Is Detroit making a comeback, or not? The answer is somewhere in the middle.
The city’s downtown and midtown areas are speckled with new construction. New projects include luxury condos, university buildings, mansion-turned-apartments, tiny homes, micro-apartments, stadiums, and trendy work spaces that look like metallic igloos. But in other parts of the city, stubborn pockets of concentrated poverty remain; decades of population loss, racially biased housing policies, and disinvestment have made sure of that. That geographically uneven recovery is natural at this stage, as City Observatory’s Joe Cortright points out. Accruing a critical mass of residents in certain neighborhoods will help bring all-around recovery, he writes:
As a practical matter, the only way forward for the Detroit economy is if more middle-income and even upper-income families choose to move to the city (or stay there as their fortunes improve). That will nominally make some of the income numbers look less “equal” but will play a critical role in creating the tax base and the local consumption spending that will—gradually—lead to further improvements in Detroit’s nascent economic rebound.
But just how does Detroit go about acquiring and retaining density? Two recent pieces of research put forth some interesting ideas.
If you (guarantee to) build it, they will come
In a recent paper published in the National Bureau of Economic Research, economists at the Federal Reserve Bank of Richmond and Princeton University take a hard look at the some of the worst-hit areas (in blue in the map below)—neighborhoods that still contain tracts with blight and vacant properties. The thing is: there should be interest in reviving these areas given how close they are to downtown. (And there has been some development in neighborhoods like Brush Park.) But that hasn’t been the case in other tracts, mainly, because no developer or resident wants to make the first move, the paper argues. "For neighborhoods to be viable and sustainable, the pre-condition is that there's a certain threshold of people,” Raymond Owens, co-author and economist at the Federal Reserve in Richmond, tells CityLab. “People want to live adjacent to other people.”*
To solve what the authors call a “coordination problem,” the city should identify exactly what that minimum amount of development is for each Census tract, and then “order up—or guarantee development of that size,” Owens says. If they get the threshold right, developers would step over each other to build properties, creating a positive feedback loop of interest in these neighborhoods. Simultaneously, residents would rush in, hoping to live close to where they work. Ultimately, “by guaranteeing [minimum development], the city would not actually have to put out any money at all.” (This idea is similar to the concept of deposit insurance, wherein banks can attract investors by mitigating the perception of risk.)
To test the efficacy of this theory, Owens and his colleagues devised a complicated analytical model. They identify 52 vacant tracts, and calculated the thresholds for each and where the minimum guarantees would be most effective. If developed, these areas would attract folks from surrounding tracts and outside the city. Median wages and land values would go up. In fact, they find that that using a minimum guarantee in neighborhoods like Rosa Parks, Lower Woodward, Middle East Central, and others would lead to higher population growth and housing price increases than the revitalization strategies put forth by Detroit Future City, a civic organization guiding the city’s revival.
Of course, these conclusions come with caveats. If the threshold isn’t correct, it could lead to a situation where the city would have to buy up the properties developers aren’t able to sell. And the model used for calculating the threshold and its impact employs a variety of assumptions. In other words, this wouldn’t be a wise step to take without sufficient research and analysis.
Increasing demand, supply, and credit access
Another part of the puzzle is about how to get the folks who want to live in Detroit—or who already do—to become a part of its growth story. To that end, a new report released by the Urban Institute offers a roadmap to a stronger, more inclusive housing market. In the summary, the authors write:
A healthy housing market is an important component of a healthy city. It enables residents to build wealth and respond to opportunities, gives cities resources to provide its residents services, and fosters community by supporting a mix of residents.
Currently, the housing market faces many challenges. In recent years, demand and supply have both fallen. The rate of foreclosures is appallingly high. The black population, which has had to endure the brunt of the city’s financial problems, has increasingly been taking to the suburbs. Of the folks who remain, few have the resources to rent in livable neighborhoods—much less buy. UI reports that 70 percent of renters in the city end up paying more than 30 percent of their income to housing costs. Detroit’s lack of jobs, high taxes, and lack of city services continue to be a barrier in attracting folks to move to the city and purchase a home—and keeps folks who already live there from staying on.
To reverse these trends, researchers recommend borrowing successful tactics from other towns with similar problems. Post-industrial Syracuse, for example, started a Home Equity Protection program in 2000, which helps alleviate concerns among buyers that they’re making a bad investment. Something like that might be useful to boost homeownership in Detroit. Another successful initiative is Austin’s Homebase Program, which helps low-income folks purchase homes through a shared equity housing model. Cleveland also has a great lease-purchase program, which lets participants who may not qualify for mortgage loans transition from renting to owning their homes over a period of time.
Other strategies include providing the Detroit Land Bank Authority with more resources, so it can expand programs that rehabilitate foreclosed homes and help residents buy back currently vacant property. But building a healthy housing market in post-recession America cannot be done by promoting homeownership alone. Affordable rentals need to be created and preserved. One way to do that is to turn some of those vacant single family homes into affordable units for rent.
Together, these two studies provide different ideas at different scales to get people to stick around—and ride the wave up from economic decline.
*CORRECTION: The post was updated to clarify which neighborhoods the NBER study labels as empty.