Our editorial: Encourage diversity without mandates

The Detroit News

All of Detroit, including its reviving downtown district, should reflect the racial and economic diversity of the city. That requires a diversity of housing stock throughout the city, and officials are right to worry that the hottest neighborhoods don’t become void of affordable homes and apartments.

There’s no shortage of low-cost housing in the city — the average rent is $702 a month and there are 389 low income housing apartment complexes, with 26,959 units, according to Affordable Housing Online.

The issue is how much of that housing is in or near the central city, where there are a concentration of jobs for workers across the income range.

Given the dismal state of public transportation in the city, it is essential that the service workers employed downtown can find housing they can afford near their jobs.

There’s a right way to meet that goal and a wrong way. The Detroit City Council is on a path to get it very wrong.

The council held public hearings this week on a “housing inclusion” ordinance offered by Councilwoman Mary Sheffield, who has made this a personal priority.

Sheffield’s ordinance would mandate that every apartment building, condo and townhouse complex that goes up with assistance from the city — tax increment financing, credits and other subsidies — contain a specific percentage of units attainable by those living below the median income.

Again, the goal is admirable, the approach misguided. And while it may seem like a simple demand — just add a floor or two of cheaper housing to every apartment tower — it has the potential to add so much cost that developers may pass on the project altogether.

There is a great demand for new housing downtown, and yet developers are not rushing in at break-neck speed to meet it. The reason? Construction costs are still greater than the rents the new housing units can command, sometimes by as much as one-third.

The gap is closing, but the reality is that apartments, condos and houses can not yet be built at market rate. That’s why the developments require the various credits and subsidies.

Demanding that projects designed to command high rents offer units on the lower end of rent scale would further distort the cost/return ratio.

The better approach is to plan development downtown and in other popular neighborhoods, such as Corktown and Midtown so that every district contains a mixture of housing choices, from low-end to luxury.

They don’t all have to be in the same building, nor should they be. Nor should the low-rent housing be relegated to isolated pockets. Adding buildings designed and constructed at a cost to make them more affordable to renters throughout the downtown footprint is what the City Council should be seeking.

The city gets the same benefits of economic diversity, without distorting the market. That’s a softer touch that accomplishes the same goal of affordable housing integrated seamlessly into each neighborhood.

That’s the approach Bedrock is taking with its plan to include 700 affordable housing units in mixed used developments downtown that were announced earlier this summer.

The council’s goal should be fostering diversity in downtown housing without making it so costly to meet strict mandates that it drives away investment, leaving the city with fewer housing choices for everyone.