2020 has turned the world on its head and changed social and economic dynamics across the board, but there’s one thing that’s holding strong: housing demand.
A 2019 study showed demand for more than 15,000 homes in Northwest Michigan over the next five years, including nearly 11,000 rentals. While the study was completed before the pandemic shook everything up, housing demand is based in a supply shortage connected to changing demographics and is expected to increase, especially for rentals.
And for the last decade, housing construction has been far below average when compared to the last forty years.
This has created a housing market that’s a lot different than the one many of us entered decades ago, and is impacting households of all income levels. For years, communities have been seeking to understand these changes and subsequent housing shortages, while working toward proactive solutions.
However, while the housing market has changed significantly, the laws and programs affecting it — and the renters and buyers that are priced out — have not. We find ourselves using old tools for new problems, and struggling to make progress.
But, in part because of advocacy from our region, that may be starting to change.
This month, Representative Triston Cole introduced legislation that would allow a homestead property tax exemption on rural workforce housing rentals that are affordable to households earning less than 150 percent of the area median income. The proposal would lower taxes for rental property owners and help to address the “affordability gap” for those who don’t earn enough to afford median rent — while at the same time earning too much to qualify for housing assistance.
Because property owners who provide long-term rentals currently lose the homestead property tax exemption, they pay higher taxes — which are usually passed on to renters in the form of higher rents. Those higher taxes sometimes drive property owners to convert their year-round units to short-term rentals like AirBnBs, which are more lucrative than year-round rentals. In fact, over 6 years, seasonal housing grew by 15 percent — while our total housing stock didn’t grow at all.
Short-term rentals are undeniably important to the region’s tourism economy.
But the loss of long-term rentals hits our communities hard.
When people can’t find homes they can afford, many move to more affordable areas. Businesses then struggle to retain and recruit employees. And when families move away, schools lose students — and the funding that comes with them.
Lowering taxes for workforce rentals can help create the housing that those workers and families need, potentially lowering rents and slowing the number of conversions of year-round homes to vacation rentals — which could ultimately help to bring more families, students, and workers back to the region.
What’s more, Cole’s proposal represents a shift in how we as a region and a state approach our housing challenges: designing policies that will create new tools to solve new problems.
Policy change is slow and arduous, and the fate of this new bill is far from certain. But changes like these are necessary to meet today’s housing challenges. Communities all over Michigan are finding this to be the case, and they’ve increasingly been looking to Northwest Michigan for solutions.
For the last year and a half, Housing North has been working closely with partners like cities, developers, and housing agencies to identify and champion policies that could create new housing tools — like changes to funding programs that would bring more dollars to rural regions like ours, tax incentives for certain development types, and more state and local funding sources for housing programs.
With voices from all sectors of Northwest Michigan, business, schools, local governments, housing providers, and more, we’re being heard by state and federal legislators — like Representative Cole, as well as state agencies and statewide interest groups that are looking for solutions to today’s problems.