High housing costs in Traverse City now hurting more industries in region


This affordable housing development in Frankfort is steps from Lake Michigan and has helped meet demand for new units. But city leaders say few options exist for households that earn too much to qualify for the income-restricted units and can’t afford market rates. (Bridge photo by Lindsay VanHulle)

TRAVERSE CITY — Ten or 15 years ago, housing wasn’t really on Penny Challender’s radar.

Today, it’s a regular topic of conversation at Hayes Manufacturing Inc., a small company near Fife Lake about 25 miles southeast of Traverse City. A lack of affordable housing nearby has made it harder to recruit employees to the 48-person firm, which builds equipment parts for industries from construction to agriculture and forestry.

Hayes considered building small houses next door and renting them to employees, though the idea of a company becoming a landlord creates other complications.

“There really are very few options in rural areas,” said Challender, a co-owner and chief financial officer. “I wish I knew the answer to it.”

Local leaders and housing advocates say a lack of affordable housing is one of the greatest barriers to the region’s economic growth. They want state lawmakers to approve tax incentives for employers that can help workers find housing, and expand local incentives cities can offer developers willing to build affordable housing.

They are also urging Gov. Gretchen Whitmer to name a cabinet-level administrator who is focused on rural issues in the state, including housing.

Kent Wood, government relations director for the Traverse City Area Chamber of Commerce and Northern Michigan Chamber Alliance, told Bridge Magazine that leaders in the region hope to have bills intended to boost affordable housing ready for lawmakers to sponsor this fall.

“We know this is not going to be done in two years,” he said, referring to efforts to change state policy in the current legislative term.

Still, he added, the time is right to plant seeds: Whitmer’s Democratic administration is young, and Republican House Speaker Lee Chatfield, who’s from rural northern Michigan, is one of the most powerful people in Lansing.

“There’s no silver bullet to this,” Wood said. “It’s going to have to be a multiple-pronged approach, and so I think that’s why we feel the need for raising the discussion.”

Failing to address the housing issue could mean companies will lose out on talented employees who can’t find a place to live, housing advocates contend, or be forced to turn down new business opportunities because they can’t attract enough employees to fulfill demand. There’s also fear that this tourism-heavy region could wind up with more affluent retirees than young working adults who can contribute to the region’s economic growth. 

In a 2015 series, “Poverty in Paradise,” Bridge Magazine explored how difficult it is for low-wage service workers to find affordable housing in an economy that depends on seasonal tourism. It highlighted the need for more rental housing for seasonal employees, in particular, who often live far from jobs; and minimum-wage workers would need to put in far more than 40 hours each week to rent in these northwest Michigan resort counties.

The housing shortage has grown more acute in the years since, and is now touching more industries beyond the tourism-based service economy, said Sarah Lucas, executive director of Housing North, a nonprofit launched this year to raise awareness on the issue and advocate for public policy changes.

Several people said retail and restaurant business owners have gotten more actively involved in helping their employees find housing, though the issue also is affecting non-tourism sectors, such as manufacturing and health care.

That is one reason why, while demand is still highest for rentals, Lucas said, more for-sale homes also are needed to satisfy growing demand.

“Maybe those seasonal workers might have been the canary in the coal mine on this issue, that it always hits lower-income households first, but the problem and the housing shortage has become much more widespread,” Lucas said.

Depot Neighborhood

A $3.6 million project, known as the Depot Neighborhood, recently brought 16 new homes near Traverse City’s public library. To qualify, prospective buyers must earn no more than 80 percent of the area’s median income — currently, $43,440 for a single person or $62,000 for a family of four. (Bridge photo by Lindsay VanHulle)

A 2016 survey by the Leelanau Peninsula Economic Foundation, an advisory board for the local business community, found nearly three-quarters of 132 business owners in Leelanau County said a lack of affordable housing was a major barrier to business growth.

More would be better 

There is no easy solution.

The region needs more income-based rental units for service workers in the tourism industry, and homes that can be rented or sold at lower price points to workers who earn too much to qualify for subsidized housing but not enough to afford market rates, said Lucas, of Housing North.

In some rural communities, she said, the housing supply simply isn’t large enough, or might look affordable on paper but require higher energy costs because it’s heated by propane, rather than natural gas. A tenant could save money on rent by living farther from work, but the extra gas costs may eat up any savings.

At its core, the housing dilemma is a function of supply and demand, Lucas said. The northwestern Lower Peninsula could support as many as 2,250 new rentals and 655 new single-family homes each year, according to a 2014 market study that is being updated.

“We’re just talking about housing, period,” Lucas said. “We feel that if we’re able to create housing, it will take some pressure off of the market and will affect multiple [housing] types and income levels.”

But the Traverse City area presents challenges for developers because of the high cost of land, labor and materials; local zoning restrictions; and trouble winning public subsidies designed to keep housing prices low, according to Housing North.

In 2017, the median new home price in the Traverse City area was $437,000, according to data from the Home Builders Association of Michigan shared by Housing North. To afford it, a household would need to earn $116,000 per year.

By comparison, the median household income in the rest of Grand Traverse County was $58,229 that year, according to Census estimates. Fewer than a quarter of county households earned more than $100,000 in 2017.

“We risk creating communities where only wealthy elites can live,” Lucas wrote in a recent presentation to a group of community members.

That would have ripple effects throughout the region’s economy, she told Bridge. The Northwest Michigan region’s year-round population is already aging, a trend most pronounced in rural areas; if younger people or families in need of apartments or starter homes can’t find them, they will settle elsewhere. That means fewer people of working age to fill open jobs, and fewer children enrolled in local schools.

Baby boomers looking to downsize are competing with young people starting families for the same housing, Lucas said, while buyers aren’t flocking to the larger, more-expensive homes older adults are leaving behind.

The shortage is affecting the region’s lakeshore communities, where the economy depends on service jobs in tourism and hospitality but whose employees can’t afford to live where they work.

Take Frankfort. Tourists love the Benzie County resort town for its proximity to Lake Michigan and inland lakes, and it’s increasingly attractive to retirees. On a recent weekday, visitors strolled in and out of restaurants and gift shops in the downtown business district.

But an entry-level house in Frankfort can cost $180,000, said Joshua Mills, the city superintendent. Businesses in town struggle to fill summer jobs, in part because many families with school-age children live miles from town due to the cost of housing, Mills said. Commuting into the city for work costs time and money.

He can relate. A Frankfort native, Mills said he couldn’t afford to live in his hometown when he took the city administrator job nearly 20 years ago. He and his wife instead built a home 10 miles away, where they raised their kids.

“We live in paradise,” he told Bridge, adding, “Paradise is at risk.” 

Developers built 92 affordable units in three housing developments in town using federal tax credits to meet demand, but few options exist for households that earn too much to qualify ‒ Mills said the homes are restricted to households earning up to 80 percent of the area median income. Census estimates show Frankfort’s median income was $39,516 in 2017, though the data aren’t broken down by household size.

Frankfort is now working to start a housing commission that would allow it to buy property targeting the so-called missing middle, or people who aren’t eligible for income-based housing but can’t afford market rates.

“If we don’t get a handle on this, we’re going to be in a bad situation,” Mills said. “It’s only going to continue to get worse.”


Joshua Mills

Joshua Mills, Frankfort’s city superintendent, said he can relate to the plight of people who can’t afford to live in Frankfort: He couldn’t, either, when he took the job managing the city nearly 20 years ago. He and his wife built a home about 10 miles away, where they raised their children. “Paradise is at risk,” Mills said of the affordable housing shortage. (Bridge photo by Lindsay VanHulle)

Identifying solutions

Regional business groups, housing advocates and government leaders say they plan to be a louder voice in Lansing.

“It’s become one of those issues that is nonpartisan,” Lucas said. “I’m hopeful that we can find enough common ground to make something happen.”

State policymakers could look at creating a state revenue stream dedicated to financing housing projects, she said; one possible funding source is Michigan’s real estate transfer tax, which currently funds public schools. 

Housing advocates also are exploring ideas to give owners of year-round rental property, which isn’t their primary residence, some relief from higher, non-homestead property tax rates that help fund public schools but also are passed down to tenants as higher rental rates, Lucas said. The concept would, in theory, require property owners to reduce rents, she added, though a specific proposal has not yet been drafted.

Another proposal would make it easier for more developers willing to build affordable housing to avoid local property taxes as a financing incentive.  

Several local leaders also called for building more flexibility into the application process for federal low-income housing tax credits. The credits are currently funneled through the Michigan State Housing Development Authority and awarded to developers, who agree to keep housing prices low.

The agency uses a set of criteria to evaluate applications, including the project’s proximity to certain amenities, such as grocery stores and health clinics, and public transportation such as a bus stop. The agency also considers a project’s walkability. Those may be fine criteria for affordable housing in cities, but housing advocates say they are less relevant to rural and other more sparsely populated corners of Michigan.

In April, just two of 14 projects receiving credits were in northern Michigan, in Petoskey and Manistee, according to MSHDA data. In October, two of 18 projects are located Up North, in Clare and Roscommon counties.

Urban and rural communities have different needs, said Tony Lentych, executive director of the Traverse City Housing Commission, who served four years as a gubernatorial appointee to the MSHDA board during the Granholm and Snyder administrations.

Lentych said MSHDA often doesn’t account for the particular circumstances of places like Traverse City, where the high cost of land means that developers might have to search farther from the city, which might lower the project’s score for, say, walkability. 

“We know what our problems are and we’re trying to fix them, but then we try to get the tools that most communities have available to them [and] we’re not successful when we apply,” he said.

MSHDA says it understands the criticism. The agency updates the tax-credit criteria every two years, and recently reduced the emphasis of walkability, said Chad Benson, allocations manager for the federal low-income housing tax credits program at MSHDA. It soon will review the criteria again.

Separately, the agency is piloting a program that helps fund development of modular homes for sale in communities with a shortage of affordable homes for workers.

“We definitely hear the need that’s there,” Benson said, adding that MSHDA receives three to four applications for low-income housing tax credits for every one that is funded.

“We’re doing everything we can to try to find a way to help all areas throughout the state,” he said.

Whitmer’s office referred comment on rural housing issues to MSHDA. Chatfield spokesman Gideon D’Assandro did not respond to a message seeking comment on whether the House speaker is receptive to these housing policy suggestions.


One of the developers behind an affordable housing development near Traverse City’s public library said it is looking to build more units in the city, as well as in the small community of Honor in neighboring Benzie County. (Bridge photo by Lindsay VanHulle)

A small opening in Traverse City 

Traverse City is not without success in affordable housing. A $3.6 million project, known as the Depot Neighborhood, recently brought 16 new homes to Traverse City near the public library. To qualify, prospective buyers must earn no more than 80 percent of the area’s median income ‒ currently, $43,440 for a single person or $62,000 for a family of four.

One of the developers, a community housing development organization called HomeStretch Nonprofit Housing Corp., plans to build six more units in Traverse City, and another two to six units in the city are in early planning stages. Another eight housing units are planned in Honor, a small community in neighboring Benzie County, said Jonathan Stimson, the organization’s executive director.


Frankfort, a lakeshore resort community in Benzie County, is home to a thriving seasonal tourism economy, though local leaders say a shortage of housing for service-based workers puts that economy at risk of being unsustainable. (Bridge photo by Lindsay VanHulle)

Sally Raths said she bought her home in the Depot Neighborhood in December for $160,000. She had rented a home in Traverse City’s Slabtown neighborhood, just outside the central business district, for close to nine years until her landlord raised her monthly rent by $300 per month ‒ a price no longer in her budget.

Raths said her daughter encouraged her to try to buy a home, and she did, though she had to move about a dozen miles outside town to find one in her price range. Her job as an enforcement specialist at 13th Circuit Court, which serves three northern counties, remained in Traverse City, along with her friends and her sense of community. And her commute got longer, especially during the winter.

She spotted an advertisement for the Depot Neighborhood in a county newsletter and inquired. When she found out she qualified under HomeStretch’s income limit for a one-person household, Raths bought one of the Depot’s three-bedroom units.

“There’s a lot of people that are coming here that are buying up properties for vacation homes, and it seems to me like we’re the average person that’s just trying to live here and work,” Raths said. “It’s a real struggle.”

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Nick A
Thu, 08/15/2019 - 9:01am

Traverse City housing has a design problem. Instead of building single family units, they should be looking at ambitious projects like the Commons in the old state hospital for inspiration. Four story mixed-use spaces add more value (and housing) for their land footprint. Building dense doesn't compromise walkability like sprawling, cloistered developments do.

Susan Murdie
Thu, 08/15/2019 - 9:19am

MSHDA's agenda is to keep building these developments with our precious local tax dollars. It is all part of their plan to self fund themselves into the future. MSHDA used funds designated to help people out of foreclosures improperly, funding purchases of vacant only homes in Jackson (and throughout the state) and demolishing them. Now MSHDA is building unnecessary apartments in our business core with developers and contractors from other states. We have old housing stock in Michigan, MSHDA needs to address how we can fix and fill what we have. This article seems to be written by MSHDA...stop the spin. If there was so much demand for this type of housing the business marketplace would fill it.

Thu, 08/15/2019 - 10:49am

"We have old housing stock in Michigan..." Exactly. Young talent doesn't want Michigan's old, decrepit housing. This is one of the reasons why Michigan has such a hard time attracting young people compared to states in the South and Pacific Northwest. We want new! We want green! We want sustainability! 80-100 year old homes with lead-based paint and lead piping just doesn't pique our interests.

Thu, 08/15/2019 - 9:21am

This is not just a Michigan problem. The same exists from Seattle, WA to Naples, FL, to Boston, MA, and San Diego, CA. A builder in Florida wanted to build housing for lower income workers in the tourist and manufacturing industry, but was denied permits because "it wouldn't be compatible with the adjacent larger houses." Too much NIMBYism that is affecting everything from housing, to renewable energy, to all the basic necessities for life.

Thu, 08/15/2019 - 11:10am

Much of housing costs are being driven the never-ending parade of good intentions. Every time there's an energy code update or new revision of the building code the costs go up significantly. The idea of payback has been stretched to nonsensical levels. Just wait until fire suppression becomes a requirement!!!! The regulatory bodies and the manufacturers have formed an alliance that the builders and consumers are too weak to fight. Local government zoning and building departments along with the formerly mentioned have made it almost impossible to build “affordable” homes without taxpayer subsidy.

Thu, 08/15/2019 - 11:18am

This is a terrific, in-depth article. Affordable housing is an issue just about everywhere, and addressing it seems to present unique problems in rural areas, especially those which rely on summer tourism and/or farms that require seasonal workers.

Greg M
Thu, 08/15/2019 - 12:20pm

Easy solution. Pay employees a proper living wage for the area and the employees will be able to afford to live in the area. These business owners who always call for less taxes on themselves now want more government subsidies so they can pocket more money and continue to not pay employees a fair wage. These business owners are so hypocritical.

James Roberts
Thu, 08/15/2019 - 3:14pm

I can see I'm going to get it for being mean here, but wouldn't it make more sense to take the headline pictured Frankfort units that are "just steps from Lake Michigan", sell them at fair market and use the proceeds to build twice as many affordable housing units in a more inexpensive location, ie: not by the beach. sheesh.

Gene K
Thu, 08/15/2019 - 7:17pm

TC has too small of a footprint and too much infighting within that footprint to do much to impact affordable housing. I would suggest working in concert with outlying counties to create a regional plan. You cross lines of demarcation quite quickly heading out of TC that have no inclusion in the thought process or planning.

Gene K
Thu, 08/15/2019 - 7:17pm

TC has too small of a footprint and too much infighting within that footprint to do much to impact affordable housing. I would suggest working in concert with outlying counties to create a regional plan. You cross lines of demarcation quite quickly heading out of TC that have no inclusion in the thought process or planning.

john chastain
Sat, 08/17/2019 - 10:01am

Part of any conversation about housing needs to include the caveat “its complicated”. There are so many forces affecting housing availability and costs that no simply answer will do. Like health care you have a supply and demand market distorted by greed and mendacity, good intentions and poor execution, conflicting levels of government, tax strategy and regulation and most of all a conversation driven by emotion. This is especially true when talking about affordable housing which means different things to different people and communities. What was affordable housing for me in the late 1970’s. It was a small home in a suburban Detroit community that was affordable for a working class family. A home whose price was unaffected by speculation and financed by a savings and loan institution that no longer exists. Between the year I bought it and the 2008 housing collapse it tripled in value yet was exactly the same property I purchased all those years ago. If you looked at the economy, local demand and wage growth (or stagnation) that value increase makes absolutely no sense. Now that market has rebounded and value distortion is growing again. This is just my example and you could write a book about the why’s and wherefores of that particular properties wild swings in value and the forces driving them. My point is that when housing was no longer just a matter of market demand and supply and became a matter of value manipulation and speculation that distortion helped give us the challenges facing us today. And that’s just my experience, you look elsewhere and will find equally valid arguments and explanations for different experiences. My thoughts are that rather then add more layers of complexity on to a situation already fraught with it we need to unwind some of the damages already done. I would start with the tax code and regulations that encourage speculation and value manipulation. That alone could stabilize and lower costs as well as freeing housing currently locked up in speculation. Other parts of this require other ideas and actions. But some of the housing challenges can be addressed by looking at housing the way it was looked at after the 2nd world war, as a community response to a social need & not just an opportunity for profit. Some things cannot be addressed by market forces alone. And then there’s income inequality and its affect on housing but that’s another conversation for another day. Cheers mates.

Sun, 08/18/2019 - 6:07pm

Are you suggesting that we get back into the giant public housing projects of the 50's and 60's? Rent control? But you don't think offering more liberal financing schemes to increase the number of buyers chasing same number of homes would have any effect on prices?

Sat, 08/17/2019 - 4:02pm

So, I'm going to go out to the middle of nowhere, cry that I can't afford to pay employees enough that they can live because I can't sell my wares at a high enough price, and I'm still going to get to call myself a businessman?

I'm going to refuse to construct the housing because "it's just too darn difficult to hire a property manager."

Michigan is a cess pool.