The voices of Urban Institute's researchers and staff
July 23, 2013

Fiscal stress: Beyond Detroit

July 23, 2013

detroitNorthEnd

Detroit is the biggest city to declare bankruptcy in U.S. history. Most of the attention on the city’s fiscal crisis, however, has so far ignored the wider metropolitan, state, and even Great Lakes context that portends widespread fiscal challenges.

Between 2000 and 2010, Michigan grew by just 87,000 households. But from 2000 through 2009, local governments in Michigan—mostly those in outlying suburban and rural areas—issued an estimated 371,000 residential building permits. That’s more than 4.3 times more building permits than new households. While not all these houses were ultimately built, many of them were, resulting in the rapid devaluation of the state’s older housing stock. Detroit’s abandonment is partly an outcome of this surplus housing construction; between 2000 and 2010, its vacancy rate shot up from 10 to 23 percent even as the housing stock declined by over 25,000 units.

But the impacts weren’t limited to Detroit. Many of the state’s other big- and medium-sized cities—Grand Rapids, Warren, Flint, Lansing, Southfield, Westland, Kalamazoo—also lost households. Housing vacancy rates went up in every one of the state’s 25 most populous cities and townships between 2000 and 2010. In all, about 3 out of 10 cities and townships in Michigan lost households in the 2000s, and even the municipalities with household growth generally added more housing than they needed.

In cities and suburbs large and small, Michigan’s housing surplus already translates into an excess of streets and highways to sweep, plow, and patrol; more extensive sewer and water systems to build and maintain; and a more dispersed population—many of whom need help getting to school, medical appointments, or workforce training sites. All these needs demand local government spending. And as retirees become an increasingly large share of Michigan residents, their fiscal contributions through income, sales, and property taxes will likely fall. Detroit’s bankruptcy involves unique local factors, but it’s vulnerable to these local idiosyncrasies in part because of larger trends that are likely to affect many other cities in and beyond Michigan in coming years.

Photo from Flickr user wearemodeshift (CC BY-NC-SA 2.0) 

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