Well, Michigan is changing.

Not just in the headlines, but in the rules and system shaping daily life.

I'm Sheri Jones, and this is Impact Michigan from WKAR.

In this series, we examine the force driving things like our economy, our schools, our democracy, and our mental health and what they mean for th people who call this state home.

Tonight we begin with the economy, with the question man Michiganders are quietly asking, why does buying a home feel impossible even when you're doing everything right?

Well, most people blame the market.

But in Michigan, the answer may lie deeper in the policies and incentives that shape who moves, who stays, and who gets left out.

Joining me in studio is Eric Lupher, president of the Citizens Research Council of Michigan.

Thank you so much for being here.

My pleasure.

Dan Gilmartin, CEO and Executive Director of the Michigan Municipal League.

Dan, thank you for joining us.

Thank you.

And Amy Hovey, CE and Executive Director of MSHDA Happy to be here.

This is going to be a great conversation.

Happy to have you as well.

Well we're going to start with one Michigan story and we're going to examine what's underneath it.

So let's begin.

I reall did think that we would be able to afford something bigger in a neighborhood we both wanted to live in and have our children raised in, but because of the way the economy is going, that feels like a further reach than what seems attainable right now.

I bought this house in 2019 and I was 25 years old.

My parents have always talked to me about finances.

They helped me build my credit score when I was in high school, so they helped prepare me to be able to buy my first home, and they helped me find the first time homebuyer program through the State of Michigan, where they were offering up to $10,000 towards your down payment.

Owning a home at 25 told m that this was my starting point.

So now that I am 32, I think of this home as this was my starter home.

I initially bought it before I met my fiancé and now we're thinking about having kids.

So to me, a bigger home makes more sense, but financially it doesn't.

When my fiancé Kyle moved into the house, one he was surprised that I owned the house.

When I met him, he was renting in an apartment that technically was about the same square footage as my home.

So for me, it was like, oh, we should probably get more space if we ever decide to start a family.

When I bought my home, I was making about $50,000.

Now that me and my fiance Kyle lived together, our combined household income is $120,000.

My current property tax is about $3,000 a year.

I escrow my property tax and my homeowner's insurance into my monthly mortgage payment, which is about $810 a month.

We did have the opportunity a couple of years ago to buy one of our friends homes in a neighborhood we both loved, but it was about $350,000.

And when we sat down and looked at the numbers, it was going to be really tight.

So we decided if we buy thi house, we would be house poor.

I know that if I move my propert taxes, my homeowner's insurance, my utilities, everything would be at least double than what I pay now.

And that is heartbreaking for me because it makes it feel buying a home even more unattainable.

Even though I already own a home.

When I bought this house, I bought it for $87,000.

Currently, the Zillow listing is at $162,000, so for it to have it to skyrocket that high is mind blowing.

But it also says, if this is now the value of my home, the house that I thought we could afford are now out of reach because they now probably have doubled in price, in my opinion.

My dream home would be modest to most people.

It's in East Lansing.

It's four bedroom, two bath.

I would love to have a pantry, an actual built in pantry, but nothing extravagant.

Initially, I pictured being in this house for five years just to meet the terms of the first time homebuyer program, and I figured at that point I would have a fiancé, which I do.

I'd be ready to start a family.

And then our next home would be something that we raise our kids and we grow old in, but now it feels more like we're goin to have to start our family here and then eventually wait for the market to change, to then find lik what would be our forever home.

This is my living room, bathroom, bedroom.

This house feels like a two bedroom house.

It does not feel like it's three bedrooms.

This is my kitchen.

But one thing I didn't like about this kitchen is it didn't have a pantry.

So we bought pantries.

I can touch the soffit.

Definitely the ceiling fan.

I can go across and touch any counter in the kitchen.

This person.

If this was a bedroom, they'd have no privacy, no space.

Because to get to the master, you have to walk through this room.

I do feel stuck.

I strive for more.

I want to offer my kids more.

And this house just doesn't feel like that.

We feel stuck.

Even though my fiancé and were middle class and we know we're middle class.

We reached th goal posts and it's like, nope.

Actually, we've moved it way further ahea and you still can't attain it.

I really did think that we would be able to afford something bigger, nicer in a neighborhood we both wanted to live in and have our children raised in.

But because of the way the economy is going, that feels like a further reach than what seems attainable right now.

We don't feel like we can afford those things anymore.

And we definitel want to thank Cheyenne for her story letting us come into her home.

And and I believe that her story is on many homeowners can relate to.

So, Eric, let's start with you.

Tell us a little bit about what what changes when someone buys a home with their property taxes.

Yeah.

So Michigan was dealin with the problem many years ago that taxes would change in an unpredictable way.

And and they were going up.

And so we put a couple of tax limitations in place.

And the most significant one we're talking about today was something that was put in place with the School Finance Reforms of 1994.

And so when you buy a house, your growth of the tax base is limited to the rate of inflation or capped at 5%.

But when you sell it, then the new buyer gets, abou half of the value of the house that it's applied to.

So that's called a pop up.

And, and it creates an issue, for a lot of people.

So it's kind of, you know, you can see both sides of it.

On the one hand, we agreed many years ago that we would set the tax base at about half of the property value, and in any new buyer they're coming into that.

So we're playing by the rules.

We, we agreed to many years ago.

But there's been, as she said, just huge appreciation of property.

And now somebody come in from a house that a starter house and trying to get into, a forever home, can be very expensive in the taxes on that very expensive.

Michigan's a very high tax state.

Are we unique in that in Michigan compared to the rest of the country?

Well, we're not the highest, but, you know, misery doesn't love company in this.

In these cases, it's a disincentive, to be in Michigan.

It's a disincentive t bring your business to Michigan.

We really need some tax reform to try to address that.

If we want to bring businesses and people in.

It just the fact that Illinois has high taxes or Connecticut.

I don't care, I live here I want to be able to afford my home here.

Right.

We're comparing it to Florida, State of Florida.

How things are different there.

Yeah.

I mean, so 50 different states, 50 different tax structures.

Florida doesn't have an income tax.

So, yeah, it's a whole lot different.

Or you can go to some states don't have a sales tax.

Every state has a property tax.

But if you provide those, different taxing authorities to the local governments, then they have we call it like the three legged stool.

Right.

You're able to balance the budget and you're not putting all the pressur on the property tax in Michigan.

It's the property tax.

Yes.

You have 24 cities have an income tax, but 1800, 700, so 1700 and 75 other governments they're living living on the property tax.

Right.

And it's the uncapping of those And when you buy that house it make it a little difficult for some people.

Right.

But it's the rules we agree to.

It's the it's the uncapping.

It's an issue.

But I think it's a fixable issue.

Okay, Amy, let's talk to you.

One of the questions that people are interested, especially as you heard in Cheyenne, she was a first time homebuyer.

She fulfilled her obligation.

How are taxes rolled into that for an incentive for someone that wants to buy a house for the first time?

Yeah.

I mean, we certainly as you're coming through our first time homebuyer program, which does come with down payment assistance to help families be able to afford to purchase their first home, purchase counseling.

We look out in time, you know, when they're going through that pre-purchase counseling, we look at what their property taxes will be and that gets wrapped up in what they can afford overall.

We do try to warn them about the situation that Eric mentions.

So sometimes when they're looking at a Zillow listing, it will have in there what the people currently pay in taxes, which isn't what they're going to pay in taxes, very likely.

So part of that homeowner education is making sure they are aware of what their ta liability, liabilities will be.

It's factored in so that it can be affordable.

But Cheyenne story is common.

And we hear often about people who feel stuck in their homes because of, the cost of getting in a new home, whether it is the property taxes or the increased interest rate, they might have bought their home with a very low interest rate during those times, where we enjoyed, you know, interest rates as low as 3%.

Well, a difference of 3% and 6% is a big impact on your monthly, housing payment.

Absolutely.

And we talked a little bit about that.

And Dan, we look at neighborhoods depending on when you buy your home, right.

Someone might be payin higher property taxes than you.

Is that fair when you look around your neighborhood?

Because most homes are pretty much the same in a in a neighborhood.

As far as their value?

Yeah there's certainly we've created a bit of a monster here in the state.

And we talked about, Eric, talked about, the proposal.

And it's also heavily amendment for the 1970s.

And when those two things interact they really sort of bastardized the entire system and make it, incongruent from one place to another.

And the other thin I think is important from a tax standpoint is to understand that we are completely overrelian on property tax in this state.

It made sense probably in Michigan in 1950.

It doesn't make sense in 2026.

And so there's been a lot of talk about, trying to take some heat off the property tax and look at other, other areas where we can get revenue for public services and for schools and whatnot.

But there hasn't been a political will at this point in time to do that.

So, you know, it's an obvious outcome of only giving, local units and school districts, one sort of real opportunity to raise money.

And that's where you sort of get squeezed out on that.

So it's really, it's a bigger issue.

We focus right on the property tax number.

And when we look at a house, for example, but it's really the entire structure that we've got to figure out, I think in Michigan is going to be more competitive.

And don't you feel.

Like we got to look at both ends of it?

I mean, we put that in place to help people be able to continue to afford their home.

So they would have a stable housing payment for as long as they lived in that home.

But at the same time, if we never uncap it, local governments don't have the funding they need to operate.

Well.

It's also, you know, part of the issue.

Why have we had this huge appreciation?

We don't have the housing stock, so we put them in place to try to avoid taxing people out of their houses.

Now I feel like we'r taxing people into their houses.

Yes, I agree.

In an ideal situation Cheyenne would be able to move on to the next house and somebody starting their family would have a starter house to move into.

But now she's feel stuck and those young families are looking around.

Maybe they can find an apartment.

Maybe they're living with mom and dad making everybody uncomfortable.

So it just creates a difficult situation I look back and the thought was give the people in the house a break.

Yeah.

Right.

And now we kind of look at it give the new people a penalty.

Right.

It was really meant to be one thing.

But the way the world has gone from a financial standpoint, that's where we're at.

So, again, it needs retooling at a whole bunch of different layers and levels.

And that's why Cheyenne said I'm doing everything right, but I feel like I'm penalize for doing everything right, now I can't make that next step.

And you find younger people that are wanting to do tha first home, but they look around and there's jus the inventory is not not there.

Right, Amy?

Correct.

We're about 119,000 units shor of the amount of housing units we need in our state.

And it is hard for folks to move.

There's lots of reasons that were in the situation we are now.

The market itself isn' working, so we can't just have developers come in and develop more units and more housing because most folks can't afford to purchase the cost of developing new.

Our research shows us that the average Michigan family can afford about $175,000 for the cost of a home.

But as Chyenne was saying, the home she wants to buy is over 300,000.

And we're seeing that for our average sale price.

I mean, it costs almost 400,000 to develop a new home these days, right?

That that's a big ga between what it costs to develop and what our average family can afford.

And so we need lots of tools to help address that.

Eric, what i your feeling about this, about, having the situation with the housing crisis and the shortage of housing for young people that really want to get into a home?

Yeah.

You know, the crazy part is, we have this housing shortage, and we're just not growing as a state.

Could you imagine if we were successful and people were flocking to be here, how muc that housing shortage would be?

It's a number of things that contribute to it.

You think back to 20, 25 years ago, and we just weren't growing th the billboards on the highway, last one out of Michigan, turn out the lights.

So developer were some of the first to flee in that looking for opportunities to build elsewhere.

And we just built such a glut, such a shortage of housing there.

And Amy and her coworkers have been racing this to catch up with that.

But it's hard.

And the economics of it, the cost of lumber, the cost of skilled trades everything just stacks up to it.

The market isn't working to serve our needs.

And so that's the why we talk about the nee for government interventions and and different types of programs to solve those problems.

Dan, your reaction to that?

Oh, it's all true.

And there's one more thing I think I'd add to that and that of the fact is that there are really two markets, the high end markets doing quite well.

And that's the really sort of the the odd thing at this point in time, it used to be sort of in economic times all boats rows all boats, some, whatever that, whatever it is I dont want to get too dark.

Right.

Now it's a little bit different.

And so you see a lot of the higher end stuff just rolling right along.

And you know, without Am and her leadership over MSHDA, you'd see very little being done at that affordable level.

Those first time home buyers that missing middle, if you will.

Peopl working on on moderate income.

So we've got to figure out ways to continue to continue to incentivize that and continue to incentivize builders to do it, because, as Eric said, too, there we have we have a, a need for for more builders.

We have a need for more developers, more carpenters, you name it.

And, and so we've got to make sure that they're working in all the markets, because it's a bit of an opportunity cost, too.

If they're all at one of the market, it makes it harder to get to the other one.

Abou five years ago, we sold our home that we raised our children in, and it was perfect time.

We made a very nice, profit from doing that.

But then we turned around and said, okay, where are we going now?

Right.

And so because we wanted to downsize and the people that bough our home, of course, you know, taxes were, property tax uncapped and now their home, probably, I think that's what we sold fo like for $465,000, now $700,000.

And so you and I think if I remember Cheyenne, she said she bought hers for $87,000 and 7 years ago.

And now it's $162,000.

So, you have the value, you have the interest rate, you have the property taxes, and the if you do go into a bigger home, you have the utilitie and the homeowner's insurance.

And so she said, you know, in her story that we heard, there's a goal line, I met the goal line, but then all of a sudden I got ther and they moved it further down.

What's your reaction to that?

You know it's kind of a crazy situation.

In normal circumstances, we'd be applauding that.

Right?

I mean, our, our properties are valuing probably the biggest investment for most of us in our lifetime is appreciating, we're going to, feel the benefits out of that at some point, but intended, instead, it's turned into a detriment to us as we try to create vibrant communities.

So, you know, we it is a bit of moving the goal line.

It's strange how we look at it as a bad thing in this circumstance.

I think that's a great point.

We often tout home ownership for a few reasons.

One, it's housing stability.

Yes.

Right.

Predictable housing costs going forward, but also it's a way for families to build wealth.

In fact, it's a number on way for most families to build wealth is the equity in that home.

So Eric is right.

We should be excite that she's got that much equity in such a short time period.

And we are, except for we don't we haven't had, income grow at the same pace to be able to allow for that equity to be super meaningful.

And her next step.

And so I think there's lots o different ways to approach that.

One is, you know, contributing to bringing down the cost of housing.

But nobody wants their own property values to decrease.

No.

Right.

And so we've got to look at ways in which we're helping people to get into home without impacting people's wealt and then also working o increasing incomes in our state, which has remained fairly flat within relation to the cost of housing.

Right.

And so there's there's more than one impact there.

Dan.

The cost is there' been a lot of things that have happened in recent year to really drive that, that cost.

And we talked about labor and lumber and, and everythin there sort of some of the fixed asset or fixed costs that have just skyrocketed themselves, which is the real reason.

Large part of the reason why we're why, these these houses are costing so much money.

The other things are is that, you know, we sort of change the system, which we work in.

I mean, I agree with you.

It was like, I think 50% of Americans have, have all their What was it?

Over 50% of, people's, net worths are tied up in real estate in America, right.

It's their house.

Yeah.

And and you run into real issues, when you sort of view that only as a, investment tool, if you will, as opposed to somewhere you live.

It used to be, Id live in my house and I get some long term security, but now your mortgages you have get sold off, they get securitized, they get bundled, they get sold out on Wall Street.

And there's this whole sort o commercialization around this.

And you see investment firms coming in and buying up whole swaths of houses and everything.

So it's a different market.

We find ourselves in now that' influenced by different things, and it has all sort of worke to drive costs through the roof.

And that's that's different than the three of u bidding on your house in 1950, and one of us is going to get it, and the other two are going to go down the street somewhere else.

Now, you've got all these other issues in the market that are driving the cost up, and it's no fair to people like Cheyenne Eric.

So this ca have a really detrimental effect on communities if we can' really get people into housing and we cant, let's talk a little bit about that.

How do we rectify that?

Well, the bottom line is Michigan, because we're not growing, is becoming a very old state.

The median age is, getting up there.

And you look at many of our older communities, the suburbs around Michigan, around Detroit, many parts of northern Michigan, just very high median age.

And, the fact that people are not able to move out the idea that you might downside and end up paying more property taxes than you were in your bigger house, we're keeping people there.

So we're not bringing young people in.

That's affects the school system and affects the need for parks.

Just the turning over of properties to have vibrant communities is hampered by where the situation we're in.

It, I am across the state in my job and I meet with employers everywhere, and they're having a hard time attracting employees to their job openings because there are not places for those folks to live.

So we're seeing businesses that aren't able to grow and which directly impacts the economy.

Our school systems are small mom and pop, you know, restaurants and service industry.

They are, We need to make sure we have housing, that people can afford that matches the incomes in our state.

It is foundational to meeting all of our state goals, whether it is increasing the economy, improving literacy rates in our state, mental health, you were talking about the focus on mental health.

You know, we know that having a house is one of those basic needs that impacts all those things, including crime.

I mean, it needs to be a focus.

We have some great tools.

We've come a long way.

So, you know, it's not like we're sitting still and just talking about the issue.

We really are working hard at impacting and making a difference.

We need more tools.

We, need more people at the table to help us address the issue in our state.

And that's what you were saying, Dan?

Yeah, absolutely.

I mean, we know all our research tells us you've got to be a place that attracts people.

It's not 1950 again.

It's today.

And people can go anywhere.

Industries move around.

People, talented people move around, workers move around.

So if we're going to have places that people want to be in, we'v got a real shot in this economy.

But if we don't hav those opportunities for people, we're going to continue to lag.

And that's wher we've all got to come together.

And the best communities out there anywhere in the world are places you can live in.

When you're a young person, you can raise a family in, you can retire in, and we need to have housing that matches all three of those areas at different income levels.

If we do that, we got a real chance in this economy because of all the great bones here in Michigan.

But we've got to do a better job with the housing.

Yes, Michigan is a great place to live, so I appreciate you very much, Eric and Amy and Dan, thank you for your expertise.

And we all know that you'r working together, collaborating, and really working to help Michigan families and getting into their homes.

So keep up the great work.

Thank you All right.

Thank you very much.

Well, if tonight makes one thing clear, it is this.

This isn't only a story about rising prices.

It's about decisions that were made years ago and how they still shap who gets to move forward today.

When we examine those choices, we see their impact extends far beyond a single home.

And that's what Impact Michiga is here to do.

To look deeper, to bring clarity, and to understand what's shaping Michigan's future.

I'm Sheri Jones, and thank you for joining u for the first episode of Impact Michigan from WKAR.

We'll see you next time.