Crain’s Detroit Business
July 16, 2017
South Oakland Shelter is taking on the scarcity of quality, affordable housing in Oakland County by getting into the housing development business for itself.
The number of low-income renters in Oakland County — which has the second highest median household income in the state — has increased since 2000. But safe, high-quality rental options have not kept pace with demand.
So SOS is developing its own.
Lathrup Village-based SOS has formed a nonprofit housing subsidiary and is teaming up with veteran developer Southwest Housing Solutions in Detroit to learn how it’s done.
The new subsidiary, Spero Housing Group, and Southwest Housing are finalizing a purchase agreement with the city of Oak Park to acquire four and a half acres for $130,000, contingent on a successful application to the Michigan State Housing Development Authority for low-income housing tax credits. The Oak Park City Council approved the deal in June.
The southern Oakland County site on the west side of Coolidge Highway north of Eight Mile Road has been vacant for more than a decade after a failed housing plan. The $13.25 million, affordable town home and ranch-style apartment development planned for the site will include green space and a community center.
The goal is to begin construction in summer of 2018 and to have it done in time to begin leasing late in 2019, said SOS President and CEO Ryan Hertz. Rents will range from $628-$1,444 for one to three bedrooms.
The project is the pair’s first aimed at bringing high-quality housing into Oakland County communities where SOS is already paying people’s rent for lower-quality apartments, Hertz said.
“We’re not shipping in low-income people. We’re taking people who are already neighbors and making them eligible to live in much higher-quality housing, which will then hopefully encourage the private landlords in the surrounding area to step up their game.”
Right now lower-income people are forced to choose between affordable and quality in Oakland County, he said. And many are one catastrophe — a medical emergency or car repair, for example — away from being homeless.
“A person shouldn’t have to be forced to live pay check to pay check because there’s not sufficient stock of high-quality and affordable options in our community,” Hertz said.
Plans for the “Coolidge Place” project come on the heels of another affordable housing development planned for Oak Park that was announced in late June.
The nonprofit Community Housing Network is serving as developer of the $16.9 million “Jefferson Oaks” project for UnitedHealthcare Community Plan of Michigan. The project will renovate a former school and build affordable town homes around it.
As that project has been developed over the past year, it’s gotten inquiries from 1,600 people for the 60 units of housing it will create, said Kim Marrone, economic development and communications director for Oak Park.
“There’s a huge need for affordable housing,” she said. “We feel there should be different types of housing provided.”
Affluence creates challenges
There are more lower-income renters looking for housing in Oakland County than there are safe, quality options they can afford, Hertz said.
In Oakland County the number of low-income renters increased by more than 50 percent between 2000 and 2014 to 30,989, according to a report issued by the Urban Institute in April.
During the same period, the number of adequate and affordable rental units in the county increased just 12 percent to 9,127, according to the study.
For affordable housing scarcity, one common measure is estimating the households spending more than 30 percent of their income on housing costs, said Erica Raleigh, director of Data Driven Detroit.
In Oakland County in 2015, 27 percent of households or about 135,000 homes met this threshold and were “housing cost burdened,” including both renters and owners, across all income levels.
At the same time, rental assistance rates for the county are calculated regionally. Housing rates in the less affluent Macomb and Wayne counties factor into the equation.
Current fair market housing rates for the three counties range from $701 for a one-bedroom to $1,300 for a four-bedroom. That means those getting rental assistance have to stay within those rent levels when looking for a place to live. In Oakland County, those are typically low-quality dwellings located in “pockets of poverty,” Hertz said.
Changing the way fair housing rates are calculated by narrowing the area where rent averages are assessed could be one way to improve the situation. Under that scenario, Oakland County rental assistance recipients could possibly get larger subsidies and get into higher quality housing. That’s something the U.S. Department of Housing and Urban Development is proposing at a national level.
But that’s a temporary fix to the shortage of quality, affordable housing, Hertz said.
It would enable SOS and others to provide rental assistance to some families for nicer housing, but they would still have to figure out how to make the rent after the assistance runs out.
And if the assistance being provided is for permanent supportive housing, it would reduce the number of people SOS and others can assist, because the rent for each would be more.
“If fair market rents go up, that doesn’t necessarily mean (our) contract for rental assistance goes up,” Hertz said.
Oakland County has the second-highest median household income in Michigan, according to American Community Survey one-year estimates, second only to Livingston County with $76,455.
In the U.S., Oakland County ranks 135th on median household income among counties with a population of 65,000 or more, said Erica Raleigh, director of Data Driven Detroit.
Median household income for Oakland County residents in 2015 was $69,998, according to ACS data. That was about 1.4 times the statewide median household income and 25 percent higher than the national household median income.
More cost-efficient than shelters
Moving into housing development is the next step to build communities that end homelessness, a revised mission SOS adopted in recent weeks, Hertz said.
SOS coordinated rotating shelter at faith-based sites in Oakland County from its founding in 1985 up until the recession.
Demand for its services increased as many found themselves homeless for the first time after the recession. But there weren’t enough rotating shelter beds available, as congregations facing their own issues consolidated and closed, Hertz said.
As another way to help get people off the streets, SOS began offering one to six months’ worth of rental assistance in 2009-10 when those dollars became readily available as part of the federal stimulus plan. And it began providing case management services for a year after to assist recipients with gaining financial stability. It added permanent supportive housing for the chronically homeless — people facing mental health issues or severe disabilities — around 2012. That segment of the homeless population accounts for about 20 percent of the roughly 600 people the shelter provides direct financial assistance to each year, COO Jenny Poma said.
SOS spends the bulk of its $3 million budget helping the chronically homeless. They are the least likely to be able to find their way out of homelessness, Hertz said, and the most expensive not to help.
“Studies show that it costs a community more money to leave a street population to its own devices than it does to pay their rent and provide them supportive services,” he said.
According to the National Alliance to End Homelessness, providing access to housing can save communities money because housed people are less likely to use emergency services such as hospitals, jails and emergency shelter than those who are homeless. It pointed to a 2007 study that found an average cost savings on emergency services of $31,545 per person, over the course of two years, and other figures that showed putting dollars behind rental assistance programs is more cost-efficient than shelter costs.
Spero, as lead developer, and Southwest plan to apply for $11.5 million in low-income housing tax credits in October to fund the bulk of the “Coolidge Place” development in Oak Park. Ethos Development Partners is providing Spero with technical assistance on the tax credits.
The developers are proposing local payment in lieu of taxes totaling 15 percent of annual rents or about $75,000 annually.
Fusco, Shaffer & Pappas Inc. is serving as architect on the project. Spero is also tapping O’Brien Construction Co. as general contractor, Dykema Gossett PLLC as legal counsel and KMG Prestige Inc. as property manager.
Spero plans to submit a site plan to the city within the next month, Hertz said.
The Oak Park project will be Southwest Housing’s first multi-family, affordable development outside of Detroit.
It’s developed 20 affordable housing developments in Detroit since it got into development 20 years ago and has a history of helping other nonprofits break into housing development. It’s collaborated on that front with nonprofits including Latin Americans for Social and Economic Development in Detroit and U-Snap Bac and the Northeast Guidance Center for developments in the Mack Alter community, Executive Director Timothy Thorland said.
Those nonprofits “could go to the private real estate market and hire any one of the folks we know to build … develop … and maybe own it,” he said.
But nonprofits aren’t operating at cross purposes when they collaborate, Thorland said, since they manage to a double-bottom line, and collaborating creates stability and capacity for the nonprofit sector as whole.
Teaming up with SOS made sense because it’s looking to bring more affordable housing into Oakland County, just as Southwest has done in Detroit, Thorland said.