DTWNews

Ann Arbor, Michigan is reportedly building hundreds of housing units for the downtown area of the city. However, a new market study shows that there will be demand for 1,800 additional housing units by 2019, as well as 90,000 to 100,00 square feet of new office space. These figures are based on job growth projections and other factors in the area, including a growing tech hub. However, while seeming to indicate economic progress, the report cautions that the demand is causing rising housing prices, which are forcing low-income workers out of the area

The market study, conducted by 4ward Planning Inc. and released by the Downtown Development Authority, identifies several factors as causes of the increasing demand for housing: these include strong population growth, an increase in non-family households, a diversifying housing market, a strong rental market, increasing retail demand, and rising employment and salary offerings. Overall, the report indicates that the need for additional housing is largely due to good economic conditions. However, if additional space is not created or found, this demand and value could vanish.

Since 2010, around 620 new apartments and condos have been built in downtown Anne Arbor, creating an estimated 1,440 new residents in the four years since, a 40% increase in the local population. While the rest of the city and other local downtown areas have demonstrated weaker growth rates, Ann Arbor’s downtown population is now projected to rise by an additional 55% by 2019. Like the rest of the nation, this increase has and will continue to consist of mostly non-family households or single residents. This has the potential to create an even longer-lasting housing trend, as these nontraditional households include a variety of age groups, including retirees, and income levels.

However, worryingly, household incomes over $100,000 are expected to grow the fastest in downtown Ann Arbor, matching reports that housing and rent prices in the area are steadily increasing. Currently, 69% of households in downtown Ann Arbor earn less than $35,000 a year, making it unlikely that residents will be unable to stay in the area as rent prices rise to as much as $1,500 a month for a one bedroom apartment.

If Ann Arbor can meet demand by adding housing options to the downtown area, the city could benefit in a number of ways. The area has indicated increasing retail demand, with the average downtown household spend around 46% on retail goods and restaurants, but that most sales come from the larger metro area. As more people look to enter the area, particularly older crowds, local businesses can expect to increase their services significantly. Moreover, with more businesses have already moved to the area to take advantage of the growing professional, scientific and technology sectors, employment rates and earnings have likewise increased, increasing average salaries for the area. This creates a unique opportunity for the city to attract workers to the area and further improve the local economy.

With these potential consequences and benefits, it remains to be seen if Ann Arbor will be able to meet demands for additional housing and office spaces by 2019. Currently, construction costs in the area are considered similar to the national average and should not act as obvious barriers to downtown building. However, with the quick rate at which these changes are occurring, it may not be possible for the city to construct the necessary spaces in time to prevent lower income households from leaving the area.