City of Muskegon Infill Housing Program

Project Description

The City of Muskegon has focused on improving the quality of life in the core city which would result in people desiring to move back into the community. To do this, the city prioritizes affordable and market-rate housing to attract more community members.

The city created an infill housing program to reverse decades of urban disinvestment by building new residential housing on city-owned vacant lots. The goal is to improve density, reduce vacant lot maintenance costs, eliminate blight, and maintain the affordability of housing types.

The shortage of homes at all price points hinders the continued growth of the community. We believe new housing types should be available and accessible in all neighborhoods. If not, housing unaffordability will persist, supply will be limited, and the cost of servicing will rise, all of which affect the social and economic well-being of our community. Improved housing is key to long-term sustainability.

Is your project easy to replicate in other communities (clear in its impact and execution for other communities)?

It’s possible for other communities to successfully implement our process. Significant coordination between multiple departments and boards is necessary. In Muskegon, the following groups are included in the collaboration: Planning, Economic Development, Finance, Treasury, Assessing, the County Land Bank, the Brownfield Redevelopment Authority, and the City Commission. Communities with large numbers of vacant residential lots should consider this type of project.

What is the Community Wealth Impact (based on one or more of the categories you selected) of your project?

Financial security – The project provides various housing options that allow Muskegon residents more flexibility in meeting their housing needs. As with most cities across the US today, Muskegon is experiencing a severe housing shortage which has driven steep increases in housing costs and is negatively impacting our lowest-income residents as higher-income families quickly purchase or rent any available property. Housing is a key element in economic development providing a tax base, customers for local businesses, and workers for our city’s employers. Muskegon will be unable to compete economically without providing a wide range of affordable housing options for its residents. Our vision is for any person to have housing choices that fit their needs in every neighborhood within the city. Infrastructure – The city has lost a significant amount of tax revenue through disinvestment and demolition of property, leading to a funding gap for critical infrastructure. New property and income taxes generated by the families occupying the new units will contribute to the maintenance of the existing infrastructure that serves each of these properties. By rebuilding on lots that historically contained homes, the new tax base generates enough income to sustain existing infrastructure, make necessary improvements for economic growth, and increase services within the city.

Describe the creativity and originality of your project.

Developers have been reluctant to build homes in Muskegon because their profit margins were smaller here than in neighboring communities. In several neighborhoods, new homes would not generate a profit at all and were likely to be sold at a loss. A recent housing needs assessment shows the need to add 3,000 housing units over the next five years. To meet this demand, the city needed a way to entice home development while reducing the risk for the developers. Our infill housing project began with the intent to prove to developers that Muskegon is a good place to invest. We were the first community in Michigan to utilize the Brownfield Redevelopment Act to build houses on scattered sites throughout the city and use the Tax Increment Financing to reimburse the losses on any sales that were below the full cost of construction. While the city initially foregoes the capture of some of our investment, the gap is repaid over time. Some homes are sold at a profit while others are sold at a loss. The tax increment on each home contributes to the totality of the funding gap, spreading the risk across the entire project. Income taxes paid by the families in the new units add to our revenue, and the new families contribute to the community through their presence, service, and spending here. Our investment is paying off. All of the homes sell quickly, and the neighborhoods experiencing infill are seeing property values increase, generating wealth for other homeowners in the area and creating demand for developers to build outside of our program. The tax capture grows each year, providing confidence for continuing to fund the program.