KALAMAZOO, MI — Developers can now apply for a 12-year tax abatement in an area south of downtown Kalamazoo.
Monday, the City Commission created a "neighborhood enterprise zone" in a two-block area south of City Hall. Developments in the zone are eligible to have their taxes halved for nine years and reduced by 10 percent, 5 percent and 2.5 percent for another three years.
The area is between South Park and Burdick streets and West Lovell and Cedar streets in the Vine neighborhood.
Two developments are already planned: A $24.2 million mixed-use office and apartment building and another mixed-use project at a former public safety training facility.
City leaders hope the abatement will encourage new affordable housing projects to alleviate a 3,000 to 5,000 unit shortage. Commissioners acknowledged that private developers need incentives and tax cuts to afford offering lower rents for low-income residents.
Mayor Bobby Hopewell said developers who buy public property are obligated to be conscious of the city’s affordable housing shortage.
"We need to not just fulfill the wants and needs of our developers, but we have to make sure they are connected to our community and understanding what we need," Hopewell said.
On May 17, the city’s Brownfield Redevelopment Authority agreed to sell 15 W. Lovell St. and 418 S. Rose St. for $1.1 million. In its place, The Hinman Company and AVB Inc. plans to build a $24.2 million mixed-use development.
The deal, which will be finalized by the City Commission on June 18, is contingent on approval of the enterprise zone. The city agreed to cooperate with developers in obtaining a 12-year tax abatement, according to a draft sale agreement.
A total of 135 apartment units are planned.
The sales agreement guarantees 14 units, 10 percent of the total, are affordable for people making 80 to 120 percent of the area median income. It’s based on workforce housing rates published by the Michigan State Housing Development Authority.
Commissioner Jack Urban said those rental rates aren’t low enough for people in need of affordable housing, generally defined as those making 30 percent of median family income for the area.
"I think it’s a good attempt to meet part of the need, but let’s not think it meets the whole need," Urban said. "We need other projects for lower income (people) that are safe and affordable."
Commissioner Shannon Sykes Nehring agreed. She expressed concern that future developments could cause gentrification and displace residents.
Greg Dobson, AVB’s chief operating officer, said the increase of units will decrease the price of housing around the downtown, unless demand increases. Studies performed by the city show a high demand for housing in downtown Kalamazoo.
Commercial tenants can occupy 8,400-square-feet on the corner of Lovell and Rose streets.
Sykes Nehring said developers should consider "culturally relevant" businesses in the ground-level commercial space to match the Vine neighborhood.
Dobson said the developers are trying to make the building match the neighborhood.
The neighborhood enterprise zone is used in places where little new construction is occurring and existing housing is in need of repair.
It was created by the state of Michigan in 1992. Once a zone is established, there are different types of applications available to property owners.
The first is for the rehabilitation of an existing owner-occupied structure and seven additional units. There are almost 40 of these already approved in the Vine neighborhood.
New owner-occupied facilities or new rental housing with a ground-floor commercial use are also eligible.
There are 11 current property owners in the proposed tax break zone.