Property values roar back in Michigan, but many communities left behind

Total value, 2017

Ann Arbor, Troy tops in Michigan

A soured residential market has put Detroit, Michigan's most populous city, behind Ann Arbor and Troy in terms of total market value of real estate. A decade ago, Detroit was No. 1.

Rank
2017 (2008)
Municipality Value
1 (3) Ann Arbor $6.9 billion
2 (2) Troy $5.5 billion
3 (1) Detroit $5.4 billion
4 (5) Grand Rapids $5.2 billion
5 (4) Sterling Heights $4.9 billion
6 (10) Bloomfield Township $4.6 billion
7 (6) Livonia $4.4 billion
8 (11) Canton Township $4.4 billion
9 (8) West Bloomfield Township $4.3 billion
10 (17) Novi $4 billion

Home values surge in suburban Detroit

The residential market has rebounded well with the most valuable home markets mostly around Detroit. Grand Rapids, helped by a growing downtown sector, is now No. 8, up from 10 in 2008.

Rank
2017 (2008)
Municipality Value
1 (8) Ann Arbor $4.6 billion
2 (3) Bloomfield Township $4.3 billion
3 (6) Troy $4 billion
4 (2) West Bloomfield Township $3.9 billion
5 (4) Sterling Heights $3.7 billion
6 (9) Macomb Township $3.6 billion
7 (7) Canton Township $3.6 billion
8 (10) Grand Rapids $3.5 billion
9 (5) Livonia $3.3 billion
10 (12) Rochester Hills $3.3 billion

Despite overall declines, Detroit's commercial sector remains strong

With a rejuvenated downtown core, Detroit's commercial market is still biggest in state.

Rank
2017 (2008)
Municipality Value
1 (1) Detroit $2.7 billion
2 (2) Ann Arbor $2.3 billion
3 (5) Grand Rapids $1.5 billion
4 (3) Southfield $1.3 billion
5 (4) Troy $1.1 billion
6 (8) Novi $1.1 billion
7 (6) Dearborn $826.7 million
8 (10) Sterling Heights $807 million
9 (9) Livonia $799.1 million
10 (7) Farmington Hills $777.9 million

Total growth, 2014-2017

Oakland, Ottawa counties hotbeds of growth

Home building in western Oakland County and residential and commercial growth elsewhere spurred big jumps in total market value.

Rank Municipality County Change from 2014
1 Lyon Township Oakland 48.1%
2 Ferndale 43.7
3 Allendale Township Ottawa 38.3
4 Oak Park Oakland 36.7
5 Oceola Township Livingston 34.6
6 Madison Heights Oakland 33.8
7 Saint Clair Shores Macomb 33.5
8 Byron Township Kent 33.1
9 Birmingham Oakland 33
10 White Lake Township Oakland 32.3

New homes, growing sales push market up

After housing starts in Michigan fell from 50,000 a year to fewer than 8,000, some communities are seeing a return to new developments and big bumps in overall residential value.

Rank Municipality County Change from 2014
1 Lyon Township Oakland 56.8%
2 Southfield Oakland 40.8
3 Waterford Township Oakland 37.6
4 Saint Clair Shores Macomb 36.1
5 Warren Macomb 34.6
6 Orion Township Oakland 34.5
7 White Lake Township Oakland 34.5
8 Birmingham Oakland 34.3
9 Chesterfield Township Macomb 33
10 Washington Township Macomb 32

Kent, Ottawa counties see commercial markets roar

Spurred by lowest in the state unemployment a number of West Michigan communities enjoyed hearty jumps in the value of commercial real estate.

Rank Municipality County Change from 2014
1 Allendale Township Ottawa 68.9%
2 Byron Township Kent 31.9
3 Wyoming Kent 31.3
4 Washington Township Macomb 31.1
5 Gaines Township Kent 30.6
6 Portage Kalamazoo 29.9
7 Wixom Oakland 28.1
8 Sterling Heights Macomb 27.5
9 Walker Kent 27.3
10 Holland Ottawa 27.2

After a mostly lost decade, property values are rising sharply across much of Michigan, helping restore equity to homeowners and improve the balance sheets of businesses from Hamtramck to Harbor Springs.

Values climbed nearly 50 percent in Ferndale and Lyon Township in Oakland County from 2014 to 2017 and by more than a third in Allendale Township just outside Grand Rapids, according to statewide assessment data analyzed by Bridge Magazine.

Overall, market values are up an average of 21 percent among Michigan’s 1,500 townships and cities since 2014. That’s a dramatic change from the downward trend of just a few years ago. The increases came across all classes of property: residential, commercial, industrial and agricultural.

RELATED: Check out property values in your Michigan community (map)

But while increasing values help owners, they have been less helpful to many older municipalities, which rely on property taxes to balance budgets, keep parks open and law enforcement in uniform.

Taxes are based on taxable value of property, which are one-half of market value. Under Michigan law, it’s easy for taxable values to plunge dramatically, but hard to catch up.

“You can never recover because (tax value) never moves up,” said Ruth Beier, a city council member in East Lansing, whose voters rejected a proposed income tax in November to bail the city out of a financial crisis.

That’s been the case since 1994, when Proposal A went into effect following a statewide referendum that curtailed annual jumps in taxes.

Property values increase with the market, but unless homes or businesses are sold, the law caps taxable value to 5 percent or the rate of inflation, whichever is less.

In some parts of the state, taxable values plunged as much as 40 percent during the real estate meltdown, and it will take years for tax bases to recover even if the housing market is booming.

Horrible laws?

The restrictions have put a squeeze on communities like East Lansing.

Heavily reliant on property taxes, the college town surrounding Michigan State University has trimmed its workforce to 320 workers from 460 in the past 12 years.

Since 2014, market values in the city rose nearly $89 million, or 9 percent. But taxable value rose just $34 million, or 4 percent. If property taxes had been allowed to climb with values, “it would make a big difference in the cuts we’ve had to make,” Beier said.

Proposal A works in tandem with another law, the Headlee Amendment of 1978 that slows the rate of tax growth by communities.

Related: Michigan cities and counties haunted by retiree liabilities​
Related: In Michigan, more than 150 communities are financially distressed

Under the law, tax rates are lowered by the same percentage that taxable values rise –  so even communities with robust home sales are limited in their tax collections.

In many communities, market values have risen 20 to 40 percent since 2014, while taxable values only rose 5 to 15 percent.

For communities that are growing, there is relief: new construction doesn’t factor into the rollback. That’s helped fast-growing communities like Lyon Township in Oakland County, where taxable values rose 34 percent since 2014.

But in most of Michigan, construction is just now picking up after a decade of decline, and many communities simply don’t have room to grow.

“It’s a horribly designed system,” said Tony Minghine, deputy executive director and chief operating officer of the Michigan Municipal League, which has long sought to soften the impact of Proposition A and the Headlee Amendment.

There’s no legislative effort now to reform the laws, though. That’s because they work just fine, said James Hohman, director of fiscal policy at the Mackinac Center, a Midland-based market-oriented think tank.

Local leaders can ask for tax increases if they want more money or  ballot measures to override the restrictions of Headlee, he said.

“It’s not saying you can’t (raise taxes), you just have to get direct local support for it,” Hohman said.

He noted that cities and townships aren’t the only ones hurt by dwindling property values: So are homeowners, and they shouldn’t be further punished with higher taxes.

East Lansing City Councilwoman Ruth Beier says the college town has been hammered by tax restrictions from Proposal A.

Lifestyle changes

Built-out, densely populated suburbs in southeast Michigan are among those most negatively impacted by the laws.

Roseville saw market values climb nearly 24 percent since 2014, but taxable values climbed less than 5 percent. Neighboring Eastpointe saw much of the same: market value rose 25 percent but taxable just under 6 percent.

Perhaps no city has been hit harder than Detroit: Since 2008, the city has  lost more than 50 percent or $6 billion of its market value – that’s more than Ann Arbor had in total in 2008.

Value-wise, both Ann Arbor and Troy are now bigger than Detroit and even though the city remains the largest in terms of population, the value of its residential market is now 14th.

Not every leader of older communities, however, is complaining about the laws. Some such as Taylor in western Wayne County are making do.

The value of housing there fell 46 percent or nearly $600 million between 2008 and 2014 (from $1.27 billion to $685 million) and the taxable value of all property fell 30 percent. Since 2014, values have risen 13 percent –  but taxable less than 1 percent.

Taylor Mayor Rick Sollars says his city has made painful but necessary cuts because of a limited tax base.

“It’s put tremendous pressure on our budget,” Mayor Rick Sollars said.

The city once had 100 public works employees, now it has 55; the police department has 20 fewer officers and the fire department was trimmed by 20.

“The same level of service (yet) we’re still 24 square miles, 63,000 people,” Sollars said.

Yet Sollars, who said he would have advocated for changes in the law a few years ago, said he isn’t so sure now. The city made necessary cuts and development is coming to the city, which straddles Telegraph Road in south-central Wayne County.

“We’ve gotten to a place where we’re in a sustainable position,” he said.

He likens the changes to an overweight individual’s battle.

Some try diets, others adopt more wholesale changes.

In Taylor, the changes were sweeping and, Sollars believes, long-lasting.

“It’s a lifestyle change. We didn’t just lose weight, we changed our lifestyle,” he said.

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Comments

JH
Thu, 05/10/2018 - 8:38am

Why should cities automatically be entitled to extra tax dollars just because market values are increasing more than inflation? Is there a greater burden on the infrastructure just because market values have gone up? There is a process to get more tax revenue; you go to voters and present the case.

Robert J. Kleine
Thu, 05/10/2018 - 9:24am

First, Michigan puts more restrictions on local government's revenue raising ability than all but 2 other states, and at the same time has sharply cut revenue sharing, which is why we have more fiscally distressed cities than any other state. Second, many cities cannot go to the voters for more revenue as they already are at the maximum 20 mills set by state law. Third, the combination of the Headlee and Proposal A limits means that for many cities property taxes grow at less than the rate of inflation. Over time services are cut to the point that a city is unable to retain or attract businesses and residents creating a death spiral for the city. This is happening in a number of cities and the next time we have a recession will become more widespread.

Carl
Thu, 05/10/2018 - 10:10am

1.) Michigan puts more restrictions on local government's revenue raising ability than all but 2 other states ... this is a good thing. The federal and state governments take what they want ... limiting local tax collection is a good thing for citizens
2.) ...at the same time has sharply cut revenue sharing, which is why we have more fiscally distressed cities than any other state. It's part of the reason ... other reasons include mismanagement, corruption, unrealistic returns on pensions, too many retires sucking from these pensions and more. Claiming revenue sharing reductions is the lone reason we have distressed cities is weak science
3.) Over time services are cut to the point that a city is unable to retain or attract businesses and residents creating a death spiral for the city. -- see response to No. 2
4.) many cities cannot go to the voters for more revenue as they already are at the maximum 20 mills set by state law. -- which means its an option for some? How many is "many" anyway?

Robert J. Kleine
Thu, 05/10/2018 - 1:36pm

Is it a good thing to have poor services? You seem to think that their is no limit to how much a city can cut their budget. Is it reasonable to operate with 20 percent less, 50 percent less, 75 percent less- what is the limit?
Do you think mismanagement and corruption is limited to Michigan? Cities in other states are in better fiscal shape because they have a more sensible system of financing local government.
There are about 75 cities with rates of 20 mills or more.
Our state will never teach its full potential if we continue to starve our cities.

Lee
Thu, 05/10/2018 - 5:21pm

To say that "First, Michigan puts more restrictions on local government's revenue raising ability than all but 2 other states" is not to say anything particularly significant. Just how severely does Michigan restrict their revenue raising ability? What percentage of cities, villages and townships find themselves constrained by those restrictions? And of those so constrained, by what percentage would their voters like to increase their revenue? And no doubt reductions in revenue sharing have contributed to localities' fiscal problems, but to what extent? Isn't it possible that because some services were essentially free to the locality, that they chose to provide more services than if they were paying the full cost? In any case, there is no justification for revenue sharing except to pay for state mandated services. If the state raises taxes in order to fully fund revenue sharing, where does the state get the money? Why, from the very localities receiving the revenue sharing. What is the point? In the process, you have severed the connection between costs and benefits. It is very likely that a locality will buy more services than they are willing to pay for, if they believe they can shift some or all of the costs to the rest of the state. That is not wise public policy.

"Second, many cities cannot go to the voters for more revenue as they already are at the maximum 20 mills set by state law." Just how many cities are at the maximum 20 mills? How are they faring? How many Michigan cities are financing an adequate level of services at that level of taxation? Yes, we the citizens of Michigan made a crucial mistake by not providing an escape mechanism in the unlikely (and unforeseen by all concerned) event of a large decline in property values. Localities should have more flexibility in raising revenue for the level of services they desire. It should be noted that it was the considered judgment of the voters of Lansing that the proposed increase in the level of their benefits was not justified by the cost. And does Mr. Kleine recall the fate of Proposition one a couple of years ago? It lost eighty percent to twenty percent.

JH
Fri, 05/11/2018 - 8:44am

Mr. Klein, which cities have reached the 20 mill limit? You make it sound like most are in that situation--is that the case?

Robert J. Kleine
Fri, 05/11/2018 - 10:26am

As I noted above 75 cities are at or above 20 mills, out of 278 cities.
The original bargain was that restrictions would be placed on the ability of locals to raise their own revenues but the state would provide a strong revenue sharing program. Of course, the agreement was not binding and all those party to it are long gone, and with term limits no one around probably even knows about it.
Many of our cities are caught in an impossible bind. In most cases they cannot raise revenue as taxable value falls and even if they do it will likely hurt their ability to compete for new business and residents. The only option is to cut and at some point services will reach the point where the city becomes very unattractive for business and residents. I conducted a study last year that estimated that about 30 cities have reached that point, and this is at a time when the economy is strong. What happens the next time we have a recession, which I expect to occur in the next 2 to 3 years.

Lee
Mon, 05/14/2018 - 5:03pm

"Many of our cities are caught in an impossible bind. In most cases they cannot raise revenue as taxable value falls and even if they do it will likely hurt their ability to compete for new business and residents. The only option is to cut and at some point services will reach the point where the city becomes very unattractive for business and residents. "
A city caught in such a dilemma should not be rescued by the state with increased revenue sharing. They evidently are unable to contribute enough economic value to the state, nation and world to earn enough revenue to sustain themselves. Any increased funding by the state would amount to an economic rent, something they had not earned.

Kevin
Thu, 05/10/2018 - 10:08am

To build on Robert's comments, Prop A and Headlee only impact how much taxable value can go up, but they do not impact how much it can go down. The point of this article was to point out that when taxable values plummeted by 30 to 40 percent during the Great Recession, taxable value, thus property taxes, went down with it. Now that property values have recovered dramatically, Prop A and Headlee limit how quickly these taxable values can recover. Thus, most municipalities in the state are not close to where they were in revenues before the Great Recession hit, even though property values have recovered nearly all that was lost during that period. It isn't about "whining" for more revenues for municipalities, it is about getting them back to even.

Arjay
Thu, 05/10/2018 - 9:01am

It is always about the whining for more money, more money. Yet never mentioned is the individual on a fixed income. If you are one of the lucky few to have a pension, most will never increase in value no matter what the inflation rate is. And social security is essentially fixed because any increase is quickly gobbled up by an increase in medicare. If you are a longtime homeowner as most seniors are, you never see a decrease in property taxes because Prop A only limited the taxable value. Never mentioned is that the SEV over time had developed a large gap between taxable value and assessed value such that for the long term owner, the property taxes increase year after year. Plus all the other entities such as ISD's millage, local school millages, special millage for this and that, and all the millages that are only one Starbuck's a day seem tho have increased the property tax each year, all while the senior revenue is flat. Taylor seems to have reacted correctly in making changes to their operations so any decrease in property tax revenue still allowed them to operate. If Taylor can do it, so can every other local government. I am sick of the continuous whining.

John Q
Thu, 05/10/2018 - 11:16am

If you live in a community where property values fell 30 - 40 percent and you're a long-time homeowner, you are likely paying far less in property taxes than you did 10 years ago.

Arjay
Fri, 05/11/2018 - 9:07am

Wrong, wrong, and wrong. The portion of tax going to the local government may have fallen, but two things conspire to keep the bottom line, the amount of the check I must write from falling are the continual addition of new millages to the bill, and the assessed value of the property which never drops as much as the true value (what someone else will pay to purchase the property in an arms length negotiated agreement). If you want a truly fair system, make everything on the property tax bill a non-ad volarum entry where everyone who wants a new library or park or whatever pays the same amount, or better yet, make all the additions to the bill be subject to the user of the service pays for the service.

Anna
Thu, 05/10/2018 - 11:01am

Because of the limitations on the increase of taxable value that had built up during the boom years in the 1990s, my family saw a taxable value decrease of only about 2% in exactly 1 year since Michigan's single-state recession started in 2000. That single decrease in taxable value was more than offset by the imposition of two new millages, one for Special Education county-wide and one for public safety. Then, in 2013 when we renovated and expanded the master bedroom of our home in suburban Washtenaw County, the taxable value was increased by exactly half of the value listed on the building permit, which turned out to be a few thousand more than we actually spent on construction, decorations, and revisions to the landscaping.

Most Michigan families and businesses have not yet made up the losses of income suffered during the Great Recession. Many of them never will. Michigan's counties, cities, and townships need to recognize that fact, along with the very predictable (but slow) growth in their property tax revenues under Proposal A, and budget accordingly.

John Q
Thu, 05/10/2018 - 2:47pm

You were able to pay far less in taxes for 2 decades than others with the same market value who had their taxable value adjusted through sale or new construction. Then your taxable value was adjusted to properly reflect the addition to your home. What exactly is your complaint?

Matt
Fri, 05/11/2018 - 8:11am

If Michigan wants to play this nonsense game that they tax you on someone's estimate of your homes worth, they get what they get. This system is highly subjective, gives poor unintended consequences and is is expensive to administrate. We would be far ahead moving to a square footage formula. But of course politicians wouldn't like losing the built in tax increases given them by home price inflation that they don't even have to vote for.

Lee
Mon, 05/14/2018 - 5:19pm

This is a pretty decent article, but it could have been much, much better if Mr. Wilkinson had calculated taxable values per capita and taxable values per square mile. And, if possible, their per capita incomes. And it would have been helpful to have had a comparison of their level of financial distress now with their situation prior to the real estate crash. That would have enabled readers to make judgments about how much Headlee and Proposition A contributed to their current distress.

sam melvin
Tue, 05/15/2018 - 9:31am

first we need to see all the budget !money from extra services!and programs that hinder some property owners while others get" Pilotprogram" cutting taxable from
$ 150 000 to 42 00.........
where is the lottery money ?for schools?grants for services ?

sam melvin
Tue, 05/15/2018 - 9:37am

market value? what is real?same old house .but market value goes up! accounting to "who's" value'
market value.improved outside garden? new roof?fence? driveway?\solarpanels?
inside new paint after 10 years.new carpets in hallway?
selfcleaing ovens?
dishwasher?
washmaching.Dryer? patio doors?
so what makes it go UP? need to know seniors>