Editor's note: This story is part of Southwest Michigan Second Wave's On the Ground Northside series.
There’s a lot of talk in Kalamazoo and across the country about affordable housing. And there’s a side conversation about compelling developers to build it, a Kalamazoo man says.
But there’s no way to make a developer produce affordable housing, says that local businessman and developer Jon Durham. “And that isn’t because you can’t,” he says. “It’s just not economically feasible to do.”
There is a huge gap between what it costs to build housing for people with very limited incomes and the money needed to make it feasible based on costs and the rental rates that may be charged, he says. But more affordable housing could be built he says if multiple parties agree to work together.
“You need everyone participating,” Durham says. “You need the city. You need the state. You need local philanthropy and you just need everyone working together.”
Garrett Seybert, left, and Jon Durham, right, sit in the lobby area of the Harrison Circle Apartments at 525 E. Ransom St. They are two of the four developers of the residential/commercial project.
Durham is a partner in the creation and ownership of the recently completed Harrison Circle Apartments at North Harrison and East Ransom streets in the River’s Edge District just north and east of downtown Kalamazoo. With 64 of its 80 apartment units to be leased to income-qualified tenants, it is considered affordable. And with 35 percent of its units renting from $363 to $509 it is affordable when compared to the median cost of renting a local apartment of $825 cited by some
Ground was broken on the $18 million, residential and commercial project on July 1, 2020 and tenants began moving in on Aug. 14, 2021.
“Affordable” housing is considered residential space priced at a rate that low- to moderate-income earners can afford. In terms of local housing, they are individuals or families who earn less than 60 percent of the Area Median Income. That 60 percent mark was $16,250 for an individual in Kalamazoo County in May and $26,500 for a household of four, according to the Michigan State Housing Development Authority.
“The other part of that,” Durham says of building affordable housing, “is philanthropy needs to come to the table.”
He suggests that philanthropic organizations and individuals become partners with for-profit developers to help make it happen.
Charitable foundations, which are often restricted by guidelines from their donors and the IRS, generally limit work with for-profits, he says. They look at the money a for-profit could make on such a project and don't want to be perceived as subsidizing that, he says. They want to give to non-profit organizations. He says those agencies do a great job with the human services work they do, but, "They are not the ones who should own and operate projects (like the Harrison Circle Apartments) because their boards come and they go. This is a big deal to run. It is so much harder (to run) than any of our market-rate projects (those priced to rent at whatever level the market will bear).”
Many apartments at Harrison Circle have balconies.
Garrett Seybert of PS Equities, a Mount Pleasant-based specialist in developing affordable housing projects, says there is also a thin line of revenues that needs to be maximized “otherwise the project will start slipping.”
PS Equities is a for-profit company. But Seybert says the financial agreements it needs to structure to make an affordable housing project viable are less lucrative than market-rate projects, and the return on investment takes longer.
Seybert and his father Phil Seybert are partners in the development of Harrison Circle Apartments with Durham and his partners Kalamazooans Mac Waldorf and Jerry Harty. They operate as a limited liability corporation called Harrison Circle LDHA-LP (Limited Dividend Housing Association-Limited Partnership).
While PS Equities develops some market-rate housing, Seybert says his father’s specialty since 1986 has been affordable housing in smaller towns – particularly places that provide the elderly a way to stay in their communities after they can’t maintain a house or have no place else to go, he says.
Seybert describes the Harrison Circle Apartments as a quality, sustainable, affordable, mixed-used development that is located in a welcoming portion of the east side of downtown Kalamazoo.
Shown here is part of the lobby of Harrison Circle Apartments.
He says “affordable” housing projects typically need funding from the Michigan State Housing and Development Authority as well as monies from other sources. Requesting that funding is a competitive process, he says, “So you have to have years of experience, knowledge, and know-how to work that.”
“Even just down to the scoring on the applications, you need experience,” says Seybert. “They’re very, very complicated deals and it takes experience. And it’s unfortunate because it can be discouraging for other people but it’s just one of those things where there are so many moving parts, so many people involved and so much money involved that it really does take someone skilled who has done it for that long to do it.”
Funding for the Harrison Circle Apartments included: support through the City of Kalamazoo’s PILOT (Payments in Lieu of Taxes) Program; a $300,000 grant from EGLE the (Michigan Department of Environment, Great Lakes & Energy) to help ameliorate contamination on the site; $1.1 million from MSHDA; and a $1.3 million grant from a family in Kalamazoo to allow the building to be made in precast concrete, to hopefully make it longer-lasting. Seybert and Durham say the generous family worked with intermediaries and they don’t know who they are.
“We need to work together as a community in Kalamazoo to get to ‘Yes’ on a project like this,” Durham says.
Here is a look inside a two-bedroom apartment at Harrison Circle Apartments.
The five-story Harrison Circle Apartments structure is located on a parcel of unused land that was once occupied by a gas station. It has an energy-efficient heating and cooling system and is LEED Silver certified. It has ground-level commercial space and four upper-level floors with 80 apartment units.
The apartments range in size from about 550 square feet to 1,143 square feet. Each has an “industrial modern” interior, with high ceilings and precast concrete floors and walls. Each has an in-unit clothes washer and dryer, a full array of kitchen appliances, and a balcony walk-out. Monthly rents range from just over $300 to about $2,100. Sixty-four of the building’s 80 units are being leased based on prospective tenants’ income level, compared to the Area Median Income.
• Tenants whose income puts them at 30 percent of the Area Median Income, pay about $363 per month. There are 16 one-bedroom units at that rate.
• Tenants whose incomes put them at 40 percent of the AMI, pay $509 per month for a one-bedroom units. There are 12 units at that rate.
• Those at 60 percent of AMI can expect to pay $799. There are 10 of those units.
• Those at 80 percent of AMI, which is considered the workforce housing rate (a person earning about $43,000 per year) can expect to pay about $1,000. There are 26 of those units (including 24 one-bedroom units and two two-bedroom units). Entering the last week of September 2021 there were 20 apartment units remaining to be leased.
• Those matching or exceeding the AMI can expect to pay monthly rent of up to $2,100. There are 15 one-bedroom units and one two-bedroom units available to them.
Two businesses are expected to open on the ground level of the building by mid-November.
Walnut & Park Coffee Shop, which opened in March of 2017 at Walnut and Park streets just south of downtown Kalamazoo, will open its second location in about 1,051 square feet of space at the easternmost part of the building. The business, which is a project of the Kalamazoo Probation Enhancement Program, employs men and women who are participants in KPEP’s Culinary Arts program. It is a nonprofit rehabilitation program for criminal offenders, parolees and probationers.
Start-up micro-brewery Brewery Outre (meaning unusual and startling) is set to use about 2,320 square feet of adjacent space on the ground level. The brewery and taproom is to be owned and operated by Ted Linabury, a Mattawan native who has been using Michigan-grown ingredients to produce specialty beers since 2017 as a “virtual” brewery. To this point, the business has not owned its own brewery. Linabury has partnered with American Brewer Inc. to produce its beers and sell them at festivals and stores.
The apartments at Harrison Circle increase the total number of housing units built in the city’s River’s Edge District by Durham and his partners in NoMi Developers LLC to 137. That includes five at the Norbridge Building just west of Harrison Circle (built in 2014), five in the Life Stories Building just north of the new apartments (built in 2011), and 47 at Walbridge Commons, which is immediately north of them all (built in 2016). Each includes some space for commercial uses. Seventeen of the residential units in Walbridge Commons are affordably priced “micro” apartments. They are 400-square-foot efficiencies priced to be affordable to area workers.
The Brewery Outre and Walnut & Park coffee shop are on the ground-floor of Harrison Circle Apartments.
What's on the horizon?
Durham says it is particularly appealing for him to bring more affordable housing to the River’s Edge area, which is officially a part of Kalamazoo’s Northside Neighborhood. He says he felt the area has too many market-rate apartment units and “Being in the Northside Neighborhood, I think to be a respectful community, we needed to figure out a way to bring more affordable housing,” Durham says.
He says there are people in Kalamazoo who are looking to make that happen “and there’s a big movement to make it happen. It's just a matter of – it needs to happen.”
He says more residential development for people over age 55 is planned. Working as 530 Rose LDHA-LP, he, Seybert and others plan to convert what is now a parking lot at 530 N. Rose St. into residential housing for people 55 and older. The partnership has received low-income tax credits for the project, which is expected to be a five-story, 64-unit affordable residential development that will have four residential floors with parking on a lower level. They hope to break ground on that $12 million project on June 1 of 2022.
Shown here is a countertop inside Walnut & Park’s soon-to-open second location in Kalamazoo.
A back and forth experience
Durham says developing Harrison Circle was so difficult since he and the Seyberts began working on the project nearly five years ago that he thought he never wanted to do another project like it again.
“It was just draining,” he says, “with very little financial return in comparison to the overall work.”
But after he and his partners began helping tenants move into the building, set up Internet routers, and hang pictures, he says, “That’s kind of been the turning point for me." He says he realizes that the community needs more affordable housing options. He says, "People were getting emotional and saying they just really appreciate having a safe and stable place to live.”
The residential/commercial project Harrison Circle Apartments at 525 E. Ransom St.
He and Seybert say they have tenants who have, for years, moved from hotel to hotel or to and from the homes of family members and friends, living on the brink of homelessness. The apartment building has become the home of at least one student and a few senior citizens as well as residents from various walks of life, and a range of ethnicities. Durham describes the tenant mix as “just beautiful -- people that really, really need housing can afford to come in and pay rent every month and be a part of home. … Everyone in this building, I would say, has worked hard their whole life – whether it’s a market rate person who is plunking down $2,100 a month for a two-bedroom apartment or somebody that’s in a 30 percent of AMI unit.”
What does he see happening in the near future with residential development in Kalamazoo?
“There will be more market-rate (housing),” Durham says. “There’s no question because there’s definitely a need. You can see that from interest. The complicated thing is can we get more affordable housing built within the city and within the county?”
He says there are a lot of barriers to that. Among them is the idea that such developments are lower-quality places for poor people. And that causes a NIMBY attitude (“Not In My Back Yard”).
“I would say that affordable housing has a stigma,” Seybert says. But it should not. Done well, they should be properties where anyone would want to live.
“The reality is that what most people need to realize is that these are their neighbors already,” he says. “These are people who are serving them at restaurants. These are people who live in your community. They’re not like some outliers that you don’t want coming into your neighborhood where it would create enemies. Great people live here. Everybody deserves a nice place to live. Not everybody makes a good income. And that’s just what it comes down to.”
Photos by Fran Dwight. See more of her work here.