In 2026, lawmakers and the governor enacted a package of bipartisan legislation aimed at increasing housing production, expanding affordable housing financing, reducing construction barriers and addressing the growing role of institutional investors in the single-family housing market. The passage of these bills signals a growing recognition in Lansing that Michigan cannot solve its housing affordability problem without addressing the cost and availability of housing supply.

The Michigan State Housing Development Authority has estimated the state faces an approximately 97,000-unit housing gap. For builders, the question now is how these new laws will translate into actual housing projects.

Build More with Code Reform

One of the most significant changes for residential construction came through House Bills 5570 and 5571, now Public Acts 28 and 29 of 2026. The legislation changes Michigan's Single State Construction Code to allow certain multifamily residential buildings up to four stories to utilize a single exit stairway under specified conditions. Previously, the state's restrictions limited this type of construction to smaller buildings.

The change is particularly important for smaller multifamily developments, infill projects and housing constructed on constrained urban parcels. The governor's office estimates the reform could reduce construction costs on affected projects by as much as 10%, while advocates have cited potential savings of up to 13%.

For builders, the practical significance is straightforward: more efficient building design can mean more usable units on smaller sites and lower construction costs per unit. That could make projects that previously did not financially pencil out more viable. It may also help communities address one of the industry's ongoing challenges of adding housing without requiring large amounts of undeveloped land.

This is an example of a policy change that could directly affect the cost of putting a housing unit on the market.

A New State Housing Tax Credit

Michigan also enacted legislation creating the Michigan Housing Opportunity Tax Credit through HB 5806, HB 5807 and SB 966, including Public Acts 30 and 31 and related changes under Public Act 23.

The program is designed to operate alongside the federal Low-Income Housing Tax Credit and provide additional financing for qualifying affordable housing developments. It will provide up to $42 million annually in credits and is expected to support approximately 2,500 additional housing units each year. For developers, this is important because affordable housing projects often face a financing gap between what it costs to construct a project and what rents can support. A state tax credit can help close that gap. The legislation also creates an opportunity to leverage private investment and federal housing resources rather than relying exclusively on direct state appropriations.

For residential builders and developers, the immediate impact will be greatest in the affordable and workforce-housing sectors, but the broader impact could be significant as additional housing production helps relieve pressure on the overall housing market.

Broader Market Impact

Michigan does not have a housing shortage at only one price point. When households compete for a limited number of homes, pressure moves throughout the market. Increasing attainability and workforce housing can free up existing housing stock while allowing more workers and families to remain in the communities where they work.

The new credit isn’t just an affordable housing program, but another tool for increasing Michigan's overall housing supply.

Institutional Investors: A Major Change for the Single-Family Market

HB 6074, now Public Act 32 of 2026, is generating the most discussion among housing stakeholders as it represents a significant change in Michigan’s housing investment landscape.

The law restricts certain large institutional investors from acquiring residential property in Michigan and establishes a limit of 100 single-family homes for covered entities. The policy objective is to prevent large institutional investors from competing with individual homebuyers for existing single-family homes.

For homebuilders, however, the issue is more complicated. Institutional capital has increasingly been used not only to purchase existing homes but also to finance, develop and operate new housing, including build-to-rent communities. The distinction between buying existing housing and financing new housing construction will therefore be important as the law is implemented.

The industry's challenge will be making sure the policy achieves its intended goal — protecting opportunities for individual homebuyers — without unintentionally reducing the amount of capital available to build new housing.

Invest in communities
The FY2027 state budget also includes $50 million for the Michigan Housing and Community Development Fund, supporting affordable housing and neighborhood revitalization.

What Builders Should Take Away

The 2026 legislative session produced several laws that could have a direct impact on the residential construction industry, and housing supply is now firmly established as a major state policy issue. That creates both opportunities and responsibilities for the building industry.

Builders should continue to engage with legislators, state agencies and local governments to ensure that new policies translate into actual housing production. At the HBA of Michigan, we will continue advocating for policies that address the fundamental economics of home building including land costs, infrastructure, permitting, zoning, construction regulations, financing, labor and fees.

Every additional regulatory requirement adds to the cost of a home. Every unnecessary delay adds carrying costs. Every restriction on the amount or type of housing that can be built limits supply.

Michigan has taken several steps in 2026 to address those challenges.

The housing crisis will not be solved by one bill. It will be solved by building more homes, in more communities, at price points Michigan families can afford. That is where the residential construction industry has an important role to play, and where continued engagement in Lansing and at the local level will matter most.