Neighborhood Enterprise Zones described as targeted tax abatement to unlock redevelopment

Susan Lighthizer Yee of Housing North told the joint study session that Neighborhood Enterprise Zones (NEZ) are an established Michigan tax‑abatement tool (dating to Public Acts in 1992) that municipalities can use to incentivize adaptive reuse of blighted or underutilized properties or to support targeted new construction. “NEZ rehab is suitable for owner‑occupied or rental housing and is used to incentivize adaptive reuse and rehabilitation of blighted or obsolete properties,” she said, and described the tax mechanics and statutory constraints.

Lighthizer Yee described two common NEZ types: NEZ rehab (for adaptive reuse/rehab) and NEZ new (for new construction). For NEZ rehab, she said the pre‑improvement taxable value can be frozen for the abatement term (commonly 6–15 years), which reduces tax increases that would otherwise flow to new improvements. For NEZ new, she said the abatement reduces the millage base (the presenter noted the millage applied to new construction can be set at roughly one‑half the state average millage rate in practice, pointing to an illustrative figure of about 19 mills). She noted constraints: current value per unit for rehab eligibility often must be below a threshold (speaker cited $120,000 per unit) and the total area designated as NEZ cannot exceed 15% of a city’s acreage.

Lighthizer Yee reviewed process steps: local governmental unit must designate the district, developers must apply prior to permits, local approval and state treasury review are required, and assessors must implement billing systems to monitor abated properties. She noted compliance is front‑loaded; annual compliance requirements are limited, but assessors must track accounts and separate land vs. improvement taxes. Commissioners asked whether NEZ could be layered with Brownfield authority loans and other incentives; Lighthizer Yee said layering was common and appropriate for projects with remediation or high up‑front costs.

The presentation included examples and local references. Commissioners asked for follow‑up examples and for staff to explore how NEZ and other incentives might be combined for targeted corridors or vacant city parcels. No formal action was taken; commissioners asked staff for a comparative memo on tools and scenarios for possible targeted districts.