The growing pains of Traverse City

TRAVERSE CITY — Long a sought-after destination for summer tourists, Traverse City's year-round population, individual wealth and real estate prices have grown in recent years, squeezing out young professionals and others from living in downtown where some condos now top $1 million.

The burst of residential development to meet new demand includes a controversial, mixed-income plan for two 9-story buildings on Pine Street at the edge of the downtown's high-rent district of shops, restaurants and bars.

The housing debate is pitting some longtime residents against a newer, younger population as city leaders weigh the size and scope of extra tall downtown building projects. The height of the proposed towers is needed, developers say, to justify setting aside nearly half of the units for lower-income renters.

“It’s a challenge because it’s different and it’s change. And change is difficult always,” said Erik Falconer, one of the developers of the project.

Concern over the affordable housing crunch is emblematic of deeper tensions in northern Michigan's premier summer resort town, where incomes and housing prices have been on the rise but roads are clogged, retail prices are rising and some locals feel priced out and forced to leave, especially recent high school and college graduates.

Supporters of the housing projects say the kind of mixed-income development allows for more people to live and work in Traverse City despite their lower wages. But a vocal group of longtime residents say the Pine Street project is out of scale and harmful to Traverse City's reputation for quaint living.

Many see the conflict as between older retirees who moved to a laid-back Traverse City and up-and-coming professionals yearning to live and work in a more dynamic and economically diverse central city.

Add in a certain number of millionaire jet-setters who've moved to the area for its beauty and waterfront vistas, and the city has become an eclectic mix of incomes and varying civic agendas.

Locals traditionally joked that a view of the bay “means half the pay.” But the economy, residents say, is increasingly empowered by entrepreneurs who start a business in order to support the Up North lifestyle.

Community fights over growth is déjà vu for Grant Parsons, a 65-year-old attorney in the city who helped lead an earlier fight against a proposed seven-story lakefront mall a generation ago.

"You can develop stuff, but there is a magic break point," Parsons said of the residential tower proposals. "I have nothing against poor people; it's just the wrong location."

Growing pains

The development debate is familiar to many expanding communities but relatively rare in northern Michigan: How to manage growth and provide the kind of affordable housing attractive to entry-level young people and lower-income service workers. Only 12% of the people who work in Traverse City live in the city of about 15,000, the latest census numbers show.

The regional economy anchored by Traverse City already has moved beyond its seasonal roots toward year-round employment. That's thanks to better-paying jobs and increasing population after decades of regional decline alongside a resurgent tourism industry.

Corporate executives fly out of the local airport on Monday morning and return at the end of the week to their families. Some call it "lifestyle migration" for professionals who move into Traverse City with their families but still spend large portions of their week on the road — and in the skies — for their jobs headquartered in other parts of the country.

Other workers untethered from their cubicles are choosing to telecommute to their jobs as they live in and around the city known for breathtaking views of Lake Michigan.

"The message now is that our doors are open 365 days a year," said Traverse City Mayor Michael Estes.

Mike Dow is the fifth generation of his family to vacation in their northern Michigan summer home. But the former defense contractor who lived in Virginia decided to make the visit permanent about three years ago, moving his family to downtown Traverse City. Later, he largely telecommuted back to the East Coast.

"The diversity of people who find a way to make a living up here is amazing," said Dow, who recently gave up his career for writing science fiction. These days he likes to hang out in Brew, a hip coffee bar on Front Street where the iced coffee comes in mason jars.

A new 'micro-politan'

The look and feel of yuppie, Bohemian life is all around, a cultural addition over the past decade to the once-sleepy lull after the summer tourist burst.

There are restaurants that serve wild boar and boast of local farm-to-table menus. More and bigger planes let highly paid executives from East Coast weekly jobs slip into their beds at home in Traverse City within 15 minutes after touchdown at Cherry Capital Airport.

A liquor store turned into a trendy food cart park by a Brooklyn restaurateur operates year-round by pulling one of the food trucks indoors. A cold-press juice start-up run by an expat back from Chicago sells "Heavenly Healing" — grapefruit, ginger, turmeric among other ingredients — at $11 a bottle marketed for locals.

One booster dubbed the phenomenon "a micro-politan," a small city with big amenities, including a buzzy technology scene, a leading health care center and nearby colleges.

Tourism still king

To be sure, the region’s fortunes are still largely tied to the tourist trade. Traverse City’s permanent population of 15,000 swells by hundreds of thousands each year with a growing number of visitors. Almost one of every three jobs remains linked to tourism, officials say.

But growing events like an annual book festival keep visitors in town after the beaches clear out. To bolster the shoulder seasons, the local tourism board promotes year-round activities, including birding, fall color tours and even the hunt for wild mushrooms known as morelling.

While the state lost population between 2000 and 2014, according to census estimates, Traverse City notched a 3.5% gain, and its surrounding county surged with a 16.9% increase. Building permits for new housing units in the city for the first nine months of the year have reached a five-year high. Median household income grew in the county for the same period by 11%.

The resulting housing shortage has left workers and their employers anxious as some young people look for brighter shores elsewhere. “The biggest problem here is labor,” said Alex Mowczan, who runs several hotels, including one specifically built for non-tourist visitors.

Residential towers offer solution

In the Pine Street project, more than one-third, or 64 of the 162 units along the Boardman River, would be set aside for workers who earn less than many — an important addition for a destination that attracts many well-to-do but lacks affordable housing for the people who serve them.

"Our housing has not caught up to the workforce needs," says Laura Oblinger, executive director of the Traverse City Chamber of Commerce, which supports the Pine Street project. "We are attracting them, but retaining them is a challenge."

The city has seen some innovative development projects, including the ongoing conversion of a sprawling state mental hospital campus into the Village at Grand Traverse Commons, a mixed-use facility with tree-lined sidewalks and expansive lawns connecting housing, retail and upscale dining. The Village Piazza sports boccie courts and a farmers market. A hotel and condos are in the works.

High and low of the economy

One of the first restaurants in the Commons, Trattoria Stella, attracts a well-heeled, off-season crowd. On a recent weekday night, its full parking hosted a Tesla Model S, retail price starting at $69,900, and a red Porsche Boxster with the license plate "BLESZED."

Inside, the high and low of the region’s economy became more apparent. Behind the bar is Sam Knudson, a 21-year-old high school graduate considering life beyond Traverse.

She grew up on the nearby Old Mission Peninsula, but more than half of her friends left the Traverse region in search of more and higher-income jobs.

"In the summer, demand is super high," Knudson says, taking a break in the back of the subterranean restaurant that serves wild boar tenderloin and butter-poached pig brain. "But then in the winter, people get let go."

Now, Knudson is turning toward Detroit and thinking about beauty school. "I want to spread my wings," she says, noting that each of her three siblings also left for better opportunities.

In search of affordable housing

Kris Rockwood, a 45-year-old single mom with two young girls, sold her share in a Chicago company to return to Traverse. This year, she opened Press On Juice, a cold-pressed juice retailer on East Eighth Street, after she became fed up with commuting out every week for her corporate job. Today, she has nine employees, including several who trained with Goodwill before coming aboard.

While Rockwood's business is growing, life at home for her employees can be stressful. At Press On Juice, the office computer is linked to Craigslist to alert employees whenever a decently priced rental comes available.

Finding the right home is a top priority for Annie Larson, a 33-year-old who left her home on the Upper Peninsula and moved to Traverse almost eight years ago after earning a college degree in furniture design. A series of low-wage jobs and other setbacks forced her into a homeless shelter this spring before taking a job at Press On.

The recession depressed land prices. But developers say the challenge today is finding reasonably priced land to build market rate developments for any sector: office, retail or residential. The downtown condo market has exploded this year with $70 million of units listed for sale today compared with $18 million in April, says Andrew Koons, a local real estate agent for Coldwell Banker.

“I think the city is very receptive to developers and properly scaled development. But many city residents want to maintain a small-town character with a resort-town charm,” said developer Jerry Snowden, who was raised and worked in metro Detroit before opening a Traverse City office in 1998.

Snowden, who said he is preparing to unveil his own 120,000-square-foot retail development outside downtown, said that “massive projects like Pine Street fail because they are too big, and they request too much public money for too little public benefit."

Surrounding sprawl

Just out of town, new developments are in full bloom.

A supersized Meijer grocery and department store is due to open later this fall at the new 180-acre Grand Traverse Town Center. Roundabouts — a traffic feature used to speed up traffic congestion — are sprouting up. An organic and natural foods grocery story chain is scheduled to open an outpost next year. A cineplex with the region’s first IMAX theater is scheduled to open by the end of the year. A long awaited upscale Hotel Indigo should open as well before Christmas.

Some in the business community worry about an aging workforce with few signs of skilled workers behind them to take over. Younger workers, they say, may find themselves steering their careers toward larger cities, and Traverse City needs to evolve to keep their attention.

"I think when you talk to people who want to move, they used to want a couple of acres," says McKeel Hagerty, chief executive officer of Hagerty Insurance Agency, a global insurer of classic cars and boats and one of the city's largest employers. "Now people want to be in a cool condo so they can walk and do things downtown."

That prompted land owners Falconer and Joe Sarafa to team up with one of the largest affordable housing developers in the nation with nearly two dozen projects completed already in Michigan.

"Frankly, we got involved in Pine and Front because Traverse City has a great need for affordable housing," said Craig Patterson, senior vice president for the WODA, an affordable housing developer based in Mackinaw City. The proposed site is already flanked by a subsidized housing tower as well as a luxury town-home project under construction with riverfront units starting at $800,000.

A crowd comes to protest

For the Pine Street development, early signs looked promising. Two nine-story, mixed-use buildings would be constructed at a downtown corner already bustling with new construction, offering units for lower-income tenants at $700 a month for a one-bedroom unit and about $1,000 a month for a two-bedroom unit.

"They could be young entrepreneurs, families, care providers for pets and children," Patterson said. "It’s the people we trust a lot to take care of what we value, but people who are struggling."

Developers still needed special city permission to build, since the buildings would exceed a 60-foot limit. The $45-million project would also add at least 20,000 square feet of commercial and restaurant space to downtown Traverse City. Developers now plan to build their own parking deck, according to recently revised plans.

The city’s planning staff found that the original project conformed to the city's master plan to encourage denser development in the downtown core. Traverse City’s planning commission approved the project in a 5-2 vote. But in August, the city's commission drew an overflow crowd largely in protest, raising new doubts about the 96-foot-tall buildings. The city has a few tall buildings, among them the Park Place Hotel at 125 feet built in 1930.

Opponents originally said the initial project asked for too much public money, tried to shortcut the approval process, and failed to engage nearby neighborhood groups who are concerned about big-town traffic and congestion issues.

"Is there a need for low-income housing? Sure there is," says Realtor Jack Lane, sipping a smoothie in a black polo and shorts on a sun-kissed September morning in front of Horizon Books, the city's landmark bookstore. "But that has nothing to do with a nine-story building."

The setback of the project “wasn't a reflection of antidevelopment or an anti-affordable-housing sentiment in the city as much as it was about inexperienced developers trying to fast-track a massive project that would change the small-town character and resort-town feel of downtown Traverse City,” Snowden said.

“The residents," he added, "don't like that.”

Its backers say the project isn't going away anytime soon. Falconer resubmitted his downsized plans earlier this month, but the proposed height remains at 96 feet. A public hearing is set for Nov. 3.

"We are committed to the idea of affordable housing," says Falconer, who also runs a publishing company and serves on the city's school board. "I’ll fight this fight a lot longer. It’s important enough to me. We will pursue all options before we take that off the table. It’s too important to Traverse City."

Contact Matthew Dolan: 313-223-4743 or msdolan@freepress.com. Follow him on Twitter @matthewsdolan