Michigan’s housing, real estate and construction industries are getting stronger. Housing prices, new housing starts and commercial developments are up; foreclosures are decreasing dramatically.
Gov. Snyder and the Michigan Legislature deserve praise for instituting tax and regulatory policies that have developers, lenders and local businesses excited to locate and expand operations here. Now we can do more to keep our economy moving forward.
A bill sponsored by Sen. Mark Jansen, R-Gaines Township – already approved with overwhelming bipartisan support by the state Senate – would provide another valuable and effective tool for revitalizing Michigan’s urban communities. We urge the Michigan House to adopt Sen. Jansen’s bill as soon as it returns from summer recess to help create jobs and provide more opportunities that will energize local economies.
The proposal would allow the Michigan State Housing Development Authority (MSHDA) to introduce a new $100 million Michigan Mezzanine Investment Fund to support housing projects around the state. MSHDA seeks to raise capital to do multifamily and mixed-use developments primarily in Michigan’s downtowns and core urban neighborhoods.
This fund would address a change in the demand for the type of housing we’re seeing in Michigan. Millenials and younger generations are trying to move back into our cities. They want walkable neighborhoods, access to mass transit, a variety of cultural and entertainment amenities and to patronize local grocery stores. They want to go to coffee shops, restaurants and bars in their neighborhood. And frankly, they don’t want to pay $4 or more for a gallon of gas to commute to and from work.
Here’s the problem: In boom markets, traditional long-term debt may make up 80 percent of these kinds of building development deals. Ideally, the lower the debt, the more likely the project is to become successful. Michigan’s builders and lenders are working with MSHDA and other partners to bring financing together that will help reinvigorate our urban centers.
However, in many of Michigan’s hard-hit urban centers, the process to secure federal and state tax credits and other nontraditional financing sources can take years to finalize. An oft-cited reason is that a gap exists between what traditional lenders will offer and what a project actually costs. This gap by necessity requires a patchwork mix of nontraditional loans, subsidies from foundations and tax credits from federal and state governments.
The Michigan Mezzanine Investment Fund would serve as a “bridge” to fill such gaps. No taxpayer dollars would be used by the fund. Rather, it would include a $25 million commitment from MSHDA’s reserve funds and $75 million from Michigan investors and other financial groups nationally. Once approved by the Legislature, the fund is expected to help to leverage between $500 million to $600 million in investments in the state.
The Michigan Mezzanine Investment Fund represents an opportunity not only to attract outside capital to Michigan, but also to spur new jobs and trigger economic activity here that would not occur otherwise.
