Whitmer’s order to speed permitting may help housing developers, but other hurdles remain

By Rachel Watson, Crain’s Grand Rapids Business

GRAND RAPIDS, MI — The state is targeting faster permitting as one way to expedite housing projects, but local developers say more significant hurdles stand in the way of construction timetables.

Gov. Gretchen Whitmer this month signed an executive directive to speed up and make clearer the state’s permitting process to help projects of all kinds — housing, community revitalization, manufacturing, clean energy, road construction and water protection — “get done on time and at cost.”

With the exception of a few departments not covered by the directive, each state agency that issues permits now has 90 days as of Aug. 3 to compile a report listing the permits it issues, including type, length, legal authority governing how quickly the permit must be processed, analysis of the time needed to promptly handle it, and a list of any permits that are unnecessary or obsolete.

Whitmer’s office will then set recommended times for processing applications for each permit type, which will be made publicly available. When state departments or agencies exceed the recommended time, they must waive or refund the full application fee “to the extent permitted by law,” according to the directive.

“This will boost accountability from the state and boost confidence for individuals and organizations seeking a permit with the state,” Whitmer wrote in the directive.

Zoning hurdles

Local housing developers said they see the news as an encouraging sign that government leaders are prioritizing ways to cut red tape amid a historic housing shortage.

“Anything we can do to improve the entitlement and permitting process is a win and a step toward making projects happen and happen faster,” said Kurtis Fritz, director of construction in the multi-unit residential market for Kentwood-based Wolverine Building Group Inc.

But Fritz added that in all the multifamily housing projects he’s worked on since joining Wolverine five years ago, “state-level permits are rarely the issue.”

Instead, he said developments tend to get bogged down at the local level with zoning barriers like density and building height strictures, streetscape and facade requirements, parking minimums, and traffic considerations.

“All those things are challenges for us through the process that tend to slow it down because you have competing interests, and no one’s wrong,” he said. “It’s just how do we get all those to align, so that we can streamline the process?”

Fritz said Wolverine currently has about 1,500 multifamily units either under construction or in the pipeline across about 18 projects in Michigan. He said local hurdles can arise in any municipality.

“Everyone has their sticking points in different locations,” he said. “I would say it’s across the board.”

The nonprofit Housing Next was founded in 2017 to eliminate barriers to housing development across all price points in Ottawa County and last year expanded into Kent County. The group is currently accepting applicants for a $500,000 grant program funded from Kent County’s American Rescue Plan Act appropriation that will reimburse local governments for the cost of amending their housing ordinances.

“The things that Housing Next (is) focused on that have been really positive are just the zoning requirements and trying to inject more flexibility into those so that we can navigate that process quicker,” Fritz said. “That’s where I see the most opportunity to improve and streamline the process, is to align all of those requirements and allow our local governments more flexibility — more options to deviate from what they’ve historically been rigid on.”

Fritz said one example he’d like to see local governments allow in their zoning codes is the ability to put housing of all kinds — townhomes, apartments, condominiums, accessory dwelling units and single-family — in any location.

Jeremy DeRoo is executive director of the nonprofit Dwelling Place of Grand Rapids, which develops, owns and manages affordable housing in Grand Rapids, Muskegon Heights, Holland and a few other rural communities in West Michigan.

He said the nonprofit has identified additional places where it would like to build housing but it doesn’t because the zoning ordinances are not friendly to multifamily development. He declined to name specific municipalities.

“The most common (obstacle) is communities have minimum lot sizes, that homes have to be an acre of land in order to build on. It makes it very, very difficult to build affordable housing in a community like that,” he said.

DeRoo said he’d like to see local governments update their community master plans to clearly spell out priorities, what types of projects and processes are permitted by right and which have to go through planning commission approvals.

“Many developers will not take on a project because they do not know what the outcome would be, and the cost and time it takes to get to knowing that is a big risk for real estate development projects,” he said.

Other bottlenecks

In addition to her pledge to speed up permitting, Whitmer signed the state budget on July 31 that includes $6.6 million for the Department of Environment, Great Lakes and Energy (EGLE) to hire 44 additional full-time equivalent permitting employees to help reduce wait times.

Hope Network previously told Crain’s Grand Rapids Business the pandemic slowed the environmental permitting process for its $40 million housing project at the former Fulton Manor in Eastown, which broke ground last month after a yearlong delay.

DeRoo said he is looking forward to the spike in EGLE staffing levels because environmental permitting has slowed down Dwelling Place’s general contractors.

But more significant for Dwelling Place is the difficulty of securing financing for affordable projects because of the highly competitive nature of low income housing tax credits and other federal programs awarded through the Michigan State Housing Development Authority, he said.

“We are taking on projects that cost significantly more to do than the economics allow them to cover the cost of, because we make them affordable for families on the back end,” he said.

One of its current housing developments has Dwelling Place partnering with developers Tom Ralston and Nick Lovelace on the Union Suites on Coit phase one and phase two projects, which together will comprise 104 apartment units.

Ralston said a more significant government hurdle than the state-level permitting process is the wait for MSHDA to approve its low income housing tax credit allocation, Form 8609, after a project is completed.

“They handle it first-come, first-served, and sometimes it takes six months or more to get processed,” he said.

He also said he’s worked on projects involving historic designations with the State Historic Preservation Office, which can be time consuming.

A Whitmer spokesperson told Crain’s the tax credit reimbursement process and SHPO protections will not be covered by the executive order to speed up state permitting.

Supply chain snags

Ralston said beyond government red tape and funding issues, in his experience, the biggest barrier to bringing housing online quickly is construction material delays, particularly for the Union Suites project. Getting the certificate of occupancy has taken a surprisingly long time, he said.

“My only reason I don’t have families moved into my building is because the electric switchgear is on backorder — the switchgear sockets and the meter banks and stuff that are the big-ticket items that go down in the mechanical room,” he said.

But Ralston echoed what others said: He’s thankful government leaders at all levels are getting serious about clearing impediments to housing development.

“At the highest level, the governor’s office is focused on trying to make it so that affordable housing can happen, so that all housing can happen, as quickly as possible to meet the demand,” he said. “People are out there doing their best to (build) housing.”

— Crain’s Detroit Business reporter David Eggert contributed to this article.