KALAMAZOO, MI - Savings from a cut to the city of Kalamazoo's property tax probably won't find its way into the pockets of renters.

With Kalamazoo's new 12-mill levy, an average property, including commercial entities and owner-occupied homes, will shave $300 off this year's summer tax bill.

City officials, meanwhile, have no way to ensure renters will benefit from the cut. However, local property management companies believe the savings could make owners more willing to reinvest in maintenance and energy efficient upgrades.

The new property tax rate is guaranteed to remain steady for at least three years while the city raises a $500 million endowment through its Foundation for Excellence to replace revenue lost by the cut from 19.2805 mills. In the meantime, City Manager Jim Ritsema said there is not much the city can do to entice landlords to reduce rents.

"Unfortunately, unless a landlord finds it in their heart to pass that savings on to their renter, there's just no way for the city to impact that," Ritsema said. "In some ways we're incentivizing lower rent by lowering the millage rate, so I don't know what else we could do to incentivize it ... You have a lot of other impacts (on rent) relative to demand."

There are 3,809 rental properties registered with the city of Kalamazoo, totaling 17,163 units. This includes single-family homes, duplexes, multi-unit rentals, bed and breakfasts, and large apartment complexes.

According to 2015 Census data, residences with the most expensive rent are in the Arcadia and Westwood neighborhoods, the southwest corner of the city and in new mixed-use housing developments on the eastern portion of the Northside neighborhood.

Homes with the cheapest rents are in the Burke Acres, Northside and West Douglas neighborhoods, and a southern portion of the Edison neighborhood.

In 2015, the median gross rent in the city's most and least expensive neighborhoods ranged between $444 and $897 per month.

Vice Mayor Don Cooney said for low-income residents, the cost to rent a home is "out of reach." The Foundation for Excellence won't be enough, he said, and the city will need to work with community partners and individual landlords to improve housing.

"The hope would be that the people who own those houses, especially the ones that don't even live here, would use some of that money to fix up the house a little more or maybe even lower some of the rents, because people are struggling now," Cooney said. "It has to be a collective response."

Joe Lukeman, owner of Lukeman Property Management, said the price of rental housing in Kalamazoo is based on supply and demand more than anything else.

He manages properties for investors who own about 110 residences, mostly in the Vine neighborhood around Western Michigan University and downtown Kalamazoo. In those areas, the demand for housing is just as fierce as ever, especially closer to downtown.

In short, don't expect the monthly bill to go down. However, renters could see a small savings in heating and electrical costs if landlords reinvest the tax savings.

Ritsema said he hopes landlords invest in energy efficient upgrades to their homes.

Whether that will happen is yet to be seen. Lukeman said most landlords put just enough money into a property to make it safe and comply with "strict" city ordinances.

"With landlords, the way they view these properties is strictly money in and money out," Lukeman said. "At the end of the day, they're looking at overall income and their bottom line."

Lukeman said he it's likely rental property owners will make some improvements to units. Things like new carpeting and appliances are within a reasonable cost, he said, but the cost of top-to-bottom renovations is "extreme."

"I think (the tax cut) is going to do nothing but encourage investment and improvement in properties," Lukeman said. "It's not huge -- it's not going to change a lot on the market -- but, I do feel it's a pretty bold statement on getting people to continue investing."

More than half of the city's residential rental market is located in and around downtown Kalamazoo.

Almost a quarter of all rental properties are located in the Vine neighborhood. Around 18 percent are located in the Edison neighborhood, and 11 percent are in the Northside neighborhood.

The city's largest rental property owner, MIMG LXVI Drakes Pond LLC., declined to comment for this story. It owns 497 units at the Drake's Pond Apartment complex, and was estimated to save $84,000 annually based on the tax cut.

Austin Perry, a property manager with AIM Corporation, agreed that most owners are looking to put the tax savings into their pockets. However, he said in an email that it's likely that many will choose to invest in more property around town.

"I really don't see how (renters) benefit much," Perry said. "I would think that long-term they are going to have a nicer place to live."

Perry said AIM, which manages almost 150 properties in the city, has been receiving calls from investors interested in the "tax advantage."

"I think (the cut) will have a positive impact on the market in Kalamazoo, both for the rental industry and the real estate market," Perry said. "The rental market itself has already been doing phenomenally, for the past year or so. The supply is much less than the demand."

The number of rental properties in the city increased following the 2008 recession, he said, as people began losing their homes and did not have good enough credit to outright buy property.

An increase in demand would increase property values, and the price of rent, he speculated. This could have a negative impact on people in poorer neighborhoods.

Areas that improve too quickly present a risk of pushing out current residents.

On the other end, Ritsema and City Finance Officer Tom Skrobola agreed that the free market will make it difficult for landlords to keep rent high if others don't.

"No one can keep an artificially high rent," Skrobola said. "In other areas that aren't a dynamic market place, renters may be not getting the benefit. I do believe everywhere in the city it will find its way."

Though the property tax component of the Foundation for Excellence might not affect rental owners, Assistant City Manager Laura Lam said people will still receive a benefit through the foundation's commitment to aspirational projects.

The Foundation for Excellence has already funded neighborhood improvements, street construction projects and lead water pipe removals and expanded youth development programs. The funds will also lead to investments in the arts, housing, and community programs.

Lam said the city will also be working with community partners to increase access to low-income housing. A City Commission work session is economic development and affordable housing is scheduled for 6 p.m. Monday.

Kalamazoo rental properties by parcel location

Search by the location of property owners throughout the United States