Rental Rehab or Rental Relapse?

[XLFD]

Rehabilitation is the act of restoring something to a once again useful function.  In what is called "community development", rehabilitation is used frequently to describe what certain programs do for select properties in select zones.  A region can, through state and federal programs, rehab obsolete properties, industrial plants, commercial properties, blighted areas, resort districts, rental unit, etc. in special zones in an effort to 'economically develop' them.  This thread will address the Rental Rehab program, which is perhap the most amicable and noble sounding rehab project of all.

 

The Michigan State Housing Development Authority (MSHDA) is a state agency that tries to provide adequate housing for lower income folks.  It was created by Act 346 of 1966 and its full rationale and goals are stated here.  The Rental Rehabilitation Program (RRP) was later developed by the MSHDA to spur affordable housing in downtowns in an effort to spur economic growth.  To that end it provides up to $35,000 per unit created, while the developer needs only foot 25% of the project's cost.

 

 

They say Rental Rehab projects targeted at downtown business districts often have a long-term positive impact resulting from (a) increased activity in the downtown, (b) increased revenue to downtown property owners, and (c) productive use of space which is often inappropriate for homeownership here.  But let's look at the RRP critically and realistically, while momentarily looking past its lofty ideals.

 

Will modest-spending people living downtown be a magic pill for our downtown's economic health?  We already have plenty of people living in and within a couple of blocks of downtown.  And there are also plenty of vacant real and rental units in that area.  And plenty of vacant units beyond.  What do downtown rental units offer?  Lack of adequate parking, no back or front yards, high street noise, limited natural lighting (windows), having to hike furnishings and groceries up mostly steep, narrow stairs, and being close to downtown businesses. 

 

But the last offering become less than a bonus if the downtown area does not have a good mix of businesses to provide for most of the renter's needs.  As our downtown becomes less diverse in staple products for the locals and more concentrated in pricy tourist-driven businesses, this benefit is lost to the low-income renter.  

 

Thus, there is a limited appeal to living downtown for this demographic, when they can find modest housing elsewhere.  And they currently can; all you need to do is scan the local paper and find Ludington rentals listed under the MSHDA-approved maximum monthly rentals costs for the RRP.  The MSHDA also helps provides housing elsewhere at various places around the City, such as Evergreen Trails Apt., Pineway Townhouses, The Arbors, etc.  These residences have few of the drawbacks of living downtown. 

 

 

In the RRP, developers get up to $35,000 in tax money per unit rehabbed for rental use in a forgiven 5 year loan.  Therefore, we have socialized the cost (used tax money from everyone) while privatizing the profits (RRP developers increase their property values for resale), while making a product that isn't in demand.  We have enriched the property owner and the local City Hall and DDA (whose income benefits from the increased value of the RRP project via taxes and TIFs), while putting a heavier burden on all the rest of us.

 

In this news article from Syracuse,  we find:

"Partners Robert Doucette and Richard deVito bought the downtown landmark Dec. 31 from a city-owned entity, the Syracuse Economic Development Corp., for $6.7 million.

Doucette and deVito said they will begin work soon to build 45 apartments on the upper floors of the building, which was acquired by the city after the department store, then called Addis & Deys, closed in August 1993.

The city renamed the building Deys Centennial Plaza and spent $18.8 million renovating it into office space in the late 1990s."

 

The Syracuse EDC acquired this department store, spent $18.8 million of taxpayer money rehabbing it into office space, which didn't work out, sold it for $6.7 million 18 years later to developers planning on creating 45 residential spaces out of those offices.  Chances are, the developers will get $2 million more in tax money from the state's rental rehabilitation program in the process.

 

Here's a novel idea.  Let's have free market principles dictate what we should use the upper floors of downtown buildings for, and save the State some money.  Instead of letting some program that dishes out 'free money' to select developers to make space for something that our community doesn't need, let's consider what else those second floors could be used for, and invest private money.  Take a risk without everyone losing if it fails.  Office space of all types, dance halls, fitness gyms, theaters (remember when the City had them), meeting/convention halls, arts& crafts spaces, training rooms, warehousing,... the list is practically endless, and more apt for the downtown area.

[XLFD]

This morning I was checking my various facebook links for leads, and found the interesting piece released from the Ludington Police Department:

 

 

 

 

Seems like the Downtown Ludington facebook site had released the same info minutes earlier than that.  Looks like the Downtowners may be in charge of what goes up on the LPD site.  It lends credence to the assertions by some that the City Hallers are engaged in a lot of networking while at their jobs...