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Housing Shortages in Detroit?

Curtis Johnson / Jun 30 2012

For Release Saturday, June 30, 2012
Citiscope News

Curtis JohnsonNowhere in the picture most people have of today’s Detroit is there an image of housing shortages. Mention the city and people think of vacant land and boarded up houses and old factories. Not many people imagine a growing cadre of career professionals scrambling for a scarce supply of rental housing.

But that scramble is the new reality. Our Citiscope team stumbled on to this as we interviewed the young and mid-career professionals moving to Detroit to join the Detroit Fellows Revitalization Program. Rena Bradley, who became one of the 29 selected fellows and who would eventually find a loft apartment she loves in Corktown within biking distance to her job at the Detroit Land Bank Authority, recalls “it took me a few weeks to find an apartment.” She landed in Detroit last August just as Live Midtown and Live Downtown programs were starting and found “there was nothing” where she was looking but hotel rooms.

So it doesn’t matter much that the median housing price in Detroit is parked at around $10,000 or that, as the Detroit Free Press recently reported, most sales of good houses in stable areas are for less than $75,000. Young people moving to Detroit want to rent.

Midtown has become a magnet for young and mid-career professionals. Their search for housing is colliding with 96 percent occupancy rates, which Sue Mosey of Midtown, Inc. calls a “very tight market.” For a while, some businesses (under the Live Midtown push) were offering $25,000 grants to employees who would buy in Midtown. That soaked up some of the supply, Mosey said. And while the pipeline seems clogged with demand, the supply is not keeping up. On the sober side of the credit meltdown, banks became wary of funding housing projects. “You had to look at very creative formulas, often involving foundations or corporate support, or you had a gap you couldn’t fill,” she said.

Olga Stella of the Detroit Economic Growth Corporation agrees, describing housing finance in recent years as stuck in “a slump of low confidence.” Asked what might catalyze confidence, she pointed to retail. But retail typically doesn’t show up until there’s evidence of enough buyers. That’s why the decision by Whole Foods to build a store at Mack Avenue and John R Street in Midtown is so significant. “It’s not just a store,” Stella said, “it’s a signal to investors that demand is still growing and isn’t likely to stagnate.” Meantime, meeting demand is “slow, hard work, one project at a time.”

Signals aside, there are stirrings of new supply. Both Mosey and Stella point to the Broderick Towers across from the baseball park downtown and the Auburn, set to open this coming October at Cass and Canfield in Midtown.

Sustainable demand for good rentals is not that hard to imagine. In recent years employers such as Quicken Loans, Blue Cross, and Compuware have moved close to 9000 workers from outside the city to downtown. Cultural and arts institutions such as the Detroit Institute of Arts and the College for Creative Studies line the shoulders of Midtown’s Woodward Avenue. A thriving and large urban university, Wayne State, anchors the heart of the corridor. Vanguard Health System is pouring a billion dollars into the Detroit Medical Center.

Another billion is contemplated by the Henry Ford Medical Center to expand its already extensive medical facilities and to build a Community Health Park on a large tract north of Midtown that would include retail and housing. Playing a leading role is another of the Detroit Fellows, Thomas Habitz, who told Citiscope that the Henry Ford system was committed to being “a leader in the revival of Detroit.”

One thing seems certain: demand for more housing in Midtown and downtown is going nowhere but up. Talent magnets are around every corner. Consider just one of the sources: the University Research Corridor, a collaborative partnership of Wayne State with Michigan State and the University of Michigan. In addition to producing 3600 graduates annually, its investments in innovation are exceeded only by the Silicon Valley and the Research Triangle.

And some organizations are actually trying to raise demand even higher. The Hudson-Webber Foundation is committed to place-making investments to attract 15,000 more households of talented young professionals to downtown Detroit by 2015.

So will supply ever catch up to demand in Midtown and downtown? “Not for a long time,” says James Van Dyke of the Roxbury Group, which is about to open the Auburn, with 58 apartments, plus retail on the ground floor. Van Dyke recalls that a dozen years ago studies showed demand outstripping supply by 5000 units just in downtown. “We’d have to produce a 1000 new units a year to even begin to reach that number. And we’re nowhere near that yet.”


Curtis Johnson, president of the Citistates Group.

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4 Comments

  1. Posted July 1, 2012 at 6:27 am | Permalink

    What’s surprising is that you’re surprised. In a declining market, of course all segments of the housing market are going to be discombobulated. It’s not like there’s the kind of demand that drives new construction by the major players. And in a market where a “signature” office building sells for $5/s.f., well, that’s an indicator of demand and value of housing as well.

    Probably there is plenty of rental housing in the suburbs, as there has been for decades.

  2. Ralph.Craft
    Posted July 2, 2012 at 5:54 am | Permalink

    With a tight rental market and good houses available for $75,000, why aren’t people buying houses and renting rooms? That’s the situation around a lot of big universities.

  3. Curtis Johnson
    Posted July 13, 2012 at 12:23 pm | Permalink

    Good points. And it’s not that we were so surprised, but we imagined any housing shortage in Detroit would force some adjustment in the way people are thinking about Detroit. Thanks for the comments.

  4. Michael Maxwell
    Posted July 27, 2012 at 1:55 pm | Permalink

    With the credit crunch, the local foundations and employers with City backing, should be initial offering financing options such as A&D loans or mini-perms to developers. Once developments are stabilized conventional financing from local banks or institutional lenders can provide take-outs.
    The PPP approach brewing in Detroit can be a model for other cities. If Quicken wants to move people downtown, they need housing products. But with an anemic market for non-institutional investment in new or renovated housing and retail, how can demand be met? One direction is to be a lender to developers by partnering with local banks and the city. It’s all about the money.