The state of Michigan is handing out $250 million in tax credits for low-income housing. The cost per housing unit? An astounding $236,000 each.

That’s more than the average value of a house in Michigan right now, which Zillow pegs at $232,500. In other words, taxpayers will dish out more per unit in subsidies than it costs to buy a whole house in Michigan.

And this spending won’t all go to new housing stock or for many single-family homes. Most appears to be going to developers for new one- or two-bedroom apartments and complexes. Other funds will only “rehabilitate” existing units.

The credits come from the federal government but are distributed by the Michigan State Housing Development Authority. They will go to 22 housing projects in 14 municipalities across Michigan. These projects often receive lots of press coverage: $1.2 million for 48 units in Kalamazoo, $8.2 million for 300 units in West Michigan, $1.65 million for 48 units in Battle Creek and $366,000 to rehabilitate 32 existing units in Escanaba. Rarely does anybody question the total cost of the project or the amount subsidized by taxpayers.

The state projects that the $250 million will create a mere 1,117 new rental units, 1,056 of which would be characterized as affordable.

The housing authority says the state needs nearly 200,000 housing units just to meet current demand. These projects, even if they all go forward, will take years to build and only meet a tiny fraction of that demand.

Gov. Gretchen Whitmer described the spending as an investment of taxpayer money.

“These investments will create more than a thousand new homes, expanding supply and driving down costs for working-class Michiganders” Whitmer said in a statement Thursday. “This year, we are working together to make the largest investments to build housing in Michigan history, driven by our simple philosophy to ‘build, baby, build.’”

The easiest way to “build, baby, build” is to...let people build. Michigan’s shortage of housing is largely driven by local zoning regulations that block housing starts and drive up the cost of construction. Metro Detroit, in particular, has some of the strictest zoning rules in the country.

State lawmakers have proposed a litany of new legislation that would make it more expensive to own and operate rental units. And the Whitmer administration is pursuing more licensing and regulatory requirements that would add to the cost of construction. This, combined with local zoning rules that make it illegal to build affordable housing in much of the state, is what has driven up the cost of building.

Instead of trying to induce demand through more subsidies, state lawmakers and administration officials need to work harder on encouraging supply. Only a freer housing market will build enough houses to make a real difference.

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