Setbacks and Renewed Growth
Ann Arbor had no sooner shrugged off the Douglas-Rose controversy than it had to face a renewed threat to its prosperity. While the completion of the Toledo, Ann Arbor and Northern Railroad in 1878 lowered freight rates and increased the volume of local economic activity, the advantage was offset by a slight business recession and a temporary setback encountered by the University of Michigan, the town's largest employer. Between 1881 and 1884 the University's enrollment declined from 1,534 to 1,295. The amount of money spent by students in the town decreased accordingly. In addition, state appropriations to the University were drastically curtailed. The gradual increase in the city's population between 1875 and 1880 was reversed. The number of residents in Ann Arbor between 1880 and 1884 declined from 8,061 to 7,022.
Good health returned shortly thereafter, and during the next sixteen years Ann Arbor obtained a durable prosperity little affected by the national depression of 1893. State appropriations to the University more than doubled and the number of students nearly tripled, going from 1,295 to 3,712. The number of permanent residents almost doubled, jumping from 7,922 to 14,509, adding in sixteen years an amount that had taken sixty years to achieve previously.
Prosperity and population growth sustained a tremendous housing boom. Many houses were sold or rented before the foundations were laid. The University provided no dormitory facilities, and most new home owners built grandly knowing that extra rooms could always be rented to students for additional income.
Newcomers were attracted by the city's natural beauty and educational opportunities. Families moved to Ann Arbor because of the high school's good college preparatory program and stayed until their children had completed education at both the high school and University. In addition to educating Ann Arbor residents, the high school also accommodated a large number of tuition students from outlying rural areas and surrounding states who were eager to prepare for attendance at the best college west of the Alleghenies.
Most of the homes in Ann Arbor in previous years had been built near the Main Street business district or in the immediate vicinity of the campus. New subdivisions on South State Street beyond Packard, on the south side of Hill Street formerly occupied by the fairgrounds, and on Washtenaw Avenue south of Hill Street were begun in the last decade of the century. The geographical center of the city's population shifted eastward toward the campus area.