By Anna Traver, Payton Wells and Hope O’Dell
Great Lake Echo
Editor’s Note: A recent study evaluated the quality of 1,322 small U.S. cities across five metrics. This story is part of a series that takes a closer look at a metric because it relates to the 39 Michigan cities in the study.
HOLT – It’s easy to see the charm of this idyllic, close-knit community that Paul Pirrotta, a resident of Holt, loves so much.
There is a farmer’s market, small shops with houses in between, and all the services a resident would need along Cedar Street, the community’s main thoroughfare.
There are even new housing developments emerging south of Cedar Street.
“If there’s a free home, it’s gone,” Pirrotta said.
Small towns across the country are filling up, according to a national study by WalletHub, a personal finance organization. In Michigan, this growth is affecting small rural communities like Holt, about eight miles south of Lansing, and medium-sized towns just outside of Michigan’s metropolitan areas, like Southfield near Detroit.
But Holt and Southfield sit on opposite ends of the spectrum when it comes to affordability, one of five measures the study used to rank small-town desirability. (The other measures are economic health, education and health, quality of life and security.)
Holt was among the five cheapest in Michigan, while Southfield sat at the bottom.
The study was based on affordability using median household income, cost of living, home ownership rate, housing cost, and the number of households in which housing was a financial burden. Housing value and home ownership were large parts of what made a city affordable or not.
The top five small towns in Michigan in terms of affordability are: Livonia, Troy, Allen Park, Holt, and Rochester Hills. The bottom five are: East Lansing, Pontiac, Flint, Saginaw, and Southfield.
Southfield’s average home value is about $10,000 cheaper than Holt. The median price of a home in Holt from 2015 to 2019 was $162,500, while in Southfield it was $155,700, according to the US Census Bureau.
Still, Holt’s homeownership rate is 71.2%, while Southfield’s is less than 50%.
What’s keeping many Southfield residents from buying a home isn’t the cost, it’s the demand for housing, according to David Ross, vice president of mortgage sales at John Adams Mortgage — a Southfield-based lending company.
“Right now at the national level [there’s] a shortage of home inventory to buy,” Ross said. “Because of the highly competitive market where there are bidding wars, someone who needs a mortgage is disadvantaged when buying.”
The high demand and low supply of housing makes cash offers more attractive than mortgages, making it harder for mortgage holders to buy a home. Ross said that because of these bidding wars, the median price for a home in Southfield is currently around $200,000 — $44,300 more than 2019 data showed.
That housing shortage is also reaching Holt, where the median price of a home has also risen to about $200,000, said Holt realtor Bruce Carpenter. He said the COVID-19 pandemic has exacerbated this shortage because at the height of the pandemic, people were not listing their homes for sale.
He said right now he has about three to four buyers per home and buyers need to look at more homes and make offers to hopefully secure one.
“So it’s a lot harder to actually find a home at this point,” Carpenter said.
But it may be easier in some communities compared to others because of factors other than supply and demand.
In addition to the house price, property taxes are also included in the cost of living.
Southfield property tax rates are double the state average of 29.9 million — Southfield’s was 62.50 million, according to the Michigan Department of Treasury. That means while the average Michigan resident paid about $42 for each $1,000 of appraised value, Southfield residents paid $62.
In the absence of property taxes and recent bidding wars, Southfield apartments cost less per square foot than other Detroit-area cities.
“There’s more bang for your buck in Southfield, but when you combine that with the bidding wars and higher property taxes, it potentially becomes less affordable,” Ross said.
Matt Webb moved to Southfield in 2014 where he bought his first home.
“It was really affordable compared to other homes we looked at,” Webb said.
Webb’s house sits on an acre of land, and he said it was affordable even with the land. Lots also tend to be larger across Southfield, he said.
According to Investopedia, a website that publishes financial advice, lot size can affect a property’s value. But the higher the value of a property, the more taxes the owner pays.
Compared to Southfield’s high property taxes, Holt’s was lower at 52 mills – which was still higher than the state average.
Holt is a “perfect community,” Pirrotta said. The taxes don’t make Holt unaffordable, but they do pay for a high quality of life, he said.
Pirrotta should know, he’s moved to Holt twice in his life. He first moved to Holt as a middle school student in the 1960s, but moved to Lansing after high school. He retired in 2003 for the newly built Holt High School.
While Pirrotta admits Holt’s taxes are high — about $10 million higher than the national average — he says they’re worth it. Those taxes pay for services like the high school that lured him to return
“It takes money to make a community work,” said Pirrotta, who is also president of his neighborhood’s homeowners’ association.
Holt has its own police force, which is contracted by Ingham County, as well as its own fire department and ambulance, he said.
This could be why small towns like Holt are growing. Pirrotta said the new developments have already been padded.
Another of the cheapest cities, Livonia has lower taxes compared to Southfield and Holt, according to WalletHub. That’s part of the draw, Livonia City Council President Kathleen McIntyre said.
“Part of that is our low tax rate,” McIntyre said. “If you look at what you pay in property taxes, that’s a big consideration for people when they’re buying homes.”
Livonia has a property tax rate of 39.3 million, which is lower than the national average and the lowest of the cities mentioned.
Not only Holt is growing. Rochester Hills, another of Michigan’s most affordable cities, attributes its growth to affordable housing such as apartments and condos, Mayor Bryan Barnett said.
Cities at the bottom of WalletHub’s list have no alternatives to the single-family home, said Tyler Augst, an instructor at Michigan State University. Augst trains elected officials on land use, zoning, planning and community development.
Single-family homes and the emergence of suburbs have increased since World War II, Augst said. There is an incentive for this because when suburbs are built, community wealth is created.
But this trend doesn’t fit with the modern lifestyle of many apartment seekers, he said.
“We see more [people] live alone or with fewer children or live in a non-traditional nuclear family,” Augst said, “but we’re not seeing an increase in these non-traditional homes.”
As more non-traditional homes are wanted but not built, rents are rising but wages are not, Augst said.
For example, Rochester Hills — one of the cheapest cities — and Southfield — one of the cheapest — have similar average rents, with Southfield being $1,125 and Rochester Hills being $1,287. However, Southfield’s median household income is $55,705, while Rochester Hills is nearly double that at $93,953.
According to the US Census Bureau, Rochester Hills experienced a 5% population increase from 2010 to 2019. Barnett said he sees that trend continuing and strengthening — with a growth rate of 7.5%, accounting for 2020 and 2021.
This is the second-highest increase for the cheapest places to live, falling just behind Troy, which experienced a 3.9% population increase from 2010 to 2019, according to the US Census Bureau.
Barnett has noticed that more people are moving to Rochester Hills.
“We’re seeing more density in places that are generally more affordable,” Barnett said.
The surge comes with challenges, Barnett said.
“Affordable housing brings density, and density lowers the price of a unit,” Barnett said. “On the other hand, it brings traffic and congestion, so you have a real balancing act to make sure you’re addressing and managing both.”
Systemic racism also plays a role in housing and home affordability, said Craig Carpenter, an assistant professor at Michigan State University who specializes in agricultural nutrition and resource economics.
“Systemic racism, racial inequality, intersects with income and wealth, which then naturally impacts housing,” Carpenter said. “So, on average, areas with more people of color have lower incomes.”
In Holt, a predominantly white community, the homeownership rate is almost 1.5 times higher than in Southfield, a predominantly black community. There was also a $10,000 income difference between the two cities — according to the US Census Bureau, the median household income in Holt was $66,316 versus $55,704 in Southfield.
Four out of five of the least affordable Michigan cities in the WalletHub report are predominantly black cities — with East Lansing, a college town with many low-income students, as an outlier. According to the US Census Bureau, 50% of Michigan’s 10 least affordable cities are predominantly black.
Historical policies restrict black home ownership today, Carpenter said. Redlining, a practice that occurred primarily in the 1960s when certain areas were deemed “unsafe” based on the number of people of color living in them and then divested.
“The effects of these earlier racist policies are still manifesting themselves,” Augst said. “So it’s like the snowball just keeps rolling and it’s really hard to reverse that momentum that started decades ago.”
Both Augst and Carpenter agree that there is a need for affordable housing in certain areas. Other resources such as housing vouchers are needed, they said.
“It’s not like grocery stamps, which every grocery store is required to accept,” Carpenter said. “Housing vouchers can be rejected, causing us to cluster lower-income individuals and create lower-income areas and make higher-density housing less affordable than would otherwise be the case.”