‘No short-term rentals’: County adopts new PILOT policy – Traverse City Record Eagle

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TRAVERSE CITY — New workforce housing projects supported by tax incentives will not be eligible for use as short-term rentals, according to a policy approved this week by the Grand Traverse County Board of Commissioners.

This PILOT policy, the county’s first, provides tax incentives to developers willing to build below-market-rate rental units in the area. Traverse City already has a separate PILOT policy in place.

PILOT stands for “payment-in-lieu-of-taxes” – a relatively new program that encourages the construction of rental units at below-market rates. Several state laws passed in 2023 authorize counties to collect a percentage of rental income instead of the usual property taxes for those properties.

To qualify for a PILOT tax abatement under state regulations, developers must promise to target renters who earn between 80 and 120 percent of area median income.

The current area median income for Grand Traverse County is about $89,900 according to the U.S. Department of Housing and Urban Development. That means a household with two adults earning about $45,000 each would be at 100% of the AMI for this area.

Under the new policy, workforce housing units (rental apartments) cannot be rented out for any period less than 30 days. However, extra bedrooms could be sublet as long as the original renter uses the space as his or her primary residence.

Property developers and/or owners will be responsible to verify income limits and residency requirements, board members agreed. Furthermore, developers are required to submit PILOT applications to the county at the same time as they are submitted to localities, such as townships or Traverse City.

So-called “workforce housing” is not the same thing as “affordable housing,” emphasized Commissioner T.J. Andrews. The greatest need in the area is for housing below 60 percent of AMI, she said. However, those less expensive rental units are difficult to find, forcing some renters to live many miles away from where they work.

Using that logic, Andrews argued that the income range for PILOT-supported projects should be limited to 80 to 100 percent AMI at most – not the 120 percent of AMI in the revised policy.

“All the studies show we have an extreme need to offset market rates,” she said. “The lower you go in monthly rent, the greater the demand. I believe 120 AMI is at or above market rates – so it really isn’t below-market rate housing. Properties for lower-income people are being ‘poached’ by those with higher incomes.”

Other commissioners argued for keeping the 80 to 120 percent AMI range, saying it will encourage more rental housing construction projects in the area.

“Buying a house is an emotional process, but building a large [housing] project is all about the numbers,” said Commissioner Darryl Nelson. “Developers aren’t married to Grand Traverse County, they’re married to the finances.

“If we limit the AMI to 100 percent, maybe those developers will go to Benzie County or Altoona, Pennsylvania, or wherever. The [non-local] banks that finance these projects don’t give a lick where it’s located as long as it’s financially viable.”

After further discussion, the 80 to 120 percent AMI range was preserved in the new PILOT policy.

In a related move, the board approved a modified PILOT plan for Wallick Communities, an Ohio-based company that is planning to build a 192-unit rental housing project near Chum’s Corner.

Wallick Communities expects to break ground this spring on a project called “Corners Crossing Apartments.” It will be located on 16 acres of land just west of the Chum’s Corner intersection near the Stone House Bread store.

Rental rates for the new project are targeted at about 63% to 93% of the area median income. Based on current income levels in Grand Traverse County, that means about $1,100 per month for a one-bedroom apartment up to $2,140 per month for a two-bedroom unit.

Blair Township is requiring Wallick to pay an additional 2 percent of rents to fund local emergency services, on top of the 2 percent for PILOT reimbursements. In contrast, the county will waive that additional amount. The motion passed on a 6-3 vote with commissioners Jewett, Hentschel and Sieffert voting no.

At its meeting Wednesday, the board also heard extended comments from Brian Martinus, interim chief executive officer of Northern Lakes Community Mental Health, which serves clients in six counties.

Martinus explained that Northern Lakes is now instituting “key performance indicators” to track important operational and quality factors. At the same time, the agency is also undergoing an in-depth auditing process managed by the Northern Michigan Regional Entity.

NMRE manages Medicaid funding for behavioral health services in 21 counties in northern Lower Michigan. Once it completes the Northern Lakes audit, Northern Lakes will begin a search for a permanent CEO.

The next regular meeting of the Grand Traverse County board is scheduled for 9 a.m. Wednesday, Feb. 7, at the governmental center, 400 Boardman Avenue.

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