Michigan Boosts Home Construction—but Whitmer Says Red Tape Still Blocks Affordability

Michigan has increased the pace of home construction but needs deregulation and new tax benefits to curtail the state's housing shortage, Gov. Gretchen Whitmer said.

In her final state of the state address, Whitmer said Wednesday night that Michigan has made progress on housing affordability since it rolled out a statewide housing plan in 2022. That includes adding almost 87,000 new or rehabilitated housing units to the state's stock.

With that goal completed a year ahead of schedule, Michigan set a new goal to get to 115,000 new units this year. That's important because 73.2% of the 4.67 million housing units in the state are owner-occupied, above the national average.

Whitmer suggested Michigan needs to push forward with its zoning reforms and a new state affordable housing tax credit to match the federal credit. That could bring further public investment to housing in the state.

"For too long, however, our laws have made it easy to expand suburbs but hard to build walkable downtowns and main streets or do more with your own property," Whitmer said. "It shouldn't be so hard to build the homes people need in the places where they want to live."

The state-by-state housing affordability report card from Realtor.com® gives Michigan a C.

Zoning debate

Whitmer also said the state needs to remove "nonsensical" construction requirements and streamline building laws.

"There's still a lot of red tape that gets in the way of shovels hitting dirt," Whitmer said. "Let's make it easier to build in-law suites and multifamily homes. Let's modernize lot sizes, setback rules, and parking requirements. By improving zoning and building codes, we can build more homes quicker, at lower cost."

Michigan, like more than a dozen other states, has a package of bills in the legislature that would loosen zoning restrictions to build more housing. Those pitches have drawn encouragement from some housing and business advocates such as the Michigan Housing Council and the pro-building firm Abundant Housing Michigan.

The bills have engendered local debate as well as a petition drive as locals have pushed back on a perceived infringement of local governance.

Whitmer acknowledged the arguments for community character that have pervaded the debate. But she said there's an economic interest in attracting young workers with the "kind of homes and places they want."

Michigan hit by affordability crunch

Michigan's efforts in housing have come up against an affordability crunch as inflation has hit the state. For instance, while it has spent "record" investments on stabilizing about 47,000 cost-burdened homes, the number of households that are cost-burdened has also increased, requiring more investment.

But the state implemented a broader housing strategy including some efforts to speed up permitting, centralizing some processes under its housing development authority. It also used tools like tax increment financing and a brownfield fund.

"We've very much had a regional strategy, with folks on the ground," Michele Wildman, senior vice president of Community Planning & Development Readiness at the Michigan Economic Development Corp., told Realtor.com.

The state's housing efforts have been subdivided among 15 regional housing partnerships with more localized development plans.

"Many of the problems across communities are the same, even if they're slightly different," Wildman said. "Costs are going up. Reducing costs and removing barriers are important steps forward."

Michigan Republicans criticized Whitmer's speech as not doing enough. They've floated several ideas including getting rid of property taxes and the real estate transfer tax. Both, they said, could make it less expensive to buy a home.