Throughout much of the 20th century the city of Detroit was a bustling metropolis, but in 2013 it filed for Chapter 9 bankruptcy, the largest filing of its kind. It has since exited bankruptcy but is still facing serious issues. In a report released in February, RealtyTrac calculated more than 81,000 vacant homes in the Motor City, or 5.3% of its housing stock.
And while Detroit is on better financial footing than a few years ago, it’s still in need of major improvements, specifically in its housing sector.
“People find it difficult to find acceptable housing inside Detroit at any price point,” says Sonya Mays. “There’s just a basic need to rebuild the core housing infrastructure here in the city. I think that is part of what made this moment the right moment for us to start up Develop Detroit.”
Develop Detroit is a mission-driven, nonprofit development firm that was founded in 2015 with significant financial backing from J.P. Morgan Chase, Ford Foundation, and The Kresge Foundation, and Mays, a native of Detroit, is its president and CEO. The firm, launched by the Housing Partnership Network (HPN), which is made up of nearly 100 leading housing and community development nonprofits nationwide, wanted to model Develop Detroit after a similar venture.
Shortly after Hurricane Katrina devastated New Orleans and its surrounding area, HPN launched the Gulf Coast Housing Partnership to rebuild communities from Texas to Florida. The public-private partnership raises capital to create and preserve affordable housing. By 2015, it had more than 2,100 units completed, under construction, or in its pipeline and 46 partnership developments for an infusion of more than $324 million into the Gulf Coast region.
The goal now is to make a similar impact in Detroit. “While Detroit wasn’t hit by a hurricane,” notes Ben Phillips, Develop Detroit’s vice president of real estate, “it’s facing a similar disaster in the economy and population.” A large portion of the city’s population has become displaced over the years due to a “rapidly deteriorating” housing stock that has seen “years of disinvestment and waves of foreclosure and abandonment,” he says.
Develop Detroit is aiming to raise $30 million and is more than half way to its goal, Mays says. Currently, the organization has three sites under control totaling 350 units. Each of the sites involves some kind of acquisition, including two that will have new construction, according to Phillips. The sites should be closed on in late 2016 or early 2017, he adds, with construction on two of the projects starting in the second quarter of 2017.
“Most of our development efforts are focused on including both income-restricted as well as non-income-restricted market rate units with the whole community built to a market rate standard,” he says.
As of now, Develop Detroit is focusing on the multifamily side of housing, but plans on expanding to the single-family sector in the future. Normally, Phillips says, a mission-based organization rehabs or builds a handful of homes at a time in a given community, but that type of approach wouldn’t work in Detroit where the problem is so vast. “A big part of the problem with supply is that you can’t establish values because you’ve got homes that are derelict next to homes that in any other market would be worth a few hundred thousand dollars,” he says. “There’s just no way for people to establish values that are anywhere near what it costs to produce a unit.”
So Develop Detroit will look into acquiring many homes simultaneously. “Rather than do them on a one-off basis, the driver would be making sure that we’re stabilizing a substantial and sustainable portion of the community, which can reignite that cycle of mutual benefit,” he adds.
For Mays, who grew up in Detroit and moved back to work on its municipal bankruptcy, the support her organization has received so far has been surprising. “Collaboration here, especially with scarce resources, has not always been the rule of thumb,” she says. The organization was created, Phillips adds, “to be a transaction partner with the city and other stakeholders who are interested in the space of revitalization, real estate development, and inclusionary housing” in Detroit.
The organization only has five members at the moment but plans on adding a few more by the end of the year. Right now, the focus is raising capital and growing the pipeline. “We need to build this ship while we’re sailing it,” says Phillips, who grew up in Kalamazoo, Mich. “This is a new space and a new model in a city that’s changing rapidly.
“We’re not here to compete for limited resources,” he adds. “We’re really here to grow the pie.”