How does affordable housing get built in Oakland County?

This story is part of a series that highlights the challenges and solutions around housing in Southeast Michigan and is made possible through underwriting support from the Oakland County (Region L) Regional Housing Partnership. 

Like much of Michigan and the U.S. in general, Oakland County has a housing affordability problem, and local advocates are working overtime to get more attainable homes built. But what does it actually take to accomplish that goal? The process of building new housing with affordable rents is often long and complex.
David VivioDavid Vivio.
"One of the bigger differences between an affordable housing project and market-rate projects is just the amount of time that it takes," says David Vivio, president of Bloomfield-based O'Brien Construction, a general contractor that has worked on Michigan affordable developments including the new Shepherd House development in Ferndale. "... Oftentimes we spend more time in that pre-development estimating phase ... than we do building a building."

So how does affordable housing get built? Does it stay affordable for the long term? And what is Michigan doing to get more affordable housing on the market in the midst of a broader housing crisis? We dug into these questions and more with several local experts.

Finding funding

Once a developer has identified a potential site for an affordable housing development, they must navigate the complex process of funding the project. Any affordable housing development will inherently generate less income from rent due to below-market-rate prices, so for most developers it's crucial to draw upon alternative funding methods to make such projects financially feasible. Developers assemble a complex "capital stack" of funding to cover the costs of the development, almost always including funds from government funding programs that support affordable housing. 
Steve KossShepherd House, a new affordable housing development catering to LGBTQ+ seniors in Ferndale.
Although there are numerous federal and state programs that fund affordable housing, the most commonly used such program is the federal Low Income Housing Tax Credit (LIHTC). The Michigan State Housing Development Authority (MSHDA) administers the LIHTC program in Michigan. The program allows developers to claim tax credits on affordable projects for 10 years. Developments funded by LIHTC must reserve at least 20% of their units for residents making 50% or less of the area median income (AMI), or at least 40% of their units for residents making 60% or less of the AMI. They must limit their rents to a certain percentage, usually 18%, of the AMI for 30 years. However, after 15 years they may seek "regulatory relief" to convert the property to market-rate units. Some developments, though, remain affordable for longer than 30 years, as owners may apply for additional LIHTC assistance at that point.

Joe Heaphy is the president of Ethos Development Partners, a Detroit-based affordable housing development consulting firm. He says the LIHTC program's name often misleads people to think that it funds housing for "very poor" people.

"If you look at somebody who works full-time at Kroger, who works full-time at Costco or Amazon, they're typically eligible for this housing," he says.
Chris LaurentChris Laurent.
Chris Laurent is the president of Cinnaire Solutions, a Lansing-based nonprofit community development financial organization that has worked on several Metro Detroit affordable housing projects, including the ongoing Casa Del Rey Apartments development in Pontiac. Laurent says "no other program is as effective" as LIHTC when it comes to creating new affordable housing. However, the program is also "heavily over-subscribed," according to Chad Benson, director of development in MSHDA's rental development division. Benson estimates that MSHDA receives three to four LIHTC applications for every one application the authority is able to fund. That's where a plethora of other government funding sources often come in to help fill funding gaps for affordable developments. Those include tax-exempt housing bonds, as well as grants from federal initiatives like the HOME Investment Partnerships Program, the Housing Trust Fund, or the Community Development Block Grants program.

Public-private partnership

Public-private partnership is key to affordable housing development, as an often complex web of entities come together to fund, plan, and build a project. Heaphy notes that the Reagan administration created the LIHTC program to incentivize private investment in affordable housing, which had previously been primarily publicly funded. Usually a private developer will accept tax credits from the public LIHTC program, then sell the credits to banks or other private entities known as syndicators so the developer can get those funds up front.
Joe HeaphyJoe Heaphy.
"When [syndicators] purchase those credits, they're providing equity into the project that ... essentially helps for the project not to have to stand on significant debt," Heaphy says. "If you don't have significant debt, you don't have to have as high of rents, because it's more equity than debt."

Other public players in affordable housing developments include MSHDA and the community in which an affordable development is to be built, which may provide funding or other incentives of its own. Other private players include general contractors, property managers, and private lenders. Benson says the public-private partnership model contributes to more, and higher-quality, affordable housing in the state.

"We have an industry of developers and management companies and builders who ... [are] experts in this area," Benson says. "And having professionals that are doing that, rather than the state doing it, ... makes a big difference in terms of it being successful."

Affordability for the future

Although the process of affordable housing development is well-established, it's also clearly not enough to meet demand in the face of a nationwide affordability crisis. In light of that, Benson says MSHDA is working to develop "new tools and resources" to meet the state's affordability needs. One example is recent changes to the state's Brownfield Redevelopment Financing Act, which incentivized remediation and development of properties that could be contaminated with hazardous substances. Developers could apply for tax increment financing (TIF) to cover some costs of those developments, meaning that the developer is reimbursed the amount by which the property's taxable value increases as a result of the development. In 2023, the program was expanded to make TIF available not just to developers of brownfield properties, but those developing housing for residents making 120% or less of the area median income.

Anne Jamieson-Urena, the vice chair of Oakland County's Brownfield Redevelopment Authority, says she's already seen "a tremendous amount" of new projects being proposed just in the short time since the change was made.

"People are only still making so much money, the rents kept going up, and so the state realized that there was a need to provide economic development incentives to allow for more housing stock to come back on the market," she says.

However, Jamieson-Urena emphasizes that TIF is "gap financing," meant to supplement LIHTC and other forms of funding. And while LIHTC remains the major financial driver of affordable housing, Heaphy says "there's only so much you can do with it." He says federal, state, and local governments all have to figure out how to further incentivize and fund affordable housing.

"Obviously, this is a pressing issue and the housing market is not likely to get better anytime soon," he says. "So there's going to have to be creative policy and funding solutions to meet the need. Otherwise, housing is going to become a luxury."
Steve KossShepherd House, a new affordable housing development catering to LGBTQ+ seniors in Ferndale.
Heaphy says those solutions could involve not just creating additional funding mechanisms for affordable housing, but changing zoning regulations that prohibit the type of multi-family developments that dominate new affordable housing construction. But that kind of change requires resident advocacy and buy-in. Laurent encourages Oakland County residents to "think systemically about who's in their neighborhood," noting that mixed-income communities hold a variety of benefits for all residents.

"Housing isn't isolated," he says. "It's part of the fabric of a community that keeps people together. ... So how can we work together to build the country that we all think about?"

Patrick Dunn is the managing editor of Concentrate and a freelance writer and editor. He lives in Ypsilanti.

Photos by Steve Koss.