Discuss Detroit Archives - January 2008 Tax incentives in Detroit Previous Next
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Goat
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Username: Goat

Post Number: 10092
Registered: 10-2003
Posted on Wednesday, February 06, 2008 - 11:24 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I am trying to figure out the various tax incentives for houses in Detroit. Whether they be new homes built in up and coming areas (such as seen in Brush Park in former years) or tax incentives for rehabing/restoring existing homes.

What I am trying to do is compare them with other cities. I have tried to search them on theis site but the topics are all of the place and it is difficult to figure out what each incentive does or does not do.
As for the Detroit website...not very easy to navigate at all.
I know a few people on here (NDavies, RSA and Histeric) are very knowledgable about these incentives so I hope they could help out.

Thanks.
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Swingline
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Username: Swingline

Post Number: 1012
Registered: 11-2003
Posted on Wednesday, February 06, 2008 - 12:48 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Goat, almost all new construction in Detroit (single family, condo and loft condo) has NEZ designation that provides for a 12 year property tax reduction from the date the premises is first occupied after construction. The tax reduction is quite large, usually approaching 70%.

In addition to NEZ properties, many stable, more (relatively) expensive neighborhoods in the city have been granted a "quasi-NEZ" designation which has provided 20-30% reduction in property taxes for homes bought since since 2001 (I think its 2001). In any event this reduction would apply to any future purchase.

Finally, there is a historic rehabilitation tax credit available for certain rehabilitation work completed on homes located in neighborhoods designated as local historic districts (e.g., Indian Village, Boston Edison, Woodbridge, Corktown, etc). It's a 25% credit that you can use to reduce your state income tax bill. All of these programs are very useful and valuable. Hope this helps.
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Ndavies
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Username: Ndavies

Post Number: 2938
Registered: 10-2003
Posted on Wednesday, February 06, 2008 - 2:28 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

All incentives come from the state or federal levels. Try looking at their websites.

NEZs can be used for both new construction and extensive rehabs of structures. Properties must be in an NEZ to be eligible for the NEZ property tax credit. The smallest NEZ you can apply for is 10 contiguous lots. The State limits the amount of active NEZs in place citywide.

http://www.michigan.gov/docume nts/2704_packet_113571_7.pdf

There are brownfield credits available for either environmental site issues or if the site will be used for a different purpose than originally built for.
http://www.michigan.org/medc/c ommon/book/main.asp?BookId=4&B ookName=Community+Guide&ChapNa me=Brownfield+Redevelopment+Au thority+%28Brownfield%29&ChapI d=71&m=12;4

State historic tax credits
http://www.michigan.gov/hal/0, 1607,7-160-18833_18873-54166-- ,00.html

There are Federal historic tax credits available for commercial properties. This is why some projects start out as rentals and then are sold later. The state tax credit is discounted depending on the amount received from the feds.

A facade easement tax credit is available from the National park service. This is only available to historically significant buildings. You deed an easement to the facade of your building to the national park service. They give you a credit for the profit you would make if you tore down the existing facade and built something else there. All future changes to the facade would then need to be cleared by the the National Park service.

There are a handful of state renaissance zones. To be eligible your property must be in one of them. This exempts you from all state and local taxes for the life of the zone. I don't know how much life this program has left.

All of the programs are really designed to help professional developers not individual homeowners.

The only two that help an individual home owner are making sure the home you buy is in a NEZ or it's a historic home in a historic district.

The NEZ, Brownfield and state historic credits are michigan things. Available in all cities throughout the state.

The federal tax credit and facade easement are available nationwide.

While some of the state credits were designed with Detroit in mind they are not exclusive to the city.
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Novine
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Username: Novine

Post Number: 423
Registered: 07-2007
Posted on Wednesday, February 06, 2008 - 4:30 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Good overview of some of the state programs:

http://crcmich.org/TaxOutline/ Property/property.html
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Supersport
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Username: Supersport

Post Number: 11751
Registered: 10-2003
Posted on Wednesday, February 06, 2008 - 7:11 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

quote:

The tax reduction is quite large, usually approaching 70%.



I had heard of new condos getting around 50%, but never as high as 70%, can anybody verify this? I received my NEZ approval letter from the state a week or two ago. When applying I believe the guideline stated 18-33% tax reduction, up to 15 years. Whatever the reduction amounts to, any tax savings will be nice.
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Mackcreative
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Username: Mackcreative

Post Number: 188
Registered: 08-2006
Posted on Wednesday, February 06, 2008 - 7:39 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

70% surprises me too. We were just approved (not new construction though) and very happy with 30% for 15 years.
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Goat
Member
Username: Goat

Post Number: 10097
Registered: 10-2003
Posted on Thursday, February 07, 2008 - 12:13 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Do other cities in The U.S. have incentives at a municipal level or is it illegal? I would have thought if incentives were available Detroit would offering some.

Thanks again everyone for supplying me with such answers.
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Swingline
Member
Username: Swingline

Post Number: 1016
Registered: 11-2003
Posted on Thursday, February 07, 2008 - 12:29 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Not an NEZ expert here, but what is known is that there are different levels of NEZ property tax exemptions. The largest exemptions are for the new construction or substantial rehabilitation projects that are originally applied for by a builder or developer. Victoria Park, the early 90's neighborhood on the east side, was one of the first neighborhoods in Detroit to receive NEZ status. For the last 15 years or so, those folks living in newly built $150K houses have only been paying about $1500 in property taxes. But that neighborhood is old enough now that the exemptions are expiring. Recent projects like the Woodward Place condos and Canfield Lofts also received this kind of NEZ.

Another NEZ category is a new one that is being applied to all properties located in certain designated neighborhoods that have been purchased after a certain date. Not sure what that date is. It might be 1999 or 2001. Anybody know? 2008 is the first year that most of these properties are getting the exemption. In any event, this new category provides a much smaller exemption to eligible homeowners and they don't have to have invested any rehabilitation dollars or anything like that. It seems like SS's and Mack's abodes are located in the second category of NEZ's.
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Cjdb16
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Username: Cjdb16

Post Number: 176
Registered: 11-2003
Posted on Thursday, February 07, 2008 - 12:52 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

I have a property in one of the new NEZ neighborhoods (Woodbridge) and got a certificate letter recently. How do I find out how much my reduction is - I have heard between 18-33% but don't know what my new rate will be. Is there a way to find out?
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Detroitplanner
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Username: Detroitplanner

Post Number: 1537
Registered: 04-2006
Posted on Thursday, February 07, 2008 - 1:35 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

I would have rather seen the City continue to drop its income tax, or put in place an across the board property tax reduction. This system sets up winners and losers. I literally live 1.5 blocks from an area where those owners get a break, but I do not. The neighborhood characteristics are nearly identicle.

A dropping of the property tax or income tax would make the City more competitive with its neighbors.
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Ndavies
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Username: Ndavies

Post Number: 2941
Registered: 10-2003
Posted on Thursday, February 07, 2008 - 2:17 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

The formulas used to calculate the NEZs cause the differences in the savings. There are three formulas. 1 for homesteads(like sport's and Mack's), 1 for new construction owner occupied and 1 for rehabilitated properties.

The NEZ only applies to the structure on the land. You always pay the full taxes on the property. The biggest savings come when the land is worth a smaller percentage of the total properties value.

The biggest savings come from rehabilitated properties. On a rehab you only pay taxes on the pre improved structure and land value. If the taxes on a burned out building was only 500 a year, that's all you'll pay after turning it into a multimillion dollar house. This would be the kind of savings you would see on projects like the overland and canfield lofts.

New construction is taxed at 1/2 the average mill rate for the entire state. This could lead to a 70% discount, Since Detroit's mill rate is higher than the average of the rest of the state's.

I also agree that property and income taxes in the city should just be cut. I also understand that the city cannot go cold turkey and just cut the taxes. It would punch a pretty big hole in the city budget.

The mill and income tax rates have been slowly dropping since I moved into the city. The NEZ program was originally seen as a way to jump start development in certain neighborhoods before the tax rate could be brought back in line with our neighboring communities.

The new NEZ expansion into already developed neighborhoods was seen as a way to limit the effect of the property pop-up tax penalty. Most of the neighborhoods identified were areas that had seen large jumps in property values. Home values were being limited in these neighborhoods due to the huge tax jumps that occurred when the properties were sold. This is why it is limited to houses purchased after 1996.
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Magnasco
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Username: Magnasco

Post Number: 234
Registered: 10-2003
Posted on Sunday, February 10, 2008 - 9:36 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Actually NDavies I think an across the board property tax cut could actually increase the overall tax base because the resulting sales would uncap a LOT of properties.

I made this argument to those in Fiscal for the city as they were doing research for getting the Neighborhood NEZ's started. They didn't like it because it seemed to promote the idea that they wanted to get rid of the current residents. But with something around 70-80% of the housing in the city valued at 20 K or under for tax purposes, they need to uncap these properties, and sales would do it.

That argument carried a little more weight before the collapse of the housing market, but I still think it is one of the only ways to try to spur enough interest in the thousands of houses in the city. Especially since many of those houses are at a pivotal point where they need to be taken care of right now or they will perish.

I cut out some of this discussion and put it under the tax appeal thread where it belonged.

(Message edited by Magnasco on February 10, 2008)
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Lefty2
Member
Username: Lefty2

Post Number: 1115
Registered: 07-2007
Posted on Sunday, February 10, 2008 - 12:06 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

^ Agree.
NEZ's are really a false sense of reality. When you temporarily subsidize a small group what it does is just transplant people from one area to another, (with some exceptions) and now there are vacancies in other areas of Detroit.
If Detroit would have the common knowledge sense of lowering taxes across the board, cracking down hard on violent crime and stop rewarding mediocrity, then people may come back outside the core city.

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