Envisioning Traverse City's Future: ADUs
Carefully Expanding Housing with ADUs
As Traverse City grows and evolves, one of the most pressing challenges we face is housing - how to create more of it, without compromising the historic charm and neighborhood character that makes this place special.
Whether you’ve lived here for decades or recently moved to enjoy Northern Michigan’s pace of life and natural beauty, the question remains the same: how do we make room for more neighbors while preserving the integrity of our city?
Accessory Dwelling Units, or ADUs, offer a conservative yet creative answer. These small, secondary homes - whether a converted garage, a basement apartment, or a backyard cottage - fit seamlessly into existing residential lots. They allow us to gently expand housing options without fundamentally altering the feel of our neighborhoods.
What I’m Thinking…
This is the introduction of what could be a ‘city-supported’ ADU program funded by a portion of the $2.3 million expected annually from the expiration of TIF 97.
Currently, if you inspect the city’s Capital Improvement Plan under the TIF 97 Fund, only $200K is slotted for ‘Workforce Housing’ and not until the 2027-2028 fiscal year. My personal opinion is this is too little - important to note, this is just my opinion.
If we increased that to $1 million a year (either from recaptured TIF money or excess fund balances), Traverse City could - in theory - launch a focused and affordable housing initiative that might include:
Pre-approved ADU designs – These could include plans for a detached single-unit cottage, a unit over a garage, an attached ADU, a studio unit, and a small duplex-style unit. Pre-approved plans would reduce architectural costs and streamline permitting.
Low-interest construction loan assistance – The city could offer financial assistance of up to 20% of the build cost, enabling more residents to participate, including retirees on fixed incomes or younger homeowners.
These ADUs should be required to be long-term rentals and owner-occupied—ensuring they're built for people who live and work in Traverse City, not as short-term vacation rentals.
TC does have a current ordinance in place ensuring this is the case - but only for ‘3-month’ rentals, not requiring long-term leases.
Financial Impact: For Residents and the City
For homeowners, the math is compelling. ADU construction costs vary depending on the size and style, but pre-approved plans and streamlined permitting keep estimates in the $80,000–$150,000 range.
High end of construction costs in Michigan are about $220/sq foot and that would allow for a 680 sq foot ADU at $150,000.
With city support, that out-of-pocket cost becomes more manageable - and the resulting rental income can help offset mortgages or support retirement budgets.
Retirees living on fixed incomes may find ADUs as a helpful way to bring in supplemental income while staying in their homes.
Younger, potentially remote workers, may use them to house extended family or earn extra income to afford rising housing costs.
For the city, even 10–20 ADUs per year could make a meaningful difference in our housing availability. That’s housing for 20–40 new residents annually. The added property value and increased density will also contribute to long-term tax revenue without requiring new infrastructure expansion.
Social and Community Benefits
There are other benefits that money can't quite quantify.
ADUs give families the option to care for aging parents nearby.
They offer younger residents a foothold in the city they grew up in.
They help teachers, nurses, service workers, and other essential workers live closer to where they work.
And they provide ways for retirees to age in place with dignity and independence.
Just as importantly, they allow us to grow in a way that doesn’t bulldoze what makes Traverse City beautiful. This is a way to preserve our historic neighborhoods while welcoming new neighbors. A detached backyard cottage doesn’t change the skyline or the feel of a street—but it can change someone’s life.
Lessons from Other Cities
Across the country, and right here in the Midwest, cities are turning to ADUs as a way to expand housing options while keeping neighborhood character intact. By studying what's worked elsewhere, we can build a program that’s just right for Traverse City.
Madison, Wisconsin - Madison permits ADUs up to 900 square feet with a maximum of two bedrooms on owner-occupied properties. In 2022, the city launched its Backyard Homes Project, offering loan financing to help homeowners build ADUs.
This approach focuses on creating affordable and sustainable housing while respecting the city’s existing residential scale. It’s a great example of how financial support and clear guidance can make ADU development accessible for regular homeowners.
Minneapolis-St. Paul, Minnesota - The Twin Cities have taken big steps toward zoning reform, but their ADU adoption has been slower than expected. Factors like financing challenges and regional housing market dynamics have limited impact.
The lesson? Policy alone isn’t enough… cities must also tailor support tools, financial options, and outreach to local needs to make programs truly work.
Charlevoix County, Michigan - Closer to home, Housing North has created an ADU Toolbox for communities like Charlevoix, East Jordan, and Boyne City. The toolbox provides pre-approved design plans, economic benefit calculators, and zoning guidance—all tailored for smaller Michigan towns. It’s a model of how smart planning and local context can empower residents to build housing solutions that fit the scale and character of their communities.
Also worth noting: Cities like Los Angeles and Boston have found success with pre-approved design plans and targeted loan assistance…. strategies that could work well in Traverse City if adapted thoughtfully.
In Boston, the city offers low-interest loans of up to $50,000 and technical support for homeowners building ADUs. In Los Angeles, the city’s standard plan program has made it faster and cheaper to build a unit. Concord, California even offers their plans entirely for free.
A Traverse City Approach to Growth
We can… and should - be intentional about how we grow. By investing a small, predictable amount each year into this ADU program, we’ll create real housing opportunities while protecting the look and feel of our neighborhoods.
It’s not about sweeping change. It’s about quiet, thoughtful progress. It’s about being the kind of community that looks out for one another and finds creative ways to make room for each other.
In Part 3, we’ll look at how Traverse City can invest in safe, connected bike and pedestrian corridors that make it easier for kids to walk to school and for all of us to get around town more safely and sustainably.
One More Thought on Taxes and ADUs
The other night, while catching up with a friend over happy hour at The Parlor (seriously, go check it out), we started talking about ADUs and what’s keeping more people from building them in Traverse City. One big question came up: how are these units taxed?
Right now in Michigan, if you live in your home full-time and add an ADU, your property can generally still qualify for the Principal Residence Exemption (PRE)-meaning you wouldn’t automatically get bumped to the higher, non-homestead tax rate just for adding a long-term rental unit like a backyard cottage or basement apartment.
That’s good news. But there’s a gray area: if you rent out the ADU, even as a long-term unit, there’s a chance the portion of your property being rented could lose its PRE status. That could result in a higher property tax rate on that space, which might discourage homeowners from making the investment at all.
Also, if you add an ADU to your property, the city assessor has to increase the value of your property, thus increasing your taxes. Not a great incentive for more housing.
It got me thinking - what if we could protect or even expand tax incentives for homeowners who add long-term rentals that serve our local workforce? Cities like Traverse City can’t make that change on our own because property tax law is controlled at the state level. So, I’ve reached out to our state representative to start that conversation.
We need state policies that reward homeowners for building housing solutions that benefit the whole community. If you agree - or have ideas of your own - I’d love to talk more. Maybe over a coffee… or another round at The Parlor.
Why do I care?
This topic hits close to home for me… literally. As a remote tech worker, a homeowner, and someone lucky enough to live here year-round, I see firsthand the growing gap between the people who want to call Traverse City home and the limited housing options available to them.
As the most recent appointee, serving on the BATA Board of Directors has only deepened my belief that “getting people to places” starts with making sure they have a place to live.
Since posting Part 1 of this blog series, I’ve had the chance to sit down with some incredible people - leaders from various boards (including the DDA), current commissioners, former commissioners, long-time locals, and new residents building their lives here.
The conversations have been smart, hopeful, and full of heart. If you want to talk about where TC is heading, I’d genuinely love to hear from you.
Sources & Further Reading
Los Angeles Standard ADU Plans
https://www.ladbs.org/adu/standard-plan-program/approved-standard-plansBoston ADU Financing Program
https://www.boston.gov/news/city-boston-announces-new-tools-assist-residents-building-accessory-dwelling-units-adusConcord Free Pre-Approved ADU Plans
https://www.cityofconcord.org/1075/FREE-Pre-Approved-ADU-PlansTraverse Ticker – R2 Zoning Changes
https://www.traverseticker.com/news/housing-density-changes-advance-to-city-commission/MarketWatch – Homeowners Using ADUs for Income
https://www.marketwatch.com/story/homeowners-are-using-this-hack-to-cut-their-mortgage-payments-in-half-and-chip-away-at-the-housing-shortage-ac934506Brookings – Owner Occupancy and Housing Crisis
https://www.brookings.edu/articles/how-owner-occupancy-regulations-are-contributing-to-the-housing-crisis/City of Madison – Backyard Homes Project
https://www.cityofmadison.com/mayor/blog/2023-08-24/accessory-dwelling-units-benefit-madison-families-and-communitiesHousing North – ADU Toolbox for Charlevoix County
https://www.housingnorth.org/accessory-dwelling-units-program-aduStrong Towns – Minneapolis ADU Challenges
https://www.strongtowns.org/journal/2023/4/20/adus-are-working-great-just-not-for-the-twin-citiesIllinois Answers – Chicago ADU Program Report
https://illinoisanswers.org/2023/06/07/chicago-affordable-housing-program-expansion/
