Traverse City commissioners approved a payment-in-lieu-of-taxes (PILOT) agreement tonight for a new HomeStretch workforce housing complex planned on Lot O on the corner of State and Cass streets (pictured, rendering). The nonprofit has an agreement to purchase the city-owned parking lot for $470,000 to build a five-story, mixed-use building with ground-floor retail and 44 residential units on the upper four floors. The retail tenant is planned to be a local food market.

HomeStretch – which is partnering on the project with Wallick Communities – is seeking a variety of funding sources, including a city PILOT agreement. A PILOT agreement allows a developer to pay a percentage of rental income to the city instead of traditional taxes to offset the costs associated with offering below-market housing. In this case, HomeStretch sought a 30-year, four percent PILOT agreement – equating to an estimated annual payment of $26,271. The PILOT is expected to reduce HomeStretch's taxes by $2.38 million over the the lifespan of the agreement.

The target market for residents will be those earning between 30 to 120 percent of the area median income (AMI), with a mix of studio, one-bedroom, and two-bedroom units offered. HomeStretch estimates the majority of units – 80 percent – will be allocated to tenants earning 60 percent of the AMI. HomeStretch Executive Director Jonathan Stimson said Monday that 30 percent AMI rental rates would equate to about $429 per month for a studio, while 60 percent AMI rates would start around $958 for a studio up to $1,214 for a two-bedroom unit.

HomeStretch is committing that that 80 percent of units will “remain at an affordable rate for so long as any mortgage loan remains outstanding and unpaid by (the buyer), the premises is owned by the buyer, or for 30 years, whichever is longer,” according to the agreement language. Using a city scoring matrix for PILOT applications, staff said the HomeStretch project received a “favorable ranking of 18.99 out of 20 possible points for this request.” Contingent on financing, HomeStretch could begin construction in 2026 with a targeted opening in 2028.