Durhal: Detroit’s PILOT ordinance is boosting affordable housing development

Detroit is at a pivotal moment in our history. After emerging from the largest municipal bankruptcy in the nation’s history, the city is building and growing again. Among many policy tools, Detroit is successfully attracting investments through tax incentives, which are an undeniable factor in re-energizing our city, drawing in new businesses and development that showcase Detroit’s potential.

When I speak with residents and community advocates, they tell me tax incentives and abatements are great. Their problem isn’t the “what,” but rather the “where” these developers choose to build. As one Detroiter said to me, reflecting the feeling of nearly every person I speak with: “It’s time to build in our neighborhoods.” 

They’re right.

Detroiters want a balanced approach to the future development of the city, one that includes investing in the people who call Detroit home, not just in large commercial ventures. And for many of them, the idea of development starts at home, with safe and secure housing in the neighborhoods they love.

Their concern is real. As the city continues to grow, the need for affordable housing is pressing. Around 39,000 Detroiters, or 13% of the city’s residents, spent more than half of their income on rent and mortgage in 2022. Meanwhile, home prices skyrocketed, from an average $37,000 in 2013 to $84,000 in 2023. And though Detroit has built nearly 5,000 affordable units in the past five years, that’s well short of the roughly 46,000 that the Detroit Justice Center estimates the city needs. 

To address this challenge, Mayor Mike Duggan and the City Council worked closely to build more than $1 billion in affordable housing. But the reality is that Detroit needs to invest an additional $1 billion to meet our residents’ demand for affordable housing. 

When we realized this need, we got right to work, brainstorming solutions and working collaboratively for almost three years. The result of this collaborative effort was the introduction of the PILOT Fast Track Ordinance, or “payment in lieu of taxes,” which is an agreement built on Michigan Public Act 239 of 2022 that allows developers to make reduced payments to the city in place of traditional property taxes. 

Instead of paying the standard tax rate, developers receive a lowered rate for a set period. This reduction creates a financial incentive to develop housing that’s affordable for residents. And with lower and more predictable costs, developers can focus on building housing that serves Detroit’s low- and middle-income families.

The PILOT ordinance passed unanimously in late 2024 and is already cranking up the development of affordable housing.

Before PILOT, Detroit had no way to incentivize the rapid building of housing units for middle class families. Back then, families had no relief and doing business in Detroit was just too hard. The city had no way to encourage and reward individuals to fix abandoned and vacant buildings in our neighborhoods.

Under PILOT, developers get extra credits if their project aims to turn these existing buildings and transform them into livable, affordable housing units. In that way, PILOT is paving the way for unprecedented investment in Detroit neighborhoods by encouraging and rewarding developers who build affordable housing where vacant and abandoned buildings once stood.

The Villages at Parkside is one landmark project under PILOT that will bring hundreds of quality homes to the city’s east side. Developers of this project, which breaks ground in fall, said PILOT played a fundamental role in making more housing possible and praised it as the best tool in the state for such projects. The entire city will soon benefit from the great promise of PILOT, which is already attracting smaller and minority developers to build in Detroit.

PILOT represents an innovative model for how Detroit can develop effective partnerships and cut red tape to accelerate the construction of homes that working and middle-class people can truly afford. Through PILOT, Detroit can address housing shortages, rein in rising rents, prevent displacement and reduce homelessness. Low- and middle-income Detroiters will enjoy greater housing stability and more financial flexibility to support local businesses, services and neighborhood programs. They can thrive in the communities they live in and help shape the future of their neighborhoods.

By promoting fairer growth and stability for all Detroiters, we can build the kind of city we all envision — where neighborhood revitalization brings new jobs, spurs local economic growth and strengthens the bonds within our communities.

Fred Durhal is a member of the Detroit City Council.