Detroit's affordable housing plan would give developers access to private activity bonds associated with Michigan’s 4% tax credit program.
Detroit Mayor Mike Duggan announced plans to launch an affordable housing fund in his State of the City address earlier this month. He said the $250 million fund would allow the city to preserve 10,000 affordable housing units and develop 2,000 more in the next five years.
The city has identified $50 million in federal grants and other funds, and hopes to raise another $50 million from philanthropic organizations. The remaining $150 million should come from partner financial institutions in the form of low-cost loans, according to the plan.
Arthur Jemison, Detroit's director of housing & revitalization, said that the city does not intend to use its bond issuance to finance its share of the costs. Instead it plans to tap into low interest borrowing to support the fund.
Jemison said in an e-mail that low cost borrowing will enable developers “who are working with Naturally Occurring Affordable Housing to borrow more and provide subsidy and to buy private activity bonds associated with the State of Michigan’s 4% tax credit program which will unlock both new tax credit equity and greater debt capacity. “
The Michigan State Housing Development Authority and the city have been working together on a program that will allow lower pricing of those PABs for projects that help achieve the goal, Jemison said.
The plan will expand the city’s existing programs that have so far preserved 1,772 affordable housing units and developed 852 units since 2015.
Officials are targeting homes for preservation that are at risk due to expiring low-income housing tax credits and deteriorating conditions. Part of the plan calls for the city to prioritize 3,500 existing units that are most at-risk.
“Preservation, maintaining the affordability of an existing unit over time, is critical to retaining the city’s existing population and ensuring future affordable housing options for all Detroiters,” the city said in a release.
“The preservation and creation of affordable housing is the cornerstone of our growth strategy,” said Mayor Mike Duggan. “Affordable housing offers stability for the city’s low-income residents and provides options to households at a range of incomes in all neighborhoods. This is what we are talking about when we say that we are building one city for all of us.”
The city remains on course to exit direct state oversight as soon as this spring. Duggan recently unveiled a $2 billion balanced budget and once it passes the city can make its case to get out from active state oversight.