For years, when Michigan politicians talked about the state’s housing problem, they were referring to a surplus: too many run-down houses, stripped of valuable copper, sitting empty and blighting neighborhoods. Now the message has flipped. In her State of the State address this year, Gov. Gretchen Whitmer lamented the housing shortage and landed one of her biggest applause lines with, “The rent is too damn high, and we don’t have enough damn housing. So our response is simple: ‘Build, baby, build!”
If you want to know what the housing crisis for middle-income Americans looks like in 2024, spend some time in Michigan. The surplus-to-shortage whipsaw here is a mitten-shaped miniature of what the entire country has gone through.
I’ve been writing about housing and the economy for two decades, and have watched as the nation’s housing market has made the journey from boom to bust to deficit, seemingly without pausing for a normal middle. There are lots of reasons this happened, but they center on a big one: the late-2000s housing bust, which the country has never fully recovered from. Or as Ali Wolf, chief economist at Zonda, a data and consulting firm, put it: “The Great Recession broke the U.S. housing market.”
At first, rapidly rising housing costs seemed like a regional problem. It made sense that places like San Francisco, which was already expensive, filled with well-paid tech workers and hamstrung by stringent building regulations, would be in crisis. Much of the rest of the country was still affordable, however, so high-cost “superstar cities” were seen as an exception instead of a warning.
Now California’s problem is everywhere. Double-income couples with good jobs are priced out of homeownership in Spokane, Wash. Homeless encampments sprawl in Phoenix. The rent is too damn high in Kalamazoo.
The housing crisis has moved from blue states to red states, and large metro areas to rural towns. In a time of extreme polarization, the too-high cost of housing and its attendant social problems are among the few things Americans truly share. That and a growing rage about the country’s inability to fix it.
So a few weeks ago I flew from California (where I live) to Michigan — from where the housing shortage started to where it’s going. I spent most of my time in Kalamazoo County, a region of 261,000 people in the southwest part of the state. It’s a good place to see how all of America, not just coastal cities, got into a housing crunch, and offers a look at some of the efforts to get out of it.
Like Detroit, Kalamazoo got walloped by a foreclosure crisis in the early 2010s that left many of its neighborhoods with overgrown lots where ramshackle houses had been bulldozed. And like virtually every other city I’ve written about, its housing problems first appeared among lower-income families, then climbed steadily up to those considered solidly middle class.
As affordability problems have moved up the income ladder, both Kalamazoo County and the state have expanded their aid programs to include households that had previously made too much money to qualify for subsidized housing. It’s part of a nationwide shift in which housing assistance has moved from an anti-poverty focus to what is increasingly looking like a middle-class support program. Those ideas now permeate Vice President Kamala Harris’s housing plan, which calls for assistance both for first-time home buyers and developers who build housing for them.
The idea of a truly free housing market, where private developers work to satisfy the demands of families that acquire homes through their own grit, has always been a fiction. From the G.I. Bill to government-backed mortgages to the generous tax breaks afforded homeowners and developers, housing is one of the most subsidized sectors of the economy — arguably the single most, if you consider that land derives much of its value from its proximity to public services like roads, parks and schools.
Even with all that, housing costs have ballooned so much that governments of all sizes have decided that a broader and more direct form of aid is needed. They are putting money into private developers and expanding subsidies to middle-class families that make more than six figures. These initiatives are frequently wrapped in euphemisms, like “work force housing,” that suggest middle-income assistance is conceptually different from welfare for the poor.
It isn’t; it’s just a different shade of the same problem. Which is that Americans’ wages have fallen so far behind the cost of living that each day more and more families — blue collar and professional, in expensive coastal cities and smaller Midwestern ones — find they simply cannot afford a place to live.
“Debates about whether supporting a family making over $100,000 is appropriate were debates we used to have in very few places in this country — New York, San Francisco,” said Shaun Donovan, chief executive of Enterprise Community Partners and head of the U.S. Department of Urban Development during the Obama administration. “They’re now happening almost everywhere, which is fundamentally different from anything I’ve seen in my 30 years working in housing.”
The lure of a place like Kalamazoo
Whenever I write about California’s housing troubles — the $5,000-a-month studio apartments, the mile-long homeless camps — I get a certain kind of cranky email. The sender, whom I imagine to be an older homeowner with a paid-off mortgage, asks why all these people struggling with housing can’t move somewhere cheaper. Like Michigan.
In fact, this is exactly what people have been doing. Economic migration used to mean moving to a fast-growing city for a better-paying job. Now finding shelter has become so onerous that housing costs are one of the major reasons people move, leaving good job markets for places with a lower cost of living, according to the economists Peter Ganong and Daniel Shoag.
Willa DiTaranto can tell you why that is only a partial solution.
Willa is one of the first people I met in Kalamazoo. She and her husband, Jim, moved there eight years ago. They had been living in Philadelphia and paying $1,300 a month in rent plus $1,000 a month in student loans. Then they had a baby. They wanted to buy a house and have more children but couldn’t afford a place in any of the neighborhoods they liked. They started looking out of state.
Jim DiTaranto, a physician assistant, was making about $90,000 a year in Philadelphia, and could earn just over six figures in Kalamazoo, where health care workers were in demand. According to a cost-of-living calculator Ms. DiTaranto found online, his new salary would be worth something like $170,000 in Kalamazoo.
And if they lived in the city proper they could take advantage of the Kalamazoo Promise, a local foundation that pays for four years of college in Michigan for graduates of Kalamazoo public schools.
Putting it all together — the cheaper cost of living, not having to pay for college, the chance to spare their children future student debt — the DiTarantos decided it made sense to move to Kalamazoo, a city Ms. DiTaranto had visited as a child. In 2016 they paid $170,000 for a three-bedroom house. Later, they were able to buy an investment property. A well-timed relocation enabled them to go from landless renters to landlords.
“It felt like such a big fresh start,” Ms. DiTaranto said. “We found out we were pregnant with our second child the day before our offer got accepted. If we were still living in our rental house in Philly it would have been scary. Instead it was really exciting.”
When the DiTarantos arrived in Michigan, housing was already a huge issue in many of the nation’s highest-cost cities. And there were signs that housing problems were migrating with them.
In 2015, the year before the DiTarantos arrived, Kalamazoo County residents passed a new tax to help homeless families find permanent housing. But in the years since, the county had a harder time finding affordable places to relocate the families, and the rents for families it was able to help were rising so fast that the program had to direct more money toward keeping them housed.
During the Covid-19 pandemic, the coastal affordable-housing problem went national. The ability to work from home turned cities like Boise, Idaho, into some of the nation’s hottest housing markets, while ultralow interest rates fomented a buying and refinancing boom that raised prices even further.
Kalamazoo County’s home prices have risen around 40 percent since the pandemic, and rent prices even further. In 2020, residents voted to replace the 2015 homeless housing tax with a bigger and broader program. This time the fund, called Homes for All, which takes in about $8 million a year, would help the poorest of the poor while also encouraging developers to build homes for middle-class people like teachers and government workers.
Since they moved to Kalamazoo, the DiTarantos’ home has doubled in value. And last year, after their third child entered school, Ms. DiTaranto went back to work. She took a position with the Kalamazoo County Housing Department, where her job is to figure out how to make housing more accessible for families that weren’t lucky enough to buy when hers did.
“As a homeowner I’m like, ‘Woo-hoo my value is going up,’” she told me. “And then I’m trying to solve the reverse problem, which is nobody can afford a house.”
The final stop in the housing crisis
For decades, it was possible to live comfortably in Kalamazoo if you were middle class. When I say middle class, I don’t mean the $150,000-a-year professionals who call themselves middle class in New York, but someone like Barbara Tackett-Denney, a 67-year-old home health aide whose household income is $65,000 a year, right around the median for Kalamazoo.
Ms. Tackett-Denney, who goes by Barb, lives with her husband, Henry Denney. His job, working in a factory that makes parts for hospital beds, accounts for most of the couple’s income. Until recently, the Denneys lived in a two-bedroom apartment in a century-old duplex with knob-and-tube electrical wiring so unreliable that Ms. Tackett-Denney had to coordinate with neighbors on who was going to use what appliances when.
The rent, though, was only $630 a month.
They had enough left over to make two car payments, eat at restaurants regularly and never stress over the cost of a movie ticket. They were even able to save.
The Denneys had lived in the same place for a decade and hadn’t noticed the steep rise in local rents. When their landlord told them that he was selling the building, they found nothing they could afford.
“It was a culture shock right away,” Ms. Tackett-Denney said.
The problem for the Denneys and millions of other renters is that they are searching for homes that were never built.
In the years leading up to the Great Recession, homebuilders were starting about two million homes a year. That number plunged during the crisis and never fully rebounded. Builders have since started an average of about 1.1 million new homes a year — far below the 1.6 million needed to keep up with population growth. The nation’s housing shortfall is now between 1.5 million and 5.5 million units, depending on the estimate.
That deficit makes everything tighter. And it means that whenever there’s a jump in housing demand — like when millennials entered the housing market in large numbers in the early 2010s, or when families shifted to bigger homes during the pandemic — it sparks against the metal of an underlying lack of supply.
More housing is the solution. And for the past decade a growing “Yes in my backyard” (YIMBY) movement has pushed both red and blue states to loosen the building, zoning and environmental regulations that make housing more difficult and costly to build. Since 2018, states including California, Oregon and Montana have passed laws that allow for duplexes and small apartment buildings in formerly single-family-home neighborhoods.
Looser zoning and land use laws will be central to any lasting solution to the nation’s housing crisis, especially in urban areas. In Kalamazoo, new downtown apartments and townhouses helped revive its urban core.
Still, much of the nation’s housing shortage has little to do with a lack of high-density housing in cities. It’s also that builders aren’t putting up suburban subdivisions at the rate they once did.
For one thing, developers everywhere find it harder to raise money, and homeowners find it harder to get loans. That’s because banks and the government, in a quest to prevent another housing bubble, have raised lending standards and made mortgages harder to get.
Builders have also become more cautious since the 2008 crisis. Many moved away from off-the-shelf (“on spec”) homes, and now they prefer that customers pay for properties before they’re built.
Land developers — companies that take a piece of dirt and add basic infrastructure like streets, plumbing and power, creating the lots where new homes are built — have also cut back. The number of vacant developed lots, or places where a homebuilder could start construction tomorrow, is still 40 percent below its pre-Great Recession level, said Ms. Wolf of Zonda.
Which is to say that the results of big changes that cities and states have made will play out over decades, and people like Ms. Tackett-Denney are struggling now.
Homes like the Denneys’ former duplex are what housing wonks call “naturally occurring affordable housing,” which is a polite way of saying places that are cheap because they are old and not very nice. They’re a huge piece of the affordability puzzle.
What has happened in Kalamazoo and elsewhere is that many of these older, cheaper units have either fallen into uninhabitable disrepair or been sold to investors who rehab them and raise the rents. Rehabs like that are necessary — even Ms. Tackett-Denney will tell you that her place was a dump — especially in Michigan, where close to half the housing stock was built before 1970. But because so little has been built since 2009, there is less “new” old housing to replace places that are naturally affordable, and the market pushes renters into much more expensive homes.
Thus, after weeks of searching for a new place, the Denneys landed in a $1,500 three bedroom in a manufactured home. They no longer eat out, save or go to the movies, because so much more of their money goes to rent.
Middle-income renters have seen their rental burdens grow rapidly over the past two decades, according to a recent analysis of census data by the Joint Center for Housing Studies at Harvard. Of course, poor people face more-severe rent burdens than middle-income renters, and their lives are more precarious, something Ms. Tackett-Denney acknowledged when she told me that she knew things weren’t as bad for her as they were for others. There are, of course, people who are homeless.
“It just kind of sucks,” she said.
“Sucks but not homeless” is a pretty good summation of the ordinary pain the housing crisis has caused. It sucks to feel that you can’t afford to do anything fun. It sucks to live with family when you want your own apartment. It sucks to leave a high-cost city where you began your career because you can’t afford to buy there. It also sucks when people from high-cost cities flee to your low-cost city.
For all its housing price inflation, Kalamazoo is still so much cheaper than other parts of the country that it was recently named one of America’s most affordable cities for professionals. A darker way of putting it is that Kalamazoo is the final stop in the housing crisis. And that’s the problem with being a place where people move to feel richer: Those who get priced out have no place left to go.
Building for the middle class
“So the market is not working,” Mary Balkema said as she drove me through Kalamazoo’s impoverished north side. And if you want the market to work, she continued, the government has to be the catalyst.
“They come in and the private sector follows up,” she said.
Ms. Balkema is a lifetime Republican who runs Kalamazoo County’s Housing Department, which was created in 2020 to administer the county’s new affordable housing tax. (She’s also Ms. DiTaranto’s boss.) On a recent afternoon she took me on a tour of money-losing developments to illustrate the upside-down math of affordable housing.
We drove through single-story neighborhoods with a lot of tattered roofs and leaning porches, and, now and then, a lovely brick home with a flower garden and American flag. Ms. Balkema’s routine was to stop in front of a new house and quiz me on the difference between what it cost to build and what it eventually sold for. The answer was usually a loss of around a hundred thousand dollars — filled in with government and nonprofit funds.
In lower-income neighborhoods like the ones we were driving through, the market generally doesn’t work. That’s why federal housing programs like rental vouchers and low-income housing tax credits exist: They subsidize developers and landlords so they can profit while renting to tenants who can’t afford market rates.
The idea that’s encoded in these subsidies, and American culture, is that private builders and landlords should provide housing for most people while the public sector reserves assistance for a relatively small group of low-income families.
Now the market isn’t working for middle-class people, either. High interest rates have added hundreds of dollars a month to mortgage payments. The cost of building materials has risen about 40 percent since 2020, which along with rising land and labor costs has pushed builders further away from starter homes.
So in Michigan, government is essentially paying developers to build for the middle band. Over the past two years, both the State Legislature and state housing agency have expanded developer subsidies for housing at all price levels and tacked on extra incentives for work force housing for the middle class (including a law that vastly decreases property taxes on new rental projects with below-market-rate housing).
Perhaps more significant, the state has raised the income limit to live in that housing. Now, households making 120 percent of their area median income can qualify, up from 80 percent previously.
Kalamazoo County is augmenting these programs with its own taxpayer money.
Ms. Balkema’s department recently put $3 million from its affordable housing fund, plus $100,000 in down payment assistance, into a 44-unit single-family-home project in Portage, which is Kalamazoo’s wealthier neighbor. Portage officials refer to the project as “attainable” instead of “affordable” housing, and renderings portray a typically suburban neighborhood with side-by-side homes near a park. The current income limit to buy a house there is $121,000 for a family four, which is 120 percent of the area median income.
In response to such projects, several members of the Kalamazoo County Commission have recently said they want the affordable housing fund to focus more on lower-income residents. Peter Dame, chief development officer for Portage, had a related fear, which is that the need for middle-class subsidies might never go away.
It wasn’t so long ago, Mr. Dame told me, that developers in Portage made money building housing for the kind of people who will live in the new subsidized project. Now a good amount of his job consists of having developers tell him that the financials on their next project have blown up and they need help.
“Every project that’s coming forward now is asking for some level of government assistance,” he said.
‘There’s no middle class anymore’
Zach and Jasmine McGowen were touring their new rental home with their three children, imagining how it would be to live there. Jasmine held the baby while their school-aged daughters zipped from room to room hatching plans. Outside, workers seeded their lawn while a crane next door hoisted a future neighbor’s door frame into place.
“We can hide in here,” one of the girls said as she opened an empty closet.
The McGowens’ house is in White Cloud, a rural city of 1,500 about an hour north of Grand Rapids, where the few local businesses include a funeral home and a fireworks depot. There are no Starbucks or condominium towers. The housing crisis is here all the same.
I met the McGowen family as they were getting ready to move into a house built by Allen Edwin Homes, one of the largest builders in Michigan.
Two years ago, Allen Edwin created a work force housing division that is using several of the state’s new housing programs to build below-market-rate homes for middle-class families. Brian Farkas, the company’s director of work force housing, said the division was one of the company’s fastest growing and was on pace to build about 100 subsidized rental homes this year, out of the 900 or so units the company builds annually (most of which are market-rate projects for purchase).
The McGowens’ new place was one of them: a single-family house with three bedrooms for $1,700 a month that sat along a wooded hill and was one of eight new homes Allen Edwin was building.
The McGowens had been living in Zach’s parents’ home in a basement, where the children had a three-tier bunk bed next to their parents’ bed. They had applied for other rentals but always seemed to be at the end of a long line of eager tenants. When Ms. McGowen got the call that they qualified for the Allen Edwin house, she cried.
There was still a wrinkle that made the whole thing feel humbling. To qualify for the house, the family’s income had to be under $98,000 a year, and when they applied they made slightly over that.
In any other context, this would be a reason to rejoice. Standing in the garage after the tour, Mr. McGowen, a mechanical engineer, told me they recently eclipsed six figures for the first time in their lives. And yet here they were being told, essentially, that they were doing too well to live in the one place they’d managed to get close to securing.
Mr. McGowen said he and his wife talked about whether she should quit her part-time job so they could get under the income limit. The idea soon became moot: Later that year the limits for affordable housing were raised. They got the house.
The hiccup stuck with them. The idea that they would try to make less money to qualify for a public program. That housing was now so unattainable that six figures qualified them for assistance. They were overjoyed to get the house, but the experience still burned.
“It’s like there’s no middle class anymore,” Mr. McGowen said.
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