Michigan tax capture law spurs new affordable housing. The cost? $144,000 per unit

• New Michigan law allows local governments to incentivize developers building affordable or attainable housing units
• State and local officials have approved 14 projects with an estimated $84 million in tax captures, creating a combined 586 affordable units
• Supporters view the option as a key tool to address housing demand. Critics question the return on investment

EAST GRAND RAPIDS — In one of Michigan’s wealthiest cities, a debate is unfolding: How much should taxpayers give up for a prominent developer to include 15 "attainable" apartments in a high-end housing complex?

Gaslight Village developers want to take advantage of a new law for a potential multi-million dollar property tax break to build a 149-unit complex, where even a more affordable two-bedroom apartment may still cost up to $2,874 per month. 

“I don't think the center of East Grand Rapids was what (legislators) pictured” when they passed the affordable housing incentive law in 2023, said resident Jerry Anderson, a critic of the plan. “This is probably the most valuable piece of real estate in west Michigan right now.”

The debate comes amid what Gov. Gretchen Whitmer’s administration calls a statewide affordable housing crisis that is especially acute in western Michigan and tourist areas in the northern Lower Peninsula.

The housing incentive law spearheaded by Democrats aims to spur housing for middle-income earners. It's essentially a rebate, allowing developers to “capture” the difference between the original taxable value and the increased value of developed land.

It's paved the way for officials to so far approve an estimated $84 million in tax captures. The 14 projects are expected to create a combined 999 housing units statewide, including 586 to be set aside for residents earning 120% or less of their median income, according to state records.

Those price-controlled units will effectively cost state and local governments about $144,000 each in forgone property tax revenue.

State housing officials view the law as a key tool to encourage affordable housing construction, which can otherwise be a money loser for developers, and say at least 40 other projects are in the works.

The program “doesn’t require that every single development be targeted” toward middle-income earners, allowing developers to rent or sell other units at whatever rates are demanded by the market, said Chad Benson, director of development for the Michigan State Housing Development Authority. 

But in East Grand Rapids and some other communities, the law is prompting debate about trade-offs: Local schools that rely on property tax millages won't fully benefit from the growth, even if children living in the new housing enroll. 

“This … doesn't really change the construct of affordable housing," said East Grand Rapids Commissioner Bradley Hunter, who is concerned about the Gaslight Village proposal. "It offers nothing back to the city.” 

Supporters, however, argue surplus tax revenue would not exist "but for" new projects benefitting communities, echoing arguments from economic development groups that pushed for the law’s passage. 

“I want to get red tape and government out of the way on housing stock,” said East Grand Rapids Commissioner Ryan Burdick, calling the new law a "novel tool" that gives cities influence on how private land is developed. 

Who’s taking advantage?

Similar conversations have played out across Michigan since the state allowed local governments to pursue incentives for price-controlled housing.

The 14 projects approved so far promise developers an average tax capture of $6 million over 25 years for a 75-unit development with 45 affordable units. 

But developers still have to front financing: All told, approved projects are projected to cost a total of $277 million to construct.

Michigan’s booming west side has been the quickest to take advantage.  Half of the projects approved so far are in west Michigan, where housing demand continues to outpace supply despite ramped-up construction. 

In East Grand Rapids, developers Scott Wierda and Brian DeVries, operating as Gaslight Investors LLC, are hoping to be among the next.

Wierda was until recently a partner at the Grand Rapids-based CWD Real Estate Investment firm, along with Sam Cummings and Dan DeVos of the wealthy west Michigan family. The company promoted the Gaslight Village project before Wierda struck out on his own with his son, but East Grand Rapids City Manager Shea Charles told Bridge CWD was never directly involved with the plans. 

Related:

• Coming soon to Michigan: Hundreds of affordable housing units. See where
• New housing, old school debates: 6 takeaways from Mackinac Policy Conference
• In Michigan, an affordable housing ‘emergency’ looms

The DeVos-affiliated firm was approved for a separate tax capture plan in Grand Rapids, where it recently broke ground on a $65 million project to convert much of the former Fifth Third Bank office building into 140 apartments, 28 of which will be income-qualified. CWD is expected to capture $17.8 million in property tax growth over the next 30 years for the project.

Speaking before the East Grand Rapids Planning Commission last summer, Wierda said his goal is to include apartments at attainable prices for middle-income renters, but the number must make sense economically to keep the project sustainable. 

Neither Wierda nor CWD responded to requests for comment on this story. But some local residents have criticized the idea of tax breaks for developers who have had success elsewhere without government intervention. 

“The big winner is the developer,” said Anderson, the local resident who has questioned the Gaslight Village plan. “There ought to be ways to do this where the big winner is the residents.” 

Last week, dozens of residents packed into a small city commission meeting space to relay their concerns, which also included the size and scale of the development, as well as the potential for increased traffic congestion. 

The missing middle

Few Michigan communities have escaped the two-pronged challenge of housing: having enough of it, and ensuring the average person can afford to live in it. 

State officials have responded by offering locally-driven, flexible fundraising options, including expanding use of local tax captures previously reserved for commercial developments. 

US Census data indicates Michigan grew its affordable housing stock by 22,000 units in 2024.

The costs of new builds have gone up amid significant increases in construction and materials prices, high inflation rates and a diminishing skilled workforce, making it harder for many developers to make the math work on affordable housing units, industry experts told Bridge.  

In light of those challenges, the new law is in some circumstances “just allowing us to keep pace with what we were building pre-pandemic,” said Ryan Kilpatrick, lead consultant of Housing Next, a regional partnership studying housing in west Michigan. “It’s essentially making up for those cost increases.”

Where federal housing programs typically target low-income households, state officials told Bridge the goal is to boost housing for so-called “missing middle” workers making between 80% and 120% of an area’s median income.  

“We're trying to put a lot of those decisions and negotiating points in the hands of the locals to be able to determine what's necessary at the local level, because they know what they need,” said Benson, with MSHDA.

Of the 14 projects approved for the financing as of April 2025, eight will be fully dedicated to housing for prospective residents making 120% or less of the area median income, while the other projects range between 12-50%.

Making a dent?

Senate Majority Leader Winnie Brinks, D-Grand Rapids, told Bridge the legislation is a  “game-changer.”

In addition to the Fifth Third Bank project, Habitat for Humanity is leveraging a projected $2 million tax capture to build a $13.7 million condominium building with 27 units in Grand Rapids, all of which will be income qualified. 

Grand Rapids officials have been “very aggressive” in using the tax capture program where possible to add more varied rents to the market, said Sarah Rainero, the city’s economic development director. 

“We're looking for all sizes and shapes and affordability levels and really going at it about that way — not really targeting any one piece of that puzzle, but just really trying to tackle all of it at the same time,” she said. 

Tax increment financing isn’t the only tool Grand Rapids is wielding to boost housing numbers and economic growth. 

More than $250 million in other state and local incentives have been approved for a plan to bring a soccer stadium, amphitheater, businesses and hundreds of market-rate apartments to the city’s downtown. The $700 million plan is backed by investors like Dick DeVos and Carol Van Andel.

Advocates point to state and local incentives as the mechanism allowing communities to make a dent in demand, despite increased building costs and  fluctuating labor markets.

Housing Next recently estimated housing needs in Kent and Ottawa counties dropped from 34,600 units in 2022 to about 33,000 units in 2025.

Communities combining new funding options with zoning changes are “where we’re really able to see significant improvements,” Kilpatrick said, characterizing recent trends as “a little bit of progress.” 

‘Every piece helps’

All of the projects approved for tax capture so far involve multifamily properties.

Housing demand is far higher for single-family houses, though for workers priced out of that market, multifamily residences are the next best thing, said Paul Isley, associate dean at Grand Valley State University’s Seidman College of Business.

In west Michigan, “we’re seeing some desire to try and chew up that excess demand,” with production of multifamily units running at roughly double the rate of population growth, Isley said.

“Every piece helps — the trick is, it will do almost nothing until we reach the point that it will do something, and then it will do a lot,” Isley said. “You have to keep adding until you reach that cliff.”

Other states, including Maine and Massachusetts, have adopted similar models to encourage development of long-term affordable housing, according to the nonprofit National Housing Conference.

David Dworkin, the organization’s president and CEO, said Michigan communities have “gotten right off the starting blocks” with the initiative: “Having units funded within two years is a solid start,” he said. 

But he cautioned the financing tool is only successful if the math works out.

“You have to make a case that the development is going to be successful enough to repay the debt,” Dworkin said. “If every community was ready to use this, a lot more people would be using it.”

Developers large and small have successfully pitched plans to secure the financing, from wealthy, high-profile firms to nonprofits or first-time real estate investors. 

Investors include Indiana-based firm Great Lakes Capital — which is converting a former butcher block factory site in Petoskey into a 204-unit complex — and Gregory and Ronita Coleman, two General Motors executives and Pontiac natives turning the city’s historic Casa Del Rey building into affordable housing. 

Pros and cons

Local tax breaks often have a multi-million dollar price tag, prompting spirited debate — and in some cases fervent opposition — to proposed developments. 

Jennifer Smith of the Michigan Association of School Boards, which opposed the new housing incentive law during the legislative process, said educators see the property tax captures as a drain on school revenues. 

But because the deals are approved locally, it’s hard for her organization to keep track of the overall tax hit, and “schools don’t have a choice,” she said. 

In some communities, however, one-time critics have embraced the idea.  

Middleville Village President Kevin Smith initially had concerns about the 144-unit MidVilla Flats affordable housing project in Barry County. In 2022, he posted on Facebook a litany of reasons why he believed the “plan proposed by the developer was half-baked at best.” 

Smith said he eventually had an epiphany: Either embrace affordable housing, or “lose the opportunity to build the other parts of the economic development engine.” 

Middle-income earners “have to be able to afford to live somewhere and start their lives,” Smith said. “In my generation, I had that opportunity.”

‘A starting point’

In East Grand Rapids, the fate of the Gaslight Village project may not be known for months.

Officials are currently reviewing the details of a “concept plan.” But to be eligible for a tax capture, the city needs what’s known as a “brownfield redevelopment authority,” an independent body that can negotiate contracts with developers.

The commission voted to create an authority earlier this year, but hasn’t yet appointed anyone to serve. 

East Grand Rapids historically hasn’t qualified for housing affordability programs and never had much use for a brownfield authority, said Mayor Katie Favale.

The 2023 law is “where it kind of worked for us,” she said, noting that the proposal to control prices on 10% of the Gaslight Village housing units is “a starting point for the conversation.”