The Strong Towns Podcast
Michigan is on the forefront of housing innovation, with many cities throughout the state experiencing a resurgence in population and housing options. Today, Chuck talks with Dan Gilmartin, the executive director and CEO of the Michigan Municipal League, which was instrumental in this revival.
Transcript (Lightly edited for readability)
Chuck Marohn 0:00
Hey, everybody. This Chuck Marohn with Strong Towns. Welcome back to the Strong Towns Podcast. If you've been following our conversation for any period of time, you know that we talk about Michigan cities a lot. The city of Muskegon is one of our shining stars, one of our former Strongest Town champions. We've had other cities in Michigan that have won the tournament or been close to the end. I've spent a lot of time myself in Michigan, just because we've had so many cities that have contacted us and wanted us to come and help move their conversation along. I feel like there's a hotbed of innovation happening around Michigan and Michigan cities. In that framing, I was able to have a conversation a couple of weeks ago with the Michigan Municipal League, and they agreed to send someone, in fact, their Executive Director and CEO Dan Gilmartin, to be on the podcast and chat about Michigan and Michigan cities and all the things that are going on there, with a particular look at housing. Dan, welcome to the Strong Towns Podcast.
Dan Gilmartin 1:09
It's great to be with you, Chuck. Long time, no see. You guys are doing great work, and you're right, you guys have had a long history here, and we've been working on and off with you for years. You've really had an influence on some of those innovative practices happening in communities all over our state, large and small. So it's good to be with you.
Chuck Marohn 1:26
I really appreciate that. It does feel like you and I chatted in the early, early days of Strong Towns. Back when this was a very small operation, you guys were calling saying, "Hey, could you come speak at this thing?" So this has been a long relationship.
Dan Gilmartin 1:26
We were like "There's this guy in Minnesota, can we bring him in and talk to him?" and now you're like, on top of the world. It's great stuff. There's been a lot of folks in that space now, but there was a time where there's a lot of screams in the wilderness, and you were one that we latched on to and really learned a lot from through the years. So thanks for your work.
Chuck Marohn 2:01
I appreciate that. Can you talk a little bit about the league? I work with a lot of leagues around the country. I wind up talking to them. You all are a little bit different, and maybe it is just culture and not substance, like your setup, but it feels different. Can you just talk about what the role of the Municipal League is, and then what you guys maybe bring uniquely to the table?
Dan Gilmartin 2:27
Yeah, well, the Municipal League, at its core, is the state association of cities and villages. There are 533 in the state. So it's everybody from our smallest community, which is a few 100 people, all the way up to the city of Detroit, and everybody in between. We've been around since 1899 actually, just celebrated our 125 last year, which is crazy. We have worked on issues, we do a lot of research for communities, a lot of program planning. We advocate on their behalf at the state and federal levels and in the courts. We provide insurances and executive searches and sort of anything and everything that local units of government need to make them better places, to make the people at council tables and whatnot working to bring best practices to what they do in the community. I think maybe the thing that might make us a little bit different than others, is we made a conscious decision, after I became director, to not just represent the council chambers, if you will, but to try to really speak on behalf of policy in our state and our communities that would affect everybody who lives there, who visits there, and who works there. That sounds the same, maybe, to some people, but it's quite different. There's a municipal structure, and there's the civic realm, and we like to play in both of those spots. Again, at that time, when I became director, Michigan was in real trouble financially. We were in real trouble from our community standpoint. Detroit was headed towards bankruptcy, and some of our smaller communities were in receivership. The end of the Industrial Revolution, if you will, hit us harder than anybody else in the country. So it was both a really trying time and a time to be innovative and say, "Okay, let's go out and turn this sucker around. Let's go get the best practices. Let's talk to people. Let's see who's doing what and where, when and how and try to bring that all back to our state." It's how we stumbled across you. So that's been part of our culture and part of what we do now for for a while, and I think it sort of reflects in what we do and what we bring to the table.
Chuck Marohn 4:32
Here at Strong Towns, we talk about cities as the highest form of collaboration for people in a place. I get a little frustrated at times when cities are looked at as the lowest form of government in a food chain of governments. You got your federal government, and you got your state government, and then regional government, and then cities. And we have townships. You all have townships too. We have this low form of government. And the idea is, "Everything runs downhill. We'll just tell them what to do. They're our implementation arm." How do you think about cities? And how do you think lawmakers at the state level and federal level should think about cities, or people in general society should think about cities?
Dan Gilmartin 5:18
I agree with your concept, that's how people think about it. It's really interesting, because it's really the reverse. We talk so much about the founders in this country, and everyone claims to know exactly what they meant by everything that they did. But it's hard to look back and find any of them that didn't believe that the government closest to the people was best. That was a real focus behind it. It was certainly states rights, when we talk about it from a federal perspective. But even beyond states rights, it was localities having the ability to make decisions locally and to preserve the context of these places. So much of our work in the last decade plus here has been about trying to create great places. What makes a great place? What's the human experience like in a downtown, in a neighborhood, at a park, whatever? Those decisions are really decisions that affect people every single day. That's stuff being talked about at the local level, that's stuff being done in partnership and maybe on a regional basis, and those decisions impact people all the time. So we believe there's a really strong role there. Certainly there is a Federal Constitution that reserves rights, there's a state constitution that gets rights over communities. In Michigan, we have a very strong history and Home Rule, and many states do, and it's just something that's sort of -- I don't know that it's up and down or big and little, as much as it's different. Again, if you drove to work today, you drove probably on a local road. If you stopped and got a coffee in a little downtown shop in downtown bakery, the city's working to make sure that downtown's works and is vibrant from an economic standpoint. That's going to impact you all the time. It doesn't make the national news, but it's really important stuff.
Chuck Marohn 7:10
I feel like there's a lot of times when the state and the local governments have interactions, where.... In Minnesota, we have 852 local governments, something like that. I mean, there's a lot, and I know Michigan has a lot. That means that some of them, at any given period of time, are doing something really stupid. You might not say that in your position, but I'll say that in mine.
Dan Gilmartin 7:35
It's a bell curve, right? Everything's a bell curve.
Chuck Marohn 7:37
It's a bell curve. If you've got 850 cities, you've got a couple dozen that are real leaders, that are places that we can learn from, that are doing great. You've got most of them that are somewhere in the middle of that, hopefully they can learn some from those great ones. But then you've got some that are doing just really stupid things, like, "Oh my gosh, I'm just cringing at the way you're melting down right now." How should states look at that? Because I often feel like what we do is we look at the ones that are struggling and we say, "Okay, we have to put something in place so that will never happen again." I actually want to look at the ones that are doing great and say, "Okay, how do we not shackle these people and let these people do great things?"
Dan Gilmartin 8:22
This will be an interesting premise, but let's define stupid, right?
Chuck Marohn 8:29
Yeah, fair.
Dan Gilmartin 8:31
Sometimes community leaders are given losing hands, right?
Chuck Marohn 8:35
Yeah, that's very true.
Dan Gilmartin 8:36
If you're in an older community with aging infrastructure, completely built out, and lots of debt from long term pensions, and you've got older roads and sewers and everything else needs to be redone, and falling housing prices and on and on and on. You're sort of grasping at straws, that's sort of one aspect. And I see some of those communities where you do have people doing a Herculean job just to keep the doors open and the lights on.
Chuck Marohn 9:03
Amen, I've seen that too.
Dan Gilmartin 9:04
Then you see growing communities, oftentimes exurbs and townships here in our state, and even some of the cities that are still growing, and they're making a lot of the same mistakes that somebody 20 miles down the road who's struggling now made 50 years ago. A lot of times, I think what communities do is living in the moment, and they're trying to deal with the hand they're dealt. If you're at a scale of one to 10, and you're at a one or a two, you're trying to get to three, and a lot of times, somebody's at an eight and they're on their way back to seven. So I think sometimes it's how you look at that. I think what states can do and what federal governments can do is understand the premise of everything, across the basis of what they're doing from a local government perspective, from a community perspective, and understand that the individual relationships are important, and that platform for doing well is important. We talk to our community leaders all the time. There's a guy named Sean Safford. I don't know if you've ever stumbled across Sean. I think we had him in one the times we had you in to speak. At the time, he was at MIT graduate student when I was teaching at U of Chicago. I've kind of lost touch with where he's at. But he wrote a book, and it was very interesting book. He put mathematical equations around relationships within communities of different individuals and different organizations. The conclusion he came to is that a vertical organization, which is one where, for example, the leaders of the biggest business in town control everything and everything falls in underneath them, had one outcome. A horizontal one, where it didn't matter if you were the Boy Scouts or if you were a nonprofit, or if you're the school district community leaders, whatever, it was much more wide when he went out and grafted it. That was a stronger way to build a more resilient community that has more tools and more innovation and more people at the table making decisions. It's really remarkable, and I think that's always led the way in which I look at communities. How do you build a more resilient platform? And how do you ask the local government leaders -- which we do, coming out of, again, Sean's language -- to be the host of the party, not the life of the party. It's where I think people on the left and on the right, from a national perspective, can get along well together. You need a strong local governmental unit. You need strong civic engagement. The role of the mayor, if you will, is to make sure great things can happen in the community. It's not necessarily to do the great thing, but it's certainly a role for great things to happen. We really tried to carry that through in all the work that we do, whether it's training or research or something, bringing some of the best practices. There's lots of examples of where that's been a really positive thing. So I think sometimes you got to grade on a curve based on what people inherit, but you're correct in that, if you have 100 people making decisions, you're not going to make the right decision 100 times. But if you're resilient, you're thoughtful, you're going to get back to zero as soon as you can.
Chuck Marohn 12:10
I feel like your pushback there was gentle and right on. What to you and me might on day one appear dumb, is going to be the genius thing a week from now. And I do think, if you don't make room for that, you're limiting your upside in a big way, right?
Dan Gilmartin 12:28
No question. And that's the innovative space, right? There's reality to it, especially on the kind of stuff you and I work on, that our organizations do. There's not a North Star, if you will, looking at how you redevelop a neighborhood, how you keep a small Victorian downtown going, how you deal with a big city that's fallen on hard times, whatever the case is. It's not simple A plus B equals C. There's a lot of nuance in there, and that requires finding the best and the brightest, and getting the best ideas in front of people, and making them politically palatable, and finding funds where they're not there, and finding partners who aren't obvious, and sort of moving forward. We have a tendency as human beings to only innovate when we're in crisis, otherwise it's too darn hard. If you have a 10 year window or a 10 year arc looking at things, but no one has that anymore. It's crisis, when things like this happen, that I think we learn some good things.
Chuck Marohn 13:32
Let's lean into that crisis thing, because the thing that I wanted to chat with you about the most was housing. I want to set it up this way because I was on a site last week or the week before, I can't remember, and someone was reacting to some stuff that I had written, or Strong Towns had written, and they actually said, "My state and Michigan is the worst state. There's no innovation. There's no this." I think they even brought up "the League is just backward in their thinking." I read that, and I thought, "Oh my goodness." I've literally been to every state in the country. I've given a talk for Strong Towns in every state in the country. I wrote a book on housing. And the examples in there predominantly come from Michigan. The conversations I've had about housing predominantly come from Michigan. We're days away from releasing the second implementation toolkit from the book, and I think a third or more of the examples we have in that toolkit come from Michigan. I want to give you an opportunity at the beginning, before we drill down into housing, to just talk about how you, as Michigan and also as the League, have thought about housing for quite a while now, even before it became the national crisis and the buzzword. And maybe even why you think there's a little bit more innovation there than what we see in other places.
Dan Gilmartin 14:55
To answer the last question first, I think I'll go back to what I just said about innovation. You do it when you're in real trouble. If you're rolling along in your company and you're making 3%, 4% a year, you just keep going. If a community is headed in a direction and they're gaining people, they just keep going. Michigan's demographics have really been struggling post Braun industrial, if you will. In 1980 in this state, we had about 10 million people, a little less, and we were a top third per capita income state in the country. So we were relatively affluent. We had 10 million people. Here we are in 2025 and we still have about 10 million people. We just crossed that last time, so it's marginal increases. And we are now in the bottom third per capita income state. That's basically the Braun industry, the Fords, the GM, the Chrysler and everybody connected to them, moving to a different kind of economy. We like to say when the country catches cold, Michigan gets pneumonia. So we got hit early. We got hit often. Certainly people know about Detroit, and people follow Detroit's first fall and now amazing progress coming back, but that's happened in smaller towns and in midsize cities all over our state. I think that's why you see a lot of innovative practice, because it gave people the license to go out and try something different. I'm very proud of our organization being at the forefront of so much of that. We really took it on as a mission. It's like, we do not just represent cities here. We believe the state is the collection of its cities, and it's a collection of its places. So we've got to figure out a way to make Michigan's places much more resilient and much more attractive to people who are either here, so they don't leave, or to people who would come, businesses, tourists, whatever it might be. So that's the culture that I think is set up. And you see that across many ways. Big philanthropy in this state. State government's been a little bit more open at times, they've certainly made good decisions and bad decisions. And we've had some work with businesses in our state. People follow maybe a little differently for longer here than they have in other places.
Chuck Marohn 14:55
I feel like there's a housing conversation going on today. A lot of the, I think, energy around the conversation, particularly when you get online and you get in public forums and all that, it's an energy that comes out of San Francisco. It comes out of the broad dysfunction of California. It comes out of New York City. Then it gets filtered down into a place like Michigan.
Dan Gilmartin 17:35
Yes.
Chuck Marohn 17:36
I think a lot of people that are on the ground in Michigan doing housing work can be a little bit bewildered by how that kind of message is interpreted in a place that is functionally very different. I don't know what it was today, but I know five, six years ago, you could get a house in Detroit for $40,000, $50,000. These were not great houses, but people were living in them. And the thing that I saw people working on is, "How do we get these people to not be renters? How do we get them to own their place? These are places that they could own. How do we make that happen?" The affordability conversation of San Francisco overlaid onto Michigan is completely dysfunctional.
Dan Gilmartin 18:19
Correct. There's become a cottage industry of that, of housing advocates that are going state to state with a list of four preemptions or five preemptions that they want the state to foist onto local government. And they think that the whole system will be better because of it. It's really nonsense. I mean, certainly everybody has a right and a responsibility to do the best they can, to provide for best practices, whether at the local level, the state level, banking and finance, the builders, you name it. We all got ourselves to this place from a housing standpoint, and it'll take everybody here to get us out, if you will. So to say "All the evils of the world are because of x, y and z," and go state to state to state. You see them out there. It is a cottage industry. There's people doing it all over the place and saying, "One size fits all and here's how we move together." Again, if I go back the innovative standpoint, when you look at innovation in housing, there's a lot of it here in this state, because we've had to do that, because we did have the dollar houses for a long time in the city. Detroit was approaching 2 million people in 1960. It's lost 60%, 70% of its population. People who haven't been here can't really understand that. If you came to Detroit 15 years ago, 70% means, if there's 10 skyscrapers, seven of them are empty. There was a time where you and I could channel the change in our couch and go buy one of those things. We're not in that place anymore. We've come back a long way from that. But just a really crazy market influence based upon some of these wide-ranging international issues when they come to globalization and everything else. So that's when you innovate. That's when you see people building different. That's when you see community groups working with philanthropy. That's when you see nonprofit groups bringing in people from all over with the best practices. Some of the things that we followed here, as we did our initial research, were from places like Northern England and other post industrial places that were maybe a decade or two ahead of us and reinventing themselves. We brought back lessons from there, in terms of what's happening in the Manchester's, the Liverpools of the world. We looked around and tried to scale things happening in great and smaller communities around the country or larger ones. How does that mean for a neighborhood in our state? There was more openness to that, and I think that's why you see some of the really cool things that we've been able to accomplish. It's not enough, and we need to do more, and we've got plans to do that, but there's a real, I think, philosophy here that people coming in from outside saying, "We need one set of rules for anybody, everybody," miss.
Chuck Marohn 21:05
This doesn't mean that Michigan doesn't have a housing problem. Describe the struggles as you see it, in terms of housing in Michigan, because there is an affordability issue, right?
Dan Gilmartin 21:17
Sure, there's an affordability issue, and there is a matchup issue of where housing is and where it's not. People come up with different numbers, and I could quote them. I think the governor talks in 100,000 range or so of needed numbers. I've seen other things being much higher. I've seen some being much lower. But certainly we, like a lot of places right now, are struggling with that entry level housing, that missing middle. We see that in the rural parts of our state. For example, up the northwest corner of our lowest peninsula is anchored by Traverse City, which is a wonderful place that's growing, has wonderful waterfront property, functional airport, lots of really cool things working for it. They don't have enough housing, right? It's a lot of little, tiny towns around there that locals live in, and if you have couple million dollars, you can live on the water and be regal about it, but if you're hired into a mid level position, there's nothing there for you. That's some of the issues they're facing. Detroit, for its amazing comeback, it's now actually leading the state in growth. They had the first uptick in growth in decades during the last census, and there's more of that coming. But a lot of that is at the middle and higher end growth. We're seeing a lot of that influx of individuals with means going to places and building stuff out. We've still got largely a missing middle issue there, and certainly an entry level issue as well. You see that in a few of our other big cities. Then we have a lot of places that are still in the process of coming back, if you will, from some of the economic chaos caused by the de-industrialization. So you see that, obviously in our suburbs it's an issue too. We need as a state to be building more and doing better and being really thoughtful, and I think, direct in terms of some of the approaches that we have.
Chuck Marohn 23:08
The legislature, I know, is looking at preemption bills and considering how to, I would say, take discretion away from cities and require them to do A, B and C as a way to alleviate some of the housing problems that the state is experiencing. You all have come forth with a different approach. I want to give you a kind of a broad ability here to just talk about, not only the way you all are thinking about preemption, but what you're doing proactively to try to help your cities deal with housing issues and, I think, to ask the legislature to be partners in that.
Dan Gilmartin 23:52
Absolutely. A couple of weeks ago, together with some home builders, some developers, some housing advocates and certainly local officials from all over the state, we introduced a proposal called the My Home Program. And of course, we're in Michigan, so MY becomes MI here because of the great Benton state. I think it's a statewide law. Everything has to have MI in it somewhere. So MI Home Proposal that we introduced is really an effort to accelerate housing construction and rehab across our state, and it's really the concept of having a partnership over prevention. So the prevention advocates are out there, many of them coming here after they've been to Oregon and Montana and California and elsewhere, and they're pushing what they want to do, and we see that some of the outcomes there haven't been exactly what they wanted, as you know. Our program is something that, again, has everybody at the table. Everybody got us here, and everybody has to get us out. So the program is really to do some of the things that I talked about before, in terms of set that platform for great things to happen. We want to stimulate housing investment. We want it to have a lasting impact. We have an initial target of 10,000 new homes directly from this program, but the lasting projects behind that is to get, again, that "hosts the party" aspect in place, so that we've got a state and local governments working together with private industry to build homes, especially at those critical points that I just talked about, those low income places, those missing middle places. We're going to do that through a proposal that has local zoning reforms. We've collected best practices from across the country. I think there's 14, if I'm remembering correctly, in there, in terms of what we're asking local units of government to consider to implement at different phases. We see the state government coming together and providing some much needed gap financing. The gap financing is an issue if you're going to build in this state right now, or really anywhere in this country, you've got to have that if you want to get to attainable. It's got the state and local streamlining processes. We've had something in a state called Redevelopment Ready for a while. I know you've worked on that a little bit with some folks here. One of my colleagues here, Richard Murphy, was instrumental in creating that. Largely, it's best practices and systems and ordinances for locals with respect to being ready for commercial and industrial redevelopment. We're really extending that to the housing circle as well. So a lot of the types of things that you see, that we know have some positive impact around the country, are included in this, together with financing, together with all hands on deck. We think it's a better way to move forward and to create this ecosystem where more housing happens. Not just these 10,000 we can build with the numbers here. We think we can do more of that across the board in the years to come.
Chuck Marohn 26:48
Let me give you an example, and I want to talk about what it actually means to make change at the local level, at the city level. One of the things that we've talked about for a long time is parking reform. It seems like a universal thing. If we're very generous, we can go back to the 50s and 60s and say, "Hey, the way you make a successful city is to have a lot of parking." And they went out and they created these ordinances, and they don't have a lot of rigor to them, but they were copied and copied and copied. And now Kalamazoo and Traverse City, and they've all got the same ordinance, and it's really not a very good thing. We started to recognize that, and there's been this move to remove them, take them out, get rid of those. I was involved in the discussion here in Minnesota, where it was like, "Well, should we just preempt cities and have them get rid of get rid of these parking things?" I spoke in favor of that bill here, but I do it with some reluctance, because I do know that the best thing for my city would be to actually have a conversation here about why we have parking, why we do it this way. Can you talk a little bit about the difficulty of making change at the local level, but I'm kind of asking you to say why it's important to experience that difficulty. What is short cutting that actually do to local capacity?
Dan Gilmartin 28:19
Shortcutting it? You mean in terms of preempting it?
Chuck Marohn 28:21
Yeah.
Dan Gilmartin 28:22
I think when you go out and just preempt things one knock at a time, you get no groundswell of support around ideas and around doing things. You basically just raise the temperature of the antis, whether that's NIMBYs in communities, whether it's local officials, business leaders, whoever it might be, it's different people in different places. Just to sort of walk in and throw a hammer down and say, "This is how it's going to be," is something that doesn't work. You can't preempt enough to completely short circuit any sort of system. And if you did, you'd have a place that no one wants to live in. That's just ridiculous. So our work here at the League has been around creating great places and and having people really understand the culture of their places and the history of their places and the dreams of their places, and who lives there, who lived there, who might live here moving forward. How do you work towards understanding the past and moving to the future? Just to walk in with a blanket set of preemptions doesn't get you any of that. It gets you a different point to looking at a parcel by parcel change of what's happening. It doesn't move the needle. We believe in the fact that we should do better at the local level. A lot of local places are doing better, but we need even more to do it. We need to look at parking. We need to look at ADUs as a big issue. We're not going to solve the homeless problem in this country with ADUs. And if you've listened to the preemption advocates, they might tell you that, but it's just nonsense. It is part of what we're doing, and looking at duplexes and triplexes and fourplexes. We've got pattern book homes here. One of the things we did as an organization a few years ago is put together pattern book homes like the old Sears and Roebuck homes. Remember, you could buy those online -- or not online, there was no online back then. You could buy them in a catalog and they show up, and you can put them together. We did sort of the same thing, same aspect of what we're doing here, and get that out to all of our communities. We've got plenty of communities looking at those right now. You certainly get a density and transit issues and the rest of it. All that stuff's best practices. I think to your point, to get a community to truly understand that and take that into the civic realm, we've seen lots of success with that. We need to see more. If you just bypass that with straight preemption, you get none of that. People's backs get even stiffer in terms of trying to defeat a development or a change in what's happening from a zoning perspective. You can't do enough of it, and you shouldn't either.
Chuck Marohn 30:57
The central argument is that cities are not innovating enough, they're not dynamic enough. They're dominated by NIMBYs, and they just won't change. My thought has always been, well, if you just take away all of their initiative, then you're reinforcing that. You all have suggested that the state's role could be to -- I'm going to use the word lubricate -- lubricate this conversation with money.
Dan Gilmartin 31:28
Yeah. "Do these things!"
Chuck Marohn 31:31
Talk through that philosophy a little bit.
Dan Gilmartin 31:32
The carrot approach. The stick approach says, "Hey, you guys, we're going to blame everything on you." As my dad used to say, establish guilt to a fixed blame. It's like, "We have this whole problem because of people who were sitting around the city council chambers in your town in 1950" -- or in my town in 1972 or wherever these fictitious people were that made housing unaffordable in 2025 -- "Blame them, and let's go in and sort of run over the top of this thing." It doesn't work, and it's intellectually dishonest as well. There's a whole bunch of reasons why we got here, and there's lots of, quote unquote, blame to go around, if we're talking about all the isms around housing and and why we're at this stage right now where we're largely unaffordable and entry level units and whatnot. So, again, if you have a carrot-based program, and we talked about partnership over prevention. Everybody wants to get done, so let's get it done. How do you work with locals at their level, with the state at its level? Who has the ability to provide funding for some of this stuff? Because you need to get financing in this arena, you just do. And how do we get folks to make the right decisions on their own? So our program includes a ton of education. It includes a list of best practices and the implementation of those. On the other end is some opportunity and some ability to gain some money in to build the types of housings that we need. There's also something else that I don't think is talked about very much in this greater housing issue that I think is important here too. There's an opportunity cost here as well. I mean, in Michigan, we certainly are short on labor right now, which is ironic I guess, given our history. I don't know how it is in Minnesota, but I know a lot of places around the country are short on labor.
Chuck Marohn 33:14
Absolutely.
Dan Gilmartin 33:15
We certainly see all kinds of other things out there, in terms of the amount of steel that's available and lumber that's available, it all costs more and keep going and everything there. When you see the same kind of homes being built, those homes are way down the line, they're more expensive, they're larger. That market is crushing it. It's just the stuff like that being built in every state in this country. And that's fine. If you're a builder and you're a developer, and you're looking at making 20%, 30% on a property, you make a heck of a lot more if you sell it for a million bucks than if you sell it for $100,000. That's just the reality of it. That's not even an anti builder thing. It's just that's where people find themselves. So you don't find enough builders and enough developers in these spaces. Again, some of this gap financing and some of the streamlining -- I know, in one of your earlier podcasts, you talk about having a different set of rules for the, quote unquote, starter houses, perhaps, than you do for larger ones. All that stuff looking at this, so we can make this more attractive for private business to spend more time and money and make more effort in these areas. That helps with the long-term aspect of this stuff, too. So that's a big issue here. I see that everywhere. You see all kinds of things stalling out there because there's not enough carpenters, there's not enough lumber available, whatever it is. If we can put more of an emphasis in this area, builders can still go out and make money, that's fine, that's what they're here to do. But we can get a better house out there, a better home, a better walk up, whatever it might be for people at different levels, that we really need, and business tells us we need, and cities know they need.
Chuck Marohn 34:49
You're describing a concept that we talk about a lot here, of subsidiarity, the idea that you devolve decision-making to the level that really needs to be making that decision, the people directly impacted, and that the levels up higher are asked to provide assistance. "How do we help you in making a good decision here? How do we help you in getting this decision made?" I want to talk a little bit about Muskegon because I feel like one of the things that you have done is taken great work that they did, and then not only defended it, but then allowed other people to learn from it. To me, this is the ultimate subsidiarity, like "We're here offering assistance to our places." I've talked about on the podcast before, but I think it'd be good coming from you. What did Muskegon do in terms of tax increment financing for these affordable units? And then, what trouble did they run into at the legislature and how did you guys overcome that?
Dan Gilmartin 35:49
Yeah. For people that don't know Muskegon, it's over on Lake Michigan, and it's a urban place with a very important shipping and industrial community for years and years and years. That has obviously changed a great deal, and Muskegon went from a thriving urban place to a challenged place, like many places in the Midwest did. They've had some really good folks there, both in elected and appointed office, and they've tried new things. They were the first city in our state to do a lot of work. Well, I'm thinking about the work they did in taking all their parking lots and turning them into businesses.
Chuck Marohn 36:27
Oh yeah, absolutely. The stuff they've done in the downtown with their chalets and closing those gaps and the farmers market that they built. I think the thing that impressed me so much is that they didn't overwhelm this downtown with money. What they did is they said, "Okay, we're not super rich. We can't blow a ton of money trying to overcome things. But what we can do see where the problems we're trying to solve are and ask how we can tactically go in and address those with the money we've got and then build on that success." Connecting their farmers market to their downtown by closing that gap with the chalets is just one of the most subtly brilliant things I've ever seen a city do.
Dan Gilmartin 37:13
Yes. To speak to that, Muskegon was, again, a city that was up against it. They went in and they took old parking lots and they put these chalets on them that local businesses were able to come into, people that couldn't afford to be on Main Street. Quite frankly, there weren't a lot of people on Main Street because it wasn't a very good place to do business. They created some real opportunity there from a business standpoint. They were one of the first communities to do that going back a decade, decade plus. Several of those individuals that went in there doing business are now on a more thriving Main Street. They're doing the bricks and mortar stuff now, and there's a lot of great things happening. They had campaigns around bringing young people there. People weren't really considering Muskegon, especially at that young entrepreneurial level where people were collecting in cities. Muskegon wasn't on their list, and they were looking at changing that, and they largely have done that. They've used tax increment financing to build housing around it. So where they now have areas that are much better off from a commercial standpoint, they're building housing using a statewide TIF, and that's something we've been involved with here. People feel all kinds of different ways about TIF. In Michigan here, we have a really crazy property tax system that is upended by two separate constitutional amendments passed in the 1970s and the 1990s so there's not a lot of way for communities, especially one like Muskegon, to get extra dollars. So providing those extra tools, asking them to use them in a much different way, has been something that, I think, again, is part of that innovative process. What Muskegon has done is add some real housing for people at the levels that we're talking about that we need. And they're now living in a community, they're able to work in a much more vibrant commercial district, and they're doing some crazy things about retaking their waterfront, which was largely dirty and old and underutilized. It's one of the real comeback stories here in the state. And they're just getting started. There's all kinds of great things happening over there.
Chuck Marohn 39:14
Yeah, I agree. I'm not a fan of TIF.
Dan Gilmartin 39:18
I'm not sure I am either, but it's one of the things we have to use in this state.
Chuck Marohn 39:22
It is. In general, I've written about how TIF is basically an admission of failure. Your city's land values are not growing enough to prompt natural redevelopment, so you have to go in and do it. I've just seen cities do some not very intelligent things with TIF. Like subsidizing a business that actually undermines them in a lot of ways. We wrote a big series about Kansas City and their use of TIF and how they're subsidizing unproductive development when their productive development is struggling. In Muskegon, they focus their TIF on a specific type of housing that they needed, which is this smaller units, entry level in existing neighborhoods, places where you've had sewer and water and street and sidewalk and all this in place for literally decades, and nothing has been built on that lot. Now we're going to take this lot and get a house that is at an affordable price. My understanding is there was some ambiguity in state law as to whether they could do it or not. Am I misunderstanding that? I kind of want to make you the hero of this story, because I feel like Muskegon did heroic things, but it would not have been able to become what it is if there hadn't been some interpretations of law that helped them. Is that fair?
Dan Gilmartin 40:50
That is fair. Again, not many places provide housing TIFs, and not many places really allow for those TIF dollars to go into what essentially is private property. So we had to sort of jump through all those hoops to be able to utilize those monies. That was really the focus of our work at the legislature, to make sure that we were able to provide this tool, and that these tools could actually go in and benefit other folks. We've also gotten involved in some other programs to get into other areas to help businesses and people in that respect. Again, you've got to look where the opportunities are, and you've got to basically provide opportunities directly correlated to doing what you want people to do, or what you want to come. In this case, they wanted to have those small level houses, those infill houses, and some of their blue collar style neighborhoods. They were able to take that TIF and really direct it specifically into those area, and they've had some real success with that. It gets back again to opportunity cost. We're passing laws all the time in states across the country and even at the federal government level that are scattershot, and there's all kinds of unintended consequences across them. There's unintended consequences with preemption as well, as we know too. Stuff like what we're talking about in our plan and what Muskegon has implemented in its plan allows you to surgically go in and get the outcomes that you want with the limited resources that we have. Because again, those tax increment financing dollars that are collected are dollars that aren't going somewhere else. And we need other stuff too. We need money for roads and libraries and you name it. So if you're going to spend those TIF dollars, you need to do it in a way that really helps the community. I'll tell you what, Chuck. I think this brings up something else too. I was thinking to some of your earlier podcasts as well, and it talks about the whole financial dilemma around housing. Again, we look for someone to blame. Is it the local level, is it the state level, whatever it is. Part of it is just in terms of what a house has become from a financial tool.
Chuck Marohn 43:07
Yeah.
Dan Gilmartin 43:07
I mean, if it's 1950 and you and I are looking to live in the same neighborhood, and there's a house up for sale, we bid against one another, and you outbid me, and you get the house, and I go on to live somewhere else. Now if we're doing it, we're looking at people coming in, literally, from all over the world. It's part of investment programs and whatnot. They're securitizing this stuff. They're bringing it in. Our mortgages get sold, they get bundled, they get securitized, they become assets in large programs that have no knowledge of or care for what's happening in the community. But the other side of it is that housing is an asset for a community.
Chuck Marohn 43:45
Yeah, absolutely.
Dan Gilmartin 43:47
If you're at the local level and you're building community, people are driving through thinking, "Do I want to live here?" They're looking around the houses, and they're looking around the neighborhoods, and they're saying, "Can I see myself here? Can I see my kids here? Can I see growing up here?" Whatever it is, they're not going down to City Hall and reading budgets and attending committee meetings. That's just not where we get to you. That's the civic realm I talk about. Now we have so much of our real estate that's owned by people that have absolutely nothing to do with the civic realm and are just looking at them, whether it's $100,000 house in a neighborhood in Detroit or whether it's a million dollar condo and somewhere else, or a $10 million waterfront home in Florida or somewhere else. That has really changed the game in so many different ways. When we talk about this stuff, we've got to understand those impacts on what's happening from from an affordability standpoint as well, because that that stuff matters. It matters a lot.
Chuck Marohn 44:19
Yeah. You mentioned earlier that Michigan's done some weird things to their tax code that limits cities abilities to, say, make a good investment and then get a return on that investment. It narrows the toolbox that cities have to build a neighborhood, build a downtown, create growth and wealth, and have that show up in more capacity for the community to go out and do things, like make your park nice and take care of your roads and stuff.
Dan Gilmartin 45:13
Even our affluent cities are struggling with that. That's the system we live under. It is what we have, and we work with what we've got, but it's a challenge.
Chuck Marohn 45:21
I just feel there's a dynamism there. I see you trying to unleash a certain amount of dynamism in Michigan cities, and it's a dynamism that I've seen myself on the ground. When I talk to people, particularly about housing -- there was like four cities that I visited earlier this year where I went and chatted with a bunch of people -- I would say, "Well, are you doing this?" And the people who were doing housing and doing housing development were like, "I'm running up into the state on that." "Well, is your city doing this?" "Well, here's where we end up from a tax standpoint." And I know you have to work with the legislature, so I'm not trying to trash your state or anything, but it's hard not to walk away from that work on the ground, thinking, "Expand our toolbox! Give us more tools, give us more capacity." Because there's all kinds of people trying to solve this problem, and when they get to where they're trying to do something, their hands are tied. That's what I run into more than anything else.
Dan Gilmartin 46:31
Yeah, that's very real. That's very real. And again, people say all the time, "Run government like a business," which is nonsense. It's not the same thing. But I understand what they're saying in terms of utilizing best practices.
Chuck Marohn 46:44
I've always interpreted that as "Use business principles to understand how your city's doing." You're not going to run the utility department as a profit.
Dan Gilmartin 46:53
Which I understand. And I will just say that in Michigan, there's not a business person worth anything that, if their profit and if their margins and their finances and their revenues and their expenditures look like they do in Michigan communities, wouldn't just shut the door and go find something else to do.
Chuck Marohn 47:16
Yeah, exactly.
Dan Gilmartin 47:16
Getting back to zero is a very difficult thing to do in our state, based upon how we do things. So absolutely, that is a huge issue. The other thing in Michigan is the only way to get additional dollars at the local level is to grow new units. Not rehabbed units. It's new units. So you've got your exurbs, largely townships around the metropolitan areas, like you have everywhere on the country. They can come in and if you put a new house on the on the tax roll, then you've got new tax revenue. But when you see communities doing everything right, and you see housing prices going up and more people wanting to move in, the city is not gaining those dollars as well at the more inside level.
Chuck Marohn 47:57
Can I say this in a different way?
Dan Gilmartin 47:59
Yeah.
Chuck Marohn 48:00
I want to drive this home, because it's very frustrating to me. Say I'm a city and my residents, all of us together, make up the city. We want to make your park nicer, and we want to make the sidewalks in front of your house nicer, and we want to make your neighborhood just a better place to be. That shows up in increased property values, because we just made your neighborhood better and more people want to move here. The city has, in a sense, no financial incentive to do that, in the sense that they're not going to get any additional tax revenue or tax base from doing that.
Dan Gilmartin 48:39
Yeah, very little. The two constitutional amendments that I talked about. One was in the 1970s and was a cap on the size of government. That was one of the original anti tax matters called the Headley amendment, and it capped the city's finances at certain levels. In the 1990s, we passed something called Proposal A which was a cap on individual assessments. It said the assessments could not grow above more by inflation. So two things happen. Number one is just about all cities hit their, quote unquote, Headley limits. Especially the older ones, they hit them very early because they've got so much in terms of sunken costs and historical costs and whatnot.
Chuck Marohn 49:19
Right.
Dan Gilmartin 49:19
Then, from the from a Prop A standpoint, in terms of your individual prices as a homeowner, we never expected that actually prices would go down. Because of Michigan experiencing what it did, we had cities that lost 40%, 50%, 60% of value in their homes. So if your home was valued at $400,000 is now valued at $200,000, it can never go up again over inflation. So it's going to move up 3% a year forever. We came back in most communities, not every community but most communities came back. We're experiencing growth, and we've had positive things happen over the last 15, 20 years, and that $400,000 might be worth $600,000 but you're paying taxes on $300,000, $350,000 at this point in time. And, oh, by the way, if everything does go up, the other 1970s era amendment kicks in, and we got to send money back. So we actually have something called a roll back. You move in and add $3,000 of property value or property tax, everybody else around you, their tax goes down by 14 cents because we have these caps. So it's a really difficult system that we have here, and it doesn't reward best practices and reward things happening. Like in a lot of other states, we find ourselves with these exurbs, building 5000 new homes and getting a bunch of money in the door and saying, "Hey, you know what we should do? Let's build a big township hall, and let's build a big park," and off they go. And it's like, you're gonna be in the same spot in a few years. Just hold on. It's a conveyor belt. Everybody's on it. It's just that some of them are going over right now and some of them are on their way.
Chuck Marohn 51:01
Yeah.
Dan Gilmartin 51:01
It stinks, but from a housing standpoint, we've got to figure out a way around that, and we've got to figure out a way to actually be able to provide services to people. Because, as you know, especially when you look at entry level houses, maybe there are neighborhoods that aren't the safest. You need police, you need roads, you need updated parks, whatever it might be, and if you're giving all that money away, then you're not able to provide some of the service on the back end. So again, that's why the state has the capacity and has the ability to move in and do some real work here. We like to say, if we are truly in a housing crisis -- I hear that everywhere I go, every conference I go to, they talk about a housing crisis -- we're not acting like it. Who's acting like it?
Chuck Marohn 51:43
Yeah, yeah. Cities are acting more than anybody, yeah. It's always been maddening to me, because we have created this huge incentive for cities to make the worst kind of investments out on the edge, or the investments that are not going to pay off for them. We make that lucrative for them, and we make it the opposite of lucrative to take care of what you have well, to do a good job. The way I've described that is it puts what's good for the city as an entity somewhat at odds with what's good for the people they serve. To me, the biggest reform we can make is to align those things better. You are with the League, and I've never felt like that is a moral failing of cities as much as it is a failing of the structure that we've given them to reflect their constituents' values.
Dan Gilmartin 52:39
Action, reaction. If you're the city manager, you don't want to come out with a budget deficit. If you're the mayor, you want to say that you're running for reelection, because you've got your ducks in a row. It gets back to something we talked about earlier. You have your municipal structure and you have your civic realm. I think we are pushing local leaders to be -- in certainly our proposal, in my own proposal -- more civic leader than municipal Chairman of the Board of Trustees, that is the municipality of x or y or z, which is what a city council is. Again, housing is a city asset. Housing is an asset of how you how you experience a place, as is a downtown, as is a walkable neighborhood, or a park, or waterfront, if you're fortunate enough to have something like that. All that stuff is part of how you and I experience somewhere, when we go somewhere. It just doesn't show up in the the municipal budget. I think it's one of the problems of housing that we have nationally. One of the big problems is it doesn't belong to anyone. At the end of the day, it's a private transaction between a builder and a buyer, or a seller and a buyer in an older house, or even you're signing a lease document, whatever it is. We've mythologized it in America that it's the ultimate attainment you have as a citizen, to purchase a home or to live somewhere you want to live, even in a lease arrangement. And yet we're now trying to figure out whose fault this is, and whose responsibility this is. Something that's in the DNA of the organization that I work with is we believe this to be really important to having great communities. We got to figure out housing. It is stopping us from expanding in certain areas, it's stopping us from redeveloping in other areas, and it's just an important part of what we do. I think, quite frankly, it makes us a bit of a a good arbiter in this situation, because we don't really have skin in the game, if you will. I mean, we talk about money going in this program. It's not going to cities, it's going to developers, it's going to people building homes so that we can build something that costs $300, $350, $400 a foot to build and we can sell to somebody at a much lower price, so we can actually get to that missing middle and those entry level points. So yeah, it is an issue of civic realm over municipal structure. I think in the really great communities that I know, they combine those things together but they're fundamentally different.
Chuck Marohn 55:21
If I'm a local leader in Michigan and I'm listening to this conversation, what would you like to see me doing when it comes to housing?
Dan Gilmartin 55:31
Conversations around housing, conversations around what the community looks like, independent of jumping on a developer when they show up at the planning commissioner, at the City Council, with a new plan that's controversial. That's when we talk about things, that's when you get into your nimbyism, that's when you get into all kinds of crazy stuff. We see it in small towns and big cities. In some ways, some of that stuff's not avoidable. But if you're really having value-based conversations, whether that's through master plans, whether that's through public hearings, whether it's just being a regular conversation you have at the city council table or chambers of commerce, we can begin to talk about the kind of places we want. Nobody likes change. You know the old joke, the only people who like change are babies with wet diapers. Even those of us who consider ourselves pioneers and innovators, we don't like change either. That's the wrong time to talk about this stuff. But if a developer walks in and says, "I just bought option 20 acres on the east side of town, here's what I want to do with it," and you've already had community conversations throughout time about what you want your community to look like, what the people there believe in, what's happening in and around your community, where the spots are that you need to deal with, whether it's housing for younger people, housing for small families, whatever it is, then you're ahead of the game and you can speak to that stuff. So I would ask locals to think more strategically -- again, from a civic realm standpoint not not a balance sheet standpoint -- what does it mean to have a housing-friendly community, a housing-friendly region, and ultimately a housing-friendly state? And again, that's how we developed this proposal. It's like, "How do we put everybody on the same page and create the best platform possible to be able to to do this stuff when and if we have the ability to do that through the private sector and through the markets and everything else?"
Chuck Marohn 57:35
You've been listening to Dan Gilmartin. He is the Executive Director and CEO of the Michigan Municipal League. Dan, if people want to follow you, find out what's going on with your stuff, plug in, what's the best way to do that?
Dan Gilmartin 57:50
Sure. Mml.org, Michigan Municipal league.org. The program that I've talked about, the MI Home program -- again, MI, because we're in Michigan, they can follow me online or on Twitter or X or whatever it's called. You can find the League, and you can find me. We're trying to do great things for communities here, and we'd love people's engagement and involvement in it.
Chuck Marohn 58:14
That's wonderful. Thanks for taking the time to chat today. It's been really great. I love the work you're doing, and I can't wait to get back to Michigan. I know it will happen soon, it's nice to chat.
Dan Gilmartin 58:23
We'll take you any time. Keep it up.
Chuck Marohn 58:24
Thanks, my friend. And thanks everybody for listening. Keep doing what you can to build a strong town. Take care.
Norm Van Eeden Petersman 58:32
This episode was produced by Strong Towns, a nonprofit movement for building financially resilient communities. If what you heard today matters to you, deepen your connection by becoming a Strong Towns member at strongtowns.org/membership.