Governor Gretchen Whitmer is using her final year in office to champion a major housing package focused on a new tax credit for affordable housing.
The proposal is intended to boost construction for working- and middle-class Michiganders, who are increasingly being priced out of many communities. To do this, she wants to remove regulatory barriers and piggyback on bipartisan housing reform legislation called “Housing Readiness,” which was introduced earlier this week.
“There’s still a lot of red tape that gets in the way of shovels in the ground,” Whitmer said in her State of the State address. “Let’s make it easier to build in-law suites and multi-family homes.”
With its initiative and the proposed legislation, Michigan joins the national shift toward state-led reforms to address housing affordability. Lawmakers in California, Oregon, Montana, Arizona, Texas, Florida and Colorado have taken similar steps.
They have moved to legalize “missing middle housing” in more neighborhoods. They also relax the rules for smaller lots, accessory dwelling units and parking minimums. These changes are intended to reduce development costs and open more locations.
The Michigan Democrat also joins the presidential candidates of Illinois Governor JB Pritzker and Pennsylvania Governor Josh Shapiro, who have launched efforts this year to advance housing reform in their states. Whitmer is considered a top candidate, but she has been ambiguous about her intentions.
Add a LIHTC program
Whitmer urged lawmakers to create an affordable housing tax credit in Michigan that would be in addition to the federal low-income tax credit.
Many states, including Michigan’s neighbors, already supplement federal grants with state programs. Affordable housing groups have proposed a credit of roughly $42 million to match the federal appropriation.
However, the credit comes at the cost of reducing future state revenues.
Kansas passed a law last year that cuts the state’s available appropriations by more than 50% until 2028, when the program expires. The incentive, created in 2022 to encourage the construction of 3,800 to 5,000 new homes per year, came under fire after projections showed it could cost the state nearly $1 billion in future tax revenue.
Georgia, which has matched federal credits dollar for dollar since 2001, could lose the tax break. Lawmakers there are considering eliminating the program in 2031 as part of a proposal to lower state personal and corporate tax rates.
Bipartisan support for housing reform
Under Whitmer, the state launched a housing plan in 2022 and a goal of 75,000 new and rehabilitated homes by the end of fiscal year 2026. The state used payment assistance for first-time homebuyers and investments from the Michigan State Housing Development Authority to boost housing.
After reaching the goal early, Whitmer increased the goal to 115,000 last year. The number now stands at nearly 87,000, according to the state.
Still, lawmakers believe more needs to be done to address concerns about housing affordability. Whitmer paired her proposal with a bipartisan housing package that would relax minimum home size requirements and allow multi-unit buildings in more locations.
Republican state Rep. Joe Aragona, one of the legislative sponsors, said in last week’s announcement that housing construction costs continue to rise.
“They become incredibly inaccessible, and that’s why you have this bipartisan, bicameral group together to try to solve this problem, or at least solve part of this problem.”
The bills aim to reduce parking requirements and other local standards that restrict new housing or drive up prices. Business groups and builders say these necessary changes address high material costs and slow permitting that have stalled projects.
Facing the same opposition as we build a legacy
Similar to zoning, tax and building code reforms other states have implemented, the legislation would replace local government authority, which has drawn the ire of local governments.
In Michigan, advocates of local control warn that state mandates could override community preferences and strain infrastructure or services in fast-growing areas.
Whitmer argues that the status quo leaves too many families without safe, affordable homes and threatens Michigan’s long-term competitiveness. She argues that young workers and families will leave if they cannot find housing near employment centers, schools and amenities.
As she nears the end of her term, Whitmer views the housing agenda as both a policy statement and a political legacy statement.
By linking a state tax credit to zoning laws and allowing reforms, she is borrowing strategies from other capitals. She’s betting that treating housing as critical infrastructure will resonate with Michigan residents concerned about costs and opportunities.
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