Michigan affordable housing advocates pitch $42M tax credit plan

Michigan is among a minority of states without a state-level version of the federal Low-Income Housing Tax Credit
Housing advocates push for a $42 million program that could help the state add an extra 2,000 housing units a year
While lawmakers have not yet acted on the pitch, housing experts say there’s never been a better time than now to do so

LANSING — Expanding affordable housing is a long-running goal for Michigan officials, but experts say the state isn’t doing all it could to aid Gov. Gretchen Whitmer’s push to “build, baby, build.”

Chris Potterpin, president of the Michigan Housing Council, is hoping to change that.

His group is the driving force behind a policy push to create a $42 million Low-Income Housing Tax Credit in Michigan, which is among a minority of states that does not have its own version of a widely used federal credit.

In an interview with Bridge Michigan, Potterpin said he believes the credit could lead to as many as 2,600 additional residences being built per year.

“If we’re going to take housing seriously in this state, this is the best way to do it,” he said.

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The Low-Income Housing Tax Credit is the main program the federal government uses to encourage the building and upkeep of affordable rental housing for people at lower income levels.

Most states also operate their own state-level program, forgoing some of their own tax revenue to supplement federal tax credits and make affordable housing projects financially feasible.

Amy Hovey speaks to a crowd. — Michigan State Housing Development Authority Executive Director Amy Hovey. (Courtesy photo)

Not in Michigan, though. It’s the only Midwest state — and among a minority of states nationwide — without the state-level credit.

While legislation has not yet been drafted or introduced in Michigan, state officials have in recent years ramped up calls to invest more in affordable housing. Whitmer has debuted programs like the Employer-Assisted Housing Fund, and her administration aims to build or rehabilitate 115,000 units across the state by 2027.

“I’m proud of the work we’ve done to expand affordable housing for every Michigan family,” Whitmer said in October while signing an executive order to expand awareness of Michigan’s affordable housing programs.

“These programs make it possible for more people to buy their dream home, a starter home, or rent a great apartment in a thriving community.”

But not having a state-level Low-Income Housing Tax Credit means Michigan is leaving dollars on the table in the form of financing capacity, said Amy Hovey, executive director of the Michigan State Housing Development Authority.

Other states have “been able to more aggressively take advantage of” leveraging federal tax credits for state housing projects, Hovey told Bridge earlier this month.

Without a state-level credit, “we often kind of lag behind in being able to fully utilize” the federal program, Hovey added.

Low incomes, high building capacity

Nearly 1 in 10 of about 1,000 respondents to a Bridge Michigan reader survey on election issues named housing as a top priority, with residents of Detroit, Grand Rapids, Lansing and Traverse City mentioning it most.

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The Low-Income Housing Tax Credit is the largest source of affordable housing financing in the country. It’s subsidized an estimated 3 million housing units since it was first created in 1986, according to the Tax Foundation, a nonpartisan Washington think tank.

There are two components to the program: A competitive 9% tax credit, and a noncompetitive 4% tax credit. Both aim to create housing for people generally at or below 60% of an area’s given median income.

The program offers developers nonrefundable tax credits to subsidize the construction of new – or older but “substantially rehabilitated” – housing projects that are subject to rent and income restrictions for at least 15 years.

Bob Filka, CEO of the Homebuilders Association of Michigan, said the federal tax credit has “been invaluable for producing housing for low-income families,” telling Bridge earlier this week his group would also support establishing a comparable credit at the state level.

“It is a critically important program that, if we can enhance in a cost-effective way… this goes into the mix of a number of different housing-related issues that policymakers need to deal with,” Filka said.

Each state is allocated the 9% tax credit annually, with dollars doled out on a population basis, and can obtain the 4% credit by financing projects through bonds. Michigan qualified for $16.3 million last year and in December announced 14 related housing projects in nine communities.

Michigan Housing Council President Chris Potterpin. (Courtesy photo)

Michigan also fully benefits from the federal 4% credit, but because it lacks a state-level equivalent, its projects usually rely more heavily on bonds, federal credits, and other gap-financing sources.

Illinois, a slightly larger population state than Michigan, has its own state-level Low-Income Housing Tax Credit and has paired it with federal credits to support a larger number of housing developments.

In 2024, the state secured $32.4 million in tax credits for 18 multifamily developments that created an additional 2,230 affordable units, according to a report from the Illinois Housing Development Authority.

“I’m not going to outright say we’re a reactive state, but we haven’t been a leader” when it comes to maximizing dollars for housing, said Potterpin, president of the Michigan Housing Council.

An uphill battle

By creating its own state-level Low-Income Housing Tax Credit, Michigan would lose out on some tax revenue from developers. But with renewed interest in housing, officials are hoping more state lawmakers will take interest – despite a looming budget crunch.

“I think there’s been a lack of, probably, will at the legislative level to put another tax credit into place,” said Hovey, head of the state’s Housing Development Authority, adding that lack of will stemmed from the fact “we haven’t been in a housing crisis” until recently.

“No blame to anyone,” she added, “but we are in a crisis now.”

Michigan has built or rehabilitated nearly 84,000 dwellings across the state since Whitmer first announced her goal of building or fixing up 75,000 homes in 2021. Since then, the state has averaged building or fixing around 19,670 dwellings per year under this program, and spent $2.61 billion across all housing programs during the most recent fiscal year.

But it remains to be seen how much the state will spend on affordable housing in coming years.

Earlier this month, economists forecast state lawmakers would need to cut roughly $1 billion from the state budget in order to keep things balanced.

And this week, House Speaker Matt Hall told reporters he wanted to cut $800 million in ongoing funding to state departments in addition to $500 million of lawmaker pet projects.

Only budget officials and Democrats “make it sound like a bad thing when you’re giving tax money back to the taxpayers,” said Hall, R-Richland Township.

Potterpin, with the Michigan Housing Council, isn’t sweating the budget numbers at this point. Even if the state does pass some sort of state-level Low-Income Housing Tax Credit this year, he noted it would still take time to get the actual program up and running — by his estimate, likely 2029 – and developers would only get the tax credit once finished with their builds.

“Over the last five years, we’ve seen housing become the mainstream narrative,” Potterpin said. “We finally think that there’s enough support in Michigan for this, where there hasn’t been in the past.”