MUSKEGON, MI – Muskegon is leveraging $5 million of COVID-19 relief funds to attract another $5 million for construction of new middle-class housing.
Officials believe they can recoup much of the city’s money, depending on the types of homeowner assistance they decide to provide, to continue reinvesting in the city.
“It’s an investment that will return to us,” Muskegon City Manager Frank Peterson told city commissioners last month.
The money is expected to result in the construction of 40 new homes on city-owned vacant lots and provide a boost to the city’s ambitious goal of adding 240 new housing units in the next couple of years.
The federal American Rescue Plan funds will be used to finance 50% of a builder’s construction costs as well as for down payment assistance for home buyers. Builders will be reimbursed their costs at the time the homes are sold, or 45 days after their completion if they remain unsold.
The homes will be built for the city, with half of them being sold to people earning 125% or less of the area median income. Peterson told MLive the homes will cost an average of $250,000 to construct.
“We don’t have housing available for people who are in that middle range, that have a job, that have two incomes,” Peterson said. “They had been choosing for decades to not live here.”
City officials are working to address the lack of housing for people who don’t meet low-income guidelines, and who are having a hard time finding suitable homes among the city’s aging housing stock.
“There are a lot of incomes that are earned here in the city, but they just migrate out to the suburbs when it comes to people that have a little bit of a higher income,” Peterson told commissioners.
“They’re choosing to invest their dollars in Norton Shores or Fruitport or Muskegon Township or North Muskegon in part because we didn’t have housing available that was what their expectation was.”
Related: $49M effort to bring 240 new middle-income homes to Muskegon
Mayor Steve Gawron called the city’s newest housing initiative a “community rebuilding program.”
“It’s more than building houses,” he said. “It’s bringing folks back in to become that vital fabric of what makes it worth living here: good neighbors.
“We sat too long through the years with empty lots that have done nothing but collect garbage and other problems,” he said. “Now we can have kids playing on front lawns once again.”
The city expects to receive $24 million in federal American Rescue Plan funds, which must be spent by the end of 2024.
Under the new infill housing program, city-owned lots will be sold for $1 to builders, who will be required to begin construction within two months, and complete it in five months, of signing an agreement with the city. The city will waive water and sewer connection fees.
The city will reimburse builders if sales revenues are less than the cost of construction. In addition, the city will share 40/60 with builders any sales revenues that are more than the construction cost. Home prices are not to be listed at more than 120% of construction cost.
Proceeds of sales will be put back into the ARP housing fund. Because many of the homes will be built in Muskegon’s urban core Brownfield Redevelopment area, the city would be able to use increases in property taxes to recoup expenses associated with preparing the lots and down payment assistance.
Related: Muskegon’s housing ‘catalyst project,’ Terrace Point Landing, is nearly complete
The city is requiring certain elements be included in the homes, including handicap accessibility; heating, air conditioning, water heaters, windows and insulation with high energy efficiency; a garage; and concrete driveway. In addition, developers will have the option to landscape with native plants and landscape materials rather than turfgrass.
Commissioner Ken Johnson said the initiative will “reap dividends for many years” in various ways, including infusing new property taxes, and possibly income taxes, into the city to support infrastructure and programming costs.
“This is a great investment of our one-time dollars that we’re getting in very unusual circumstances,” Johnson said.
Peterson noted that the state has committed $100 million of its American Rescue Plan funding to low-income housing throughout the state. In addition, new low-income apartments are under construction in the city.
Related: Construction starts on senior affordable housing complex in downtown Muskegon
The 75-unit TEN21 Apartments for low- and moderate-income renters is nearing completion at 1021 Jefferson St. Last month, construction started on a 53-unit apartment complex at the corner of Spring Street and Webster Avenue in downtown for low-income people age 55 and older.
The $5 million cash infusion will help with the city’s plans to add 240 houses on scattered lots by the end of 2023.
Peterson told MLive that the city has had trouble finding builders with access to sufficient capital to take on multiple housing projects. That’s where the $5 million should help, he said.
The city already has an agreement with Dave Dusendang’s West Urban Properties to construct 100 homes, all of which will be rentals or rent-to-own units and 40% of which will be targeted for moderate wage earners. He’s working on his 27th home, Peterson told MLive.
Rudy Briggs, a Muskegon builder, has an agreement to build five homes.
The city received four responses to its request for builders to participate in its new infill housing program, Peterson said. They currently are choosing lots to build on and refining home designs, he said.
New housing has been a focus of the city for several years, and downtown is and has been a hub of construction for new residential units.
Related: Major residential and commercial building in downtown Muskegon expected to be finished in January
Five years ago, the city completed the nine-home Midtown Square development near downtown and recently completed an additional 16 homes in the neighborhood’s second phase that includes townhomes.
Dusendang recently constructed 13 new rental homes on Webster Avenue between Eighth and Ninth streets aimed at middle-income families as well as 14 Western Place condominiums in the heart of downtown.
The city has an agreement with Allan Edwin homes to build 25 houses on Yuba Street at the site of the former Farmers Market. Another eight duplexes with 16 units are being built on Hackley Avenue near Dowd Street.
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