urbanSTL

The issues are myriad and thorny, ranging from low incomes, low multifamily rents, aging single-family homes and a lack of liquidity for investors.
The lower incomes earned by many residents of Detroit, generally considered the poorest big city in the country, are at the root of the issues that many experts say they’re facing in trying to make housing viable. 

At present, it’s not, according to Matthew Temkin, a partner with Greatwater Opportunity Capital, a Detroit-based apartment development and management company.

“Forget being profitable. Most housing (operators) in Detroit can’t afford to pay the bills right now,” said Temkin, one of the conference organizers. “Unfortunately, if Detroit housing doesn’t become viable soon, it’s going away.”

In just the last few months, the lender for the Lafayette West apartment development near downtown has taken back the project, and a trio of east side apartment buildings owned by an entity tied to Temkin and others has fallen into receivership.

For starters, with about one-third of Detroiters living in poverty, landlords and developers are constrained in how much they can charge, even as expenses for construction, maintenance, insurance and other cost-drivers go up. 

Nonpayment of rent ticked up during the COVID-19 pandemic years and courts that handle evictions were backed up, leading to a lengthier process to remove a tenant who isn’t paying their rent, further eroding margins. 

And for those new construction projects that do get across the finish line, the investors find it difficult to get their money out because a new owner is going to see their property tax bill increase once the taxes are “uncapped” under new ownership, something known as the pop-up tax under Michigan’s tax policy in which property taxes are capped annually at 5% growth or the rate of inflation, whichever is higher. 

So given those factors, is housing impossible to do in Detroit?

“No, but it’s really hard,” said Brandon Hodges, founder of Detroit-based Tribe Development, which has done various mixed-use projects around the city. 
As one example, Hodges pointed to a $21 million project he’s working on in Detroit. But the valuation of the completed project is just $6 million. 

“The only way that building is getting built is subsidies,” Hodges said, noting that he and other developers generally rely on federal low income housing tax credits and a variety of other layers within a capital stack in order to make their projects even close to viable. 

Those on the financing side of many of these deals say they’re hopeful that a time comes soon when more Detroit housing deals can be done with more straightforward debt and equity, but for now, “the math doesn’t math,” said Damon Hodge, vice president of lending for Invest Detroit, a community development financial institution. 

Given the cacophony of issues the experts say they’re facing, a large part of Thursday’s conference was focused on finding solutions. Even there, the bright spots are minimal. 

Cassandra Floyd, executive director of the West Grand Boulevard Collaborative, said she’s hopeful that some initiatives around the city to spur community land trusts could be helpful. Such efforts use nonprofit ownership around a geographic area to create more affordable homeownership opportunities and fight back against land speculation. 

Horhn, the city assessor, said that it’s increasingly more economical to build new rather try to renovate the city’s aging houses, which number above 200,000. Convincing developers that there is a way to make money on smaller and less-costly houses, under $400,000, is critical. 
“And I don’t know how to do that,” Horhn said. “Because it’s the average cost of construction today.”

MOsloth22 wrote:If your entire comeback is hitched to the wagon of one benevolent billionaire, it’s way too fragile.

I agree that the STL business community needs to step up in terms of actually putting jobs and people downtown. Financially though, they actually show out pretty well. So many of our civic and cultural institutions are extremely well funded in large part because of them. Arch to Park Equity is essentially our business community bucking up for downtown development. Taylors are obviously huge investors in downtown west right now.

In terms of growth, Metro Detroit has fewer jobs today than pre-COVID. Greater St. Louis is at least up, albeit marginally.

StlAlex wrote: ↑

2:47 PM - 18 days ago

MOsloth22 wrote:If your entire comeback is hitched to the wagon of one benevolent billionaire, it’s way too fragile.

I agree that the STL business community needs to step up in terms of actually putting jobs and people downtown. Financially though, they actually show out pretty well. So many of our civic and cultural institutions are extremely well funded in large part because of them. Arch to Park Equity is essentially our business community bucking up for downtown development. Taylors are obviously huge investors in downtown west right now.

In terms of growth, Metro Detroit has fewer jobs today than pre-COVID. Greater St. Louis is at least up, albeit marginally.

Well in reality, Detroit's comeback is fake. There's huge swaths of the city that are still and probably will always be worse than the worst parts of North City. They just ignore those parts.

So I wouldn't call it fragile, I'd call it basically not real. It goes to show how much downtown's image does for perception.

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StlAlex wrote: ↑

8:28 AM - 19 days ago

First we need a billionaire who actually gives a sh*t and doesn't leverage himself for political gain and not actually help the city (and in turn the region) at all.

Beyond just the billionaire, we need a business sector that actually wants to be in a growing MSA to help attract new talent and in turn help themselves grow.

But we have neither.

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