Ordinances, Funding, and Dealmaking Hold Up Progress on Affordable Housing

·8 min read

Jan. 23—SUTTONS BAY — Sun flicked off the snow in Suttons Bay as Larry Mawby walked around the front of his home. He talked about the neighborhood, pointing to the vine-covered grove outside his office window, where he suspects the Lutheran church once dumped its extra flowers.

And he pointed across the road, toward a string of three houses that were recently converted into short-term rentals; three among more than 700 that have multiplied across Leelanau County,

It has been on his mind.

"It guts the neighborhood, it really does," Mawby said. "We've had three families that were here for 10 or 15 years, now living somewhere else because the home that they were renting for a long time got short-termed."

Six months ago, Mawby formed Peninsula Housing, a soon-to-be 501©3 nonprofit land trust. He hopes the trust can absorb a network of properties, protecting them with affordability requirements and ownership restrictions that would fend off the short-term rental sharks.

And yet for all the froth in the affordable-housing conversation, initiatives like Mawby's face a number of barriers in order to be successful. Many housing organizations are learning as they go, stumbling into troublesome zoning ordinances, financial dealmaking, impatient lenders, and a lack of resources in vital public agencies. All the while, these philanthropic nonprofits compete against the private sector, which can churn up capital far more quickly than MSHDA, the state's primary provider of home-building loans.

Mawby, a former vintner, thinks he's cut out for a task that will take time — years, and more likely a decade — to divert the erosion of homes in the county, let alone the neighborhood. He'll need to be a diplomat, encouraging donations from private philanthropy, as well as continuing to nudge the Leelanau County Land Bank and Brownfield Authority toward collaborations that will bear fruit.

"You need time," said Mawby. "I grew up in a fruit growing family, we put an apple tree in the ground and we expected to be harvesting from that for 40-50 years. That's the mindset."

His land trust is eyeing four properties currently owned by the Leelanau Land Bank Authority. If he can raise enough money, Peninsula Housing will buy them and build homes that will stay within the trust in perpetuity. Mawby, a self-avowed "think-big kind of guy," says the trust could ramp up to 200 affordable units 10 years down the road.

The problem is that buying the land will cost money, some of which the trust will have to borrow from a lender. Borrowing the money will mean finding an institution willing to take a chance on a nascent nonprofit. Earning the land trust legitimacy will require successfully building a first-project. And building that first-project will cost money.

Other land trusts are in a similar position. In Benzie County, the newly formed Frankfort Community Land Trust is also waiting for a grant — this one from the Michigan Economic Development Corporation — which officials thought might have arrived in December.

In the meantime, the Frankfort CLT has already identified the plot, the project, and even the construction company for the trust's first project, a 20-unit complex of modular studio apartments.

"We've always said we need to get our first project done," said Katie Condon, president of the Frankfort Workforce Housing Commission, which started the trust in 2021. "It's just taking a lot longer to cross the T's and dot the I's."

It's an uphill battle in Grand Traverse County as well. In 2019, a market analysis by Housing North identified a need for nearly 4,000 rental units for households making less than $60,000 per year, as well as a need for more than 1,500 homeownership units.

A few successful projects have provided glimmers of hope. Last Fall, the city had success when an Ohio developer broke ground on a project slated to provide 58 units for residents making 30 to 80 percent of the region's Area Median Income, which was around $67,000 in 2020. The project had stalled for years while the developers waited to win tax credits from MSHDA.

Still, other deals suggest that county officials don't always feel like they can push developers with affordability demands. In 2020, the Grand Traverse County Land Bank Authority sold a foreclosed property in Blair Township to housing developers from Kalamazoo.

The land, a relatively unwieldy tract behind Blain's Farm and Fleet, was sold for $450,000 on a pitch to build between 200 and 300 residential units, according to Heidi Scheppe, Grand Traverse County treasurer.

The developer, Edward Rose and Sons, has no obligation to list those future apartments at a below-market rate. Edward Rose and Sons did not return calls seeking comment on whether they might yet do so.

Scheppe said the decision to sell the land was in line with the land bank's primary goal: to get derelict and foreclosed properties back onto the tax rolls as quickly as possible. Land Bank Authorities exist to capture and return delinquent properties to the market. However, they can also be leveraged to kickstart affordable developments with the properties they resell, a function that is included within Grand Traverse County Land Bank's own mission statement.

"The land bank could have put that requirement on Edward Rose and Sons, but if they didn't agree to it they could have just walked away from the deal," said Scheppe.

Blair Township officials echoed Scheppe. Lisa Guerreri, Zoning Administrator for Blair Township, said it was better to have it sold to a for-profit developer than to have it doing nothing.

"It's very exciting for the township to have those buildings, because either way you look at it we need housing, especially for rentals," said Guerreri. "That dirt had sat vacant for quite a few years before it took off."

Affordability stipulations did come up in zoning board meetings, but Guerreri said those conversations didn't get very far.

Scheppe said she could see a future with a more involved land bank, but voiced legal concerns about becoming too involved. Scheppe said she was aware of a "nightmare scenario" involving the Kent County Land Bank Authority, in which private developers sued the county LBA for preferentially selling foreclosed properties to community land trusts.

"None of us want to be like Kent County," said Scheppe.

The other hurdle for Scheppe is familiar to many employers: Grand Traverse County's Land Bank Authority is understaffed. Running the LBA is one of a number of tasks handled by Scheppe, and it's largely split between her and Deputy County Administrator Chris Forsyth.

"There are land banks that are significantly more active than us in GT County at this time. Here it's just me, and Chris helps us out," said Scheppe. "At this point we're happy to be partners. We just don't have the staffing."

Outside of the landbank, Forsyth said that Grand Traverse County could end up committing COVID-relief money into affordable housing developments, but stressed that nothing had yet been decided for the $18.2 million windfall from the American Rescue Plan Act.

"We'll bring everybody to the table, and I'm sure that affordable housing will be part of the conversation," said Forsyth.

In the meantime, much of the onus of actually building affordable homes has fallen on national groups like Habitat for Humanity, as well as HomeStretch, a local nonprofit.

For all the positive attention the nonprofit receives, HomeStretch has its own hurdles — long, drawn out grant applications with MSHDA which rarely net all of what HomeStretch needs to put up a home, according to Jonathan Stimson, the organization's executive director.

Stimson may be the most frustrated out of everybody. In his five years at the helm, he's prepared an entire apparatus of contractors and subcontractors who are "ready to go," he said. But more often than not, Stimson said he's fundraising instead of building.

"We're a one-stop-shop, and the money should just be flowing to us with the demand that's out there. But it's not, and we have to go out and get it," said Stimson. "That's what's holding me up. It's like pulling teeth."

Stimson said MSHDA-funded projects take "1-2 years before he can get a shovel in the ground." Otherwise he hunts down statewide and national grants, a role he's still adapting to after 15 years as a general contractor.

Sticks and bricks, Stimson can make a home for $210,000, he said, which he reckons to be a good deal considering development fees tacked on in the private market.

With a lean model, HomeStretch has done a lot already. Stimson said they've built 32 units with another 96 in the pipeline, including redeveloping a downtown parking lot property on East State Street with the Traverse City Housing Commission.

Stimson said it took five years just to get ahead of the learning curve — the ordinances, the tax credits, the contractors and the politics.

"There's no school of affordable housing," Stimson said. "You go and learn it on your own, and you better have somebody full time, on staff, that knows their way around this stuff."

In Leelanau County, Larry Mawby still is hopeful in the short-term.

He thinks a first-deal for Peninsula Housing will come together within the next year. That's if he can line up his donors, the builders, and county officials.

"There's no free lunch in this system," Mawby said. "But if you don't do anything, you never get there."