Detroit’s New Housing Proposals: What Michigan Landlords Need to Know
The landscape of Detroit’s housing market is set to undergo significant changes with the recent approval of two major housing proposals.
The Detroit City Council recently approved revisions to the city’s rental property regulations with a decisive 7-1 vote. These changes aim to tighten the reins on landlords known for recurring infractions, refresh the escrow program that lets tenants withhold rent if their living conditions are unsafe, and refine the requirements for lead inspections.
These initiatives, aimed at enhancing affordable housing and streamlining rental property management, pose new opportunities and challenges for landlords in the city.
Let’s break down the key elements of these proposals and talk about what landlords need to do to navigate this evolving regulatory environment.
Fast Track PILOT Program: Accelerating Affordable Housing
The Fast Track PILOT (Payment in Lieu of Taxes) program represents a concerted effort by Detroit officials to boost affordable housing development. By offering property tax cuts to developers based on the affordability of rent prices, the program seeks to incentivize the creation of housing units that remain accessible to low and moderate-income residents.
Under this initiative, developers can qualify for tax reductions that correlate with their commitment to maintaining affordable rents for households earning up to 120% of the area’s median income (AMI).
For instance, a developer offering a one-bedroom unit at a rent affordable to those making below 60% AMI could see their annual property taxes reduced significantly.
For landlords, this program could mean greater participation in affordable housing development with reduced financial burdens. However, you must adhere to compliance requirements, including maintaining affordable rent levels and passing annual reviews, to be eligible.
Revamping Detroit’s Rental Ordinance: New Escrow Requirements for Tenants
Escrow is a leverage mechanism for tenants to ensure landlords meet essential health and safety standards.
When a property is without a compliance certificate or has safety concerns, tenants can opt to deposit their rent into an escrow account rather than paying their landlord directly, without the fear of eviction.
Should the landlord bring the property up to standard, the escrow funds are released to them. If not, the funds are returned to the tenant.
However, only about 20 tenants per year successfully utilize Detroit’s current Escrow Program, with 90% of applicants deemed ineligible.
The program’s requirements previously included:
- Living in a single-family home or duplex
- Having a lease that’s not expiring within 90 days and isn’t month-to-month
- Proof of the last three months’ rental payments
- Possession of an ID and a utility bill in the tenant’s name for the property
- No ongoing legal actions concerning the property, such as eviction cases
But many renters, who may lack identification, formal leases, or documented proof of rent payment, weren’t able to avail of the program.
So the new amendments aim to overhaul Detroit’s Escrow Program, significantly lowering these barriers to increase accessibility for residents.
The changes suggest allowing more flexibility regarding the type of residence, lease documentation, and ID requirements.
Additionally, the proposal includes shifting the program’s management from the city’s BSEED to the Housing and Revitalization Department (HRD). Through HRD’s Housing Services Division, each participant in the Escrow Program would receive a dedicated case worker to guide them towards a successful resolution.
Increased Penalties for Blight Tickets
Over the past five years, Detroit has issued around 100,000 blight tickets, yet the city has struggled to enforce payment, managing to collect less than 20% of the fines, as reported by the Center for Community Progress in March.
In response, the new ordinance proposes higher fines and additional penalties to strengthen enforcement.
For instance, the fine for not securing a certificate of compliance will jump from $250 to $400 for a first offense, $500 to $650 for a second offense, and from $1,000 to $1,150 for subsequent violations.
A significant addition to the ordinance is the power to place a lien on properties for unpaid fees if landlords remain non-compliant, a measure designed to enhance the effectiveness of the ticketing process.
New Property Inspection System: “One Inspection, One Fee” Plan
Under the old system, landlords had to have two inspections – one for lead safety, and one for the home’s general condition.
The new system will combine this into a single system, ostensibly making it easier for landlords to comply.
Here’s an overview of the differences:
BSEED Director Dave Bell said of the changes:
“Detroit landlords have been telling us the current approach is too exhaustive. We know the result is that few are taking steps to be compliant… These proposed changes will make it easier for landlords to go through the process, and our inspectors will not cut corners when it comes to residents’ health and safety.”
Whether or not that’s how it will work in implementation remains to be seen.
Impact on Landlords and Property Management
These changes mark a serious shift in landlord-tenant dynamics in Detroit.
We could easily see an environment where tenant disputes end up in serious penalties for the landlord, or even a lien being placed on their investment property.
Furthermore, compliance with the revamped rental ordinance may require landlords to invest in property upgrades and rigorous maintenance.
Finally, the introduction of an escrow program for tenants, allowing them to withhold rent payments if their homes fail to meet safety standards, adds another layer of complexity for landlords.
In light of these new regulations, we can’t emphasize enough how important screening is. Even if the city doesn’t uphold stringent ID and address verification requirements for the Detroit Escrow Program, you as a landlord still can.
Stay updated on Detroit’s housing policies and their implications for landlords.
Subscribe to our newsletter for expert insights and guidance on navigating the evolving real estate market in Michigan.