Some Michigan small cities more affordable than others

A house for sale is pictured in Holt. The community 8 miles south of Lansing is rated as most affordable in a recent study of Michigan small cities.

A house for sale is pictured in Holt. The community 8 miles south of Lansing is rated as most affordable in a recent study of Michigan small cities.

Capital News Service/Payton Wells

It’s easy to see the charm of this idyllic close-knit community that Holt resident Paul Pirrotta said he loves so much.

It has a farmers’ market, small businesses with houses snuck between and every service a resident would need along Cedar Street, the community’s main thoroughfare.

There are even new housing developments going up south of Cedar Street.

“If there’s a free home, it’s gone,” Pirrotta said.

Small cities across the nation are filling up, according to a national study by WalletHub, a personal finance website 

In Michigan this growth affects small rural communities like Holt, about 8 miles south of Lansing, and mid-sized cities just outside of Michigan’s metropolises, like Southfield near Detroit. 

But Holt and Southfield sit on virtually the opposite ends of the spectrum when it comes to affordability, one of five measures the study used to rank the desirability of small cities. The other measures are economic health, education and health, quality of life and safety.

Holt was among the top five most affordable in Michigan, while Southfield ranked near the bottom.

The study determined affordability based on median household income, cost of living, homeownership rate, housing costs and the number of households in which housing was a financial burden. Housing value and homeownership were large parts of what made a city affordable.

The top five small Michigan cities in affordability are: Livonia, Troy, Allen Park, Holt and Rochester Hills. The bottom five are: East Lansing, Pontiac, Flint, Saginaw and Southfield.

Southfield’s median home value is about $10,000 cheaper than Holt’s. The median price of a house in Holt from 2015 to 2019 was $162,500, while in Southfield it was $155,700, according to the Census Bureau.

Yet the homeownership rate in Holt is 71.2%, while in Southfield it’s at less than 50%.

What’s keeping homeownership out of reach for many Southfield residents isn’t cost but the demand for housing, according to David Ross, the vice president of mortgage sales at John Adams Mortgage –– a Southfield-based lending company based. 

“Right now, nationally, [there’s] a lack of housing inventory to buy,” Ross said. “So, because of the highly competitive market where there are bidding wars, someone that needs a mortgage is put in a disadvantage to buy.”

The high demand and low supply make cash offers more desirable than mortgages, making it harder for mortgage-holders to buy a house. Ross said that because of bidding wars, the median price of a home in Southfield is about $200,000 –– $44,300 more than the 2019 data showed.

The housing shortage reaches Holt too, where the median price of a home has risen to about $200,000, said Holt Realtor Bruce Carpenter. The COVID-19 pandemic exacerbated the shortage because at the height of the pandemic, owners weren’t putting their houses up for sale.

He said he has about three to four buyers per house, and buyers must look at and make offers on more homes to hopefully secure one.

“So it is a lot harder to actually get a home at this point,” Carpenter said.

But it may be easier in some communities than others because of factors other than supply and demand.

Property Taxes

Property taxes factor into the cost of living.

Tax rates for homes in Southfield are twice as high as the state average of 29.9 mills –– Southfield’s was 62.50 mills, according to the Department of Treasury. This means while the average home owner paid about $42 for every $1,000 of assessed value, Southfield owners paid $62.

“There’s more bang for your buck in Southfield, but when you couple that with what’s happening with the bidding wars and more expensive property taxes, that may make it less affordable,” Ross said.

Matt Webb moved to Southfield in 2014, where he purchased his first home.

“It was actually really affordable compared to other houses we looked at,” Webb said.

Webb’s house sits on an acre, and he said that even with the land, it was affordable. Lots tend to be bigger as well in Southfield, he said..

According to Investopedia, a website publishing financial advice, lot size can impact the value of a property. But the higher a property is valued, the more taxes the owner pays.

Compared to Southfield’s high property taxes, Holt’s were lower at 52 mills ––still higher than the state average.

Pirrotta said, Holt is a “perfect community” where taxes don’t make Holt unaffordable but pay for a high quality of life.

Pirrotta should know – he moved to Holt twice. He initially moved there in the 1960s as a middle schooler but moved to Lansing after high school. He returned in 2003 because of the newly built Holt High School.

So, while Pirrotta admits Holt’s taxes are high–– he says they are well worth it and pay for services like the high school that tempted him to return

“It takes money to make a community work,” said Pirrotta, the president of his neighborhood’s homeowners’ association.

Holt has its own police force contracted through Ingham County and its own fire department and ambulance service, he said.

That could be the reason small cities like Holt are growing. Pirrotta said new developments are already filled up.

Livonia, another of WalletHub’s most affordable cities, has lower taxes than Southfield and Holt. That’s part of the draw, said City Council President Kathleen McIntyre.

“Part of it is our low tax rate,” McIntyre said. “When you look at what you pay in property taxes, that’s a big consideration for people when you’re buying homes.”

Livonia has a tax rate of 39.3 mills, lower than the state average.

City growth

Rochester Hills, another of the most affordable cities in Michigan, attributes its growth to affordable housing, like apartments and condos, said Mayor Bryan Barnett.

Cities at the bottom of WalletHub’s list lack alternatives to single-family homes, said Tyler Augst, a Michigan State University Extension educator based in Paw Paw. Augst educates elected officials about land use, zoning, planning and community development.

Single-family homes and the creation of suburbs have been increasing since World War II, Augst said. There’s an incentive for that because when suburbs are built, community wealth is created.

But the trend isn’t matching up with the modern lifestyles of many looking for housing, he said.

“We are seeing more [people] living on their own, or with less kids, or living in a nontraditional nuclear family,” Augst said, “But we aren’t seeing an increase in these nontraditional homes available.”

As more nontraditional homes are desired but not built, rent increases but wages don’t, Augst said.

For example, Rochester Hills –– one of the most affordable cities –– and Southfield –– one of the least –– have similar median monthly rents, with Southfield at $1,125 and Rochester Hills at $1,287. But Southfield’s median household income is $55,705 while that of Rochester Hills is almost double that at $93,953.

Rochester Hills saw a 5% increase in population from 2010 to 2019, according to the Census Bureau. Barnett said he sees that trend continuing and increasing –– at a 7.5% growth rate with 2020 and 2021 accounted for.

That’s the second-highest increase for the most affordable places to live, falling right behind Troy with its 3.9% population increase from 2010 to 2019, according to the Census Bureau.

Barnett has noticed more people moving to Rochester Hills.

“We are seeing more density in places that are generally more affordable.” Barnett said.

The increase brings challenges, Barnett said. “Affordable housing, on one side, brings density and density lowers the price for a unit. On the other side, it brings traffic and congestion, so you have a real balancing act to try to make sure you’re addressing and dealing with both.”

Systemic racism

Systemic racism also plays a role in housing affordability and homeownership, said Craig Carpenter, an assistant professor at Michigan State University who specializes in agricultural food and resource economics.

“Systemic racism, racial inequalities, intersect with income and wealth, which of course then affects housing,” Carpenter said. “So, areas with more people of color on average have lower income.”

Predominantly white Holt has homeownership rates almost 1.5 times higher than predominantly Black Southfield. There was also a $10,000 income disparity between the two–– the median household income in Holt was $66,316, in Southfield it was $55,704, according to the Census Bureau.

Four out of five of the least affordable Michigan cities in the WalletHub report are predominantly Black –– with East Lansing, a university town with many low-income students, as the outlier. Of the bottom 10 least affordable Michigan cities, 50% are predominantly Black, according to the Census Bureau.

Historic policies limit Black homeownership today, Carpenter said. Redlining, a practice that took place mainly in the 1960s when certain areas were deemed “unsafe” based on how many people of color lived there, crippling investments.

Augst said, “Impacts of those earlier racist policies are still manifesting. So, it’s sort of like the snowball just keeps rolling and it’s really hard to reverse that momentum that started decades ago.”

He and Carpenter agree that more affordable housing is needed in certain areas. More resources like housing vouchers are needed, they said.

“It’s not like food stamps where every grocery store is required to accept them,” Carpenter said. “Housing vouchers can be rejected, so as a result, we end up segregating lower income individuals together and creating lower income areas and making higher density housing less affordable than it would be otherwise.”