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A Pessimistic Note

Five local developers sound a distinctly pessimistic note about downtown development in a surprisingly candid Business Direct Weekly roundtable. “The funny thing about everything you read right now is somehow this is all going to stop urban sprawl, too. Come on: 500 units downtown?” “Mixed use - you don’t need it.” And, most depressingly, “But then people aren’t going to drive to Ann Arbor to park in a three-level underground parking structure to go up to Crate and Barrel. They’re going to go to Somerset (in Troy). It’s only 50 minutes away.”

37 Responses to “A Pessimistic Note”

This entire conversation explains so much of this wesite, it’s scary.
posted by todd on June 24th, 2004 at 2:00 pm
Oh, good old BDW. Seems to be the only local publication that realizes what in the hell is going on there.

You know, there have been times in the last month, in not being able to find gainful employment yet, when I’ve thought the whole moving thing may have been a mistake.

Then I read this and feel just fine.
posted by rjwhite on June 24th, 2004 at 2:36 pm
This is the smoking gun that many of you have been looking for, and the reason that as O’Keefe put it….why there’s no there there.

Downtown development is an impossibility in Ann Arbor, and that is why those of you who want the trappings that come with a vibrant downtown area can’t find it….
posted by todd on June 24th, 2004 at 3:48 pm
I had some respect for Ed Shaffran before I read this article. Now I figure he’s just a whiney greedy pig. The other folks in the article are at least thinking about how to make things work or change things to make it work. But Shaffran? sheesh!

I hope the politicians are listening to the cooler heads here. Development is one thing, but having the pendulum swing too far in either direction will only hurt the city. It is very possible to overbuild and suffer the consequences.
posted by mucho gusto on June 24th, 2004 at 4:09 pm
One of the problems seems to be that the city of Ann Arbor considers a $200,000 home a starter home. That’s the 1000 sq. foot home on the concrete slab that you can probably get in Ypsi for about half the price. If they want to attract young folks, they have to get over that mentality. In order to be a growing city, you have to get young folks. And they are right, if you are going to plop down a chunk of change for a place to live, you will want parking with that too.

Anyways, I remember one of the buildings they are talking about. The restaurant was the Pantree, I seem to remember it being fairly decent (or perhaps that was the time of night, it used to stay open fairly late). It folded and shortly thereafter, the Community News Center folded (it was a good hedge to Borders). Now I think the place where Commie New Center used to be is now some sort of Management Place.

I also remember the other place they were talking about. I think it used to be Tower Records. Now the upper floor is office buildings. The middle floor is Underworld. I mean if a record store can’t survive in a college town, what can?

As some people have said, Ann Arbor has changed a bit and I’ve lived in the area for 15 years. I like the area itself, but some of the people can go.
posted by Kozzie on June 24th, 2004 at 4:56 pm
It’s not that the city of Ann Arbor considers $200,000 to be a starter home. It’s that buyers are willing to pay $200,000 and up for starter homes. So there’s no point complaining that they (the Big Bad City) have to get over a mentality to attract younger buyers. It’s clear that there’s no shortage of people of any age who have the money or are willing to take out a large enough mortgage to park their butt in Ann Arbor.

Perhaps people would be attracted to less expensive condos in downtown, but I agree with the interviewees who pointed out that it’s a fairly limited market. For sure it excludes most families with children who would gravitate to a home with a yard and a neighborhood over a condo off Huron.

Who would buy a downtown condo? Several groups come to mind including retirees, singles, and people who want a pied-a-terre in Ann Arbor. Maybe that’s enough to support a vibrant downtown of modest size.

It was really a fascinating article. Many thanks for the link.
posted by Mike Gorund on June 24th, 2004 at 5:15 pm
If these guys (who are not small time local developers) are leery of building downtown, I hope the politicians are listening and forget some their pie in the sky plans for an extra 2000 people (and their cars) downtown.

Ann Arbor is successful. It shows in the property values, the UM, the income, community involvement and education levels of the people who live here.

If the “vision” of growth in A2 is to pack more folks downtown and get a Crate and Barrel (laughable) all it will be just another wannabe city.

Why monkey with success??
posted by Anonymous on June 24th, 2004 at 5:39 pm
Ann Arbor should do what it does best. Be overrated.

That’s the best way to stop overdevelopment
posted by mucho gusto on June 24th, 2004 at 5:41 pm
The $200,000 starter home was a comment from one of the Ann Arbor papers. And yes people are willing to pay it, but for how long? Especially when you can look elsewhere nearby and have the advantages of living near Ann Arbor.

Maybe it’s possible they might fill those 2000 spaces, but that would lower values elsewhere and other people don’t want that.
posted by Kozzie on June 24th, 2004 at 6:46 pm
Ain’t nothing good happening if Ann Arbor ignores affordable housing.
posted by First City on June 25th, 2004 at 12:55 am
They aren’t ignoring it, they are just changing the definition.
posted by Kozzie on June 25th, 2004 at 9:28 am
I am not trying to be jerk here, but I think that you are all missing the point.

The citizens of Ann Arbor, together with the planning and building department have, over the past 30 years, brought development in the downtown area to a standstill. The time to put in affordable and well-planned mixed use structures in the downtown area has passed. The train left the station years ago.

The gentlemen in the article are left to discuss “what do we do now”? The simple economics of the situationhigh demand, and no available housing have done many things:

1. Raised the cost of a home in Ann Arbor disproporionately to the surrounding areas. As one poster just put it, why would you pay 200K for a condo when you can get a swell house for that much in Dexter or Saline?
2. Boom in restaurants….since there are all these new people in surrounding areas, and UMich enrollment keeps growing year after year, and you can’t convert existing buildings into housing units (the city won’t let you)…what do you put in? Retail can’t afford the rent.
3. Gentrification. Who among you can afford to live in Ashley Mews? This is a direct result of the whole problem that the roundtable was discussing: they keep shrinking the height of a building on a given footprint, they make it impossible to get a project through— costing the developer more money, taxes keep rising, and the cost of construction keeps rising. They have no choice but to pass along the cost to the consumer.
4.Affordable housing is now impossible without government assistance. This is why Shaffran said that affordable housing was laughable. You can’t make projects work in Ann Arbor.

The worst part of all of this roundtable discussion is where they all say that they would rather sit on the sidelines then get into the mix now. This is killing any chance of fixing the problems in Ann Arbor.

What no one seems to understand is that these men are the best friends that Ann Arbor could possibly have. You laugh about the Crate and Barrel (as well you should btw) but if you read further, they discuss the need for a “critical mass” of shopping downtown that will draw people away from driving to and shopping at the big box stores, and the inevitable mega mall that will be installed in Washtenaw County in the next five years. With a few “anchor” stores downtown that are well known, neat little locally owned stores like Encore will begin popping up all over the place.

Did any read the recent article that shows that Ann Arbor’s population hasn’t grown in the last three years? Did you also read that enrollment in K-12 in Ann Arbor is down? Doesn’t that seem strange to you? The roundtable explains why this is.

Needless to say, Dexter just announced a project that will build 3,000 homes, and Saline is discussing a development that will build 6,000 homes in the coming years…..all of the pent up demand for affordable housing in the Ann Arbor area has directly led to these projects.

This roundtable explains why Ann Arbor is overpriced. It also explains why it doesn’t have the vibrant downtown…and this is the entire reason that this web site exists. A little inside info: I know an awful lot of the local business owners in Ann Arbor, and I have yet to meet a single one who would do another project in Ann Arbor. Not one….and they actually laugh when I bring it up. This is the saddest indictment of all in my opinion.

Enough rambling…this whole subject bums me out. I need a beer.
posted by todd on June 25th, 2004 at 9:43 am
Right off Main Street used to be a store called Rider’s Hobby. They wanted to get a bigger store downtown but the city council made it a pain and the rent for them wasn’t worth it. They had a store on Carpenter and Ellsworth and ended up expanding that instead. I’ve got to believe that is a common occurrence in downtown.

It sounds like people want a vibrant downtown but they don’t want all the trappings that go with that (tall buildings, affordable prices, etc.). As a result, the surrounding area will grow while Ann Arbor itself stagnates (or regresses). I don’t think you can support a vibrant downtown with just restaurants.
posted by Kozzie on June 25th, 2004 at 10:52 am
Okay, so, who’s running for City Council this fall on the Ann Arbor is Overrated ticket? If the city is the problem, who’s in? I’ll volunteer to let myself be nominated to the Planning Commission by whomever the AAiO councilmember ends up being.
posted by Murph on June 25th, 2004 at 12:41 pm
I remember Rider’s… They brought a lot of the cool-city young adult Saving Amy types into the mainstreet area (in addition to geeks and older adults) — people who walked there and stuck around to shop at other stores, like Afterwords.

Are either of the comic book stores still around? Or have they been turned into yuppie condos and restaurants, too?
posted by Anna on June 25th, 2004 at 12:43 pm
Err… that would be “Chasing Amy”
posted by Anna on June 25th, 2004 at 12:45 pm
Not so strange, but I think todd and the new guy Kozzie are missing the point.

The back story. I’ve lived here for more than 30 years and am very close to the inner workings of the development process.

todd, blaming the planning department and the building department for stopping development is off the mark. Both of those city departments are only doing the bidding of their political masters, the one’s elected by the voters.

In the past 20 years there have been two building booms in Ann Arbor, one for 7 years in the middle 80’s and the last one for 9 years in the 90’s. The boom of the 90’s saw more development (dollarwise) than any other time in Ann Arbor’s history. During the 80’s boom there were more apartments and hotels built than at any other time in the city’s history. The 90’s saw $500 million worth of construction from Pfizer alone and a boom in single family homes as well as constant remodelling and redevelopment of aging commercial buildings and single family homes.

The building department has little to do with the development process except to inspect buildings for compliance to the building codes. The building deparment has a legal mandate from the state of MI to enforce the laws (codes) To do otherwise is illegal and unethical. If someone doesn’t like the codes, protest the legislators who pass the laws, not the law enforcement officials.

If developers and builders have problems with the building department, it’s because they don’t know how to design or build in compliance with the codes. Local inspectors have done more to ensure safe buildings and code compliance than any design professional or contractor has ever done for the city. Ask yourelf why Ann Arbor has one of the lowest fire incident rates of any city in the state? If you have a problem with the codes, don’t blame the messenger. Ann Arbor does not have special rules for construction. The difference between here and other areas of Michigan is that the codes are actually enforced here. Strict inspection results in a better and safer product. It’s not cheap, but what would you rather have, an unsafe home or one that might kill you, your family or the next door neighbor?

The planning department (different from the planning commission) has tried it’s best to not become involved in the political web woven between developers and politicians. The primary problem of the development/planning process is that it becomes politicized by developers seeking an edge by trying to circumvent the process. When they succeed those circumstances lead to whining by the developer who didn’t play the game with the politicians or the planning commission (who are political appointees). There is a Master plan for downtown and almost every area of Ann Arbor. They are ignored by the planning commission, the DDA and politicians, because they want to please developers they favor. The planning process becomes one of favoritism and deal making. That leads to all sorts of claims that “The City” (ie the bureaucrats in the planning and building departments) getting kicked in the teeth for “preventing” development. For all the whining from developers about how hard it is to build here, why do they continue to come to Ann Arbor? Because they can make money! The problem now is that the planning and development process is about to become more politicized than ever before. The rules are being redesigned to prevent staff input and the planning comission is being stacked with the mayors appointees. Out of town developers with great ideas for development are constantly turned down in favor of the politically connected. Inspectors are sometimes asked to “go along to get along” because a development is favored.

A stagnant downtown? Where are you guys living? I’m not particlarly worldly, but most of the midwest downtowns I’ve seen are dead compared to Ann Arbor. It’s a destination. Not because of the retail, but because it’s a night out in a safe, clean, pleasant and fun place. the folks who come here are mostly from somewhere else, not locals.

Why is housing expensive here? It’s not only the marketpalce supply and demand, it’s because sellers will ask for and buyers will pay what the market demands. Why isn’t there more “affordale” housing in Ann Arbor? It’s not only because property isn’t cheap here, but the market demands upscale housing! These things are not controlled by politicians or bureaucrats, but by capitalism.

The A2 News reports that the population actually grew in Ann Arbor in the last several years as opposed to the surrounding area and the midwest in general.

The last thing Ann Arbor needs is to try and become something it isn’t and doesn’t want or need to be. If we follow Jerry Spear’s logic and tear down some ($200,000) “shacks” (mostly owned by local student ghetto slumlords) and build some 15 story condo hi rises, Ann Arbor will lose some the character that makes people want to live here, regardles of how much you might think it’s overrated.

The problem isn’t now big or how much development, it’s about sustainable development over time that compliments what the city already has. Pleasant neighborhoods, a vibrant downtown, and world class university, diverse, educated and hardworking people.
posted by Anonymous on June 25th, 2004 at 1:17 pm
AA News reported that the population grew by 29 residents last year. Can you say statistically insignificant?
posted by AA Hater on June 25th, 2004 at 1:48 pm
Anyone care to comment on the article in yesterday’s A2 News regarding the proposed new development south of Milan? The article made it sound like the “anti-sprawl” Greenbelt initiative is indeed having the opposite effect by driving development further out into the hinterlands.
posted by soakman on June 25th, 2004 at 2:50 pm
“todd, blaming the planning department and the building department for stopping development is off the mark. Both of those city departments are only doing the bidding of their political masters, the one’s elected by the voters”

I don’t have time to address everything in your post just now, but i just want to say that I didn’t say that the building and that planning department were stopping development. What I did say is that they were part of the problem…if for no other reason than they are underfunded and understaffed, making it very very difficult to build here.

More later…..until then, go outside and enjoy the day!
posted by todd on June 25th, 2004 at 4:05 pm
Soakman, I don’t think the Milan development can be seen as a direct result of the greenbelt proposal–a development that big is going to take more than six months to design, to find a township with plausibly bendable zoning, and to find and option land for.

I suppose it’s possible that they were originally looking in one of the nearer townships as an option, but I’d personally rather have it popping up at the edge of Milan than halfway in between Saline and Milan or Ypsi and Milan–have it add to a city that already exist rather than doing its best to continue fuzzing out the cities.
posted by Murph on June 25th, 2004 at 4:08 pm
Cities?
posted by Steven on June 25th, 2004 at 5:58 pm
It seems that most of the new housing was in Pittsfield, Ann Arbor and Scio Township. Other than the expansion of Pfizer, it doesn’t seem like there was that much in Ann Arbor. Don’t get me wrong, I love Ann Arbor, but I wouldn’t want to move there. I would probably pay about $4~500 more a month to get the same apartment I have here. Given the fact that Ann Arbor is right next door, I don’t see the point of actually living there.

But it seems that one of the definitons of “cool cities” is keeping young people here in Michigan. If you want to keep young people, you really need to have lower priced homes which means ones that start around $100,000. Otherwise they just live in other places.

And to answer the other question, there are still two comic book places but they aren’t the same ones.
posted by kozzie on June 25th, 2004 at 7:35 pm
So, who wants to run?
posted by Anonymous on June 25th, 2004 at 9:27 pm
i often wonder to myself *why* people have forgotten my allotment with respect to the affordable housing issue. i live in “the village”, a 400 condo subdivision off washtenaw near arborland. the 1 bedroom condos go for 56-60k and the 2 bedroom condos go for 70-80k. 5k gets you in the door! everything is taken care of for the most part and the places are built SOLID. yet there are still a metric TON of them for sale all the time, and i don’t understand why. i don’t know why my place is going to have to sit on the market for 6 months to a year when i say “hey, i have a 1080sq. ft. place for 75k.”
posted by beth on June 26th, 2004 at 12:00 am
Because the Village blanket mortgage is an odd way to finance a home purchase, and the monthly payments wind up being quite high. I know two people who live at the Village–one rents, one owns. The former pays $700 a month for his two bedroom townhouse. The latter pay $900 a month for their two bedroom townhouse. Given how hard it is to resell Village property, plus the opportunity costs of a downpayment, it seems like a bad investment to buy at the Village. Of course I don’t know why that is either…. doesn’t seem right that it’s entirely a result of the development financing arrangement.
posted by Alex on June 26th, 2004 at 7:44 am
So Alex,

Is the issue of low cost housing one of making a profit because of ownership? Or is it one of reasonably comfortable low cost shelter?

I own an old (1913) home in the OWS. I bought it almost 20 years ago for 70k. It was a pit and nothing fancy about it. There’s been a lot of $$ and sweat equity to restore, update amd maintain. Considering what homes sell for here, I figure it’s market value is around $350k. Now, a buyer can spend that much money for a whole lot more house elsewhere and even here in the city.

Do I look at my house as an investment? Yes. But, primarily it’s a place to live.

Did I aspire to own a $350,000 home? No, I just wanted a place to live that I could call home.

It’s all about the choices we make.
posted by OWS guy on June 26th, 2004 at 12:58 pm
Most people do very simple cost/benefit analyses about buying a home: can I afford the monthly payment? will I be able to sell it when I need to? Those are really incredibly basic indicators of whether or not one should buy, and what one should buy. If the monthly payment is too high *and* you are going to have a hard time selling the place, then it’s neither a good investment nor a reasonable solution to the “where am I going to live?” problem. Also, most people buying starter homes–and that’s what we were talking about–don’t intend on staying in them for 20 to 30 years (hence being starter homes). So their ammortization periods are far far shorter.
posted by Alex on June 26th, 2004 at 1:06 pm
Interesting discussion.

A few things.

First, a $700 or $900 a month payment is not affordable. Although your mortgage may be low - many people do not have $5k nor $700 a month.

June, re: your comment. I think that a lot of people believe that A2 should’t just be supporting what it already has - it is missing something. Perhaps the market does demand upscale housing but there is also a HUGE demand for affordable housing. About the stagnant downtown - all I can say is that the uprising of corporate chain presence in downtown is not a good indication of the future.
posted by Vanessa on June 29th, 2004 at 9:10 pm
First, a $700 or $900 a month payment is not affordable.

Bull. For 2 bedrooms? Rent (or mortgage) should be 25% of your gross income. A townhouse in that price range can attract families whose household income is in the $34,000 - $43,000/yr salary range. If that’s not what “affordable housing” initiatives are supposed to attract, I don’t know what is.
posted by Constantine on June 30th, 2004 at 4:52 pm
Mmmm, I was under the impression that the adage was for “Shelter costs” which implies one must include basic utilities in the equation.
Therefore if one looks at the poor and the working poor the situation looks absolutely grim eg:
SSI/SSDI payment approx $700 per month (If youre lucky) one quarter of that is around $180 is there ANY option for even a squalid room including utilities anywhere in A2 for that? NO
Working poor potential gross income -$1000 to $1400 one quarter of which becomes $250.00 to $400.00 are there even single rooms incl. utilities at that price level? Maybe at $400 IF you’re lucky, but if you have to pay your own health insurance as many do, subtract another $400 or less, again, if you’re lucky….then take the taxes and that does not leave a whole hell of alot to save for a down payment or even to enjoy any of the cultural or gastronomical amenities that allegedly abound here.
I grew up in this town and now I can barely survive here and I see HUNDREDS of others in the same boat. Were it not for the fact that I MUST continue to live here to be near a very elderly parent I would be gone, albeit with real regret
posted by stella on July 1st, 2004 at 12:01 pm
Does the $700 a month for the mortgage figure in condo fees (add another $100 minimum), insurance premium, and local taxes? My mortgage payment would be tiny if I didn’t have to also pay homeowner’s insurance and city taxes (add $200/month and $500/month respectively).
posted by Anna on July 1st, 2004 at 4:02 pm
I am disappointed to find such a lively discussion in such a dull arena-mortgages! As a newcomer to this blog I hoped to find some inspiration, now that we have acknowledged our misrepresented small town what do we do?
posted by Fernanda on July 1st, 2004 at 7:07 pm
Fernanda: I’m not too sure you’ll find inspiration here as much as incentive to finish up whatever degree you’re working on as quickly as possible and head for one of the coasts.
posted by Anna on July 1st, 2004 at 9:10 pm
I saw this piece in BDW, and was pleasantly surprised by the candidness of the developers. I thought it was particularly interesting that Jeffrey Spoon was nowhere to be seen. Did anyone see the piece about his development/tax woes in BDW?

I think his unsold luxury condos, $50,000 unpaid property tax bill, and the fact that he is being sued by his big buddy Fred Beal for $2.5 million in unpaid construction costs speaks volumes. There is not a market for more than a handful of luxury condos downtown. This is a city of 140,000 people, not a metropolis.

The BDW piece says that “some 2000 units are being sought from developers.” Who, please help me understand, is going to spend $375,000-$750,000 for a condo in Ann Arbor? People tired of mowing their lawns? Doctors? Lawyers? DINKS?

This is one of the most misguided development schemes I’ve ever seen.

Ed Shaffran recently pulled out of the Lower Town development project. BDW let him get away with saying that is was because of a “conflict of interest,” because he teaches a course as an adjunct at U of M. His comments in the BDW roundtable provide a fuller explanation.

There is no infrastructure to support downtown living in Ann Arbor like there is in Chicago and New York. Maybe in the end, the University will step in and buy the buildings for student housing, who knows?

Lifer
posted by lifer on July 2nd, 2004 at 11:13 am
Uh… you’re thinking of Peter Allen, not Ed Shaffran. He pulled out of Lower Town, which he’s spent lots of time working on, because it’s U of M, which is insanely worried about being sued or getting bad press, and potentially wouldn’t have located there if there seemed like there could be some bad conflict-of-interest press.

TooMuchInfoInA2
posted by Anonymous on July 2nd, 2004 at 5:08 pm
Starter homes are $200k in the city of Ann Arbor???? That is total nonsense.

Our house, about 2 miles from downtown, is in reasonably good shape, 3 bedrooms, hardwood floors, full basement, new furnace and wiring, mature trees, favorable topography, on a bus line, walking distance to stores and restaurants and elementary school. And after 5 years of improvements and increasing values, it isn’t worth $200k even now. Not even close.

And it is typical of probably thousands of similar houses in the city. And thousands of others are smaller and have fewer amenities, presumably even cheaper.
posted by Larry Kestenbaum on July 8th, 2004 at 12:54 am