An Interesting Property Tax Solution for Traverse City's Housing Shortage
Often, good and interesting policy ideas come from unexpected conversations.
At my campaign kickoff this month (July 22nd), a neighbor pulled me aside with an intriguing suggestion. He owns a few rental properties in the city and has been researching ways to make long-term housing more affordable for local workers.
What he shared could be a game-changer for Traverse City's housing shortage.
"Have you heard about what they’re doing in Frankfort [ie, the Michigan Attainable Housing Facilities Act]?" he asked. I had - but only briefly at a meeting with Housing North and the city planning department… so after diving into the research, I do think this could be one of the most practical tools we have to address our housing crisis – and it might not cost taxpayers a dime - nor would we need to ‘develop’ more housing.
Here's How It Works
The Attainable Housing Facilities Act (AHFA), passed by the Michigan Legislature in 2022, offers property owners a simple trade: commit to keeping your long-term rental affordable for local workers, and we'll dramatically reduce your property taxes.
Here's the math that caught my attention. Take a typical rental property valued at, let’s say $400,000 in Traverse City. The owner currently pays approximately $ 10,000+ per year in property taxes (estimates based on non-homestead rates). Under this program, participants could save up to 50% per year – real money that makes a real difference.
In exchange, the property owner agrees to rent to households earning up to and not above 120% of our area's median income (that's about $96,000 for a family of four) and keep rent at no more than 30% of the tenant's income (my rough math puts this at about $1600 per month max). The commitment can last anywhere from one to twelve years, as determined by the city.
The AHFA also addresses renovations, requiring investments of at least $5,000 to bring properties up to minimum building code standards. Additionally, it specifies that even if a household's income increases beyond the qualification limit during their lease, they can remain in the unit until the lease expires.
The beauty of this approach is that it works for properties from single-family homes up to small apartment buildings with four units (the owner of the rental properties can only max this tax advantage out at a total of four units per the law).
Neighbors also complain to me often about the number of AirBnBs that are busy all summer with parties and guests and then sit vacant all winter. This program could help convert some of those properties into stable, year-round housing for local families. This means better use of existing neighborhoods rather than building and developing more infill.
The Numbers Tell the Story
Traverse City faces a stark reality. The region has a shortage of 1,000+ rental units and 1,200+ for-sale homes. Meanwhile, our median home value has jumped to $453,000, pricing out the teachers, firefighters, and service workers who make our community function.
Currently, we have hundreds of short-term rentals that could potentially convert to long-term workforce housing. If just 50 Airbnb owners chose to participate in this program, we'd create 50 new affordable rental units while providing those property owners with an estimated $250,000 in combined annual tax relief.
Another opportunity lies in the smarter use of land we've already zoned for housing. Consider the property owner in Traverse Heights who has an adjacent lot zoned R-2. Under our updated zoning rules, they could build one new quadplex – that's 4 new housing units in an existing neighborhood, close to services and infrastructure. With the Attainable Housing Facilities Act, each building would qualify for significant property tax savings, making the economics work while creating affordable housing for more local families.
The program is entirely voluntary. Property owners would choose what works best for their situation. Some will stick with short-term rentals, others will find this long-term approach more attractive – especially as short-term rental regulations continue to evolve.
The Bigger Picture (And What We Need to Watch)
If successful, this program could fundamentally shift our local housing market. More long-term rentals mean more stable housing for our workforce and more families would get to stay in Traverse City vs need to move away - this applies to seniors renting as well!
Families could put down roots instead of facing constant uncertainty about rent increases or lease renewals.
But we need to be smart about implementation. Any policy that changes property tax collections of non-homestead property affects school funding, and we must carefully analyze the impact on TCAPS revenue. The program creates an alternative tax structure, so it's not a complete loss of revenue, but the details matter. We owe it to our schools and students to model these changes thoroughly before moving an idea like this forward.
We also need to ensure the program serves its intended purpose. The goal isn't just to create any rental housing – it's to create genuinely affordable/attainable options for the people who work in our community.
Moving Forward Together
This idea emerged from a conversation with a neighbor who sees the daily reality of our housing challenges, who owns rentals, and is trying to come up with a way to lower rent for tenants. It deserves consideration as part of our broader housing strategy, alongside our recent zoning updates and ongoing affordable housing projects.
The Michigan legislature has given us the tools. Our city has made the zoning changes. Now we need the savvy to put the pieces together and create a program that works for property owners, renters, and our community as a whole.
Sometimes the best solutions come from listening to our neighbors and thinking creatively about the tools we already have. This could be one of those times.
What do you think? I'd love to hear your thoughts on this approach to addressing our housing challenges. You can reach me at ljboehmer@gmail.cm or join the conversation on social media.
Sources and Further Reading
Michigan Attainable Housing Facilities Act:
Michigan Department of Treasury - Attainable Housing Exemption
Michigan Legislature - Attainable Housing Facilities Act (MCL 207.902)
Traverse City Housing Data & Policy:
The Ticker: "City Approves Zoning Changes, Annual Budget, Strategic Plan, Sewer Bonds, Cairns Settlement" (June 2025)
Property Tax Information:
Background on Franfort MI:
National Context:
