A nonprofit organization plans to turn the former Grand Traverse Penitentiary into a housing development

Empty churches have been reinvented as cafes and businesses. The same applies to schools. Now, a former prison outside Traverse City is being brought back to life in an unusual way that some say could help ease the affordable housing crisis in northern Michigan.

Exodus House, a Grand Rapids-based nonprofit, plans to convert the former Pugsley Correctional Facility, a state prison located 30 minutes outside Traverse City that closed in 2016, into a housing development. The project will include 80 units to start, with room to expand to up to 300 units across four buildings at the facility, CEO Robert Munger said.

Exodus House, which provides housing and health care services to men experiencing homelessness in Grand Rapids, has entered into a land use agreement with the property’s current owners, the Grand Traverse Economic Development Corporation, the business investment entity of the Grand Traverse Band of Ottawa and Chippewa Indians. Plans await approval of a grant from the Michigan Economic Development Corporation this fall, Munger said.

If a $5 million state grant for revitalization and placemaking, or RAP, is approved, Munger expects residents will begin moving in by next fall, he said.

“We want it to be available only to the average person who works and needs a good, affordable apartment,” Munger said.

Converting the former Pugsley facility into housing will be Exodus House’s first affordable housing project not specifically designed for people experiencing homelessness, Munger said. It will contain studio and one-bedroom apartments, which Munger hopes will cost about $1,000 and $1,100 a month, respectively.

“We’re going to keep it as affordable as possible at market price,” Munger said. “Our goal is to make as many products as affordable as possible so that they are open to local workers.”

Development – which is in the early stages; Nothing has been submitted to local officials for site plan approval yet — and it comes at a time when northern Michigan is seeing a “severe” shortage of affordable housing, one expert said.

Exodus House originally planned to convert the 136,000-square-foot facility into transitional housing for homeless men, but scrapped those plans and shifted toward an affordable housing development after some residents rejected the idea.

The former prison has a sale price of $1.9 million, and the Michigan Economic Development Corporation will announce RAP grant recipients this fall. Realtor Marty Stephenson said the property is under contract but is still accepting back-up offers. Munger said obtaining the grant was crucial given the high construction costs.

Ownership requires a lot of work

Converting the former prison into a regular housing complex would require significant work on the land and buildings, Munger said. He added that many roofs must be replaced and the barbed wire surrounding the facility must be removed.

Munger estimates the redevelopment will cost $12 million in total. He will have to submit site plans and obtain building permits from the local government but is waiting for a grant to be approved and the sale to go through. Fife Lake Township Supervisor Jerian Street confirmed there have been no applications for permits yet.

The Pugsley facility’s square footage and location, directly between Traverse City and Cadillac, make it an ideal location for development, Munger said. Tax records show the prison sits on 85.8 acres.

“Both places are struggling to keep up with having enough employees to work at their companies and manufacturers,” Munger said.

Acute housing needs

Experts say Michigan’s Grand Traverse region suffers from a severe housing shortage.

“This area is one of the fastest growing areas in the state,” said Andrea Brown, executive director of the Michigan Chapter of the American Planning Association. “There’s a lot of issues around worker housing…so there’s not enough affordable housing for seasonal and year-round residents, to primarily serve service industries, you know.”

A recent housing needs assessment conducted by Housing North indicated the county has a shortage of about 3,500 rental units, said Ashley Halladay-Schmand, director of the Northwest Michigan Coalition to End Homelessness.

Halladay-Schmand said a family should not spend more than 30% of their income on housing for it to be considered affordable.

Under this standard, studio and one-bedroom apartments at Munger’s proposed prices would be affordable to low-income residents of Grand Traverse County, or those who make 80% of the area median income, according to 2022 income limits set by the Development Authority Michigan housing. The apartments would not be considered affordable for county residents with very low or very low income levels.

“For your household to be considered affordable, you should contribute no more than a third of your income toward your housing; across the board, this is becoming less and less realistic for anyone,” Halladay-Schmand said. “On average in our community, one-bedroom (rents) are over $1,200.”

Halladay-Schmand said the shortage of affordable housing is impacting homelessness rates.

“We have people experiencing homelessness for longer periods of time, simply because there is no mechanism to get them out of homelessness — which means providing affordable housing,” she said. “For people experiencing homelessness, the greatest need is studios and one-bedroom apartments.”

Publicly subsidized housing is also at a crisis point in the region, Halladay-Schmand said. She added that any community experiencing a housing crisis will have homeless encampments.

“In the summer, people are homeless because we don’t have enough housing,” Halladay-Schmand said. “Historically in our community…people go to The Pines,” he said, referring to an encampment in the Traverse City area where those without housing often stay.

Change of plans

Exodus Place had planned to use the Pugsley facility as temporary housing for men experiencing homelessness, but plans changed after strong local backlash, Munger said.

“The impression among local residents is that all that’s going to happen is the re-entry of prisoners and people who were dealing with addiction, (people) with severe criminal histories,” Munger said. “For us, not getting the transitional (housing) portion of Pugsley for the homeless is not an issue because there are enough people looking for housing, affordable housing, that we can rely on that and still help people who are homeless to a great extent.” On the verge of becoming homeless.”

Munger presented the plans to local residents at a well-attended Fife Lake Township Board meeting in July, according to resident Paul McCall. Many wondered how individuals who had recently experienced homelessness would get around, given the lack of public transportation in the area, and how Munger would ensure the safety of the facility’s neighbors.

“There’s a fair amount of hostility among locals to anything that comes from downstate,” McCall said. “People had serious concerns… It’s a very rural site, but there are still people living close by.”

Munger says the new plans still fit Exodus Place’s criteria of “trying to bridge the gap between people facing housing challenges and creating more stability in the housing market.”

But locals may view it warily.

“I expect Mr. Munger is going to have a tough time from a credibility perspective, just because of his previous attempt,” McCall said. “I suspect that… whatever he proposes now will be met with a certain degree of skepticism as to what he is really trying to achieve.”

Rural development

The former Pugsley facility opened as a camp in 1956, but was converted to a Level 1 secure prison starting in January 2001 with a capacity of 1,342 inmates, according to the state Department of Corrections. Located 25 miles southeast of Traverse City, just outside Lake Fife, it is a small village with a population of just under 500 people.

“Fife Lake may not need that many new units to serve its existing businesses, but the area … does,” said Brown of the Michigan Chapter of the Planning Association.

Transportation is a consideration for potential residents and the developer, Brown added. The area lacks robust public transportation options and low-income residents can’t always afford cars.

“Right now, we have this predominance of single-family residences, but the market is looking for one- and two-bedroom units,” Brown said. “They want density, they want proper walkability, and they want to be close to entertainment, culture and shops.”

While the Pugsley project doesn’t meet all of these demands, the need for housing is so great that any new construction is a “bonus” for the state, Brown added.

“Although this prison conversion does not meet the characteristics that a lot of people are looking for, there is still a need for this large number of units for workers,” Brown said.

Some of the facility may be dedicated to assembly and light manufacturing, but other than that, there are no plans for mixed-use development, Munger said.

Adaptive reuse of old structures, like a prison, is better environmentally because it doesn’t require as many new materials, Brown said.

“You’re also preventing something from being built in a green field or on farmland, right, because you’re building in an already built-up area,” she said. “We have to do better at stopping… development patterns that consume land.”

This is the first project in the state that Brown is aware of to convert a former prison into housing, but it is not the first adaptive reuse project in the area. The former Traverse City State Hospital, a state-run shelter, was converted to The Village at Grand Traverse Commons beginning in 2002.


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