Affordable Housing Strategy

I. Introduction

Affordable housing is one of the most pressing challenges that the City of Ann Arbor and its residents and businesses face today. There are many causes for the high cost of living here. Our growing college student population and the desirability of the Ann Arbor business climate, together with our growing technology industry base, have all contributed to the competition for living space. Meanwhile, we have a population of long-term residents, many aging, who sometimes struggle to afford to continue living here. Our businesses and service industries have difficulty in finding workers because of the cost of living, and our values demand that we provide housing for those whose incomes and life circumstances mean finding any shelter at all difficult.

In recent years, City leaders have talked about addressing housing affordability without defining what is meant by affordable housing and without actually accomplishing much. There is no single method for addressing the multifaceted problem of affordability. The City must use the tools available while working to change state laws that prohibit other methods of addressing affordability. It would be presumptuous to declare a particular plan without recognizing the obstacles to addressing affordability. Rather, we must be willing to experiment, collaborate and be flexible in our efforts. Plainly, we must do more than just throw around buzzwords and express good intentions.

How can Ann Arbor City government craft policies that will address these complex problems and foster a healthy mix of residential options? It will not be easy, but

I am ready to take on that challenge as your next mayor.

Jack Eaton


II. Definitions

The term “affordable housing” is rather broad and actually includes more specific categories. The definitions are important because the goals for each category are quite different. Therefore they lead to very different policy decisions.

A. Subsidized Housing: Rental housing for very low-income and/or disabled people which is subsidized by Government agencies (HUD Section 8, Ann Arbor Public Housing, etc.). In Ann Arbor, the Housing Commission

administers the “Affordable Housing Fund” which provides supportive and low- income housing through public/private partnerships including rent subsidies.

B. Workforce Housing: The Urban Land Institute definition is “housing that is affordable to households earning 60% to 120% of the Area Median Income (AMI).” In 2018 Ann Arbor’s AMI is $92,900 per year for a 4-person household. Per Housing and Urban Development (HUD) guidelines 60% equates to $55,750 for a 4-person household and $39,050 for an individual (Ref. 1). An annual salary of $39,050 computes to an hourly wage of $18.78.

C. Affordable Housing: Financial guidelines indicate that housing costs, at no matter what income level, should not exceed 30% of annual gross income. Housing costs include rent or mortgage, utilities, property taxes, insurance, etc.

D. Fair Market Rent: HUD determines the Fair Market Rent (FMR) based on a rental market study and uses the 40th percentile of rental rates by unit size from the previous 2 years, not including new units and subsidized units. In 2018 the Ann Arbor FMR rates are $875 Efficiency, $905 1 bedroom, $1,103 2 bedrooms, $1,485 3 bedrooms, $1,842 4 bedrooms.

E. Student Housing: Student housing types vary in style. There is an increasing proportion of out-of-state undergraduates from high-income communities as the University of Michigan is compelled to rely less on diminishing state support. These out-of-state students are willing and able to spend their parent’s money on luxury rentals, driving speculative development and remodeling the existing housing stock out of range for the less affluent. The Inter-Cooperative Council Co-ops are among the few remaining affordable student housing options.

For graduate students, more of whom rely on stipends, assistantships, and loans rather than family money; many can no longer afford to live in Ann Arbor at all, commuting from Ypsilanti and surrounding areas. This is not sustainable economically or in terms of transportation. Further, this deprives Ann Arbor of their active participation


III. My Actions, on Affordable Housing.

Here is just a small sample of the recent, most high-profile, development- related Council votes:

A. 2015 Council Resolution on Affordable Housing Goals

Background: The Affordable Housing Needs Assessment plan is a holistic view of the affordability housing issue in Washtenaw county and therefore aims to better blend the housing markets of Ann Arbor and Pittsfield Township with those of Ypsilanti (City and Township). The overarching concept is to restructure the demographics of the region by increasing affordable housing in Ann Arbor and Pittsfield while “limiting affordable housing” options in Ypsilanti (City and Township, thus beginning to close the gap in the housing markets of

the two areas (Ref. 2). This ambitious and frankly unrealistic plan does not specifically address the heart of the affordability problem here in Ann Arbor and will require additional funding measures. I was the singular “No” vote in addressing the major problems of this proposal.

"The tax burden on our residents already is quite high, and if we can afford to contribute to other communities' affordable housing problems, then perhaps we should be reducing our taxes instead so that our residents can afford to live here. If we continue to tax our residents in a manner that allows us to afford to fund regional policy changes, it's actually going to have an impact on the ability of people on limited or defined incomes to live in our community, and I think that's counter-intuitive when you're trying to address affordable housing."
Jack Eaton (2015) (Ref. 3)

Since the Affordable Housing Needs Assessment was approved in 2015, on average, the city has only built approximately 15 subsidized units per year of the goal of 140 units per year. The minimal gain in subsidized units per year shows the shortcomings of the policy. (Ref. 4)

B. Library Lot / CORE Spaces Development

On April 17, 2017 Council voted 8-3 to sell the development rights of the City-owned property commonly known as the Library Lot (on South 5th Ave. next to the downtown library) to Chicago-based developer CORE Spaces. I voted against the sale in part because City Council allowed a permissive calculation of the ratio of building size to ‘affordable’ units required under our zoning code. Simply put, the building is larger (17 stories) and the number of Workforce Housing units smaller (43 out of 354 apartments) than required by the D-1 zoning for the site. (The City agreed to pay CORE $1.475 million for 9 additional Workforce apartments. These 52 units will be marketed at 150% of FMR.)

I believe when possible, we must use zoning to get developers to either include affordable housing units or to contribute to the City’s Affordable Housing Fund, especially when buying or using City-owned property.

C. Lower Town Development

The existing Zoning for this parcel was PUD (Planned Unit Development) and required that 96 ‘affordable’ units be provided out of the 600+ that the developer proposed. I argued to maintain the PUD zoning and voted against the change to C-1AR Zoning, which eliminated the ‘affordable’ unit requirement.

The majority of Council voted for the zoning change. Consequently, of the 684 units to be built in the Lower Town development, only 15 will be ‘affordable’ and only because the City was able to secure these 15 units through a Brownfield Tax Credit.

D. Washtenaw County Mental Health and Safety Millage

Voters approved a millage request on the November 7, 2017 ballot for Mental Health and Public Safety. While the title of the ballot issue did not mention that funds collected under the new millage would be used for purposes other than mental health and public safety services. A poll commissioned by Citizens for

Mental Health & Public Safety sheds light on people’s views at the time of the election as well as their current views. Although a majority of Council members indicated prior to the election that they intended to spend 40% of the City’s allocation on climate change actions, 59% of citizens had no awareness of Council’s plan, and an additional 16% were only vaguely aware.

I believe that the Mental Health and Public Safety millage should be used for the primary stated purposes. A majority of Council voted to spend the millage funds as follows: 40% on affordable housing, 20% on bicycle and pedestrian safety, and 40% on climate action change. The 40% for affordable housing would be about $860,000 per year, substantially less than City staff estimates it needs to fulfill the goal of adding 140 units of affordable housing per year.

I believe that a more reliable stream of funding must be identified to fund the City’s affordable housing efforts. For example, the City could earmark all or part of the $4 million per year it receives from the DDA parking revenue for affordable housing.

E. Y Lot Resolution

On May 1, 2018 City Council considered the fate of the Y Lot (350 S. Fifth Ave.). One Resolution stated the Council’s intent to support ‘affordable housing’ if ownership of the property returned to the City. I offered 4 amendments to strengthen the outcomes proposed in the Resolution.

  1. I suggested the Workforce Housing be rented at 90% FMR rather than the original 150% rate proposed; Council agreed to 110% of FMR.
  2. I proposed the Developer offer at least 50 units of single-room occupancy for people with incomes of 40% or less of AMI; Council did not support this amendment.
  3. I proposed extending the period to accomplish these goals from 48 to 60 months based on the City’s past experiences with the Library and Y Lots; Council did not support this amendment.
  4. I proposed using funds from the sale of the Library Lot for affordable housing, and to retire any debt incurred from buying the Y Lot; Council adopted this amendment.

The majority of Council was willing to support vague references to include affordable housing in the proposed project but refused to support language that would have set measurable minimum goals for what kind of affordable housing was sought.


IV. What are Our Ideas / Proposals to Address Our Problems?

The need for affordable housing is so great that no one or approach or single individual will be sufficient. A citizen-led team and I propose using a variety of methods to address the various forms of housing needs. Some ideas require changes to state law.

A. Cooperative Housing

Ann Arbor has a long history of successful and affordable cooperative housing, starting with the Inter-Cooperative Council on the U of M campus, and long-standing residential communities such as Arrowwood, University Townhouses, and Colonial Square. With HUD no longer providing funding for such projects, a local funding model is needed. Land costs and utility hook-ups are a significant part of building costs. In the near-downtown area, options include the higher ground parts of city-owned property on 721 N. Main and 415 W. Washington the Library Lot, and the Y Lot (all potentially slated for sale to private developers). Such cooperative housing should be developed as low to mid-rise housing in keeping with the goals of neighborhood friendly development and integrating with neighborhood character. These could be designated for Workforce Housing, funding for utility hook-ups waived or provided, and the City or DDA’s bonding capacity used to undertake construction. Upon completion, a cooperative ownership structure could be established to obtain permanent financing to repay the bonds.

This approach takes the volatility of housing prices out of the hands of private developers. Ownership by the cooperative residents ensures long-term affordability, and offers the residents the opportunity to build equity, should they want to move in the future.

B. Land Trusts (Athens, GA Model)

As the federal government has pulled back from their role in financing affordable housing, we will need to look towards some new models. One such model is thriving in Athens GA—The Athens Land Trust (ALT), which is both a conservation and community land trust. They set out to achieve these goals:

  1. To preserve the land of many types: woods, open space, wetlands, wildlife habitat, productive farms, historic sites, and open space in low-income neighborhoods.
  2. Increasing home ownership and creating permanently affordable housing by separating the cost of the land and the buildings. By retaining the land, ALT removes the primary driver of cost, bringing home ownership within reach. Homes remain affordable in perpetuity, allowing residents to stay in their neighborhoods.

ALT both builds new homes and renovates existing homes to high levels of energy efficiency, maintaining neighborhood character. The ALT also rents low- income apartments. This model incorporates what has been posed as competing interests: Land and energy conservation, historic preservation, neighborhood integrity, permanent affordability, and a mix of rental and homeownership. (Ref. 5)

C. Public / Non-Profit Partnerships

In Ann Arbor, we already have a model for this, the partnership between the A2 Housing Commission and Avalon Housing for Miller Manor. What is needed is a consistent revenue source. This could be provided by earmarking all or a portion of the DDA’s parking revenue for the Affordable Housing Fund, in order to replace the option of enacting an ‘affordable housing millage.’ A millage for affordable housing would negatively affect affordability for owners and renters of single-family and multi-family homes. (Ref. 1)

D. Zoning

Ann Arbor’s zoning code includes important elements that can be used to leverage affordable housing from new development. For example, developments in the downtown D-1 zoned area are limited to a certain size unless the developer provides premiums, such as affordable housing. The developer seeking to build on the Library Lot is providing some units of affordable housing but could have been required to provide more if the City had used a less permissive calculation of the ratio of the building size to lot size.

Similarly, the City’s planned unit development (PUD) zoning district can be used to require affordable housing units in projects using that zoning designation. When a developer sought to build a project on Broadway, the City permitted a zoning change from PUD to a very permissive zoning classification. In making that change in zoning, the City lost 96 units of affordable housing.

In addition to zoning code rules currently available, the City could seek changes in zoning law that would allow our zoning code to follow a model similar to Montreal, Canada. There, a large number of low and mid-rise buildings provide density but at much less cost because smaller buildings are much less expensive to build. Montreal has kept housing prices much lower than other urbanized areas of the U.S. and Canada.

“Montreal demonstrates the power of ‘missing middle’ housing on a massive scale.” (Ref. 6)



V. Summary of past, present, and future issues

I care very much about the lack of housing for the truly poor in our community. My concern does not end there. I also care about the ability of the working poor who do not qualify for housing subsidies to afford housing. Housing values have increased so dramatically, that housing is also becoming unaffordable for workers with relatively decent incomes. Additionally, residents who have worked an entire career and are living on a fixed income in their retirement find it difficult to afford

the property taxes and fees associated with home ownership. Affordability strategies must address the many aspects that affect our residents.

It has been the practice of the City to focus on the neediest when prioritizing our housing efforts. That is a reasonable response because those are our residents with the greatest need. As we develop plans to address affordability better, we must expand the scope of our efforts to include other affordability concerns. That should never reduce the emphasis on the most in need.

A. Life-Span Affordability

I take a comprehensive view towards housing affordability across the lifespan. There is a diversity of household types needing a concomitant variety of housing— from the itinerant undergraduate through the retiree intending to age in place in their own home. We need to address the needs of all of our residents with an appropriate range of solutions. There is no need to pit owners of single-family homes against renters of apartments. We do need to find ways to develop permanently affordable housing without encouraging speculative development that drives those on fixed incomes from their neighborhoods and homes.

B. Low-Income Units Sunsetting

Recently, MLive reported on a City Council work session where staff reported on affordable housing. The article noted that in addition to not meeting the goal to add new units of affordable housing over the past three years, the City will lose hundreds of units of affordable housing built 20 or more years ago. (Ref. 1)

We have a lot of low-income housing tax-credit projects that are now coming out of their affordability periods. We're seeing just in the next couple of years about 350 units coming out of affordability, and they will likely go market-rate. We're going to end up seeing a loss in our affordable housing units as a result of not having committed, mission- based nonprofits doing this work and developing affordable housing units.

You can't solve the affordable housing problem or satisfy the demand for affordable housing by supplying luxury apartments.”-Jack Eaton

There are long-term renters on Section 8 vouchers, many with disabilities, who are facing eviction as the development agreements reach their “sunset.” After the (15 years) window of affordability that a developer agreed to at the time of construction, they are eager to get new tenants at today's high market rates. This imposes a tremendous burden on these vulnerable residents, disrupting long-standing relationships and routines for meeting basic activities of daily life as well as creating fear of impending homelessness. We need more permanence in our affordability models, such that these most vulnerable members of our community do not live with the looming anxiety of imminent eviction.

C. Rent and Market Changes since 2015

In order to promote income diversity and life-span affordability in Ann Arbor, we must be able to provide housing at or below 80% Area Median Income (AMI).

*AMI (assuming 1 person household)
30% AMI (cashiers, cooks, wait staff, childcare workers) $19,500
50% AMI (school bus driver, office clerk, pharmacy techs) $32,500
80% AMI (city HR coordinator, city water technician, city police officer) $50,300

As aforementioned, the idea that the complexity of Ann Arbor’s housing market can be reduced to simple supply and demand economics is a gross oversimplification of a complex and multifaceted problem. The U.S. Census Bureau data shows that from 2010-2015 the housing density in Ann Arbor has increased by 32%, however, median rent during that time frame has also increased by 14% (Ref. 7). The mere availability of housing does not reduce the overall cost burden for the young- professional and working-class residents. Monthly rates at luxury housing options aimed at UofM undergraduates range from $1059 to $1889 per person (Ref. 7) thus encouraging overall rent rates to increase above FMR guidelines.

D. What Can Middle-Class Families and Individuals Afford Today?

With a family income of $55,750 a family, if backed by a mortgage at current interest rates, could afford to buy:

  1. A home worth $250,000 if they had no other debt and had the minimum down payment.

  2. A home worth $190,000 if they had debt of 12% of their monthly Income, or $557.50 and had the minimum down payment

  3. A condominium worth $140,000 if the condo has $250 per month Association dues and if they had debt of 12% of their monthly Income, or $557.50, and had the minimum down payment.

With an individual income of $39,050, one could, if backed by a mortgage at current interest rates, afford to buy:

  1. A home worth $190,000 if they had no debt and the minimum down- payment.

  2. A condo worth $140,000 if they had no debt, the minimum down-payment and $250 per month in association fees.

  3. A condo worth $80,000 if they had no debt, the minimum down-payment, $250 per month in association fees and if they had debt of 12% of their monthly income or $390.50 per month.

In each case, in Ann Arbor, the minimum down-payment requirement is 0% for veterans via the VA loan program and 3.5% for everyone else via the FHA loan program. (Ref. 8)


VI.  References:

  1. Ann Arbor News, 5/18/18 Does Ann Arbor need a new tax to fund affordable housing?
  2. Office of Community and Economic Development, Washtenaw County January 2016 Full Affordable Housing Needs Assessment Plan
  3. Ann Arbor News, 2/18/15 Ann Arbor adopts new affordable housing goals: 'Things will have to be different in the city'” 
  4. Ann Arbor News, 7/1/18, “How should the city fix its affordable housing shortage?” 
  5. About. (n.d.). Retrieved from
  6. Durning, A. (2017, September 21). Yes, You Can Build Your Way to Affordable Housing. Retrieved from
  7. Michigan Daily, 6/21/17 “City and students share concerns over affordability of housing” 
  8. The campaign obtained these calculations by consulting with the head of a leading local mortgage lending firm, Matt Haas, VP of University Lending Group, 2750 S State St, Ann Arbor, MI 48104. Mortgage interest rates and programs in effect as of 7/22/2018 were used in the calculations