The Next Generation Of Affordable Housing

Affordable housing has a new address – 25-to-35 year-olds – and a rather elusive definition. The young professional creative class may be willing to spend a higher proportion of income on housing, but it better be hip. Beyond that requirement, real estate observers differ about what may appeal to Millennials, as well as what constitutes "affordable" for the group. Whatever – falling market values are bringing more and more places into the affordable range.

Inner-ring suburbs like Wayne and wannabe artist magnets like Ypsilanti compete with one another for this coveted demographic. The city of Detroit is currently struggling to fill its neighborhoods with Millennials, despite attractive housing stock and a distinct price advantage.

Creative class guru Richard Florida, interviewed in The Atlantic earlier this year, pegs 20 percent of income as the ideal set point for young people's spending on housing and related durable goods. "How are we going to grow if people are forced to spend the largest share of their income on this product that isn't really contributing to economic growth? And how we shift to much more rental housing could be part of that conversation," Florida says.

But scratch into the issue with any depth and it soon becomes clear that price isn't the only aspect to the affordable equation, and few can agree what the formula for success entails. To local market watchers, young people seem willing to spend more than 20 percent on housing, as long as the neighborhood is hip and close to public transportation. Still others say the housing itself is critical – neighborhood is secondary.

"It's gotta be cool. We rent our 'cool' apartments before our non-cool apartments. The ones with hardwood floors, exposed brick and upgraded appliances rent for more money, and quicker," says real estate investor Stewart Beal.

"Neighborhood doesn't matter at all. If you have a beautiful loft project in a not-so-good neighborhood, they'll rent those lofts in a second. They have got to be close to public transportation and a downtown environment. Obviously if there are safety concerns, that's an issue."

Artists are indifferent to cosmetics. If the neighborhood is merely down and out but the housing on offer has amenities, they're good with it, Beal adds. "They like the gritty stuff. They're looking for affordability and community," explains Beal, who is president of Beal Properties LLC, a real estate development firm.

No matter where it is, it seems that the neighborhood must have an urban vibe - which means lofts to some. "Everyone wants only lofts – everything else is too traditional," says Brian Hurtienne, architect, real estate investor, and Corktown resident.

"We have enough cool neighborhoods (in Detroit) but we don't have enough cool housing that fits 'affordable' for those people. Corktown and Woodbridge are cool but they don't have the kind of housing that fits the market. The few rentals are traditional, which is not hip or cool. Woodbridge is a big rental market but it's all houses with multiple people in them. Who wants a roommate when you're 35?"

In downtown Detroit, the rental market is minimal – the Kales Building on Grand Circus Park ($975-$1550/mo) or the Lofts on Merchants Row nearby on Woodward Avenue ($785-$2720/mo) are about it, Hurtienne says. He points to Eastpointe and Southfield as potential centers for Millennials in search of bang-for-the-buck.

"They have lots of Mid-Century Modern 900-square-foot ranch homes – those are kind of fun – but they don't have the neighborhood coolness. Those may be the next step for the Millenials after loft living," he says. That's wishful thinking, according to those who believe neighborhood matters most.

Don't give up on Detroit, says Deborah Younger, executive director, Detroit Local Initiatives Support Corp (LISC). "We're starting to see a lot of young artists and designer kinds of people moving in, particularly on the east side. It's not occurring everywhere. It's a huge opportunity because housing values are so low. Young creative types can get houses now for $20K in Boston-Edison," Younger says.

She points to the north side, Boston-Edison (a once-elegant mid-city neighborhood of large homes), Midtown, and the North End as target neighborhoods where creative types can buy and renovate to suit themselves without a huge investment.

"We're starting to see non-traditional immigration going on under the radar, including a group of Danish students," Younger adds. "We think of Hispanic and Middle Eastern (as Detroit immigrants) but they're also coming from Eastern European countries. People are talking about the architecture, too."

She cautions that it's going to take 5-10 years to recover, given where we are – with 30% of Detroit's housing stock vacant or foreclosed. Really aggressive strategies are required, but the economy and lack of jobs derail some of those efforts.

Futurist Lou Glazer, president of Ann Arbor-based think tank Michigan Future, Inc., thinks southeastern Michigan has more problems vis-à-vis Gen Y than the economy. "It's shocking what young professionals will pay to live in a neighborhood in New York or Chicago that they consider cool. They're not buying housing – they're buying the neighborhood. You can have cheap housing in lots of places and young professionals aren't coming," Glazer says.

"The attribute that matters most is a vibrant walkable city neighborhood. The creative community has tended to place a high value on low-cost housing. They then become the creators of these interesting neighborhoods. It's an asset I’d sure like to take advantage of, but it isn't strong enough to attract talent on the kind of scale we need."

If you want proof of what Glazer claims, you have only to look at Ferndale's evolving downtown neighborhoods. Not only are hip, local shops moving in, so too are young professionals.

What other cities are looking for Gen-Y approval? Ypsilanti, for one.

Stewart Beal says Ypsi has many advantages over most communities in Michigan: Washtenaw is the best county in the state for lots of reasons, including educational and job opportunities, as well as arts and entertainment options. "It's got affordability and a nice downtown environment. Rents on our Ypsi apartments go from $500 to $1,200/month in downtown and in walking distance of downtown. Ann Arbor downtown rents start significantly higher than that," Beal says.

Also waiting at the altar: Wayne, Wyandotte, and Mount Clemens. All three cities have made major downtown improvements, with more to come when the uptick starts. All have particular advantages and all share the essentials: housing (some nascent), walkability, and places to be once you walk there.

"For young adults, I have older traditional apartments. Most of my lofts are new builds and the price point is higher. The apartments, in a century-old building, have nice architectural features," says Arthur Mullen, Mount Clemens DDA executive director.

Building housing to appeal to the creative class has been hampered by a lack of developers familiar with non-traditional financing tools such as historic tax credits, Mullen says. (Those same credits are part of Stewart Beal's success elsewhere.)

Mount Clemens believes it's solved the rest of the Gen Y equation. "People want to live in the entertaining and dining capital of Macomb County. We have 30 bars and restaurants that are walkable," Mullen says.

The city has set up a downtown enterprise zone to encourage conversions of upper level space from office to residential, but like other suburbs with a similar mission, Mount Clemens is butting up against the economy.

Wayne doesn't have 30 restaurants and bars, but it does have downtown grocery and clothing stores – and affordable housing, some with river views.

"We were always affordable. Now that we've gotten even more affordable because the values have dropped, we think we're uniquely situated. We're close to the highway (I-94) and only 10 minutes from the airport," says Matthew Miller, city planner for the City of Wayne.

The River Rouge runs through the entire city and there are 17 parks, including a large natural area with trees and wildlife, and a mile-and-a-half long trail with overlooks on the river. Some houses back up to the river. There's a new farmers' market, a real movie theatre, and unlike most newer suburbs, the city pays for all street and sidewalk maintenance.

"We have a good mix of homes – tract houses from the '50s, others built in the '20s and '30s, end-of-the-street-park suburbs, Sears catalog houses. Every house is different – and we have a lot of street trees," Miller says.

Downriver, on the Left Bank of a much bigger river, the city of Wyandotte has joined the Michigan Main Street Program and launched a new art center project in the former Masonic Temple downtown. Its downtown has substantial assets already. Most businesses are locally owned, including such quirky retailers as a custom milliner and a kayak shop that does business all across the US and Canada.

"We can offer a unique experience that folks can't get at the mall, especially if we can maintain our unique architecture," says Brandon Wescott, Wyandotte DDA director.

Another strength is Wyandotte's waterfront. The city is considering adding a short-stay marina for boaters in transit along the Detroit River. Downtown would be a direct beneficiary.

"Developers have seen the advantages of the 'floor above' (converting office floors to residential space.) It's probably just beginning to take hold here. I've been in one unit downtown above the art gallery – it's a great space, a nice big loft," Wescott says. "Rehabbing the old Masonic Temple building and promoting that space to hold events will be good for downtown. The museum department has done a good job getting all the historical designations we can get."

Whether it's Mt. Clemens, Royal Oak or Corktown, communities are starting to understand that if Metro Detroit is to attract and retain young talent, it's going to take more than just cheap houses. And it's not a matter of an arts center here or an affordable high rise there. The answer seems to require a new way of thinking about how affordable or 'work force' housing addresses the needs of a new kind of worker - the young professional, and how it dovetails with their increasingly urban interests.