An affordable housing development years in the making will take at least a little while longer to come to fruition.

More than a year ago, a pair of partners, New Waves United Church of Christ and Habitat for Humanity Grand Traverse Region, kicked off infrastructure work on the New Waves Community, a 14-home development situated off Bugai Road in Elmwood Township.

Initially, the plan was for construction of the actual houses to begin last summer. But due to skyrocketing building costs and other hurdles, the development has followed a significantly slower timeline than expected. The slowdown is a symptom of a larger challenge in affordable housing development – one that could make it especially difficult for Leelanau County to navigate its way out of a lingering crisis of limited home inventory and ever-rising living expenses.

The roots for the New Waves Community development go back two decades, to when the Michigan Conference of the United Church of Christ (UCC) purchased 20 acres in Leelanau County with plans of starting a new church. Per the New Waves Housing website, as the local UCC congregation got started and grew, “there was hardly a week when the need for affordable housing was not mentioned by local media in the Grand Traverse Region.” In 2017, New Waves “began to investigate” what it would need to do to help address the problem. UCC ultimately donated 11 acres to the cause, and the New Waves Community project was born.

“We also formed a non-religious nonprofit [called New Waves Housing Inc.] so people would know that New Waves United Church of Christ has no desire to tell anybody who will buy or rent from us how to live,” says Tina Allen, the volunteer project manager for the New Wave Community development. “We want to help anybody who is not able to find housing for any reason. That might be people of color; it might be indigenous people; it might be people who are LGBTQ+ and have had trouble with other landlords. We named our road Justice Way, and there's a reason for that.”

Ultimately, the plan is for New Waves Community to consist of 14 homes, including seven low-cost rental homes, six Habitat for Humanity homeowner program homes, and one New Waves UCC staff home. Each home will sit on its own 1/3-acre lot and will be about 1,100 square feet in size, with three bedrooms, 1.5 baths, and a one-car garage. For both New Waves UCC and Habitat Grand Traverse, the goal is to sell and rent homes at affordable rates – and to keep those homes affordable for the foreseeable future by way of deed restrictions. Allen says New Waves is even in talks with the Northwest Michigan Coalition to End Homelessness and Goodwill Northern Michigan “to prioritize at least four of the homes for families coming out of homelessness.”

But there is an elephant in the room: Thanks to rising construction costs and high interest rates, New Waves and Habitat are having trouble making the numbers work.

“We cannot afford to take what's called the FMR, or fair market rent,” Allen explains. “That’s what is used by state and federal funding sources for a three-bedroom, 1.5-bath home, which is what we’re building. FMR for Leelanau County is a little over $1,300 a month, and it has to include utility costs. So that doesn't give you a lot of rent income. And as a result, if we try to mortgage any of this, it just doesn't work for us to be able to pay off those loans. We really just need to raise the money to pay to build the homes.”

Wendy Irvin, CEO for Habitat Grand Traverse, feels the same: She says The misalignment between what it costs to develop a housing project and what it takes to keep it affordable is a huge issue – and not just for New Waves Community, but for all projects like it.

“It's changed everything for us, honestly,” Irvin says of the recent market trends. “If a home appraises at $285,000 and a Habitat homebuyer can afford $170,000, there's a major gap there. And normally, in a situation like that, we're taking on a silent second mortgage on the back end to close the gap. To continually have to do that is a challenge for us.”

Irvin tells the Leelanau Ticker that the cost of bringing a Habitat project to fruition has increased 40 percent since before the pandemic. What Habitat homebuyers can actually afford, meanwhile, hasn’t increased at all.

“And so, the extreme choice would be to step back and build one home a year and wait until this passes,” she says. “But that’s certainly not what our board or our team envisions. We have passion for the work we do, and we know that the people that we’re representing have great need. So, we’re working as hard as we possibly can to create solutions.”

One solution is simply encouraging more donor support, which both New Waves and Habitat Grand Traverse are doing. Another option is to look at ways of reducing costs in the construction process: Irvin says Habitat is currently “working on a 12-home project in a different county” that has several characteristics – townhomes instead of standalone houses, carports instead of garages, etc. – that are helping make it more affordable.

While Irvin doesn’t hesitate to use the word “crisis” describing the state of affordable housing development in northern Michigan, there is some good news. Earlier this year, New Waves Housing received a $10,000 seed grant from Rotary Charities to hire a fundraising expert. That person is helping the organization apply for grants, work with private donors, and explore the feasibility of other potential fundraising pathways. Allen also teases a partnership “with another nonprofit that is a member of the Coalition [to End Homelessness],” which she’s confident will help open up new funding doors.

Additionally, much of the infrastructure for the New Waves development is already in place, which Allen says should allow for houses to go up relatively quickly once construction does begin later this year.

“We have the roads in, we have the signs in, we have all the drainage in, we have the well in,” Allen says. “We’re waiting for some sign people to put up a private road sign, but other than that, [the land] is ready. The next step is just to build the homes, and Habitat is planning to start work on their first two homeownership homes and our staff house this fall.”