Developers assess task of closing West Michigan housing gap Some say the challenges of delivering a project hamper the ability to meet growing demand

RACHEL WATSON

GRAND RAPIDS — As West Michigan tackles an ambitious plan to make itself the leading tech hub in the Midwest, developers question whether they can build enough housing in the booming region to accommodate a potential in ux of workers.

e population of greater Grand Rapids grew by 9.2 percent from 2010 to 2020 and is expected to grow by another 18,000 residents (2.7 percent more than in 2020) by 2027, according to an updated housing assessment released in February.

at population growth is good news for the region’s economy — especially when population growth in Michigan is nearly at and many state counties lost residents.

Yet, some question whether builders can keep up with demand.

e task force behind the new tech strategy aims to grow West Michigan’s technology workforce by 20,000 workers over the next decade. ey want 10 percent of that total to be new residents.

It’s hard to say how many of those tech sector employees would physically move here with remote work still popular. But groups like talent marketing organization Hello West Michigan are promoting the region’s quality of life and cost of living to former residents and laid-o tech workers from the East and West coasts.

Randy elen, president and CEO of e Right Place, spearheaded the plan. elen said many factors, not just the population boom, contribute to the housing crisis.

e wrong solution, he said, is being less ambitious about job growth. Rather, regions with declining and stable populations rarely draw new housing investments.

“Fundamentally, the way to solve the housing problem is to build more housing,” he said, adding that groups like Housing Next are convening stakeholders across the spectrum to work on the issue.

The drive to build

Ryan Talbot, owner of Birmingham-based Talbot Development, said regional growth spurred him to invest in a 72-unit apartment project in Grand Rapids that’s breaking ground this spring.

“It’s a great market. e people seem friendly. e restaurants are great. You can walk a lot of places. I’m totally not surprised there’s net migration coming in, and I love the plans that are in the future for the city,” he said.

“I think bringing in a lot of tech talent makes a ton of sense, and I’m very optimistic for the future of Grand Rapids.”

At the same time, Talbot is skeptical that developers can increase the housing stock quickly enough with all of the headwinds in play.

“ e arc of delivering a project can be two to three years very easily. And you’re talking about 10,000 units in the pipeline right now with a need of about 30,000 — so, tripling the pipeline? It’s a really Herculean task to try to build that many units that quickly,” he said.

He said West Michigan needs more than interested developers.

“You need the (general contractor) infrastructure. You need the bandwidth at the city to process that many permit applications. ere are lots of constraints along the way that you might hit when you try to triple (production).”

Economic imbalance

One obstacle to luring more builders and a supportive infrastructure is interest rates.

“Over time, a market supply ultimately nds an equilibrium with demand,” Talbot said. “But I don’t think we’re going to see that equilibrium for quite a while.”

Je Olsen, a partner in Grand Rapids-based Olsen Loeks Development, agreed there’s an economic imbalance keeping the community from closing the housing gap. Olsen Loeks is building a $62-million, 16-story tower downtown with nearly 200 apartments and condos.

He said another issue is with the continued shortage of construction workers.

“While the supply chain seems to be coming back in line, and we have some feedback that in ation is starting to come into check, the one prob- lem that isn’t showing signs of improvement is access to skilled labor,” he said.

“ at becomes the key problem for developers to solve. Once we get past supply chain and interest-rate hurdles, we still need to have access to a skilled labor force that can deliver the product.” e residential tower, called Studio Park, was planned well before the pandemic hit and the housing gap worsened, Olsen said. His rm is also investigating multiple other urban and suburban sites where it could build more multifamily housing.

Not working in a vacuum

Local government o cials are making a concerted push to lessen the housing problems. For example, Grand Rapids supported 762 new housing units in 2022, up from 137 in 2021. But more will be needed as costs continue to rise.

“ e housing shortage is unlike anything we’ve seen in recent history, and it’s going to take intentional e ort from the development community, local government, city (and) state o cials to help create the balanced economic platform to allow meaningful progress to be made in this area,” Olsen said. ey are inspired by various assessments, such as RentCafe’s periodic look at the hottest rental markets in the country. Its most recent report put Grand Rapids in fourth place and helped build interest from out-of-market investors who can help nance projects. Combined with traditional lending sources and government incentives, this makes projects more doable, Olsen said.

Grand Rapids-based Victory Development is building the 120-unit Victory on Leonard apartment complex in Grand Rapids and is planning projects for 280 Ann St. NW and Celebration Village, said Brian Hamrick. He and his partners plan to add 1,000 units in the Grand Rapids area within the next few years. With what’s in their pipeline, they’re about halfway there.

However, there’s still the question of how to physically get the projects built.

“With Victory Development Group, we just run our numbers under the current situation and see if we can get it to work,” Hamrick said. “(But) it gets tricky because of that labor shortage and supply shortage and material costs.”

Two of Hamrick’s Victory Devel-

Victory Development Group partner Brian Hamrick is one of the partners behind the planned 250-unit Celebration Apartments project on Grand Rapids’ northeast edge. | LOTT3METZ ARCHITECTURE

Housing Next’s September 2022 assessment of Kent County housing: opment partners co-own Honor Construction, which has “a deep bench” of reliable vendors and subcontractors to get projects across the nish line, he said.

 813: The approximate number of housing units available for purchase. That’s only a one-month supply.

 2.1 percent: The vacancy rate in the county that has 764 vacant rentals.

 4 percent to 6 percent: The vacancy rate considered healthy in a balanced market.

 There are 10,237 units in progress at last count. That includes about 32 multifamily rental communities, eight senior living properties and 44 for-sale housing projects currently in the Kent County development pipeline.

 The number of units in the works is considerably shy of the 35,000 new units experts project the county will need by 2027. To meet that need, developers must more than triple production over the next few years.

Talbot, the Birmingham developer working on Hillcrest Apartments across town, said his approach is to nd a local general contractor with good relationships with subcontractors “and the ability to get people to show up.” He’s currently working with Pinnacle Construction on the Hillcrest project.

Still, Hamrick knows developers who are putting projects on pause while they wait for interest rates and labor costs to come down.

As the supply gap widens, stakeholders say it will be crucial for everyone in the region to step up.

“And it’s important for everybody to do their part to continue to attract… workers to do the work and people to come in for entertainment and travel and tourism,” Hamrick said. “If we can continue to work collaboratively with all these groups, we’ll continue to see growth and success in the greater West Michigan region.”

Contact: rachel.watson@crain.com

(989) 533-9685; @RachelWatson86