Despite ‘Lack of Trust’ in Developers, Council Votes 4-1 to Settle the Newman Lofts Dispute

East Lansing’s City Council voted 4-1 on Tuesday to approve another amendment to the Center City District Master Development Agreement. The latest settlement lets the developers off the hook for three illegal rentals in the Newman Lofts age-55+ apartment building.

The matter did not pass without the developers, Harbor Bay and Ballein Management (HB BM), being called out as deeply untrustworthy by numerous people.

Still, the four who voted in favor — Aaron Stephens, Jessy Gregg, Dana Watson, and Ron Bacon — believe it will end any supposed ambiguity around the age-restriction for rentals in Newman Lofts, and avert what they feared could be a costly lawsuit.

Council member Lisa Babcock was the lone dissenting vote. Babcock had also been the lone dissenter in Council’s decision to put off enforcement last November and again two weeks ago, even as all of Council has consistently acknowledged that HB BM violated the zoning code and Master Development Agreement by renting to people under age 55. 

When Council voted 4-1 in November, they instructed City staff and City Attorney Mike Homier to negotiate a “mutually agreeable” settlement. That’s what Council formally approved on Tuesday evening. 

Notably, the agreement — the third amendment to the Center City Master Development Agreement (MDA) — allows for the three sets of tenants under age 55 to remain until the “natural” end of their leases, meaning they can extend their leases for many more years, if they so choose. The agreement does require that, going forward, any units rented be leased and occupied by at least one person age 55 or older. 

The new amendment to the MDA also includes the City forgoing any recourse, like monetary fines, for the current illegal rentals. And, the City must pay its own legal fees in this matter.

“It was important from the owners’ perspective to allow those tenants to be able to continue their residency until their voluntary termination,” a staff memo to Council reads. “Further, the owners insisted on clarifying that the City did not intend to pursue any fines or other action related to their tenancy in previous months.” 

The memo concluded that agreement was “reasonable” in the eyes of the staff, as they believe it will ultimately bring about compliance.

Advocates for seniors weighed in.

The specific language about occupying the unit came in response to a written request (pages 19-24 of the written communications packet) from three members of the East Lansing Age-Friendly Community Steering Committee — Kathy Boyle, Jim Levande, and Nell Kuhnmuench. Both Levande and Kuhnmuench also called in to speak.

“I am personally dismayed and appalled at the behavior of this developer,” Kuhnmuench told the Council. “This project was approved, at least as I understand it, because of the commitment to the over-55 housing. The developer never shared its market study, other than in a form it was so heavily redacted, it really wasn’t meaningful. But it was the market study used to make their commitment to over-55 housing….Then the developer sought to get out of that agreement having, without the knowledge of the City Council at the time, willfully and knowingly violated its agreement by renting a few units to under-55 people.” 

She continued: “I am concerned that this developer is asking you as a body to trust them that they have made a commitment that they will keep. I think it is hard to rely on their good faith when they have done nothing to earn your trust. And I just want you to know that’s how I feel about this developer.” (Read more about that redacted market study here.)

The issue of the illegal rentals originally arose during a Council meeting in September 2020, when Steve Willobee of Harbor Bay confirmed to Council that units in Newman Lofts were being rented to people under age 55. Council directed that a letter be sent informing HB BM of the violations, at which point HB BM responded by asking for a break from the enforcement (which they got) and time to work out a deal with the City. 

Several members of Council had made clear they did not want to be seen as forcing people out of apartments during the pandemic. 

The City Attorney rejected the developers’ claim about ambiguity in the deal, while also moving to amend the MDA to try to prevent future gaming by the developers.

During the course of the dispute, the developers have argued that because of the wording in one part of the MDA, referring to the federal Housing for Older Persons Act (HOPA), they had a right to rent 20 percent of the Newman Lofts apartments to people under 55. 

On Tuesday, Homier consistently rejected the validity of that claim, and explained that he had ultimately gotten the developers’ counsel to back off that claim and agree that the MDA allows only for rentals to people over age 55 at Newman Lofts.

Still, Homier wanted the MDA amended to eliminate any ambiguity about who can lease and live there.

Along with other Council members, Mayor Pro Tem Jessy Gregg expressed concern that absent the new agreement, a judge might side with HB BM on the developers’ reading of the MDA and HOPA, potentially allowing for under-55 rentals. 

Babcock, the only lawyer on Council, saw the matter differently. When the matter finally came to a vote, Babcock said that while she had no issue with the language of the amendment to the MDA, she had no trust in HB BM and does not believe the change in the agreements will get them to behave any better. Thus, she would vote no. 

“At the end of the day, if you can’t take them seriously, you can’t take them seriously. I wish I was a better person than this, but I just don’t have a lot of faith in what they claim they’ve signed off on,” Babcock said.

What will this mean for the future?

Responding to questions, East Lansing’s Director of Planning, Building and Development Tom Fehrenbach explained to Council on Tuesday that there is no easy way to know that the developers are following the terms of the agreement. But, now that HB BM has explicitly agreed that it knows what the rules are — and absent information they’re violating the law — the City will assume lawful behavior. 

Stephens asked Homier if the Council could take action against DRW Convexity if — like HB BM — that set of developers tries to get out of their agreements with the City on their project, known as the Park District. DRW Convexity is obligated to build not senior housing, but income-restricted affordable apartment units at 341 Evergreen Ave. 

Homier assured Stephens that the leeway being given to HB BM would not prevent Council from fining or taking to court other landlords and developers.

Council member Ron Bacon shared Babcock’s sentiments himself earlier in the meeting, noting “there is a lack of trust” with HB BM, the Center City District developers. But he thought the settlement was the right approach “from a clinical perspective.” 

“If it was not for the tenants and correspondence from members of the 55-plus community today, my perspective was a lot different,” Bacon said. “But I am willing to move forward in good faith from our side, but the machinations that we’re being forced to make here, we need to be abundantly clear it’s not out of trust or anything in my mind, or naivete that I assume they’re going to do the right thing. I hope they’re listening. Moving forward, do the right thing. This won’t be the best conversation next time we have to have it.”

Bacon lauded members of the public for bringing what he called the right “tone” to this particular conversation.

After the vote, Babcock took a point of personal privilege to speak about disability rights. 

“I understand that Harbor Bay presents itself as a residence for ‘active adults,’” she said. “And I do truly understand the importance of setting expectations and facilities, so that, just because an apartment complex caters to the over-55 crowd doesn’t mean that they include things like nursing services and transition services….I understand the importance of making that clear up front.”

She continued: “I have no vendetta. But I swear to God, if we find out that this marketing material, and this phrase [‘active adults’] is used to deter or discourage anyone with any physical disability or anything that violates the state, federal or local civil rights laws — we have a Human Rights Commission, we have many agencies. And if any of this, including the lack of accessibility and lack of ADA [Americans with Disabilities Act] requirements makes anyone feel that they cannot or should not or are not welcome there in violation of the civil rights law, I give you my word that we will unleash everything we have.” 

Note: On Thursday, Feb. 25, East Lansing’s Downtown Development Authority will discuss and vote on the MDA amendment at its midday meeting, because the DDA is a party the MDA and so must also vote to approve it. Find the agenda here.