Because of decades of disinvestment, population loss, and exclusionary housing policies, Detroit’s housing market experienced distress well before the housing market collapse and Great Recession.
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.
In this report, we use Detroit as a case study to examine three interdependent elements of a healthy housing market: demand, supply, and credit access. In Detroit, these elements pose significant barriers to residents and other parties working in the housing market. Yet, Detroit policymakers, lenders, and nonprofits have designed programs and policies to address these challenges and jump-start the housing market. We examine these core challenges, identify trends, and document promising programs in Detroit and beyond.
Homeownership in Detroit has fallen significantly. In 2000, 55 percent of Detroit residents owned their homes. By 2010, the share had fallen to 51 percent. This decline occurred for several reasons.
First, Detroit’s population has seen steady losses since 1970. Most notably, Detroit’s population between ages 25 and 44, the group with the greatest transitions to homeownership, fell sharply between 1990 and 2014.
Second, people who remained in Detroit suffered from unemployment rates and incomes that did not keep pace with regional and national trends. In April 2016, Detroit’s unemployment rate was 9.1 percent, 4.4 percentage points higher than the national unemployment rate. Detroit’s median household income fell short of national averages by $27,000. Other factors that contributed to the population decline include high taxes, low-performing schools, and safety concerns.
Detroit’s housing supply lost more than 45,000 units between 1990 and 2013, with the number of occupied units in Detroit decreasing 46 percent between 1970 and 2010. These losses stem from several factors, including low home values, low rents, and high property taxes. Most houses in Detroit are single-family units built before 1960, and the mean sale price of housing units in Detroit is well below the national average.
Home purchase loan originations fell from 8,400 in 2005 to 490 in 2014. Consequently, cash sales percentages reached historic levels in 2014 at 97 percent. Home improvement loan originations also fell from 3,475 in 2001 to 21 in 2014.
This trend is the result of distorted property appraisals from a lack of comparable properties and a high amount of distressed sales, Detroit residents having an average credit score of 585 compared with 670 nationally, 66 percent of Detroit residents having debt in collections, and additional factors that affect residents’ access to credit.
Lessening the harmful effects of these interconnected factors requires interdependent solutions and collaborative, coordinated action from local policymakers, lenders, and nonprofit community developers. Implementing actions that address problems related to intertwined housing market characteristics will enable local stakeholders to create a more cohesive and balanced housing environment.
We offer strategies aimed at eliminating barriers to the supply of decent, safe, and affordable housing, as well as increasing credit access. Several recommendations are based on successful models from other cities. Detroit would need to tailor these policies and programs to fit local neighborhood dynamics and would benefit from incorporating elements of other jurisdictions’ successful programs.
In promoting a healthy housing market, collaboration is crucial. We highlight examples of collaboration in the effort to strengthen Detroit’s housing situation, but many efforts are not bound by a common framework, a shared vision that drives their actions. Instead, Detroit’s housing market is a complex ecosystem of multiple actors, interdependent programs and policies that each address individual elements.
To accelerate market recovery, Detroit will need to align and connect current housing efforts. We recommend forming a Detroit Housing Compact that would guide local nonprofit, private-sector, and public-sector leaders to focus on one or two major housing goals. This ongoing forum for collaboratively solving housing issues would examine interdependent relationships between various market segments as they simultaneously craft policies that address demand, supply, and credit access.
The compact would not duplicate current housing and land-use planning efforts, but would complement and coordinate their execution. Additional planning and resources would be necessary to staff the Compact, encourage full participation, and engage neighborhood leaders to ensure its actions reflect Detroit’s diverse neighborhoods and residents.
With this forum and our other recommendations, we hope to elevate strategies that can revitalize the housing market for all Detroit residents and neighborhoods and put the city on the path toward economic resilience.