The Un-affordability of housing in Grand Rapids

At Tuesday’s Grand Rapids City Commission meeting, one agenda item a resolution approving the establishment of the Lofts on Grove Neighborhood Enterprise Zone (NEZ) for the parcels of property located at 1359 and 1329 Plainfield Avenue NE. 

The agenda item can be found in the Agenda Packet for Tuesday, November 15, pages 12 – 17. Part of the text for this resolution reads: 

The Developer, which is affiliated with First Companies, owns the Property and proposes to demolish the existing buildings and site improvements to construct a new, mixed-use four-story building containing 3,275 square feet of ground-floor retail space and 110 market-rate residential units. Total investment in the project is estimated at $24.4 million with hard construction costs of approximately $18.6 million. Ten new jobs are expected to be created by the tenant of the commercial space, with wages anticipated to be $15.00 per hour with benefits. 

The Developer has also been approved for reimbursement of up to $1,146,476 for brownfield eligible activities including environmental assessment, demolition, lead and asbestos abatement, site preparation, and infrastructure improvements. Reimbursement is expected to occur over a 13-year period, with an additional five years of capture for the Local Brownfield Revolving Fund.

So, the developer will get reimbursed just over $1 Million in this process, which is a lovely perk. Later in the proposal, the cost levels for renting a studio apartment, a 1 bedroom and 2 bedroom apartments, which are shown here below.

Now, the average wage of the 10 new jobs that will be created in this project is $15 an hour, which would be $31,200 a year for 40 hours a week before taxes. Let’s be generous and say that after taxes, someone making $15 an hour would make $28,000 in take home pay. This means that for those who would rent the studio apartments, they would spend half of their income, at $14,100. If one wanted to rent a 1 bedroom apartment, which would cost $17,400 for a year, this would leave them with only $10,000 left for utilities, food, transportation, health care, entertainment, etc., which would mean they would have $833 a month to cover all expenses other than housing. 

Grand Rapids, like most cities in the US, continues to perpetuate a housing crisis. Housing is un-affordable because city officials and many housing organizations can’t look past market solutions to this crisis. How can you expect people to live on $15 an hour, which is the average wage of the jobs created in the Lofts on Grove businesses, making is very difficult to afford the cost of rent for the apartments that will be located above where they work?

The National Low Income Housing Coalition provides excellent information on affordability of rent in all states, including Michigan, which you can find here https://nlihc.org/oor/state/mi. The graphic below, provides a good summary of the average cost of rent and what people need to earn per hour to afford most rent. As you can see in the graphic, for those renting in Grand Rapids, you need to earn $20.02 an hour to afford the average rent. There are literally tens of thousands of individuals and families who do not make $20 an hour in Grand Rapids, yet developers keep creating housing that is un-affordable for so many people.