Michigan Affordable Housing Projects Are Frozen – Here’s Why Construction Has Stopped

Written by:

Alejandra Rodriguez

Date:

29 Apr 2026

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After several years of steady progress, affordable housing development in Michigan has come to a near standstill. Projects that were moving forward just two years ago are now on indefinite hold, with developers unable to break ground due to financial constraints. For Michigan residents hoping for more affordable rental options or homes, a new supply may be years away.

Marilyn Chrumka, Vice President of Development at Michigan Community Capital, a nonprofit developer active statewide, sees the slowdown firsthand. Her organization typically starts one or two new projects each year, building apartments and homes aimed at middle-income families who earn too much to qualify for subsidized housing but cannot afford market-rate units. This year, the entire pipeline is stalled. “We don’t plan on having any groundbreaking this year,” Chrumka says.

The freeze is not due to a lack of demand or local support. Instead, it’s a financial problem that has only become more severe since the pandemic.

Construction Costs Outpace Rents

Construction costs in Michigan have surged about 50% since 2018. This increase is driven by more expensive materials, higher wages for skilled labor, and updated building codes that require pricier systems and safety features. At the same time, rents in many Michigan communities have not risen enough to cover these higher costs.

In smaller markets such as Grayling and other rural areas, affordable rents are capped by what local families can pay. A two-bedroom apartment might rent for $900 to $1,100 — amounts that reflect local incomes, not developer costs. Meanwhile, the cost of building that same unit has doubled over the past several years.

“People think our rental rates are very high, even though we’re pricing them for the county area median income,” Chrumka says. She points out that many residents are unaware of just how much construction costs have increased.

Because of this gap, developers like Michigan Community Capital must secure grants or subsidies to cover about half of a project’s cost. Typically, they finance 25% through loans and provide another 25% as equity. The remaining 50% must come from government programs or local incentives.

Currently, those funding sources are nearly depleted, leaving many projects unable to move forward.

How Projects Stall

The Saumlofts project in Grayling illustrates the challenge. This mixed-use development, which includes apartments and retail space, had strong community support and received all necessary local approvals and tax incentives. A groundbreaking ceremony was even held.

However, during the pandemic, construction costs rose by 30% in less than three months, forcing the project to pause for years. It only moved ahead after Michigan’s Revitalization and Placemaking program, funded by federal pandemic relief, provided $6.5 million. The Michigan State Housing Development Authority added another $3.5 million, bringing total subsidies to $10 million. Saumlofts finally broke ground in October 2024 and is set to open this spring.

“We were asking for more than we originally requested, but construction costs had gone up even more since then,” Chrumka says.

For smaller projects in more remote parts of Michigan, the situation is even tougher. Construction in northern Michigan often costs more due to transportation and labor challenges, while local rents remain low. This combination makes it especially difficult to close funding gaps without substantial government support.

Recent Policy Changes

Michigan has made some policy adjustments to help affordable housing projects, but these changes have not solved the core financial problem.

The state’s Brownfield tax increment financing program was recently expanded to include housing. Previously, developers had to combine several tax incentives to reduce property taxes. Now, affordable housing projects can qualify for a 30-year tax break, streamlining the process.

“It’s pointed us in the right direction, but it’s not enough to make up the difference we’re seeing between affordable rent rates and construction costs,” Chrumka says.

In addition, Michigan has allowed payment-in-lieu-of-taxes (PILOT) agreements for “missing middle” housing — homes and apartments for families earning up to 120% of the area median income. These measures help developers by lowering tax expenses and making it easier to secure loans. However, they do not provide direct funding, and the large gap between the cost of building and what people can afford to pay remains.

Looking Ahead

Without a significant increase in state or federal subsidies or a substantial drop in interest rates, Chrumka expects most affordable housing projects in Michigan to remain on hold through at least 2026. Communities seeking new affordable homes and apartments will likely face continued delays.

Families earning $50,000 to $70,000 a year are caught in the middle: their incomes are too high for subsidized housing but too low to afford the homes being built by the private market. This group, often called the “missing middle,” is left with few options.

Chrumka argues that without direct government investment, affordable housing will not get built at the scale needed. “Housing needs to become a public issue,” she says. “Affordable housing isn’t going to get done without direct government intervention.”

What This Means for Michigan

The current freeze in affordable housing construction highlights a growing disconnect between what it costs to build and what Michigan residents can pay. Policy tweaks and tax incentives have provided some relief, but the core math remains unchanged: without major public funding, most projects are financially impossible.

For Michigan communities, this means that the shortage of affordable homes and apartments is likely to persist. Unless state and federal leaders step in with new resources, the wait for affordable housing will continue — and the families caught in the middle will have fewer and fewer options.

About the Expert: Marilyn Chrumka is Vice President of Development at Michigan Community Capital, a nonprofit developer based in Michigan. Her team focuses on workforce housing and missing-middle housing — apartments and homes for families earning between 60% and 120% of the the area median income. Since 2018, the organization has developed more than 450 rental units and 36 for-sale homes across the state.

This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.