The state of Michigan is expanding the Brownfield Tax Increment Financing (TIF) program in efforts to generate more affordable housing in Michigan. It is no longer limited to brownfields. That's land that's been abandoned or underutilized due to pollution from industrial use. As enacted, Senate Bills 129, 130, 131, and 132 make it so builders develop affordable housing anywhere in the state as long as it is on non-agricultural land.
Through TIF, builders are reimbursed for development expenses out of the additional tax money collected on properties they developed. Amy Hovey is the executive director of the Michigan State Housing Development Authority. “Local and state governments use future tax revenue generated from the developed home or complex to subsidize the development of the housing,” she explained.
Hovey said Michigan is in a housing crisis. “We don’t have enough units for our current population,” she said. Hovey pointed out that building permit applications are down in the state.
She said there's a cost gap to fill. "Right now, it costs more to develop [housing] than what the majority of Michiganders can afford to pay in rent or in purchase price. So we need to provide some incentives for developers to develop housing. And this is just a tool in the toolbox to help us get there,” Hovey said.
She described TIF as part of a portfolio of financing options builders and developers can layer to bring building costs down. She said the goal with TIF is to bring down building costs so housing prices can be set lower for buyers and renters. The units ultimately need to be intended for low- and middle-income buyers.
“By using this incentive, we help bring down that cost of development so that [developers] can then afford to rent or sell to families at or below 120 percent of an area’s median [household] income, which is the majority of our population,“ Hovey said.
Hovey said that’s a broad market for builders. She said in most counties, sixty percent of the population would be eligible for housing developed through this program.
TIF also has no end date, which Hovey said gives developers confidence. Some projects take years to complete. Hovey said builders can count on TIF still being in place when projects are completed and generating more tax revenue.
TIF used to be limited to demolition, site preparation and environmental remediation on brownfields, according to Hovey. She said now it's much more broadly available. It’s available for projects large and small, single family or multi-family. It can be meant for selling or renting out. Developments in this program can be new builds or rehabilitated properties.
Hovey said more than half of Michigan homes are over 50 years old. “With Michigan’s aging housing stock, the state is hopeful that this expansion will allow builders to rehabilitate existing homes and stabilize neighborhoods,” Hovey said.
Hovey also appreciates the local control built into TIF. Development proposals have to be approved at the local level first before going to the state.
