Most of us have had a conversation that inevitably features the sentence “well its really a supply issue” when talking about the housing market. These conversations typically end in frustration as the only real agreement is that buyers are being squeezed out of the market by soaring prices. Many factors have contributed to the lack of affordable housing, but one that is unique to Michigan is our property taxes. The burden created by Proposition A of 1994 and the Headley Amendment have created a crunch for much of the middle class.

Older residents have been increasingly affected by the un-capping system involved with Michigan’s property tax system. Take empty nesters for example who are on a fixed income, they plan to use the sale to finance a cash offer on a house and not worry about a mortgage. They find a home to purchase in the current market, however the property tax rate they will pay may negate the benefits that they would see from downsizing. This situation “traps” them in their current home and makes downsizing undesirable.

By choking the economics of downsizing, the Michigan property tax system has further reduced the available supply of housing. This will cause many first-time homebuyers to not be able to find housing that fits their needs, as well as their families.

Many would propose some form of tax abatement as an incentive for seniors to sell their homes and downsize. This is most likely to be a short-term solution to a long-term problem. It is time that we start looking at ways to reform our tax system entirely, to reduce the cost of housing, and stabilize it for the future. Since Proposition A in 1994, the American economy has radically changed. It is time our tax system in Michigan accounts for that. The cost of housing is going to rise, that is a fact. Michigan should take steps to ensure that its property tax structure does not continue to be an “inflation double-whammy.”