Muskegon, Michigan, amended its affordable housing agreement with developer West Urban Properties on Tuesday, Oct. 13, allowing both the city and the developer to collect tax increment financing on rental homes already built under the city's infill housing program.
The Muskegon City Commission voted during its regular meeting to terminate the original 2020 pilot development agreement and replace it with a structure city staff described as more sustainable and enforceable, according to mlive. The city will pay West Urban a settlement of $246,405 to cover several years of rental subsidy payments Muskegon owed under the old deal.
Why the city called the original deal unfavorable
The pilot agreement, first passed in November 2020, gave West Urban Properties the opportunity to build 100 rental units across several Muskegon neighborhoods. So far, 50 units have been constructed, with 48 retained by the developer and two sold to individual owners, a city memo shows.
City staff determined the agreement, as written, worked against both parties. The fix allows West Urban to capture financing through the Michigan State Housing Development Authority's Housing Tax Increment Financing Act, a tool that lets local governments and developers capture the increased property tax generated by new developments and use it to reimburse eligible costs. The amendment also preserves the revenue Muskegon's housing fund receives from the homes as of 2026.
Under the new arrangement, the tax increment financing is split between the city and West Urban for the existing rental properties, while the rest of the infill housing brownfield plan stays the same.
City Development Services Director Jake Eckholm told commissioners the vote is the first step in amending the brownfield plan to allow a better outcome for both parties to continue the infill housing.
What the settlement means for taxpayers
The $246,405 payment settles the city's obligations under the terminated agreement, but the new structure is designed to stop the bleeding going forward. Rather than continuing a subsidy model that staff judged unsustainable, Muskegon shifts the yet-to-be-built homes under the West Urban deal into a workforce housing Payment in Lieu of Taxes agreement, identical to deals the city already has with Allen Edwin Homes and several smaller builders.
Those agreements come with real affordability requirements. Built units will be reserved for households earning at or below 120% of Muskegon County's area median income, which equals $70,320 per year for a single-person household and $80,280 per year for a two-person household, according to MSHDA's May 2026 income and rent limits. The developer must charge rents consistent with tenants' income range for the duration of the 15-year PILOT term.
A program with a track record
Muskegon, the county seat of Muskegon County on the shores of