MSU Extension Government

In 2022, the Michigan State Housing Development Authority (MSHDA) released the state’s first statewide housing plan to begin strategizing how to meet the state’s housing needs. That plan highlighted challenges across Michigan with 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 amendments in 2023 to the Brownfield Redevelopment Financing Act (MCL125.2651 et seq.)—commonly referred to as Act 381—to help expand incentives available to local communities and developers filling the gap in housing for Michigan’s working people. One of these changes expanded the use of a tool called tax increment financing (TIF) for housing development.

Housing TIF is already being used by Michigan communities and developers to help finance housing projects and meet community housing goals. Through a housing TIF, a developer may be able to close the financing gap or pay for costly rehabilitation preventing a project with workforce housing units from moving forward.

More recently, MSHDA and the University of Michigan’s Housing Solutions for Health Equity partnered to publish the 2024 Michigan Statewide Housing Needs Assessment. That assessment echoed earlier work by MSHDA in their 2019 Michigan Statewide Housing Needs Assessment and the Michigan Association of Planning’s Zoning Reform Toolkit for Housing Choice and Supply that documented the need for more housing supply while also highlighting concerns about affordability and attainability.

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

What is brownfield tax increment financing?

Brownfield TIF is a tool that local communities, through a local brownfield redevelopment authority permitted through the Brownfield Redevelopment Financing Act, can use to incentivize development of eligible properties. As the Michigan Economic Development Corporation (MEDC) explains in their Community Development Brownfield Program Overview, a TIF is used to reimburse the developer for eligible activities as part of the project. As a project is developed and the taxable value increases, the difference between the taxable value at the onset of the project and the current taxable value (also known as Tax Increment Revenue or increment) is captured under a brownfield plan and used to reimburse the eligible activities.

More information about the brownfield TIF program can be found on the Michigan Department of Environment, Great Lakes, and Energy’s (EGLE) Act 381 Tax Increment Financing page. This page also includes guidance documents, templates, and program staff contact information.

Housing brownfield TIF

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

A full list of eligible housing development activities is found in the Brownfield Redevelopment Financing Act (MCL 125.2652 (x)) and the MSHDA Housing Tax Increment Financing Program Statement (beginning on page 3). Note that most of these activities are limited to income qualified households – that being a household at or below 120% of the county’s Area Median Income.

To utilize a housing TIF, the process follows what is used for other brownfield plans for approval from the local brownfield redevelopment authority. For a housing TIF, there are some additional considerations though, like demonstrating housing need through local, regional, or statewide plans or studies. Some communities and housing nonprofits have undertaken local housing needs assessments already. For communities that don’t have a housing needs assessment, according to the MSHDA Housing TIF Frequently Asked Questions webpage, MSHDA believes that a master plan that shows housing needs can meet this requirement, or a developer can rely on MSHDA’s Statewide Housing Plan. With needs identified, developers can propose projects, develop plans, and work with the local brownfield redevelopment authority and local unit for approval as described in the Brownfield Redevelopment Financing Act Section 13b(4) (MCL 125.2663).  

For those brownfield housing plans that include capturing state school taxes, approval from MSHDA is also required. Approval from other state agencies may be required for projects that include commercial development or where there’s environmental contamination. The criteria MSHDA uses for that review are detailed in the Housing TIF Program Statement – Addendum II. The review will check that the plan aligns with local and statewide housing needs, eligibility of property and activities, and other statutory requirements. If there is no use of those school operating taxes, but only local taxes, then this review is not required.

Additionally, the 2023 changes to the Brownfield Redevelopment Financing Act raised the limits on the amount of local tax a brownfield redevelopment authority can capture based on the number of active projects (MCL 125.2663b (7(c)). The act also now requires brownfield redevelopment authorities that have housing development activities to send reporting to MSHDA (MCL 125.266(3)), among other changes.

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

Next steps

This article is only a brief introduction to brownfield housing TIF. If you are interested in learning more about using housing TIF in your community, consider these next steps:

• Engage with your local brownfield redevelopment authority if one exists, or consider creating your own
• Explore MSHDA’s Housing Tax Increment Financing (TIF) program site
• Review MSDHA’s Housing TIF Virtual Information Session recording and slides
• Explore your local housing data in a local master plan, State of Michigan Housing Data Portal, United States Census Bureau, or other source
• Consult with your local team, including municipal attorney, MSHDA staff, and other qualified professionals

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