First off, happy Thanksgiving!
In my last column, I discussed growing economic disparity right here in Ann Arbor. I mentioned that we’re the eighth most economically segregated city in the nation. I mentioned that the incomes of the top 10 percent of our residents are growing, and growing fast, while the exact opposite is true of our bottom 10 percent. And I mentioned that a couple working two full-time jobs at minimum wage can’t afford to live here, nor can a public school teacher. What I didn’t mention was a solution.
So what can we do?
Well most immediately, we can try to lower our housing costs. For all the ways Ann Arbor is unique, there’s one specific way that’s very relevant to this particular conversation. And that is that we’re a hot real estate market. So hot, in fact, that back in July, Ann Arbor was ranked the ninth hottest market in the United States — a ranking that matches us with some of the largest cities in the country. To put that ranking in perspective, in Ann Arbor, the average house will only spend 61 days on the market before sale. In Manhattan, that number is 73 days. We’re moving faster than a real estate market that doesn’t sleep. And that means Big Apple prices in a small Midwestern city.
Now, as students, we probably have a good five to 10 years before we start to use the word “buy.” For now, most of us are renters. But we exist in that same world — demand for housing is demand for housing. A Harvard study shows that, after the last recession, homeownership is steadily falling while rental demand is surging nationally. In Ann Arbor, homes are being bought up at higher prices and middle-class residents are being pushed into the rental market. That means students and professionals are competing for the same type of apartments. That also means the average one-bedroom unit will cost $1,244 per month, almost double the monthly rate of East Lansing.
It’s clear people want to live here. But are we really giving them or ourselves a chance?
The short answer is no, or not yet. This huge demand for housing doesn’t have the supply to match it. Common sense, Economics 101 and that same Harvard study all say that if supply increases to match demand, price will lower. Here in Ann Arbor, we can’t legally grow our city limits outward. We’re about 29 square miles, and that number won’t ever change much. That means we need to invest in denser housing — townhouses over McMansions and some high-rises downtown. That said, I believe all things should be done in moderation — saturation is good, oversaturation is bad. After all, it was a real estate bubble that caused our last financial crisis. But at the end of the day, we work in a market and so we have to work with the market.
Now, the laws of supply and demand have been around for more than 300 years. But Ann Arbor is a hub of technological and social innovation. Our response to a crisis in affordability should be innovative, too.
So a question: What do a young tech entrepreneur, public school teacher, artist and retiree all have in common?
The answer is they all have pretty similar incomes. Right now, Ann Arbor’s housing market works great for the wealthy. And the Ann Arbor Housing Commission provides public housing for our neighbors most in need. But there’s a missing middle to the housing market — a middle that would satisfy the needs of young tech entrepreneurs, public school teachers, artists and retirees alike.
Luckily, we have some options. The most straightforward is to sell or lease public land — parking lots or old facilities — to private developers at below market rate. This lowers the cost of construction to such a degree that the new landlords can, in turn, rent the new units at below market rate. Potential partners are already itching to get going. These public-private partnerships spread responsibility for the community across government and business while hedging both sides’ investments.
Want to spread the responsibility further? We can put the power right in the hands of the residents themselves. Neighborhood cooperatives have the power to regulate sale price, ensuring prices only increase at a set rate. In fact, we already have thriving townhouse cooperatives here in Ann Arbor.
These issues are by no means isolated to Ann Arbor. These are issues facing every cool and desirable city across the United States. But the solutions will never come naturally. They will come as a result of dedication and commitment. And they will succeed as a result of thoughtful design.
It’s an uphill battle and it will take time. But it’s the change we need. Because you should graduate and feel like you can afford to stay here. You should live a full life and feel like you can afford to retire here. And for all those years in between, you and all your neighbors should live comfortably, free from the undue burden of high rents and high mortgages created by an overburdened housing market.
Zachary Ackerman is an LSA senior and Ann Arbor City Council member representing Ward 3. He can be reached at zdack@umich.edu.