to us,” Allen said. “We’re asking them to put up the land, we get it entitled, zoned, site planned, and we write a 99-year land lease with the owner.”

That way, the public entities get a new revenue stream and the development is put on the tax rolls, Allen said.

Land is typically worth 20-25% of the value of the development, so reducing the upfront costs with a land lease helps make the numbers work, he said.

Big and small projects

There are multiple areas of focus for EA2, Allen said. The first is gentrification mitigation and creative solutions for missing-middle housing, including adding accessory dwelling units on single-family properties and other neighborhood infill developments.

“Support ADU construction with modular options, innovative financing, and/or partnership structures,” the EA2 plan states, discussing various ways to help middle-income and working-class residents own homes.

Proposal would allow over 22,000 homes in Ann Arbor to add accessory apartments

“Focus two is bigger deals like downtown sites,” Allen said, mentioning various downtown parking lots, including the county parking lot at Ann and Main streets.

Those bigger deals would involve partnerships with public land owners to build mixed-income housing with an emphasis on creative placemaking and sustainability, the EA2 plan states, outlining a goal to match housing to job growth near job centers and transit lines in Ann Arbor’s core and perimeter.

EA2 has approached the city, county, schools and university and they’ve all said it sounds interesting, but they want the group to demonstrate a deal first, Allen said.

“We’ve been focusing on downtown and a couple of infill sites, and I can’t tell you exactly where,” he said.

The Standard high-rise

The Standard, an off-campus student housing development under construction at Main and Liberty in Ann Arbor on Friday, April 30, 2021.Jacob Hamilton | The Ann Arbor News

The group is still waiting to see how things play out with the Housing Commission’s plans to develop affordable housing on more city-owned sites. EA2 may try to get involved or help bring in a developer on some of the sites, Allen said.

Jennifer Hall, Housing Commission executive director, said she doesn’t know enough about the group to comment yet.

Derek Delacourt, the city’s community services administrator, said EA2 could bid or be part of a development team that bids on city projects just like any developer.

“My conversations with Mr. Allen have been consistent, the city is not able to treat or partner with his group any differently than other groups that approach the city about development of private or publicly held parcels,” he said.

EA2 might partner with a developer or two if they share the group’s goals and where EA2 can add value consistent with its mission to add equal-opportunity housing, Allen said.

“We want to be a partner as well with the developer over the long run to protect the interests of the city, to make sure the affordability is done well, right and for the long run, particularly with a land lease,” Allen said.

“If they have to pay a percentage of their earnings or a percentage of their net operating income to the land owner, we want to be the fiduciary to oversee that process as a nonprofit. It’s complex, but it’s been a precedent in other cities, it’s been worked on, and community land trusts are not new.”

City Council Member Julie Grand, D-3rd Ward, said she hasn’t seen enough to comment on EA2′s plans, but the city’s housing crisis is an incredibly complex problem and the solution isn’t going to come from just one source.

“We’re not going to fix it only with the millage, we’re not going to fix it only with the private sector,” she said. “We all need to work together, so the more people and groups that want to contribute constructively to solving this problem, the better.”

John Mirsky, who has worked on sustainability issues as a city energy and environmental commissioner, is vice president of the EA2 board. The group can play a role in promoting a sustainable, vibrant community that is a model for others, he said.

Part of the EA2 plan for better mobility includes getting the city to expand its vision for the Treeline urban trail for pedestrians and cyclists, making it a 14-mile loop around the city.

The Gallery condos

The Gallery, a condominium development at the corner of Ashley and Jefferson Streets in Ann Arbor on Friday, April 30, 2021.Jacob Hamilton | The Ann Arbor News

‘For Ann Arbor, by Ann Arbor’

Lorenz, an Ann Arbor native, said her husband is a builder and they’ve wanted to build more affordably priced housing in the city, but land prices and construction costs push new housing into a pretty expensive range.

EA2 can play an intermediary role in bringing about more moderate-cost housing, working with local builders, and seeking funding from foundations and community development financial institutions, Lorenz said.

“A little phrase that we’ve been throwing around is development for Ann Arbor by Ann Arbor,” she said.

EA2 is trying to pull ideas from different parts of the country, but in some ways Ann Arbor is somewhat unique in that it’s a bubble of really expensive housing with much more reasonably priced housing within an hour’s drive, Lorenz said.

Developers will be attracted to the EA2 vision if they’re given sufficient density bonuses, allowing them to build bigger in exchange for providing affordable housing, Allen said. And the prices they’ll get for the 75-80% market-rate units will help subsidize the 20-25% affordable units, he said.

That, coupled with land leases and possible subsidies from the city’s affordable housing millage, makes the numbers work, Allen said.

“And I’ve proven it to several developers who are eager to come in and implement this plan in Ann Arbor,” he said.

MORE FROM THE ANN ARBOR NEWS:

Ann Arbor sets sights on developing affordable housing at three more locations

Millennials, seniors predicted to drive more housing demand in downtown Ann Arbor

Empty lot by Michigan Stadium in Ann Arbor listed for sale for close to $600,000

$5.1M from new Ann Arbor affordable housing tax could go toward downtown high-rise

Q&A: Ann Arbor affordable housing leader explains ambitious $397M plan