A place called home: Paths to affordable ownership in Leelanau

Elaine Foster (and husband Jim) have lived in their Habitat for Humanity-built home in Maple City for six years.

By F. Josephine Arrowood
Sun contributor

Leelanau County has long been known as “the land of delight,” but for many of its people, the terrain leading to a place called home appears more difficult. For at least the past 25 years, homes and land have been bought and sold dearly, but a confluence of circumstances has brought the issue of affordable housing to a crisis state today. These include the start of the Great Recession in 2008, a severe tightening of lending practices, a lack of permanent, full-time jobs in a growing tourism and service region, and the refusal of government and some community leaders to recognize and act on long-term solutions to the county’s housing challenges.

Part One of this series discussed some of these complex factors, and focused on housing rentals. Part Two identifies and addresses some of the obstacles and opportunities of home ownership in Leelanau.

Perhaps it goes without saying that one time-honored method of acquiring a home involves the help of family members. Land connected clans often set aside acreage for their grown children, either to farm or to live on. Family members loan, gift, or bequeath down payment sums to their heirs. Truly extended family communities, such as the Grand Traverse Band of Ottawa and Chippewa Indians, provide a model that synergizes both work and family for the benefit of both.

After the Anishinaabek tribe, now based in Peshawbestown north of Suttons Bay, received federal recognition in 1980, they worked quickly to establish an economic development corporation (in 1983) to create and promote tribal businesses, including gaming, construction, and the hospitality industry. These in turn have thrived and fostered the Housing Department, creating “responsive initiatives that address social and economic concerns via a solution-oriented education based housing program.”

Nicki Basch works in the Housing Department, which has both rental and ownership programs, as well as exploring elder housing and assisted living options for their six-county service area that includes Antrim, Benzie, Charlevoix, Grand Traverse, Kalkaska and Manistee. “With home ownership, we can help with a one-time payment anywhere in the six counties, on tribal property or off. We do emergency home repairs, contractors. With rentals, we have one to five-bedroom [units]. They can be income-based or market based. For home ownership, the person must be a tribal member, but a renter can be the non-Native parent of a tribal member.” According to their website, the Grand Traverse Band places a priority on homeownership as a means to stabilize communities by promoting self-sufficiency”.

Non-Native buyers don’t get to participate in the GTB’s holistic approach, but those who seek home loans in a “free market” economy do have a variety of options. Tom Klinefelter has been in the mortgage industry since 2005, and serves the Traverse City and Leelanau area, and one of his specialties is first-time home loans. He describes the process in brief: “Typically, borrowers come to me, and we have to do a prequalifying even before they see a realtor. We look at their income, assets, job history, total debt; it’s risk assessment [for the bank].“

Debt ratio is a critical factor; it equals one’s total debt divided by total assets, typically about 43 percent. “So if you make $1,000 a month, you can’t have more than $430 in total monthly obligations—construction loans are 38 percent, but you could go as high as 50 percent if you have assets, investments, stock portfolios.” He notes that some borrowers are also selling their current home, and often must wait until the process concludes in order to access that particular asset. A two-year history at the same job, say, as an accountant with a business degree, as well as a credit score of at least 740, are also vital pieces of the borrowing puzzle.

According to Paul Oster, CEO of Better Qualified, LCC on nerdwallet.com, “Since 2007, the effect of credit scores on consumers has become more severe; since the Recession, the magic number has been increasing … it’s now 740,” but alas, he notes, “The average credit score is around 685.”

Klinefelter adds, “Sometimes people have been sloppy with credit. You have to have three open lines of credit, such as a Visa card, a car loan you’ve been making payments on, a cable bill of at least a year that you’ve paid on time.” And, he warns, even after the loan is approved, “We monitor your debt and pull your credit report the day before the closing. If you just bought a lot of furniture from Art Van’s for that new house on your credit card, we’d have to cancel” the house sale.

Do banks offer homebuyer classes or workshops? “Unfortunately, no, I don’t know any that do,” he says. “That would be a good thing—it should be mandatory.”

Nevertheless, “I’m seeing borrowing on all fronts in Leelanau: Empire, Leland, Northport—first-time buyers as well. A $100,000 home would be about $700 to $750 monthly payment, cheaper than rent. And of course, there’s a huge second home market, especially in a place like Glen Arbor.”

Asked about the other big barrier to first-time homebuyers especially: the down payment, the banker says there are some avenues still open. While Fannie Mae government-backed loans require 20 percent down—an amount out of reach for many young families or individual workers—“the USDA Rural Development loan is zero-down, with a 41 percent debt ratio, and FHA is three and a half down, and can be gifted by someone, say, a family member. On a $100,000 loan, that’s $3,500.”

A stroll through recent Leelanau real estate offerings on the Multiple Listing Service website showed few homes for sale at $100,000 (this was also the case 18 years ago, when I was buying a home, but the lending practices were more flexible). Still, there were nuggets of hope: a $78,000 condominium in Elmwood Township and a converted granary in Solon at $98,900. A three-bedroom, two bath in Centerville asks for $139,900, and even a pint-sized cottage on Little Glen Lake is listed at $149,900. There were various listings throughout the county for small to medium sized homes hovering around the $150,000 asking price—a new baseline average? Vacant land also comes in range of sizes and prices, but purchasing and construction loan financing are a different set of hoops to negotiate. A buyer who builds will also need a temporary place to live—and the means to cover two separate, monthly housing payments—while building that new dwelling.

Realtor Rob Serbin of Glen Arbor weighs in: “The inventory for affordable houses is down. When they do come on the market, they’re fairly well scrutinized. And with the big box banks, there are delays, obstructions. I have a seller right now who has bent over backward … a buyer being asked for the same documents over and over …” He sounds frustrated at the four-week delay in getting a sale to the closing. “But local banks are so much better to deal with.”

Dealing with a bank, local or franchise, also presupposes that a home seeker has enough income to make payments. On one bank’s website, an example of a 30-year fixed mortgage of $120,000 with a 4.125 percent interest rate carries a “payout stream of $581.58 per month. This does not include a 20 percent down payment, points (if any), closing fees, or escrow fees for property taxes and insurance—the last two listed could add around $350 (at a guess) to the monthly payment. If using the formula of one-third of one’s monthly income going to housing costs, the buyer would need to earn at least $30,000 annually to afford a home. And while home ownership is not the answer for everybody, for a variety of reasons, many studies—including one by Habitat for Humanity International (which admittedly has skin in the game) have shown that home ownership benefits families and their communities in significant, multigenerational ways.

Ashlee Bartleson, volunteer coordinator for Habitat for Humanity-Grand Traverse Region, estimates that the ecumenical Christian housing nonprofit has helped over 100 families in Grand Traverse, Kalkaska and Leelanau since its start in 1986. She points out that Habitat is not a one-size-fits-all organization in terms of assisting people in need of homes.

“Each situation is tailored to the needs of partner-owners, and we make sure we have projects going in each of our [service] counties. Our Leelanau Task Force is made up of area churches; they do home repairs and rehabilitation. We just finished up a roof repair.” But for the next year or two, Habitat has no plans for new building in Leelanau. The Depot Neighborhood project in Traverse City will encompass 10 single-family, net-zero energy Habitat homes: “Three underway right now that will be finished in late September or early October. Then we’ll get the next two started—the really basic stuff,” like foundations, by the end of the year, in preparation for early spring of 2015. Meanwhile, the five-county HomeStretch housing nonprofit is working on grants to fund their portion of the Depot Neighborhood: five duplexes and one single-family townhouse to be sold to eligible families with 60-80 percent of the area’s Median Family Income of about $54,000.

With Habitat owners investing 275 hours of “sweat equity” and paying about $550/month mortgage payment, the program is far from a welfare handout, by any stretch of the imagination. To qualify, prospective homeowners must show stable income at or below 60 percent (or $32,400 in Leelanau) of their county’s MFI, and a paper trail of financial responsibility. They also must attend owner education and budgeting workshops; after all, the organization builds on its success in part, so to speak, by recycling regular, on-time mortgage payments to help fund the next generation of projects.

In central Leelanau’s Maple City, a planned unit development called Maplewood Commons sits largely empty, waiting for families to create the neighborhood community. Included as part of Kasson Township’s Master Plan for higher density residential housing near the existing village, it fell victim to the Great Recession, like so many other real estate ventures, and is slowly recovering. About a dozen houses lie scattered throughout, including four built in 2008 by Habitat volunteers and partner-homeowners.

Jim and Elaine Foster have lived in their Habitat home in Maple City for six years. The Korean War veteran, age 80, did two separate stints in the army, and worked as a delivery driver, newspaper route carrier, and postal service clerk. Prior to their move to Maple City, the couple had owned a trailer in Traverse City. Jim says, “It was a pretty nice trailer. I’d put all new windows in—a couple thousand dollars—and just about gotten that all paid off. I wanted to put a new roof over, to keep out all the leaks.” They applied to Habitat’s home repair program, and the organization came out to do an initial assessment.

“All it needed was a new roof, we thought, but they inspected the trailer and found black mold, so they couldn’t do the roof. So we got approved for a house,” Jim explains.

Elaine adds, “I called [the Habitat worker] because my husband wanted a house—I figured, before something happened, I wanted him to have a house.” Jim was in his early 70s at that time. Elaine continues: “People think, ’Oh, Habitat,’ that they give it to you. You have to attend meetings so many times, and work for it, put in so many hours. My husband helped build the house, but I’m handicapped, so they had me answering the office phone. You have to earn your way in.”

The three-bedroom house is modest and appears well built, and well cared for by its owners. “It’s held up,” Jim says. “A couple-three years ago, [Habitat] came out—they had a program to check the energy efficiency, and they added another layer of insulation up in the attic. I put in all the daylilies,” he says of the cheerful landscaping in the front yard. Hanging flower baskets grace the porch; clearly, the couple has invested emotionally as well as financially in their home.

Even so, “It’s lonesome out here,” Elaine says. Past the empty street, their living room window looks out to meadow views and the distant steeple of a church nestled in the treetops above the village. “I was hoping when they said it was in a subdivision, that it would have more families. I had six kids; I would have loved to see kids running around.”

Jim notes that, “As much as we have to go to the doctors in Traverse City, it’s a long drive,” especially in winter and with serious health issues for both. Elaine also feels that, “There’s nothing out here in Maple City,” and wonders if a larger grocery store and other year-round amenities would attract more people to build in their nascent community.

Increasingly, public policy planners nationwide have identified a trend known as “deconcentration,” where lower income and poor people receiving housing assistance are moved out of concentrated urban areas to more sparsely populated rural places. (Meanwhile, “effortless” urban living, as recently touted by one Traverse City housing developer, is marketed to more affluent consumers.) This trend’s origins were formed in post-World War Two housing shortages, gained some momentum during the late 1960s desegregation efforts. But the “less government” ideology of the Reagan era met its complement in what sociologist Janet Smith calls “the Democrats’ new, new federalism” under both Bushes and Clinton: “The common thread is the assumed benefits of concurrently scaling back the federal government’s involvement … while significantly increasing ‘local control.’”

Unintended consequences of these policies include disruption of familial and social safety networks, and diminished infrastructure and resources such as those described by the Fosters in Maple City, as well as more spent time and money on cars, gas, and food while traveling to access more distant services. Still, many people would choose a safer, more structurally sound housing arrangement farther from jobs, services and other daily necessities: ”If we were younger and had more energy, we would be fine,” with the extra commutes, affirm the Fosters.

At the local level, Leelanau County government has effectively dismantled nearly all of its housing initiatives, and is on record as being against involvement in the “housing business.” The primary job of the county’s Housing Manager, Diane Kiessel, involves repair and rehabilitation for residential home owners on their own land. At 20 hours a week, she is plenty busy helping residents, and says, “I love my job, I love it,” working with Michigan State Housing Development Authority (MSHDA), the Department of Veterans Affairs and the Northwest Michigan Community Action Agency to help identify and qualify applicants.

She explains a bit of the process: “We go out on inspection—maybe they want a roof, but they also need electrical, and MSHDA requires Uniform Physical Conditions Standards: in other words, the home must be brought up to standards of decent, safe, healthy. We bid specs and send out to contractors. Any contractor can participate; we have a pool of those who are interested in bidding. Our housing review committee awards the bid to the most appropriate contractor, and the work begins.” The work of the Housing Department is not free, either: rather, it’s a low or no-interest loan, often in the form of a second mortgage. “We see a lot of single moms, seniors/retirees and widows,” Kiessel says.

Although the county is now “out” of the housing business, it still must, by law, administer the remainder of the 30-year mortgages on eight townhouses in Lake Leelanau it built in the 1990s with the now-shuttered REACH group. Otherwise, they lose MSHDA monies that would instead go to another unit of government administering Leelanau’s loans. (Other homes that were built in Suttons Bay, Northport and Empire have passed into private ownership.)

As the population of Leelanau continues to age, and more and more working age, middle-class people are priced out of living in “the land of delight,” perhaps community members need to rethink and revision its direction. Models such as the Grand Traverse Band, Habitat for Humanity, HomeStretch, the Empire Townhouses, and the collaborative efforts of private and government parties could catalyze positive, long-term change.