Muskegon city commissioners voted Tuesday to amend a brownfield housing agreement with West Urban Properties after city staff concluded the original deal wasn't working for either side. The revised pact restructures how tax increment financing flows from affordable rental homes already built under the arrangement, and it comes with a $246,405 settlement the city will pay the developer.
The amendment addresses what a city memo described bluntly as an agreement that, as written, was unfavorable to both Muskegon and West Urban Properties, according to MLive.com. The same memo indicates the settlement payment is meant to satisfy several years of so-called rental subsidy payments the city owed under the old terms, according to a City of Muskegon commission packet. City and company officials worked to develop what the memo calls a more sustainable and enforceable agreement structure going forward.
What the New Deal Actually Changes
Under the amendment, West Urban Properties can now capture Michigan State Housing Development Authority housing tax increment financing from rental homes it has already built, while the city's housing fund also receives revenue from those same houses going forward, per MLive's reporting. Development Services Director Jake Eckholm characterized the vote as an opening move rather than a finish line, saying it is the first step in amending the brownfield plan to allow for a better outcome for both parties to continue the infill housing, per MLive's report.
The rest of Muskegon's broader infill housing brownfield plan, which covers 555 parcels citywide, remains unchanged by the amendment. Those parcels are generally subject to agreements with third-party developers who build rental or owner-occupied homes to address blight and meet housing and economic development goals, per the same city memo cited by MLive.
A Pilot That Hasn't Hit Its Full Scale
The pilot development agreement with West Urban Properties dates back to November 2020 and gave the company the opportunity to build 100 rental housing units across several Muskegon neighborhoods. So far, the company has constructed 50 of those units, retaining 48 as rentals and selling two to owners, according to the city memo reported by MLive. For the duration of the 15-year pilot, the developer is restricted to charging rents consistent with tenants' area median income range.
Those income limits are tied to figures the Michigan State Housing Development Authority set in May: $80,280 annually for a two-person household and $70,320 for a single-person household. Unbuilt homes still contemplated under the West Urban agreement will be transferred to a workforce housing payment-in-lieu-of-taxes structure that is identical to agreements Muskegon has already entered with Allen Edwin Homes and smaller-scale builders. Under those affordability requirements, built units are reserved for households earning at or below 120% of Muskegon County's area median income.
How Housing TIF Works, and Why It Matters Here
Housing tax increment financing allows local governments and developers to capture the increased property tax generated by new development and use it to reimburse eligible project costs, a mechanism that underpins the financing shift in Muskegon's amended deal. The Michigan State Housing Development Authority has also built out Potential Rent Loss and Potential Development Loss calculations, along with a Total Housing Subsidy formula, to gauge whether proposed tax captures are reasonable, according to MSHDA. A separate city project document notes that at least one Muskegon property will lean on the newly amended Housing TIF language specifically to offset a potential financing gap tied to lost rent, per City of Muskegon records. Housing TIF is provided by 2023 legislation amending the 1996 Brownfield Redevelopment Financing Act, Public Act 381.
Part of a Much Larger Housing Push
The West Urban amendment is a small piece of a much bigger citywide effort. Muskegon's infill housing program began in 2018 with 435 vacant lots and has since facilitated construction of 1,770 units as of May, according to MLive's earlier reporting. From 2023 through March, the program alone generated 1,290 new units, split between 933 rentals and 357 homes for sale, with the city aiming to add 3,000 units by 2027. Development Services Director Jake Eckholm has said the broader program has drawn $424.2 million in investment, generating roughly $5.3 million in new property tax base for Muskegon.
