GRAND RAPIDS — Now that a high-tech life sciences corridor is booming on this city’s east side, its leaders are turning their attention back to the arts, which are already transforming a once seedy thoroughfare on the city’s south side into the new Avenue for the Arts.

This spring developers will begin a $7.5 million renovation project that will transform four vacant, decrepit buildings on gritty South Division Avenue into low-rent living and working spaces geared specifically to artists. The project, the Division-Oakes Arts Initiative, will intensify the ongoing rejuvenation of the city’s historic Heartside District by adding 23 affordable loft apartments and some 15,000 square feet of studio, gallery, and other retail business space.

The project, along with a similar initiative in Jackson, Mich., would fit squarely into Michigan Governor Jennifer M. Granholm’s “Cool Cities” campaign, which hopes to someday offer new state policies and tax incentives to encourage such projects in depressed downtowns. But in a state whose Legislature has yet to recognize and assist such affordable housing opportunities, the Division-Oakes project is instead relying on other unrelated, innovative financing to house the creative class that is any cool city’s lifeblood.

The arts initiative’s manager went through what he calls a “highly challenging” process to assemble an exceptionally eclectic mix of existing state tax credits, local tax dollars, and philanthropic support to finance the project. But even that effort will leave a small, non-profit housing management company several million dollars in debt when the project is completed, which will make rents on the project somewhat higher than preferred.

If it succeeds, the Division-Oakes project could help earn the term “affordable housing” a better name in Michigan, which has lagged far behind other states in establishing a trust fund that would encourage similar projects in urban and rural areas. The project’s leaders seem confident that their effort will accelerate, in a very colorful way, the comeback of an area here that once seemed permanently stuck in hard times.

“The idea is to have artists of every kind,” said Chris Velasco, vice president of Artspace, the Minneapolis-based real estate development organization serving as a consultant for the project. “Painters, sculptors, actors, musicians, dancers, writers, poets, and people whose art defies description will all be part of this.”

Art: Good for Business
Mr. Velasco’s vision is well rooted in reality. Once infamous for its poverty, brothels, and drug deals, Heartside continues to emerge as Grand Rapids’ unofficial hub of arts and culture. The area is now home to the Urban Institute for Contemporary Arts and the Van Andel Arena, which hosts megastars ranging from Bette Midler to Kid Rock. Nearby, the Civic Theatre celebrates the small stage and Kendall College of Art and Design cultivates aspiring young artists.

The Division-Oakes Arts Initiative would further rev up a creative engine that is an increasingly powerful sector of the local and national economy, Mr. Velasco said.

“We used to say these arts projects are good for the city because ‘Art is a good thing,’” he said. “But in 2001, the economic impact of the nonprofit arts in the United States was $134 billion. The total trade between the U.S. and China in that same year was $9 billion less.”

Communities from Seattle to Philadelphia have realized that public investments in projects like the Division-Oakes Arts Initiative — which will provide respectable and affordable housing options for a targeted population — can spur job creation and economic revitalization, according to Mr. Velasco. In Lowertown St. Paul, Minnesota, for instance, a similar project turned a nearly deserted neighborhood, with 50 inhabitants and a 90 percent vacancy rate, into a vibrant urban center with 5,000 residents and a 10 percent vacancy rate after just eight years. 

Michigan’s Misconception
Michigan struggles to replicate such striking success partly because it lacks a funding strategy for increasing housing options for low-income earners. Evidence is growing that without such a strategy the state will continue missing significant opportunities to strengthen its communities and commerce. 

The Michigan Land Use Leadership Council, established by Governor Granholm, a Democrat, with support from Senate Majority Leader Ken Sikkema and House Speaker Rick Johnson, both Republicans, directly addressed this problem in August 2003. The bipartisan leadership council’s final report recommended establishing a Michigan Housing and Community Development Trust Fund to expand housing options and encourage diverse, vibrant communities “where people want to live, work, invest and grow business, learn, shop, and recreate.”

Three months before the council released its final report, several state senators and representatives used the emerging recommendation to propose legislation to establish the special trust fund. But despite broad bipartisan support, the bills languish in committee. Meanwhile, more than 30 other states already have similar funds.

“I think people have misconceptions of who needs affordable housing,” said Carol Townsend, the urban community development agent at Michigan State University Extension in Kent County. “Generally, we are talking about working people who cannot find safe and decent housing. And we are talking about young professionals who cannot afford a house in the area where they work.”

A Necessary Ingredient
The U.S. Department of Housing and Urban Development defines “affordable housing” as costing no more than 30 percent of a household’s income. Nearly 750,000 Michigan residents live in housing they cannot afford, according state housing experts. The proposed trust fund would encourage both nonprofit and for-profit developers to create more housing opportunities for low-income residents.

Ms. Townsend projects the proposed trust fund could annually support the development of more than 1,000 affordable housing units and expand residential opportunities for all citizens. In Grand Rapids, where inner city property values are rising, a fund would help factory workers, teachers, and even medical students and researchers attracted to the thriving life sciences corridor along Michigan Avenue.

“Inc. Magazine recently rated over 200 metropolitan areas as the best and the worst cities to live and work in,” Ms. Townsend said. “And Grand Rapids was rated one of the worst. This is due to a variety of reasons, like the loss of manufacturing jobs. But a prime reason why cities like Atlanta were rated among the best was due to the affordability of their housing.”

“Clearly we need a range of housing opportunities for all income levels if Grand Rapids and other communities in the state intend to prosper and progress,” she added.

Ms. Townsend and members of United Growth for Kent County, a nonprofit citizen coalition that promotes urban revitalization and rural preservation, plan to meet with state Representative Jerry Kooiman, a Republican from Grand Rapids, to discuss the trust fund proposal he is sponsoring.

Dennis Sturtevant, who led the assembly of the financial package that is launching Division Oakes, is the executive director of The Dwelling Place, Inc., the Grand Rapids-based agency that is managing the project. He emphasized that a state trust fund will do more than help people of limited means.

“This is part of an overall strategy to encourage the revitalization of our downtowns and small towns,” he said.

Success Stories
For every dollar governments invest in projects such as the Division-Oakes Initiative, eight come back into the community, according to Artspaces’ Chris Velasco. Philadelphia, for example, launched its Avenue of the Arts initiative in 1983 with an initial investment of $8 million. Today, the project has leveraged a total investment of approximately $650 million and created 4,000 full and part-time jobs; businesses there annually generate some $200 million in revenues. Seattle, Reno, and Minneapolis, have experienced similar results.

The economic benefits of public investment in affordable housing are hardly limited to the arts community. A May 2001 report from Public Sector Consultants, a Lansing-based research group, concluded that most housing trust funds leverage an additional five dollars of public and private money for every trust fund dollar expended. The report said that affordable housing initiatives save millions of taxpayer dollars by reducing emergency care needs, particularly for the homeless, and increase tax revenues for cities and states through increased wages, retail sales, and property values. 

The report acknowledged that the sluggish economy makes funding new initiatives difficult but said that, “now is the time to lay the groundwork for an affordable housing plan in Michigan, in order to be prepared when the economy improves.”

To fund the Division-Oakes Arts Initiative, Mr. Sturtevant devised a complicated formula that leverages state and federal Historic Preservation Tax Credits, Michigan Brownfield Redevelopment Tax Credits, New Markets Tax Credits, and funds from private donors. Still, Dwelling Place will assume several million dollars in debt, which ultimately drives up the cost of residential and commercial space.

“These core city initiatives are highly challenging,” Mr. Sturtevant said. “The proposed trust fund, on its own, likely will not pay the total cost of a given project. But it might make the numbers work better.”

Construction on the Division-Oakes Arts Initiative begins this May and is already luring the creative class. Colorfully intense murals brushed on boarded up windows signal the transition from decay to revival. Local painter Reb Roberts’ Sanctuary Folk Art gallery is already open for business. And some 125 individuals have expressed interest in the 23 two-bedroom apartments Dwelling Place plans to lease. 

“As we strive to make Grand Rapids one of Michigan’s cool cities, it is projects like the Arts Initiative that will help us make that happen,” said Mayor George Heartwell. “This project will provide a reason for artists, especially recent graduates, to decide to stay in Grand Rapids rather than move to Chicago or New York. The residential units for artists and others will add to the 24/7 atmosphere that we are promoting for downtown Grand Rapids.”

Andy Guy, who is chronicling the rise of Grand Rapids as a center of Smart Growth innovation in the Midwest, directs the Institute’s Grand Rapids field office. Reach him at aguy@mlui.org, or 616-308-6250.