MUSKEGON, MI – Faced with hundreds of vacant lots and a dearth of affordable housing, Muskegon is embarking on an ambitious $49.5 million plan to build 240 homes in the next three years.
It’s an effort that officials say can be replicated in other aging industrial towns with the help of “Brownfield” redevelopment funds meant to help cities address past industrial contamination.
The vacant lots all are in Muskegon’s urban core Brownfield Redevelopment area, meaning the city can recoup many of the expenses associated with preparing the lots and even help subsidize rents and purchase costs.
Most of the lots once had aging homes on them that were rundown and torn down as part of the city’s blight abatement efforts. Some of the empty lots have since become dumping grounds for trash and old tires.
The hope is that the new homes will renew the once-thriving neighborhoods by increasing property values that could help neighbors invest in their own homes, city leaders believe. Most of the new homes will be on lots scattered throughout the city’s Nelson and Jackson Hill neighborhoods.
“It’s about as ambitious as you can ask for,” said Muskegon City Manager Frank Peterson. “It’s all about creating a better atmosphere in the neighborhoods.”
Pent-up demand
The infill housing project also should eventually infuse the city, schools and other taxing authorities, with new property tax revenue since the lots, almost all of them owned by the city, have no taxable value.
At least 100 of the homes will be targeted as affordable rental housing – something the city particularly needs -- and are expected to be completed within two years. Those homes, to be built by Dave Dusendang’s West Urban Properties, will be single and multi-family units, with the former available for purchase as well, Dusendang told MLive.
Related: Muskegon exploring public-private partnership to build 100 new rentals
Officials have found a pent-up demand for decent rental housing, with developers of properties meant to be sold getting flooded with inquiries from renters who can’t buy due to a lack of credit or down payment, Muskegon Planning Director Mike Franzak told the city’s Brownfield Development Authority recently.
“Folks just want a decent place to rent in Muskegon,” he said.
The Brownfield Redevelopment Program allows the city to “capture” increases in most property taxes resulting from the improvements as reimbursement for certain expenses. The city, which is the developer of all the homes, is expected to get nearly $6 million in reimbursable expenses, Franzak said.
Those reimbursements, along with proceeds from home sales, will be used to help the city pay for infrastructure, including roads, water and sewer, needed to prepare some of the lots, particularly the former farmers market site at Eastern Avenue and Yuba Street, and the former Froebel School property on Jackson Avenue. Plans are for an estimated 40 housing units at each of those sites.
The Spanish-style Froebel School, built in 1930 and closed in 2003, likely will be torn down – at a cost of $1.2 million. Franzak said the city has considered trying to repurpose the school, but developers aren’t convinced it’s worth it.
Another 10 estimated homes are planned for a lot at Ninth Street and Webster Avenue close to the city’s downtown and within walking distance to the Heritage Landing park and festival grounds on Muskegon Lake.
Many of the homes will be scattered throughout the two neighborhoods, some two to a lot, in an effort to fill holes while avoiding “gentrification.” They will include single-family homes, duplexes, four-plexes and townhomes.
Another 10 existing homes will be rehabilitated.
Taking a gamble
Alan Nash has lived on West Grand Avenue for the last 13 years; his wife has lived there practically her entire life.
From his front yard, Nash can count six vacant lots. Some of them are targeted for the city’s infill homes while others are privately owned. Across an alley that runs alongside his home is an empty lot where two tires recently were dumped along with myriad trash.
Nash is cautiously optimistic that the city’s efforts will pay off in an area he said goes through periods of improvement and decay.
“It’s a vicious cycle,” Nash said. “The city will come through and clean (empty lots) up and people will trash them again.”
When asked if he thinks infill housing will help, Nash responded “I couldn’t tell ya.”
Dusendang said he’s convinced that the new homes he builds will influence neighbors to improve their properties, including landlords who will be competing for tenants. Dusendang said he hopes to offer mentoring and guidance to those interested in improving their properties.
He sees a real need for new middle-class housing in the city, which his 100 homes will help fill. Many available properties are old and rundown, he said. As a result, middle-income families are taking their money and moving to the suburbs, he said.
Dusendang is getting the ball rolling, with plans to initially build 25 homes, and will continue in 25-home increments as long as the market is responding, he said.
Community enCompass, a community resource and housing agency, will build housing on five of the lots -- most likely a mixture of single-family homes and duplexes, said agency Executive Director Sarah Rinsema-Sybenga.
While the construction of luxury condos, townhomes and apartments in downtown Muskegon is exciting, the community risks leaving out those with lower incomes, said Rinsema-Sybenga, who is married to Muskegon City Commissioner Dan Rinsema-Sybenga.
“Gentrification can happen so quickly,” she said. “People who have been part of maintaining the vitality of neighborhoods for decades get priced out. This lets everybody be beneficiaries of the cool new stuff that’s happening.”
She agreed that the current housing stock is old and tired, and that bringing in new updated units will “force” other landlords to improve their properties.
Rudy Briggs, owner of LRS Enterprises construction in Muskegon Township, has expressed interest in building 32 of the new homes.
“We’re building something that people need and want,” Briggs said.
It takes a “creative and “innovative” process to meet the demand for mid-level homes, he said. Those who are ready to move out of lower-income housing currently are finding themselves without options for new and upgraded housing in the city, he said.
“Right now, we have a deficit in housing in Muskegon,” Briggs told MLive. “We’re helping people get to where they want to get in their life.”
For Dusendang, the effort takes money. He said he’s investing $15 million into the new homes he’s building, 95 percent of which will go to local suppliers and subcontractors.
“It’s such a gamble to do what I’m doing,” he said.
Nobody else will do it
City figures show most housing units will cost $200,000 to construct, and will be eligible for 10 percent reimbursement under the Brownfield tax capture.
That Brownfield benefit helps make the homes more affordable, since the difference between sales price and construction cost is among the reimbursable costs. Rents and sale prices will be based on affordability for those earning 80 percent to 120 percent of average median income, city documents show.
According to a letter of intent between Dusendang’s West Urban Properties and the city, the homes are expected to increase real estate taxes on each vacant lot by an estimated $4,650.
The infill housing project expands upon the Midtown Square project that initially saw nine homes built in a block within walking distance of downtown. That project is now expanded, with West Urban Properties finishing construction on 16 additional homes, and has had positive repercussions with more home sales in the neighborhood at higher prices, Peterson, the city manager, told MLive.
It’s that spinoff that the city has in mind as it contemplates selling homes for less than they cost to build.
“We might win more by building a house for a dollar and selling it for 75 cents,” Peterson said.
Besides, it’s unlikely that any developer other than the city is willing to take on such a risk, he said.
“It’s got to take an amazing amount of risk to revitalize these neighborhoods,” he said.
There’s also a price for doing nothing. The city can “easily” spend $100,000 per summer mowing vacant lots, according to Peterson, and it must carry insurance on them while losing out on property taxes.
Muskegon’s effort could be replicated in other older cities with a history of industrialization that caused widespread pollution – making them eligible for Brownfield credits, Peterson said.
“We’ve opened a lot of eyes across the state,” he said. “A lot of cities think they just have to manage the decline.”
But, Peterson said, cities like his need to accept that “if we don’t do it, nobody will do it.”
The first, and easier step, is tearing aging housing down. It’s rebuilding that’s the hardest part.
“You can’t expect houses to last forever,” Peterson said. “At some point you have to start replacing them.”
Also on MLive:
City loan to help launch 2nd phase of downtown Muskegon apartments
Solar panels to save West Michigan city $354K in energy costs
Parking added along Terrace Street in downtown Muskegon
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