Newman Lofts Settlement Upended and Delayed by Concerns at DDA

The East Lansing Downtown Development Authority (DDA) voted unanimously today to defer taking action on a third amendment to the Center City District Master Development Agreement, two days after Council voted 4-1 to approve it. That puts off finalizing the agreement.

DDA Vice Chair Jim Croom, an attorney, found the proposed wording lacking in clarity with regard to what would be required of the developers by the amendment. City Attorney Mike Homier ultimately agreed with Croom’s concerns, and now the material will be rewritten and voted on anew by Council and the DDA, probably in March.

The third amendment to the Master Development Agreement deals with the issue of who can rent the apartments at Newman Lofts, a project the Council and DDA intended to be restricted to people aged 55 and up. 

The proposed amendment was set to give the developers — Harbor Bay Real Estates Advisors and Ballein Management — a reprieve from fines or punishment for the three illegal rentals to people under age 55. Homier told Council on Tuesday that the proposed amendment also “clarified” that all the units in Newman Lofts must be rented in accordance with the 55+ age restriction. That “clarification” was given as the reason the City should want the amendment.

After Council approved the drafted amendment on Tuesday, and with the developers having also approved it, approvals from the DDA and also the Brownfield Redevelopment Authority (BRA) — separate public bodies but with identical membership — would have been the final step in the all the parties coming to terms on this, the latest Center City District settlement. 

But now the matter is on hold until Council takes up a new version of the amendment, to be drafted by Homier and which the DDA and BRA are then expected to vote on at their March 25 meetings.

DDA member Rueben Levinsohn asked Homier if delaying action could have any negative effect. 

Ideally, the documents would be dealt with as soon as possible, simply to get the issue resolved, Homier answered, but that “delaying this is not going to cause any immediate harm.”

Since the City is not taking any action on the illegal rentals, the developer is also presumably suffering no harm.

The goal was to clarify everyone’s understanding, but Croom found the proposed amendment didn’t do it.

DDA Vice Chair Jim Croom was the first to voice concerns about the proposed amendment at today’s meeting. Croom took issue with the following sentence from subsection B on the first page of the agreement. 

It reads: “Each of the three Under 55 Tenants may continue to reside in those units in Building B3, provided that upon the voluntary termination of tenancy by any of those Under 55 Tenants at the end of the current lease term or any subsequent voluntary renewals of the lease term by the Under 55 Tenants, once vacated by the Under 55 Tenants, those three units, as well as all other units in Building B3, will be leased only to, and occupied by, residential tenants who include at least one person 55 years of age or older.”

That sentence, Croom said, could be taken to mean that the requirement of renting all the units to people over age 55 doesn’t kick in until after the three sets of under-age-55 tenants move out. Homier ultimately agreed it was unclear.

Croom also had another concern, specifically the word “occupied,” asking Homier if he could define what it meant to occupy a unit. He asked if, for instance, someone who keeps an apartment in Newman Lofts as a second home and has their under-age-55 children living there would count as occupying it. 

Homier told Croom that he is unsure if the Department of Housing and Urban Development has defined “occupied,” but would look. (It is also not clear whether that is the applicable legal standard.) 

“I’m a little squeamish about supporting this,” Croom said at this point. He also asked Homier to add wording about a governing law provision, to specify which laws apply.

Croom is the only attorney on the DDA — a voluntary board of citizens appointed by Council — and he often ends up checking the work of hired attorneys. On City Council, Lisa Babcock is the only attorney, and she was the one “no” vote against the amendment on Tuesday.

Before the 4-1 vote on Tuesday, wording aimed at specifying an occupancy requirement was inserted by Council at the request of three individuals from the Age-Friendly Communities Steering Committee, who wanted it to be expressly clear who could live in Newman Lofts. 

Mayor Aaron Stephens, a member of both the DDA and BRA by virtue of his office, had supported that change and offered a similar sentiment about trying to clarify who can live in Newman Lofts.

“The intent was they would be actually living in the location,” Stephens said, addressing Croom, “but to further clarify your point, we wanted to add the language ‘and occupied by’ to be absolutely certain that those individuals would be not just renting [by signing the paperwork] and having somebody else occupy the apartment.”

Stephens made clear his goal with this amendment is to settle the issue of who gets to lease and live in a unit in Newman Lofts: Someone over the age of 54.

“My goal with this, truly, is that we set the record straight,” Stephens said. “We clarify things and we don’t have this come back. And I’m fine to have revisions to it to make that happen.”

DDA and BRA Chair Peter Dewan questioned the viability of the 25% restriction to diversify housing downtown.

The age-limit restriction in question originates from Ordinance 1384, an East Lansing zoning law passed by Council in 2016 requiring that large multi-family housing developments (read: new apartment projects) downtown dedicate at least a quarter of their units to one of three options: 55+ age-restricted housing, owner-occupied housing (condominiums), or low-to-moderate income housing. 

In the case of Newman Lofts, the developers chose the 55+ restriction, citing a proprietary market study as proof of its viability. (The only version the developers shared with the public was heavily redacted.)

Dewan, in discussion of the proposed third amendment, argued it’s worth considering what might happen if, in a year or two, the DDA and City Council were having to deal with a mostly-empty apartment building downtown. He did not think it would be “clear sailing” without further issues for the City just by approving the third amendment to the MDA, and argued that the 25% restriction is making it harder for developments to succeed.

“We’re trying to create a downtown that is a destination location. . . . I’d like to know what the path is going forward as far as trying to make certain that this project is a successful economic development project and all other subsequent development projects are successful,” Dewan said. “And I think these are policy questions that need to be addressed at the Council level.” 

City Manager George Lahanas responded to Dewan, noting that Newman Lofts has been open for slightly longer than a year, and is intended to be there for decades. The building has only been open since October 2019, and Lahanas argued it’s not fair to try to judge so quickly whether the Center City development is a success. 

Lahanas also said that without any policy to diversify housing downtown, we are likely to see only student housing being built. 

“For the prior 15 years, we saw development happen without the 25% [ordinance] and no diversified housing came into it,” Lahanas said. “So, I think letting the market ride on this, we’ll end up with a one-dimensional downtown, that we will be so far down the road we can never change.”

DDA member Luke Hackney agreed with Dewan, saying he didn’t think the 25% restriction for downtown was “viable” for future projects. DDA member Jeff Smith took a slightly different tack, offering the idea of incentivizing (and disincentivizing) the behaviors the City wishes to see from developers rather than making hard regulations.

Stephens also responded, saying he appreciated Dewan’s opinion and forward-thinking, but opposed relaxing the restriction. The developers, Stephens said, effectively made a promise to the City Council and residents when the project was approved to feature the age-restricted apartments. They got public land at a discount with subsidies in return, plus the right to build a large student-housing project.

Stephens did agree that a discussion about incentives going forward would be worthwhile, and was “all onboard” to address how the City can aim to diversify housing in the future. He and Lahanas also indicated that if the project is struggling to rent to people over age 55 in a few years, they’d be open to a discussion about removing the restriction. 

But for now, Stephens was steadfast on maintaining the age-restriction for Newman Lofts.

“We need to see that promise through,” Stephens said.