Workforce Housing PILOT for Rental Projects
The Workforce Housing PILOT is for rental units that do not have "qualifying financing." New construction projects or rehabilitation projects are eligible for a 15-year Workforce Housing PILOT if the owner voluntarily rent restricts the units. If conditionally approved for a PILOT, the owner will sign a Restrictive Covenant that details PILOT requirements including annual compliance reporting. See below for key information.
Click here(PDF, 286KB) for a sample Restrictive Covenant
Click here(PDF, 46KB) for a diagram of the customer journey
*Note: The applicant is encouraged to obtain all applicable Planning Department approvals prior to applying for the Workforce Housing PILOT. PILOT approval may be delayed if applicable approvals have not yet been obtained.
Basic Concepts
One Application per Parcel
Scattered site rental buildings require separate PILOT applications for each parcel. They cannot be combined into one application. A rental project that will reside on multiple contiguous parcels that will be combined before project completion should only submit one application. Space will be provided in the application for the applicant to explain the parcel combination plan.
Rehabilitation Defined
"Rehabilitation" in the context of Workforce Housing means any work that requires at least one of the following three building permit types:
- Remodel or Repair
- New or Addition
- Re-roof or Re-side
After the rehabilitation work has been completed, it must receive a final, approved inspection by a City Building Inspector. If not inspected, approved, and finaled, the rehabilitation work will not constitute eligible rehabilitation.
Click here for information about Building Permits
Apply Before Starting Rehabilitation
Qualifying rehabilitation work may not occur prior to applying for PILOT.
Number of PILOT Units
The owner may designate all units in a project as PILOT units or may have a mix of PILOT units and standard market rate units. The total number of PILOT units will be clearly established in the Restrictive Covenant and may not increase over time.
PILOT Term
The property tax exemption and PILOT shall begin on December 31 of the year in which all of the following has occurred:
- New construction or eligible rehabilitation has commenced as evidenced by the City’s issuance of an acceptable building permit, and
- The Restrictive Covenant has been signed and recorded with the Kent County Register of Deeds, and
- Owner has submitted all required documents to the Michigan State Housing Development Authority (MSHDA), and the owner or MSHDA has provided the certified notification of exemption to the City Assessor before November 1 of the same calendar year.
The property tax exemption and PILOT shall end after the conclusion of the 15-year term OR upon sale to a new ownership entity, whichever occurs first. To obtain a new PILOT, the owner must reapply and complete qualifying rehabilitation.
PILOT Tiers
There are four AMI tiers. A different income range, total PILOT charge as a percent of shelter rent, and rent limit is associated with each one. The chart below shows the tiers and the associated PILOT charge(s). Two options exist for how to allocate the PILOT charge. Selecting Option 1 means a portion will go to the City’s Affordable Housing Fund in support of future affordable housing projects.
| |
Area Median Income (AMI) |
>100% - ≤ 120% |
>80% - ≤ 100% |
>60% - ≤ 80% |
≤ 60% |
| Option 1 |
Service Charge |
5% |
3% |
2% |
1% |
| Affordable Housing Fund Contribution |
5% |
5% |
4% |
3% |
| Option 2 |
Service Charge (% of shelter rent) |
10% |
8% |
6% |
4% |
Units may “float” up to a higher AMI tier if a tenant’s household income increases. If a tenant moves out and another one moves in, the AMI tier of the unit will be reset based on the new tenant’s household income. The AMI tier of a unit shall be based on the household income of the tenant that occupies the unit as of December 31. If the unit is vacant as of December 31, then the AMI tier of the unit shall be based on the household income of the most recent tenant to occupy the unit. The PILOT charge will change anytime a unit "floats" to a different AMI tier.
Click here(PDF, 20KB) for the rent and income limits
County Opt-Out
Per the state enabling legislation, Kent County is allowed to opt out of any Workforce Housing PILOT. If the County chooses to opt out, the City Assessor’s Office will charge the owner whatever additional amount is needed, in addition to the applicable PILOT charge, to make the County whole. Opting out means the County will receive the same amount of property taxes that it would receive if there were no PILOT.
Rent & Tenant Income
Lower Rent for PILOT Units
The owner is required to pass savings from the tax exemption and PILOT on to tenants. To accomplish this, the owner must charge tenants in PILOT units less than market rent. The PILOT application requires the owner to provide market rent figures for each unit type (i.e. units by number of bedrooms) along with the rent they intend to charge under the PILOT. Fair market rent as published by the U.S. Department of Housing and Urban Development (HUD) or Grand Rapids Housing Commission (GRHC) Voucher Payment Standards may be used as the source for market rent. Alternatively, the owner may use rent roll data or a market study as the basis for the market rents it provides. If not using HUD or GRHC numbers, the data source supporting the market rents must be uploaded as an attachment to the PILOT application.
Click here(PDF, 156KB) for HUD Fair Market Rent & GRHC Voucher Payment Standards
Rent Limits
Maximum rent amounts for each unit type will be established in the Restrictive Covenant and will be based on information submitted in the PILOT application, a City estimate of financial savings resulting from the PILOT, and the AMI rent limitations as established by the Michigan State Housing Development Authority (MSHDA) based on HUD data. The MSHDA Utility Schedule shall be used to estimate the cost of utilities tenants are responsible for paying, and this estimated cost should be considered when proposing PILOT rents. The maximum rent amounts shall be valid for a term of one year from the date the Restrictive Covenant is signed. After the initial twelve-month time period, rental rates may be increased by no more than four percent (4%) per year. At no time may the total rent plus applicable utility allowance exceed the AMI rent limit adjusted for number of bedrooms as published by MSHDA. "Total rent" is defined as tenant paid rent plus all rent subsidies such as Project-Based Voucher payments, Section 8 payments, and Tenant-Based Rental Assistance.
Click here(PDF, 268KB) for the MSHDA Utility Schedule
Click here(PDF, 20KB) for the AMI rent limit chart
Maximum Income Limit and Minimum Occupancy
Tenants in PILOT units must have a total household income that does not exceed 120% AMI. If a tenant's household income increases beyond 120% of AMI, as reported in annual Tenant Income Reports, the unit will be out of compliance and the owner will be charged ad valorem taxes for the unit in the invoice issued that same year. Once a unit is out of compliance, the unit is no longer bound by PILOT rent restrictions.
Units that are not occupied by eligible tenants for at least 9 months per calendar year, whether due to vacancy or tenants being over-income, shall be deemed to be out of compliance. Units that are out of compliance will be assessed the equivalent of ad valorem taxes for that year. The 9-month minimum occupancy rule shall not apply to the first calendar year when initial occupancy under the PILOT begins for a new construction project or for a rehabilitation project that required existing tenants to relocate.
Annual Compliance
Annual Income Review
The owner shall collect income source documents from all tenants annually, either on the anniversary of each tenant's initial 12 months of occupancy or on a specific date the owner establishes. These income source documents should be used to complete the Annual Tenant Income Reports.
Annual Tenant Income Reports and Financial Reporting
The owner shall provide Tenant Income Reports and a Financial Report to the City, by May 30 of every year, in order to affirm continued eligibility for the tax exemption. One Tenant Income Report shall be completed for each PILOT unit. The information of the tenant who occupied the unit as of the December 31 preceding the reporting due date shall be used to complete the Tenant Income Report. If the unit was vacant as of December 31, then the information of the tenant who most recently occupied the unit shall be used. The Financial Report shall collect rent revenue information and owner-paid utility information needed for PILOT fee calculations. All reports will be completed through the City's web-based Accela system. The City reserves the right to collect income source documents such as tax returns, pay stubs, benefits statements, and completed verification of employment forms to substantiate the income figures reported in any Tenant Income Report, and the owner is advised to keep income source documentation in tenant files. The owner shall also upload annual financial statements to Accela by August 1 to substantiate revenue figures.