Making a better future for the next generation in Michigan.

How Michigan Solved Its Housing Shortage

Mar 8, 2023 | Elections, Government, Housing, Michigan, Rights, Small Business | 1 comment

A note from the year 2042….

The prospects for affordable housing in Michigan? We can understand why you were concerned. In the 2020s where you live, the signs of a growing housing shortage were all around in Michigan. Homeless shelters were filling up. Apartment dwellers were troubled by double digit increases in rent. Home values were out of reach for many first time home buyers. Many families accepted hour-long daily commutes to find affordable property.

The old pattern of young people moving from their parents’ homes to apartments, to low cost starter homes, and then to larger family homes was broken. Home builders stopped producing the 1,400 square foot starter homes that were so common before 2000. Even as the size of families was shrinking, typical new houses were growing in size and adding features like marble countertops that boosted their price. The top end of the market was the only place home builders could make a profit.

These trends were not unique to Michigan. We checked the records — when the National Association of Home Builders issued its annual report on housing affordability in 2023, they found that only 40.5% of families could afford to buy the average priced house in the U.S. It was the lowest percentage they had reported since they started keeping score. The numbers of vacant apartments for rent and houses for sale had been drying up everywhere for the previous 15 years.

We are happy to tell you that Michigan was able to turn the housing market around. By the mid-2030s we were producing more than enough safe housing in every price range. Many other states followed Michigan’s example and the nation is better housed than ever. It’s an interesting story.

The puzzle of the housing shortage

The turning point in Michigan came in the mid-2020s when Willa Jackson, a retired economics professor from Kalamazoo, got worried about her grandkids doubling up in apartments and doubting they could ever become homeowners. Several had put off getting married and having children because they couldn’t afford to rent or buy a family-sized house. She wondered what had gone wrong.

In her career of teaching economics, Willa had always believed in the power of markets to fulfill demand. The supermarkets would always have enough food, she thought. The car dealers would have more than enough automobiles in every price range. Online retailers could ship almost anything overnight. She woke up at 2:14 AM one winter’s night in 2024 and never got back to sleep wondering why the market system was not working for housing.

The next morning, after about three cups of coffee, she decided to make the Michigan housing market her study, her passion, and her retirement project, “for the sake of my grandkids.” Coming from an academic background, she started at her university library by reading every study of the housing market she could find. After she formed some ideas about what was wrong, she made up a list of questions and started calling home builders and developers in every part of the state. About half were eager to talk and vent their frustrations.

The top items mentioned were a lack of skilled labor, zoning restrictions and red tape, rising interest rates, and the high prices and shortages of building materials. After three months of study and publishing an article about her findings, she didn’t know what to do next. None of what she discovered was really new.

The circle grows

Willa felt stuck. She was proud of her academic research and writing skills, but that didn’t get any new houses built. Not knowing what to do next, she reached out to her old friend George VanDyke, a political science professor who wrote an occasional column about Michigan politics for the Detroit News. He was intrigued by her work and invited her to a have a conversation about it at his East Lansing home.

That conversation on George’s porch over glasses of lemonade was the first of many during the summer of 2024. They decided to ignore the high cost and shortage of materials because it was the type of problem that the market would solve by itself. Likewise, the FED would probably back off its high interest rates as the wave of inflation subsided. That left the shortage of skilled labor and the burdensome regulation as the key barriers that were keeping the market from working.

George and Willa discussed current efforts to boost home building like the Federal Government’s Low-Income Housing Tax Credit, Michigan’s Neighborhood Enterprise Zones, zoning reforms in individual cities, and Michigan’s efforts to attract kids to the building trades. They agreed none of these were addressing the core barriers that kept the housing market from working.

George and Willa felt stuck. George suggested that they bring Bob Nelson into their conversations. Bob was a third generation home builder from the nearby city of Howell. He was happy to join their conversations because he had been feeling guilty about not building the kind of houses young kids could afford.

At their first meeting, Bob listened attentively to what George and Willa had discovered and thought. He was silent for a minute or two and then said, “My grandfather used to build housing for everyone – bare bones houses on an eighth of an acre, ten unit apartment buildings, big houses for the business owners and professionals in Howell. If he could do that and I can’t make money doing it, we must have lost something along the way. I think the difference is we used to have the freedom to build housing the way we wanted where we wanted and we used to have a lot of craftsmen who would step up to do the building. If we had the freedom to build and the skilled people to do it, we could whip this thing.”

Freedom to build and skilled people to do it

That sounded too simple, but George and Willa couldn’t argue with it. The freedom to build and skilled people to do it became their mantra. It took five years and the involvement of many more people, but two big things happened that turned around the Michigan housing market.

The first was a public-private partnership to bring in as many skilled laborers as possible. Bob convinced the Michigan Home Builders Association to work with the Michigan Department of Labor on an earn-and-learn skilled trades apprenticeship program. Their lobbyist worked with legislators to secure the funding that could put it “on steroids.” Within two years, the program was up and running and pulling in kids starting their careers, retail workers switching careers, immigrants sponsored by home builders, and even the formerly incarcerated looking for a second chance.

Freedom to build took longer. George talked to many of his contacts in government and no one wanted to touch it. Legislators knew that fussing with local zoning and building regulations would be about as much fun as kicking over a beehive. The candidates for governor considered the issue a loser, too.

George had an idea. He made the rounds of the Home Builders Association, housing advocacy organizations, libertarian think tanks, and pro-family nonprofits. If there should be a right to build appropriate housing, why not put it in the Michigan constitution with the other rights of Michiganders? If they could get the right proposal and a strong coalition together, they could circumvent the legislature and get a constitutional amendment on the ballot through voter petitions.

The idea took off. A “Housing Freedom” coalition formed that included housing-poor Millennials, housing advocacy organizations, home builders, libertarians, and many religious denominations. They drafted an affordable housing rights proposal that read,

The people have a right to safe and affordable housing. Neither the State of Michigan, nor any subdivision thereof, shall enact a law that increases the cost of housing, unless to protect the health and safety of the people.

The amendment would leave in place building codes that protected people’s health and safety, but all other regulations for zoning, minimum lot sizes, setback, prohibitions of auxiliary housing units, and so on would be voided.

A people’s campaign for the freedom to build

It was a wild political campaign pitting a good share of fearful homeowners and realtors against the new coalition. Misinformation and predictions of a collapse in housing values were rampant. In the end, enough signatures were collected on petitions to get it on the ballot in 2028, it passed 52% to 48%, and a new right was added to the Michigan Constitution.

It took five years of litigation to work out exactly what the amendment meant. In the end, most restrictions on building fell. The housing market started functioning as it should. That started a boom in new housing construction. Home builders and developers from other states started moving to Michigan or expanding there. They found a strong workforce ready for the challenge. Housing values did not collapse.

The change in Michigan sparked efforts in the 26 states that allow citizen ballot initiatives. Within five years half of them had added affordable housing rights amendments to their constitutions. After initial hesitation, Michigan officeholders started to take credit for the new right enshrined in their constitution.

The aftermath

Bob Nelson returned to his grandfather’s business model of building homes for every part of the market. George VanDyke wrote a book called Michigan Citizens’ Fight for Housing Freedom and went on a national speaking tour. Willa Jackson decided she had had enough excitement for a 78-year old. She stayed off social media and refused all interviews. She was pleased, though, when her granddaughter started a “Thank Willa” campaign. It is said that she treasured the dozens of thank-you cards that came in the mail each month with pictures of families in their new houses.

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1 Comment

  1. J Heafield

    One thing that’s always bugged me about new housing developments is that municipalities always require a set-aside of some percentage, maybe 20%, of the project to be “affordable housing.”  Absent such requirements, would builders build unaffordable houses?  They do expect someone will buy what they build. Of course municipalities define “affordable housing” as dwellings that lower-income people can afford. I agree with you that builders should be able to build housing that THEY judge will sell.  Adding more housing of any kind, even luxury houses, will have the effect of reducing market shortages and prices.  My favorite example is San Francisco, a city full of 1,000 sq ft single-family and duplex houses.  There’s not enough housing in SF, so wealthy people are paying over $1 million for these houses.  If attractive luxury high rises were added to the market, maybe blue collar workers and young people could afford one of those 1,000 sq ft houses. If SF builds “affordable housing,” how would it differ from the existing housing stock?  It seems the only difference is that housing designated as “affordable” has income limits.  The housing itself is probably just as nice as the million dollar homes. Surely, the “affordable housing” rules are discouraging many builders from building as many houses as they would like, giving the perverse result that fewer houses are built, and the affordability crisis only gets worse.

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