Michigan Creates Housing Tax Credit, Extends Redevelopment Tools
by Will Ramirez, on Sep 14, 2026, 1:29:59 PM
States continue to build out their own housing and redevelopment incentives to complement federal programs and address local needs. In July 2026, Michigan enacted a package that created a significant new state housing credit and, through separate acts, extended existing commercial-redevelopment tools.
For developers, employers, and communities in Michigan — where housing availability increasingly affects workforce and economic-development decisions — the legislation adds financing capacity and preserves familiar local incentives.
Recent Program Activity: What Changed
On July 21, 2026, Governor Gretchen Whitmer signed a bipartisan package that created the Michigan Housing Opportunity Tax Credit and, through separate legislation, extended two of the state’s commercial-redevelopment programs and expanded a brownfield tool. The centerpiece is a new state low-income housing tax credit designed to work in tandem with the long-established federal credit, making Michigan one of more than 30 states with a state-level LIHTC.
A New State Housing Credit
The Michigan Housing Opportunity Tax Credit — enacted through Senate Bill 966 (Public Act 23), House Bill 5806 (Public Act 30), and House Bill 5807 (Public Act 31) — directs the Michigan State Housing Development Authority (MSHDA) to administer the credit beginning with award cycles on or after January 1, 2027. The program has a $42 million base amount for 2027, adjusted for inflation in later years, and an award cycle may also draw on prior unused authority plus recaptured or returned credit authority. The credit is nonrefundable, runs against the individual income tax, the corporate income tax, and the insurance premiums tax, and unused amounts may be carried forward for up to ten years.
At the project level, the credit is limited to the lesser of the amount necessary for the development’s financial feasibility or the “adjusted annual federal credit amount” — defined in the law as one-sixth of the aggregate federal low-income housing credit a project receives over the federal credit period. The law also sets aside 25% of the annual authority for new-construction projects financed with 4% federal credits and 25% for preservation projects financed with 4% federal credits, with rural allocations inside those categories when there are enough applications. State officials estimate the program will support roughly 2,500 newly created or preserved affordable units each year.
Commercial Redevelopment and Brownfield Tools
Separately, three companion acts extended commercial-redevelopment tools and expanded a brownfield program. Public Act 34 (Senate Bill 721) extended the Commercial Redevelopment Act and Public Act 35 (Senate Bill 722) extended the Commercial Rehabilitation Act — local-option programs that abate property taxes to encourage the redevelopment and rehabilitation of commercial property, allowing new certificates to be approved through December 31, 2035 — while Public Act 36 (Senate Bill 723) doubled the aggregate tax-capture limit for Transformational Brownfield Plans from $1.6 billion to $3.2 billion.
Program Overview: How the Housing Credit Works
Like the federal LIHTC, the Michigan credit is designed to close the financing gap on affordable-housing developments by providing credits that developers use to attract private equity investment. Because the state credit is calculated in tandem with the federal credit and administered through MSHDA’s competitive process, developers coordinate the two in a single financing structure.
The set-asides for 4% bond-financed new-construction and preservation deals are significant, since those transactions often need additional subsidy to be feasible. State officials have positioned the credit as a way to move more of those projects forward while stretching limited federal resources.
Why It Matters
Housing availability has become an economic-development issue, affecting employers’ ability to attract and retain workers. By pairing a state credit with the federal program, Michigan expands the capital available for affordable housing and improves the feasibility of projects that might not otherwise pencil out. The extended commercial-redevelopment tools and the larger Transformational Brownfield cap, meanwhile, preserve and expand familiar incentives for revitalizing commercial property and complex sites.
For developers, the practical effect is more financing capacity for housing and continued — and, in the brownfield case, expanded — access to redevelopment tools; for communities and employers, it is more housing and redevelopment activity.
What Companies Should Do
Affordable-housing developers should prepare for MSHDA’s 2027 award cycle, aligning projects with the credit’s set-asides and the adjusted annual federal credit limit, and coordinate the state and federal credits in their financing structure. Commercial developers should confirm eligibility and the extended certificate timelines for the Commercial Redevelopment and Commercial Rehabilitation Act programs — now available through 2035 — in the communities where they are active, and large-scale projects should assess the expanded Transformational Brownfield capacity.
Because these programs interact with local approvals and other incentives, early engagement with MSHDA and local officials will help sponsors make the most of them.
How SSG Can Help
Site Selection Group helps developers and companies evaluate state and local incentive programs and structure projects to capture available benefits. We monitor legislative and program developments like Michigan’s, assess how new and extended programs apply to a specific project, and help clients coordinate with the agencies and localities that administer them.
Program details verified against primary sources as of August 31, 2026. Program rules, application status, and administrative guidance can change; confirm current details with the administering agency before acting. This article is provided for general information and does not constitute tax or legal advice.
