Going Up

Despite soaring materials and labor costs, new housing construction in the Ann Arbor area continues apace as affluent households, attracted by a plentiful job market and quality infrastructure, pour into the area. More than thirty developments are currently in various stages of construction in the city, with many more in the pipeline.

The biggest ones are high-rise apartments near the U-M’s Central Campus. The university has added 15,000 students in the last twenty years to reach an all-time record of 51,225 last fall—but its only new dorm, North Quad, has fewer than 500 beds. A dozen private high-rises, meanwhile, have added close to 4,000 beds, with almost 900 more under construction.

But according to city planning director Brett Lenart, not a single high-rise plan for downtown has been submitted since 2019. As developers warned in the 2021 Observer article “The Last High-Rises?,” city council’s attempt to require much more affordable housing in student high-rises instead made them financially unviable.

A consultant’s study released in February acknowledged the failure and outlined a range of possible fixes. But developers aren’t waiting: three are proposing plans for high-rises close to, but outside of, downtown zones.

All three are being proposed as “planned unit developments,” or PUDs. These are site-specific zonings with terms and requirements individually negotiated between the developer and the city, so it would be up to city council to decide how much, if any, affordable housing to require.

After seesawing back and forth between pro-change and pro-preservation factions during the 2010s, the pro-change forces led by mayor Christopher Taylor took complete control in the last election. If they approve one or more of the PUDs, that could presage even more seismic changes in the upcoming revision of the city’s comprehensive plan.

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This isn’t the first time the university’s growth has created an extreme housing shortage. After falling below 10,000 in WWII, enrollment doubled in the postwar years and tripled by the mid-1960s. Largely as a result, Ann Arbor’s population doubled between 1950 and 1970 to just over 100,000. City leaders at the time expected it would soon hit 150,000. Instead, at the end of last year the population was estimated to be about 126,000.

Growth slowed because the postwar expansion triggered a backlash. Neighboring townships started fighting Ann Arbor’s outward expansion, limiting the extension of water and sewer service and the denser neighborhoods they enable. And it “put a lot of stress on the city,” says former planning manager Wendy Rampson. When University Towers and Tower Plaza went up in the late 1960s, she says, “there was a huge outcry.” At the same time, “a lot of lovely old homes were being torn down” to build small apartments disparagingly known as “cash boxes.”

Council responded by tightening zoning downtown and creating historic districts there and in nearby neighborhoods. When she started at the city in 1984, Rampson recalls, “people I dealt with were primarily into preserving the character of Ann Arbor.”

Downtown added just a handful of major buildings between 1970 and 2000. But public sentiment began to change in the 2000s with a community-wide planning process called “Discovering Downtown Ann Arbor.” And redevelopment really took off at the end of the decade, when council passed a zoning overlay that simplified existing requirements and created the D1 high-rise and D2 mid-rise zones. Simultaneously, it created premiums that allowed developers of market-rate buildings to go taller if they included some affordable units.

The zoning changes and premiums accelerated construction of student high-rises. With the country coming out of the Great Recession, recalls former planning director Karen Hart, “nobody could get anything financed except these private dorms … so that’s what got built.”

What didn’t get built was much affordable housing. So in 2019, council amended the premiums to require more units for lower-income tenants. But developers concluded that they couldn’t build enough market-rate units with the bonus area to subsidize the affordable units required to earn them.

One of those developers is Howard Frehsee of Cerca Trova LLC, based in Bloomfield Hills. Frehsee points out that there is no one on city council with a business background who can cost out a building project. Construction is exorbitant today even without factoring in affordable housing. “If Subway sandwiches have increased 50 percent in price,” he says, “think about that effect on a big project.” Frehsee is currently developing a nineteen-story high-rise and a six-story mid-rise behind the Michigan Theater—a project he says would not have been possible under the current affordable housing requirements.

Last year, the city hired urban planning consulting firm Carlisle/Wortman Associates to evaluate the 2019 changes. Preliminary results presented in February confirmed that they weren’t working. Potential fixes, the firm wrote, include “eliminate the premiums entirely, increase the base density for the Downtown using the Transit Corridor as a template, maintain the premiums with a few tweaks, or a combination thereof.”

Ann Arbor housing commissioner Jennifer Hall questions whether affordable housing belongs in market-rate buildings at all. Despite a waitlist of 5,500, many of the affordable units in market-rate buildings sit empty. “From a big picture I think we are trying to get a square peg in a round hole by requiring high-end market-rate developments to include affordable units unless the developer also has experience developing and managing affordable housing,” says Hall. “There’s a difference between screening people out by having strict tenant screening requirements and expensive fees in addition to rent, and screening people in and welcoming tenants with lower incomes and lower credit scores.”

Councilmember Lisa Disch, D-1st Ward, sits on the planning commission. “One strength of Ann Arbor’s initiative to locate affordable housing on publicly owned properties is that these properties are centrally located and well integrated into the community,” she says. “This makes me less concerned about trying to figure out how to make it work well to successfully offer affordable housing units in market-rate developments.”

Disch adds that developer donations to the Affordable Housing Fund may be more useful. “Ms. Hall has stated a preference for payment in lieu, because she can make those dollars go farther by pairing them with grant money, and she can offer housing to those most vulnerable and most in need.”

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While the city reconsiders its affordable-housing strategy, market-rate developers are looking beyond downtown for opportunities.

The zoning limits on nearby neighborhoods are so strict that entire blocks have scarcely changed since the 1960s; most still forbid any building taller than thirty feet. But “I think the A2Zero [climate emissions] discussions really put people in a different frame of mind” about such limits, Rampson says. “We’ve learned more. We know that density is important to some of our sustainability and our carbon reduction goals … I think the tone is changing.”

A longtime development watcher who asked not to be named agrees. From “everything I’ve heard at council and working sessions,” this person says, “there’s an openness to considering” bigger buildings outside downtown.

Rampson adds that “the university also sets the tone by the development that they do.” The new dorm planned for Elbel Field, she says, “is not a high-rise, but it’s very, very dense. And everything that they’re building is very, very dense. So I think maybe there’s a tipping point where people are like, ‘Oh, it’s not a big deal anymore to have a tall building.’”

Another factor, she says, is that “Ann Arbor continually refreshes who’s here.” That means the upcoming decisions will be made by “a different group of people” from the preservation-minded activists who often prevailed in the 1970s and 1980s.

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The PUD farthest along in the review process is at 721 S. Forest, where Subtext Acquisitions wants to replace the 1960s-vintage Forest Place apartments with a 631-bed, eleven-story high-rise. Though the site has R4C zoning with a thirty-foot height limit, the developers argue that it is a natural extension of the much higher-density development along South University.

Planning staff recommended denying the PUD. The development watcher, however, expects council to make its own decision.

“Staff believes, arguably rightly, that they’re not policy makers,” this person says. “For better or worse, the master plan is stuck in the past, and they don’t feel comfortable recommending approval when [a plan is] not in conformance.”

A second PUD, on Church St. across from East Quad, started out as a fairly modest proposal to replace a small apartment building and some rental houses with townhouses. But campus landlord Zaki Alawi quickly withdrew that project—the planning watcher hears that, with construction and financing costs soaring, the numbers didn’t work—and sold the site to Austin-based developer LV Collective. It’s now proposing a nineteen-story student high-rise with 1,050 beds.

LV Collective representative Kristen Hendrix emails that the developer “specifically targeted this site given its location, with frontage on Church St., south of the existing South University retail and high-density residential area.” When the project first came before the planning commission, members agreed that it responded to an urgent need for more housing, but several questioned whether it would be more appropriate for the developer to request an extension of the D1 zoning that ends on Willard St. just north of the proposed site.

The third PUD plan is dubbed “5 Corners” for its location at the five-way intersection of Packard, State, and Arbor streets. Proposed by Wyoming-based developer Timberwolf, LLC, the six-to-fourteen-story, 494-bed building would replace eleven low-rise residential and commercial structures, including the one fronting Packard that’s currently occupied by Jack’s Hardware and Sushi Town.

Unlike the sites on Forest and Church, the area has commercial zoning with no maximum height, though it does have floor-area limits. Lenart says that in their pre-proposal meeting with the planning commission, the developers argued that “the businesses in that area were struggling …  and there was talk about how adding density might provide that area with an economic shot in the arm.”

Lenart says commission members were disappointed that the site didn’t include the Domino’s Pizza shop at the corner’s point, without which “the design seemed uninspiring.” But the development would have more open space than other high-rises, with a plaza on the State St. side that links up to adjoining Forsythe Park.

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Lenart acknowledges that considering PUDs ahead of the comprehensive plan may seem haphazard. But, he says, “we are not able to wave a magic wand and have these projects stay at bay during those conversations. So it will be a dynamic couple of years as we navigate” the proposals developers bring forward.

“We should encourage all levels of development,” says DDA board chair Tyler Kinley, vice president of local management and development company Praxis Properties. “Demand is increasing, and existing homes are rising in price because of lack of stock. More housing will bring down the pressure.” Referring to a satellite image of downtown, he adds, “The idea that Ann Arbor is full is wild. There are so many parking lots” that could be redeveloped.

Zoning changes in the next comprehensive plan could also make future PUDs unnecessary. Disch emails that the comprehensive process “provides an excellent opportunity for equitable public engagement around how to translate the principles and priorities like affordability and sustainability that Ann Arbor voters have identified in recent elections and millages into zoning.”

Lenart anticipates the possibility of far-reaching changes from the next plan. “Is the downtown what we envisioned it would be ten or twenty years ago?” he asks. “Market demand for housing could be realized as growth outside of the downtown core by extending the limits of the downtown, or it could be realized within the downtown core by re-envisioning what is allowable in terms of height limitations.”

Kinley hopes to facilitate what he calls “good faith” conversations during the rezoning process, although he isn’t overly optimistic. “What I’m worried about is that it will become entrenched warfare rather than a discussion,” he says. “Density advocates can’t dismiss nervousness about losing a sense of place. And it’s not fair for the other side to say, ‘I don’t think Ann Arbor should change,’ because it is changing. And the change can lead to more affordability.”