Local in Ann Arbor

In our previous post, Disruption in Ann Arbor: It’s a Promise (1), we discussed the oncoming primary election in which Mayor Taylor has put forth a Slate with a unified message. In particular, he has been promising some major changes in Ann Arbor for months, using the signal word “Disruption“. We concluded:

The message is very clear. No more business as usual. A different community. And most of all, more density. Whether we like it or not. As Taylor has experienced more and more barriers to his direction-setting for the City of Ann Arbor, he has grown more and more shrill. And the key factor appears to be density. Why is that?

Density and Development

There is quite a history of the effort to develop Ann Arbor more intensely. Tall buildings downtown were an issue for a long time. Here is a nice history of Tower Plaza. For a long time it was the tallest thing downtown. Several historic districts were formed just to keep this sort of thing from happening again (one reason our Main Street is so attractive). But starting in 2003 with the Downtown Residential Task Force (sponsored by the Downtown Development Authority, which had just been granted a 30-year charter), there was a push to bring dense high-rises downtown.  This entailed changing the zoning code. The Ann Arbor Discovering Downtown (A2D2) process, beginning in 2006, accomplished that. But first there was a major push to educate and inform Ann Arbor citizens about all the ins and outs of intense development downtown. A well-known consultant, Peter Calthorpe, presided over a mapping exercise where we residents sat at tables and put little stickers where we thought more density could work. The discussion is described here, in an article from the Ann Arbor Observer (2005) Our Town vs. Big City . The Calthorpe report was, in fact, not much followed in future planning.  It makes for interesting reading to see what might have been. Now our downtown is scarcely recognizable from what it was only a little less than 20 years ago. Ryan Stanton of the Ann Arbor News has been doing a good series to describe these changes, including this article.

ADDENDUM: Evidently Tower Plaza is still the tallest building downtown. I haven’t actually made a census of the rash of high-rises. But I was probably thinking of the planned 19-story high-rise that was approved last December. But now that project (to be constructed on Washington, behind the Michigan Theater) is on pause because of the effect of the COVID-19 pandemic. We’ll see if Mr. Frehsee’s optimism is warranted.

The Library Lot

Downtown was the location of a recent battle between the densifiers (development advocates) and residents. The Library Lot (LL) has been a key focus of the competition for the future of Ann Arbor and its use by its own citizens for years. We reviewed that in Core Spaces and The Soul of Ann Arbor. Taylor’s Council supermajority voted on April 17, 2017 to sell the development rights for the LL to a developer, Core Spaces, to build a 17-story building. It was important that Taylor had the 8-vote majority because it takes 8 votes to approve certain types of City action, including the sale of City property. But note: this was not the final sale. There were still numerous steps to go through, including a site plan approval and a final sale contract. In August 2017, Anne Bannister was elected to fill Sabra Briere’s former Ward 1 seat. (Jason Frenzel was appointed by Taylor to fill it when Briere left, and he was that vital 8th vote.) So upon her seating in November 2017, a new Council was sworn in and Taylor no longer had his supermajority. On May 31, 2018, Taylor and City Administrator Lazarus signed the Agreement of Sale with CBRE, the developer for Core Spaces’ building. But Taylor failed to bring this contract to City Council, and instead signed it on their behalf. On June 18, 2018, two Council members, Sumi Kailaspathy and Anne Bannister, filed suit against the City, the Mayor, and the City Administrator (the Clerk was also named, as she was required to sign the document) on the basis that this was an illegal contravention of the City Charter requiring the Council to vote on all such sales of city property. Kailaspathy was on the previous Council (and did not vote for the initial resolution) and Bannister represented the new Council, sworn in as of November the previous year. (This lawsuit is the reason that some campaign materials accuse Bannister of having sued the City.) The lawsuit was finally settled with a Council vote on January 22, 2019. The settlement prohibits the City from selling the development rights to the LL.

After an effort of many months to collect signatures, in May, 2018, a couple of citizens’ committees finally submitted petitions to place a measure on the ballot for the November, 2018 election that would prohibit the sale of the Library Lot and cause it to be made into a public area (a commons or park). This was obviously a cause for alarm on the part of Taylor and others who firmly supported the Core Spaces’ building. (Note that the contested contract signing occurred after these petitions were submitted.) The battle was now truly on, with committees forming on both sides of the issue, which became known as Proposal A.  Voters for A Responsible Ann Arbor included many recognizable Taylor supporters among their contributors, including, notably, current Council candidate Linh Song, who donated $5000 to the cause of defeating Proposal A. Ann Arbor Central Park Ballot Committee similarly received donations from many Taylor opponents, including current CM Anne Bannister. Most of those donations were modest, excepting the $7200 (in several separate donations) from the long-time stalwart supporter of a Central Park, Mary Hathaway (now deceased).

There was quite a concerted effort to defeat the ballot proposal. Apart from the campaign committees, a number of prominent citizens spoke up on both sides of the issue. Linh Song was highly visible in the opposition, as was YIMBY spokesperson Jessica Letaw. The Washtenaw Housing Alliance, a non-profit headed by real estate broker (and former Council member) Sandi Smith, came out very strongly against the proposal. And of course, Christopher Taylor himself sent out a message to supporters urging the proposal’s defeat. When the voters approved the measure by 53% in November 2018, Taylor described it as a “gut punch”. (It can’t have helped that he also lost his majority on Council in the August primary.)

Why was this such a devastating loss? It was the money. The lot was to be sold for $10 Million. Half this cash was to go into the Affordable Housing Trust Fund, thus it was a big payday for affordable housing advocates, especially Jennifer Hall, the Housing Commission director who has taken the lead on most such programs. The other $5 Million was to buy back the Y lot (later the Council simply borrowed the money).  But a $10 Million (or more) addition to the tax base, once the building was complete, would have served as a great addition to the General Fund. In his plea to voters, Taylor estimated this as $600,000 per year. But also, this was a defeat in showing that the mood of the voters was not entirely complicit with the development program.

Eliminating Single-Family Zoning

The initial impetus behind the downtown density explosion was, ultimately, the need to provide for housing for the huge inflow of students to the University of Michigan. This has been nicely documented until recently by Ryan Tobias, the publisher of the blog TreeDownTown. His 2018 post explained how the downtown density has just kept up with growth in student enrollment. We are waiting anxiously for an update. And of course the COVID-19 pandemic may have an effect on that demand that we can only speculate about at this point.

Most recently, the focus has been on density in residential areas of the city.  The current zoning and master planning for the city has resulted in large areas zoned for single-family housing (especially the R1A classification). The Strivers have been emulating efforts in other cities, including Minneapolis, to eliminate single-family zoning in order to permit more densely built housing (sometimes called “missing middle” housing, referring to duplex, triplex, or quadplex buildings) in traditionally single-family neighborhoods.

This effort has been given voice by a group who were self-named YIMBY (Yes In My Back Yard). This has been a nationwide movement, brought to Ann Arbor by DDA board member and housing advocate Jessica Letaw. She opened up a Facebook page under the name A2YIMBY. The theme has been simple and straightforward: Build more densely, increase the supply of housing, housing becomes more affordable and therefore more equitable. YIMBY was a term chosen to counter the NIMBY label (Not In My Back Yard), a pejorative often used against people who simply want to keep their neighborhoods intact. But lately the YIMBY term has itself become a pejorative.  Recently, the YIMBY Facebook page has changed its name to Ann Arbor Humans Who Wonk. (Try putting that into an acronym.)

Another group that is emulating efforts by advocates elsewhere is Neighbors for More Neighbors. This appears to have sprouted from Minneapolis as well. Our local group has its Facebook page and has produced signs and other material. It also has a Twitter feed. But it is not obvious who is behind it. No actual persons’ names have been used. Yet the group is taking on a shadow identity. NFMN also signed on to the Washtenaw Housing Alliance pledge to seek affordable housing in the county. This from an organization without any identified principals. It is not listed as a PAC in the Washtenaw County campaign finance pages. Perhaps all this would be less noteworthy if its signs were not showing up on lawns joined with the Slate’s campaign signs. Someone is putting substantial effort and money into it. But who? Note that campaign signs like this cost approximately $1000 per 250 signs.

Finally, a clue. NFMN held a “kickoff” on March 24 at BLØM Meadworks. Here is the announcement.

The little note says it is a special project sponsored by the Washtenaw Housing Alliance. But the “project” is not mentioned on the WHA site itself. And what does “sponsored” mean? Is WHA using its own funds to pay for the signs and other expenses? WHA is a 501(c)3 nonprofit (this information is buried inside a recent financial report). So they should not be using funds to support candidates. But are they? Perhaps not. It’s just that their signs cohabit many lawns with the Slate’s campaign signs.

It was initially thought that abolition of single-family zoning would be accomplished via the Master Plan process. The Master Plan is specifically mentioned in A2Zero. Here is some background about the effort to embark on a new Master Plan. In that post, I speculated that it was about eliminating single-family zoning in our city (though the RFP does not specify that). However, the Master Plan required substantial funding for a consultant to take us through the process. That has been “deferred” in the new City budget planning because of the COVID-19 crisis, which has caused a considerable shortfall. The price tag (initially $500,000) has been subtracted from expenditures for the near term.

Density in Ann Arbor’s Residential Neighborhoods

So why is there such a push for density in our residential neighborhoods? The answer keeps changing. Early on, we were all concerned about suburban sprawl. The townships around us were turning into tract developments. It was simple economics. Farmers got old and their property was worth more for development than to farm. It was seen as their 401K. After several attempts to pass land-protecting measures at the County level, the Ann Arbor Greenbelt millage was accepted by Ann Arbor voters (2003). As explained at the time, it was to keep down sprawl and also prevent congestion from the new homeowners who would be commuting into Ann Arbor. Unfortunately, after it passed we were presented with an unwelcome linkage – it was claimed by development interests that we had also voted for density! (That was not on the ballot, nor on the campaign material.) So ever since, it has been claimed that we must develop densely in Ann Arbor in order to prevent sprawl.

Then we came into the Placemaking age. As we explained in The Placemaking Agenda and Ann Arbor Politics, economic development in Ann Arbor was tied to lifestyle issues. These were important to attract “talent” (read, tech workers). These young people like downtown action, biking to work, and a generally condensed and readily accessible lifestyle. So we were to remodel our core neighborhoods to fit these needs. This general push seems to have worked, in that new companies and enterprises have succeeded in building an increased demand for near-downtown housing.

For the last couple of years, the YIMBY argument of the need to increase supply in order to make housing more affordable has been the dominant argument. This has continued despite the lack of any evidence that it has worked here in Ann Arbor (or really, anywhere that has a similar real estate value situation). As old houses in near-downtown neighborhoods like Kerrytown or Water Hill come down, expensive condominiums go up. They are typically occupied by wealthy retirees or affluent employees of the UM or downtown companies. But still, the YIMBYs hope that somehow by increasing supply, the younger members of our community can achieve a lower rent, or homeownership.

Note: “affordable” means many different things to different people. There is a well-accepted rule that no household should spend more than 30% of their total annual income on housing. This ceiling has long been exceeded for many, including relatively affluent households. For lower-income households, there is limited subsidized housing in which the cost is held below the market value by grant programs. This housing is often what is meant by “affordable housing”. But for many people whose income is below the median, but does not match the thresholds for subsidized housing, “affordable” simply means a place where they can afford to live. Unfortunately, most market-based housing in Ann Arbor does not match that need.

While the subject of this current post touches on affordability, it is not intended as the major topic. There is a thirst in the community to discuss affordability, but this post is meant to make a different point.

Our Housing Commission Director, Jennifer Hall, has of late been bringing up the timely racial angle. She presented all our Council members with a copy of the book, The Color of Law. The book has an excellent summary of past history in recounting how Federal law, mortgage policy, and activity such as “redlining” and covenants in housing developments actively and knowingly discriminated against African Americans in housing. Her conclusion has been that single-family housing (because it was the result of zoning decisions during that time) is racially discriminatory on its face, including today. Recently she administered a scolding to Council members on this basis. (She is referring to neighbors of 415 W. Washington.)

The very latest wrinkle has been nicely summarized by UM professor Jonathan Levine. (Dr. Levine’s special field is transportation planning.) His recent op-ed in the Michigan Daily has drawn in climate change as a reason to increase density, with a good dose of racial equity thrown in. The premise is that with denser housing (more dwelling units), fewer commuters will be traveling by automobile into the city, and instead will use mass transit or non-motorized travel (i.e., bicycle or walking) to work. He was writing the piece in support of the A2Zero Plan, recently approved (June 1, 2020). In the earlier version (2.0) of the plan,  eliminating single-family zoning was identified as a method of moving Ann Arbor toward “carbon neutrality”. Although single-family housing is not identified, the phrase “by right” means that the zoning restrictions involved would be lifted.

As a compromise during the Council deliberation of the plan (June 1, 2020), this language was modified (Strategy 4.5 Diversity of Housing) to remove the key phrase “by right”, though most of the language of that section remains confusingly the same (it is not clear how the objectives will be met since the actual mechanism is no longer specified).

In recent social media posts (7/11/20), Taylor has stated flatly that “I don’t propose that we eliminate single family zoning. ” It appears that he is literally correct. However, he has been a forceful proponent of the A2Zero plan as originally drafted (see above), even writing the introductory letter to the plan, in which he stated “carbon neutrality means that we must adopt new land use strategies.”  In using that phrase “by right”, the zoning changes proposed would eliminate single-family zoning. Explanation follows.

What is single-family zoning?

The definition of zoning districts is contained within the Unified Development Code (Chapter 55).  “Single-family” refers to one of the R1 districts (see this table). The differences between R1A, R1B, R1C, R1D and R1E are basically the required lot size and the required setbacks. There is also a height limit. More than one building can be present, but it must adhere to the setbacks and the minimum distance between buildings. In practical terms, this means one house per lot for most lots.

If the provisions of the original A2Zero plan were followed, presumably these setbacks and area limitations would resemble those for multiple family districts. Note that while R1A requires a total of 20,000 square feet per dwelling unit, R4A requires only 4, 300 SF per unit. While the front setback for R1A must be 40 feet, for R4A it is 15 feet. So as long as new construction obeyed those limits, many more dwelling units could be built in an existing single-family lot. This is what is meant by “by right”: it is implied permission to build whatever you like as long as the restrictions for that zoning code are followed. The actual setbacks, height, etc. would have to be determined through a planning process if this change really took place.

Single-family zoning does not actually guarantee one little house on a lot. The zoning code is actually more flexible than that. Unfortunately, from the neighborhood viewpoint, too flexible. Some of the zoning classifications (R2A and R4C) allow a modest number more of units to be built on a “single-family” lot, but restrain them in size and setback. But the lots can be combined and this changes the parameters of any planned development (remember, it’s all about the setbacks). We saw this completely played out with the City Place fiasco. This is a development on South Fifth Avenue where a single developer (Alex de Parry) owned a whole row of historic houses which had been rentals for years. The neighborhood was just beginning to be recolonized by homeowners and the lovely old houses to be fixed up. City Council went through months of debate before de Parry simply claimed “by right” to build a dense development on his combined lots. By combining lots, he was able to defeat many of the safeguards in the setbacks and area limitations and the result was a student-style development in a residential neighborhood. Some of the residents moved away and many historic structures were lost. It should be noted that the original structures, though somewhat deteriorated, were already serving the need for student housing and were more affordable. In other words, less profitable. Meanwhile, this had the effect of displacing a whole neighborhood. There was outrage about this, and a committee was formed to examine the role of R2A and R4C zoning. They produced a report after months of productive work. Oddly, the recommendations in the report were then and are still now ignored by the Planning Commission.

So how would this be handled if we abolished single-family housing by changing the zoning code to something like R4A? The proponents imagine tidy little duplexes, triplexes, and quads tucked in amid single homes, with relatively little change to the character of the neighborhood. But what provision will there be to administer a case where several parcels are combined? How large a complex might then be built in a block of formerly single-family homes?

Who benefits from development in residential zones?

Regardless of which explanation you chose for the abstract benefits of increased density, there are many interests who benefit directly (in monetary terms) by development. Let’s assume that we have a half-acre lot in a single-family zoned neighborhood. Under provisions of something like R4A zoning, this could hold 4 units (attached or not). Now, if the original owner continues to live in the house on that lot, they are not really of a lot of value to most other people. Yes, they will pay their taxes. They’ll buy goods, we hope locally. They’ll employ local services. They might even make donations to local charities. But frankly, pretty much of a dead letter in terms of bringing a lot of money into the pool. It is even worse for people who have lived here for some years. Because of Michigan Proposal A, there are limitations on how much property taxes for residential homeowners can increase from year to year. The taxable value (TV) can increase only 5% a year, or inflation, whichever is lower (inflation has been lower through most of the life of this law). So a nice little neighborhood of long-term residents essentially becomes a little tax-evasion garden, from the viewpoint of taxing authorities. Once the property is sold, it is taxed at its current value. Avoiding this “pop-up” tax is a major influence in keeping neighborhoods static. And, more troublesome, those residents persist in requesting services, which can get to be costly.

Development has a wide set of beneficiaries. Right up there at the top is the taxing authority, and also the people who actually get to spend those tax monies. The City Council and Mayor, City Administration, and career staff need money to fulfill various visions and projects. With everyone set in place, it mostly gets wasted providing services.

New development is much sought after for that reason. This answer to the pertinent question during the latest budget discussion illustrates the stakes.

Actually, $1 million per year isn’t much for the average budget these days, but I think if we could see this on a yearly basis you’d see a bigger bump in more recent years.

When the property is sold for development, money flows in many directions.

1. The owner. Most likely bought the house at a much lower price, but has put a fair amount of money since then into maintenance and upgrades. Still, in a good market, this is a way many people extract some equity from their property. If the zoning has relaxed so that the parcel can be developed more intensely instead of just selling an old house, the yield might be bigger.

2. The realtor and people involved in the property transfer. (Title companies, lawyers, inspectors)

3. The developer. This is the deal-maker. With luck, they’ll buy the property at a favorable price and then leverage that with lots of financing.

4. Banks and investment entities. Making money from money.

5. Construction contractors, demolition contractors, excavators, building materials suppliers, land surveyors, architects, decorators, furniture stores, paint stores, landscapers.

6. Brokers and rental agents. Once built, sales to customers begin.

7. And don’t forget the taxing authorities.

The Oil Well in Your Backyard

Here’s the thing. Ann Arbor is now such a desirable place to live that its real estate has essentially become an extractible resource.  Just like an oil well or a gold mine, each little piece of ground is a fungible bit of wealth. For one thing, actual City of Ann Arbor area is geographically limited because we can no longer annex land (other than occasional township islands). So our land availability is inelastic, which is known to increase housing prices. In other words, there just isn’t enough land to meet our demand, especially in the choice areas near the core. This can be a good thing, if you own the land and want to sell. But there are considerable downsides as well. As the Joint Center for Housing Studies (Harvard University) explains, the cost of land is a driving factor in the expense of housing. As land prices increase, it becomes more and more difficult to build moderately-priced housing. And the value of the land is likely to cause a replacement of existing structures with higher-value ones. We have already seen examples of this, with teardowns in the areas near the core and big-footprint houses (or, where zoning allows, expensive condominiums). For example, a decent house on Spring Street was bought last year for $400,000, immediately demolished, and a 3000-square foot house built. (The zoning would have accommodated a duplex.)

The Federal Housing Finance Agency has been tracking the cost of land using a complicated formula which takes into account the cost of replacing an existing structure. (Note that not all parcels in these zip codes are within the City of Ann Arbor; also note that most parcels are less than one acre.)  The value of these parcels will be much higher if they can be used to develop a higher-value structure.

So what would be the effect on single-family neighborhoods if zoning were changed to allow duplexes, triplexes, quadplexes? Inevitably the value calculations will drive the sale of parcels and the house on them (which could be a rental, or owner-occupied). Because of that sale, the assessed value of similar parcels will increase. (Assessed value is based on current market value.) This will have some tax consequences, depending on the status of each remaining parcel. A house that was accompanied by a house on each side will gradually find itself flanked by larger structures (just how large depends on how the setbacks are drawn and what the height limitations are). Inevitably, because more households now occupy the block, there will be more congestion, more noise, more issues with neighbors. This is not a tragedy but will change the quality of the originally quiet neighborhood. And, of course, there is the possibility that a developer will succeed in assembling several parcels and a City Place type of structure will be built. (Remember, it is all about lot area and setbacks.)

More to the point, this value profile will mean that more and more current residents will be displaced for one reason another, perhaps because a landlord or relative has decided to cash out, or because costs of remaining may increase. This pattern is familiar to all gentrifying neighborhoods. Water Hill, currently in full flush of gentrification, was once a segregated Black neighborhood and has gone through many of these changes already.

Often it is assumed that older residents would welcome this opportunity to sell and bank that equity. But the cost of living in any part of our metropolitan area has now increased to a level that this is not going to be easily feasible. (There is an “Ann Arbor bleedover” effect.) A new residence (if purchased) will be at a new higher tax rate. There is the loss of nearby friends and helpers. There is also an expense and trouble in moving. There are many reasons why many prefer to “age in place”. So the notion of being displaced from one’s home is a frightening one.

Disruption, indeed.

Those Troublesome Voters

Over the last several elections, it has become clear that the residents of Ann Arbor, especially in the settled neighborhoods, just can’t be trusted to vote against their own preferences and best interests. This is our home, our city, and we expect our elected representatives to address our concerns. That is not to say that our Council should not represent our ideals and aspirations. We are among the most liberal populations in the State of Michigan. We respect good leadership and confident, competent government. But we do believe that we deserve a say in the direction of our community.

Ann Arbor does indeed face many challenges in an uncertain future. As we have commented in the past, as in Ann Arbor and the Climate Crisis: Policy and Outcomes, we need to match our policies with the need to adapt to changing conditions, including the climate crisis. (And we really didn’t plan for a pandemic.) Instead, we are being confronted with a wealth agenda. The proposed changes (disruption!) in our City’s organization appear all to be oriented toward growth. Growth and real estate development are the source of wealth. And it is likely that current residents are not considered to have much of a place in this scenario.

It is clear why our Mayor, Christopher Taylor, has become so frantic and is now campaigning so strenuously for his Slate. Unless he regains his supermajority, all these “disruptions” will be at hazard over and over again by the troublesome voters of Ann Arbor. Every election matters, but this one (the Democratic primary, August 4, 2020) really could be the turning point.

 

 

 

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