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Investing
in Affordable Housing in Michigan
May 2001
Prepared for
Community Economic Development Association
of Michigan
Executive Summary
Even in the aftermath of the longest economic
growth period in American history, the need for affordable
housing remains acute. In a contracting economy, Michigan
is faced with difficult choices in allocating scarce resources.
This paper analyzes whether Michigan should invest public
resources in affordable housing. Public Sector Consultants
(PSC) reviews Michigan's affordable housing situation; examines
housing trust fund and tax credit options; identifies current
state programs for low-income residents; summarizes job, wage,
and tax data on low- and middle-income housing construction;
and assesses the economic and noneconomic benefits of low-income
housing.
The U.S. Department of Housing and Urban
Development (HUD) defines affordable housing as housing which
costs no more than 30 percent of household income. New construction
and adequate existing housing are not affordable for many
middle-income and most low-income families. It is difficult
for low- and middle-income families to find decent, quality,
affordable housing. The Michigan State Housing Development
Authority (MSHDA) estimates that almost 750,000 residents
have housing affordability problems. These households include
many city, suburban, and rural Michigan residents.
Despite Michigan's high marks in many
areas of public policy, when it comes to spending on housing,
Governing magazine's 2001 Source Book on state and local
governments ranks Michigan 48th and 49th among the states
on per capita spending and spending as a percentage of personal
income (Governing 2001, 93).
Housing trust funds and housing tax credits
are the primary options employed to address affordable housing
in the United States. Currently, 37 states are investing in
housing trust funds; 34 cities have created housing trust
funds (only Ann Arbor in Michigan); and 39 counties (none
in Michigan) have housing trust funds to help low-income families.
The federal Low-Income Housing Tax Credit is used in all states
to provide affordable housing (Brooks 1997).
MSHDA and the Family Independence Agency
(FIA) operate the majority of Michigan's housing programs.
These programs contribute to the economy by creating jobs
and increasing the tax base. In addition, affordable housing
programs help to stabilize families, leading to improved school
attendance, increased academic performance, better health
for children, and less domestic violence.
PSC concludes that the economic impact of affordable
housing can be shown in the following four areas:
- By leveraging additional funds, most housing
trust funds generate at least five dollars of public and
private money for every dollar from the trust fund
- On average, 36 jobs are created per $1
million of new residential construction
- Increased permanent, quality, affordable
housing can save millions of dollars in reduced emergency
care for the homeless
- Increased wages, sales, and property tax
values would raise tax revenues in cities and the State
of Michigan
While the current political climate is
not conducive to new funding measures, further review of funding
options for an affordable housing trust fund is warranted.
These include the use of the Single Business Tax, Budget Stabilization
Fund, or a .03 cent cigarette tax increase. All of these options
could generate about $25 million for at least several years.
Now is the time to lay the groundwork for an affordable housing
plan in Michigan, in order to be prepared when the economy
improves and a new administration takes office in 2002–03.
Download the full
report (Adobe® Acrobat
format)
(27 pages, about 80 KB)
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