Traverse City commissioners Monday approved a tax break for a new affordable housing project – even as word came that two other proposed projects had been turned down for state funding, leaving the city still struggling with a shortage of options for low and middle-income residents.

Commissioners approved a payment-in-lieu-of-taxes (PILOT) agreement with HomeStretch Nonprofit Housing Corporation to build six two-story townhome-style apartments at 1210 and 1216 East Eighth Street (pictured) near the intersection of Eighth Street and Garfield Avenue. Neighboring dentist Dr. Stanley Smyka owns the parcels and approached HomeStretch about developing the property into housing. The project, called Oakwood Townhomes, would remove two blighted houses from the site and build six two-bedroom, 1.5-bathroom units approximately 973 square feet each in size.

Four units would be rented out at $720 per month, targeted at residents earning at or below 60 percent of the area median income (AMI) level. An additional two “workforce” units would be rented at $930 per month, targeted at residents earning at or below 80 percent of the AMI level. The PILOT agreement allows HomeStretch to forego paying traditional property taxes and instead pay six percent of rental income annually to the city, a payment estimated at $4,968. HomeStretch’s total investment in the project is estimated at $1.255 million, including $820,000 in construction costs.

Commissioners were initially asked to approve the project two weeks ago, but delayed making a decision due to a number of concerns, including privacy intrusions on neighbors, tree removals, and a potential lack of ADA-accessible units. HomeStretch Executive Director Jonathan Stimson came back with proposed solutions for addressing those issues, including replacing at least one larger dying tree with a new tree and performing preservative work on other trees on-site. The group also offered to make “reasonable accommodations” to outfit a unit for ADA accessibility if requested by a tenant. “We wouldn’t turn anybody away that had that handicap requirement,” Stimson said.

HomeStretch also agreed to erect an eight-foot barrier on the east side of the property to provide a privacy shield to neighbors located just feet away from the intended site of the new units. While commissioners still harbored some lingering project concerns, including a desire for the development to provide more density than six units, they also expressed reluctance to reject a proposal bringing more rental options to the city.

“I don’t want perfect to be the enemy of good here,” said Commissioner Brian McGillivary. Commissioner Amy Shamroe said that while she struggled with the “fast and furious” nature of the approval process – HomeStretch said it’s rushing to meet an August 1 grant dispersal deadline for state funding – she supported the organization’s overall mission and plans. “I appreciate all the work HomeStretch does…and I really do appreciate the opportunity to add more affordable housing,” she said. Commissioner Richard Lewis said the project could help spur redevelopment on the east end of Eighth Street, which he said had several properties “in need of some love.”

“I believe this is starting to meet our goal (for affordable housing),” he said. “I know there’s some folks out there that don’t like the idea of doing a PILOT, but this is the only opportunity we have as a city in which we can help encourage (housing construction). Six units is not going to change the world…but at least it’s one more little step that we can do to assist.”

In addition to approving the project, commissioners Monday also learned that two other proposed affordable housing projects in the city have been turned down for state funding. Woda Cooper Companies – formerly the Woda Group – planned to a build a 57-unit apartment complex called Ruth Park Apartments across from Safe Harbor on Wellington Street, as well as a 46-unit development called Depot Commons on nearby Railroad Avenue. Both projects were approved for PILOT agreements with the city earlier this year, but failed to land state funding from the Michigan State Housing Development Authority (MSHDA) necessary to proceed with construction. City Attorney Lauren Trible-Laucht said MSHDA’s rejection contained “cryptic” language about why Woda’s application was turned down and said she planned to contact the agency for further explanation.

City Manager Marty Colburn said that if the rejection was tied to language in Traverse City’s ordinances, such as an implication that PILOT agreements could be easily revoked, the city could consider revising its ordinances to make them more appealing to MSHDA. Commissioners Monday agreed to form an ad hoc committee that will study the city’s process for reviewing and scoring PILOT requests from developers, and could also study revisions to city ordinances based on feedback from MSHDA. Lewis and Commissioners Tim Werner and Roger Putman will sit on the ad hoc committee, with Lewis serving as chair.