Council Supports Meadows’ Push for More Housing Grants to City Employees

Above: Mayor Mark Meadows at City Council last week (photo by Ray Holt).

At its meeting Tuesday night, East Lansing’s City Council voted 4-0 in favor of a proposal to expand a program that will provide $50,000 in housing assistance to City employees this year, regardless of how much they earn.

None of the five members of Council responded to ELi’s request for comment on the proposal, including a request to speak to the optics of increasing employee benefits while citizens are paying a new income tax to deal with the financial crisis brought on primarily by ballooning debt related to employee retirement benefits.

Mayor Mark Meadows had stepped forward specifically to support the move, saying at last week’s discussion-only meeting of Council that he was in favor of increasing the per-employee assistance amount from $5,000 to $10,000 and the total annual budget for the program from $10,000 (aiding up to two employees) to $50,000 (aiding up to five).

That is what Council members Meadows, Erik Altmann, Shanna Draheim, and Aaron Stephens voted to do on Tuesday night. (Ruth Beier was absent.) 

The four also voted through a budget amendment to allocate the funds.

The City started this program in 1997 and, according to a staff memo, “has serviced 30 employees with the most recent person served by the program in 2017.”

In 2008, the City teamed up with Michigan State University to create the Employee Home Ownership Program (EHOP), providing forgivable loans for both MSU and East Lansing employees.

Before the increase was passed on Tuesday, City and MSU employees could apply to obtain forgivable loans of up to $5,000 to buy a house in neighborhoods near campus and downtown. (See the map here.) That amount has been increased to $10,000.

The loans come without fees or interest and are 20 percent forgiven each year. So, if an employee keeps the house for five years, the loan is completely forgiven. The program terms require the employee to use the house as their main residence and prevents the house from being rented out for 15 years.

Meadows said at last week’s meeting that he “thinks it is time” to increase the value of the individual forgivable loans and to increase the program total to $50,000 per year.

Following Meadows’ suggestion, City staff recommended to Council “that the East Lansing City Council consider an increase in funding in FY20 to the EHOP program by $40,000. By doing so, up to five East Lansing employees could apply to receive $10,000 in financial assistance versus $5,000.”

The reason given by staff for the increase was that the average value of houses in near-university and near-downtown neighborhoods is going up, with the average sale price now at $204,000.

Staff noted that, “By increasing a downpayment to $10,000, the City of East Lansing could provide close to a 5 percent deposit toward the purchase of a home.”

Money for the program comes out of the City of East Lansing’s General Fund. The budget for the General Fund has been the focus of tense debate, with Council Members arguing over sums as small as $7,000 when it comes to funding arts or social service programs.

At the September 3 meeting of Council, City Manager George Lahanas said that the City had been “cautious” about expanding the EHOP budget because of the City’s financial problems. He suggested that the program might be used by an employee to buy a rental house to turn it owner-occupied.

But those who have expertise in the issue of converting rental housing to owner-occupied housing have warned that conversion of near-university rental houses would be very expensive and challenging in a market like this one.

The City recently formally ended a project that had been aimed at converting about 25 rental houses in Chesterfield Hills. After many years, only seven houses were converted and the program was closed out.

It is more likely the EHOP forgivable loans will be used by City employees to buy houses from existing owner-occupied stock.

Employees do not have to income-qualify to benefit from the program, and given that the average house price in the target area is $204,000, it seems likely that relatively higher-earning employees will be more able to benefit from the program than low-earners.

Lahanas told Council he had “availed myself of the EHOP program” when he bought his first house in the City.

This article originally appeared on October 28 and was updated and republished on October 30 to reflect the votes.