In 2022, the Michigan State Housing Development Authority (MSHDA) released the state’s first statewide housing plan to develop strategies to address the state’s housing needs. This plan highlighted challenges across Michigan related to housing affordability, an aging housing stock, not enough new homes being built to meet demand, and racial disparities in homeownership rates.

Following the release of the plan, the State of Michigan made changes to the Brownfield Redevelopment Financing Act (MCL125.2651 et seq.) in 2023—commonly referred to as Act 381—to expand incentives for local communities and developers to close the housing gap for Michigan’s working population. One of these changes expanded the use of a tool called Tax Increment Financing (TIF) for housing construction.

Housing TIF is already being used by communities and developers in Michigan to finance housing projects and meet community housing goals. Through a Housing TIF, a developer may be able to bridge the financing gap or pay for costly improvements that prevent a workforce housing project.

Recently, MSHDA and the University of Michigan’s Housing Solutions for Health Equity partnered to release the 2024 Michigan Statewide Housing Needs Assessment. This assessment built on previous work by MSHDA in its 2019 Michigan Statewide Housing Needs Assessment and the Michigan Association of Planning’s Zoning Reform Toolkit for Housing Choice and Supply, which documented the need for more housing but also highlighted concerns about affordability and accessibility.

For more information on common housing terms, see the Michigan State University Extension article “Community discussions around housing: Explaining common key terms.”

What is tax increment financing for brownfield sites?

Brownfield TIF is a tool that local communities can use through a local brownfield redevelopment authority with Brownfield Redevelopment Financing Act approval to encourage development of eligible properties. As the Michigan Economic Development Corporation (MEDC) explains in its Community Development Brownfield Program Overview, a TIF is used to compensate the developer for eligible activities within the project. When a project is developed and the tax value increases, the difference between the tax value at the start of the project and the current tax value (also known as tax increment revenue or increase) is captured under a brownfield plan and used to reimburse the eligible activities.

For more information about the Brownfield TIF program, visit the Michigan Department of Environment, Great Lakes, and Energy (EGLE) Tax Increment Financing Act 381 page. This page also provides guides, templates, and contact information for program staff.

TIF for brownfields

The Brownfield Redevelopment Financing Act’s 2023 amendments expanded the definitions of eligible land and eligible activities for TIF reimbursement to include some things related to housing. The definition of an eligible land that can be included in a brownfield plan now includes a “residential lot,” defined as a lot on which one or more housing units are being built or rehabilitated, or housing in a mixed-use project (MCL 125.2652(y)). Eligible housing construction activities, those activities that can be reimbursed using the tax increment, have also been expanded to include things like rehabilitation, demolition, renovation, temporary relocation costs for income-eligible households, infrastructure, and more.

For a complete list of eligible housing measures, see the Brownfield Redevelopment Financing Act (MCL 125.2652(x)) and the MSHDA Housing Tax Increment Financing Program Statement (starting on page 3). Note that most of these measures are limited to income-eligible households—that is, households with incomes 120% or less of the county median income.

To utilize a residential TIF, the process follows that used for other brownfield plans for approval by the local brownfield redevelopment agency. However, for a residential TIF, there are some additional considerations, such as demonstrating housing needs through local, regional, or statewide plans or studies. Some communities and nonprofit housing organizations have already conducted local housing needs analyses. For communities that do not have a housing needs analysis, according to the MSHDA’s Residential TIF FAQs webpage, MSHDA believes that a master plan demonstrating housing needs can meet this requirement, or a developer can rely on MSHDA’s statewide housing plan. Once the need is identified, developers can propose projects, develop plans, and work with the local brownfield redevelopment agency and local unit to obtain approval, as described in Brownfield Redevelopment Financing Act Section 13b(4) (MCL 125.2663).

In addition, brownfield housing plans that include the collection of state school taxes require MSHDA approval. Approval from other state agencies may be required for projects that involve commercial development or that involve environmental pollution. The criteria MSHDA uses for this review are outlined in the Housing TIF Program Statement – ​​Addendum II. The review is designed to ensure that the plan is consistent with local and statewide housing needs, land and activity eligibility, and other legal requirements. If no school operating taxes are collected, only local taxes, this review is not required.

In addition, the Brownfield Redevelopment Financing Act Amendments of 2023 raised the limits on the amount of municipal tax a brownfield redevelopment authority can levy based on the number of active projects (MCL 125.2663b(7(c)). The Act also now requires brownfield redevelopment authorities that conduct housing development activities to submit reports to MSHDA (MCL 125.266(3)), among other changes.

This short video from MSHDA introduces the Housing TIF tool and a project that uses it in Grand Rapids. This project is just one example of how local communities and developers can work together to use innovative financing tools to achieve housing goals. In this example, the Housing TIF provided additional funding to cover the costs of eligible activities while helping to rehabilitate a property that was generating little tax revenue and meet local housing needs.

Next Steps

This article is just a brief introduction to Brownfield Housing TIF. If you would like to learn more about using Housing TIF in your community, consider taking the following steps:

Upcoming housing policy programs can be found by searching for “Housing” in MSU Extension upcoming events. If you are interested in bringing one of these offerings directly to your community, please contact Tyler Augst at [email protected] or (269) 657-8213.

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