Traverse City approves 35-year tax deal for workforce housing units

Traverse City chose a 35-year tax break for just 16 apartments on East Eighth Street, betting that a small downtown workforce-housing project is worth preserving for decades rather than letting those units drift to market-rate rents.

The city approved a payment-in-lieu-of-taxes agreement for the third and fourth floors of the East Eighth development owned by Nest Community Partners. Under the deal, the property will be taxed at a 4 percent rate over 35 years, with the apartments reserved as affordable housing for people who work in Traverse City. Kate Redman, the executive director of Nest Community Partners, said the arrangement helps keep the units affordable instead of allowing them to become more expensive later.

City staff framed the decision as part of a broader effort to make sure teachers, health care workers, service workers and other employees can live in the same community where they work. That goal has become harder in Grand Traverse County as housing costs climb and employers struggle to recruit and keep staff who want to stay close to downtown, schools and medical offices. The practical result here is limited but concrete: 16 apartments in a central location will remain tied to affordability rules, adding a small but durable piece to the local housing stock.

The city has been leaning on several tools at once. Its housing strategy includes planning and zoning changes, greater density, smaller units, PILOT programs and identifying city-owned land for affordable housing. Traverse City says Michigan legislation passed in December 2022 gave local governments discretion to enter workforce-housing PILOT agreements without relying on state or federal tax credits, and the city adopted its own policy in October 2023.

Other recent projects show how the policy is being used. Ruth Park at 520 Wellington Street received a 6 percent PILOT for 16 years and was completed in December 2023. Annika Place at 947 South Garfield Avenue and Annika Place II at 1020 Hastings Street each received 6 percent PILOTs for 16 years, with dozens of units targeted to households earning 70 percent to 80 percent of area median income. Parkview Senior Apartments at 1223 East Eighth Street also received a 6 percent PILOT for 45 years.

East Eighth Street is emerging as a housing corridor of its own. A February 7, 2025 memo said the Traverse City Housing Commission was assembling property for a separate workforce-housing proposal at 314 E. Eighth Street, the former Copy Central parcel, with plans for roughly 40 to 50 units on about .8 to 1 acre. That makes the 16-unit Nest project less a stand-alone exception than another piece in a longer downtown push, though one whose scale remains modest beside the city’s larger affordability gap.