Michigan’s recent affordability crisis comes in large measure from the COVID-19 pandemic and the policies that followed. Laws banning evictions kept people in their homes and apartments, but at a huge cost to landlords. People looking to rent suffer even now, due to housing shortages and landlords becoming more stringent in selecting tenants. Government lockdowns caused shortages, especially in construction materials. State and federal government spending surged, contributing to inflation and higher interest rates.
Now the real estate market is stalled. Landlords who were burned by the emergency restrictions are reluctant to accept new tenants, while the price of a home can be three times what it was five years ago.
For decades, Michigan’s abundant low-cost housing was one of the state’s selling points. Housing providers were steadily building houses and apartments, even when Michigan was not a fastgrowing state. The Great Lakes State didn’t always make the best policy choices, but homes were reasonably priced, and apartments were affordable. That made Michigan more attractive.
In 2012, housing prices in Michigan were nearly 30% lower than the national average. But that advantage has dissipated. Homes here cost twice as much as they used to, and prices are less than 20% below the national average. Compare Michigan with our neighbor Indiana. It had the same average home price as Michigan back then; now, buyers in Michigan must pay a 7% premium.
Why? One reason is that the Hoosier State builds more than we do. Indiana, despite having three million fewer people, approved 25% more building permits than Michigan last year. Our pace of adding homes is one-third to one-half what it was in the 1990s.
The COVID-19 pandemic and lockdown policies harmed home builders, landlords, renters and buyers. But they also exposed problems Michigan imposed on itself. Homebuilders and construction workers faced a significant increase in regulations, especially in licensing and permitting. Our outdated building code imposes regulations in the name of energy efficiency, environmental protection and safety, without considering trade-offs. Local governments have made it impossible to build anything but single-family homes, and they’ve added unnecessary rules that delay construction.
Michigan’s housing laws had problems before anyone heard of COVID. When the pandemic came, the state’s housing laws made things worse. It’s time for lawmakers to help things get back to normal.
