Urban Wire How Detroit leaders can build on the city’s investment momentum
Brett Theodos
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After years of population loss and economic decline, Detroit now shows signs of stability and renewal. Construction and development projects are breathing new life into the city, and commercial real estate financing is riding a new wave of increased credit access. As validation of this trend, the city’s mayor, Mike Duggan, was just decisively reelected.

By unpacking the flow of Detroit’s recent commercial property investments, we provide a better understanding of the Motor City’s current economic context and offer suggestions for how local leaders can help expand investments throughout the city.

Overall trends

We found that the investment and loan market for Detroit’s commercial, industrial, multifamily, and institutional properties is reemerging after declining during the Great Recession:

  • Sales are increasing but are still less than half of the way back. Although sales of these commercial, industrial, multifamily, and institutional properties and land fell from $196 million in 2006 to $49 million in 2011, sales volume had increased to $81 million by 2015.
  • There is strong growth in construction and rehabilitation activity. The total dollar amount of construction and rehabilitation investments more than doubled from $374 million in 2011 to $770 million in 2015.
  • Lending activity is robust. Debt financing peaked at $798 million in 2005 before falling dramatically to $282 million in 2008. But since 2015, lending levels have rebounded to $473 million.
  • Investment projects are spread, but dollars are concentrated. These investments are spread throughout Detroit, but investment patterns vary by neighborhood. Money for projects is concentrated in the Central Business District and the Woodard neighborhoods, a finding that owes more to the size of projects located there than the number.

Drawing on data from sales, construction and rehabilitation, and lending, a consistent story emerges. Detroit experienced a steep decline in property values, number of investments, and those investments’ dollar volume during the Great Recession. Sales values, while still low, are slowly regaining ground, and construction, rehabilitation, and lending activity is growing strongly.

The role of mission lenders

When the Great Recession hit Detroit, conventional lending activity slowed significantly. In its place, mission capital became a vital source of funding for development projects across the city. Although mission capital plays important roles in many cities, it has played a greater role in Detroit, especially as the city has transitioned out of bankruptcy.

Mission capital, also called opportunity finance, is investment meant to yield both financial and social returns. Mission lenders, such as community development financial institutions (CDFIs), often make loans in environments that mainstream providers (such as banks) may perceive as too risky, and they blend capital and provide flexible rates and terms that are not commercially available. In addition to flexible loans, mission lenders also provide technical assistance, planning, and consulting services to developers.

We found that mission capital has an outsized importance in Detroit, as large amounts of subsidy funding and mission investments have facilitated development.

  • Mainstream lending cratered while mission lending was countercyclical. Mainstream lending peaked at $737 million in 2005 and plummeted to $211 million during the Great Recession. Conversely, mission lending rose during the recession, reaching $182 million in 2008 (up from $13 million in 2003).
  • Mission lending fills a void. Between 2008 and 2015, mission lenders directly provided or leveraged 29 percent of loans to commercial, industrial, multifamily, and institutional real estate.
  • Community development financial institutions were front and center. Among mission lenders, CDFIs played an important role. From 2008 to 2015, they comprised 60 percent of mission lending. During those years, CDFIs made or leveraged investments worth $749 million, which included $652 million in direct lending.
  • Local, state, and federal subsidies were key. Between 2013 and 2015 (the period for which we have reliable subsidy data), subsidies, mission lending, and mission-leveraged lending accounted for 42 percent of investment in commercial, industrial, multifamily, and institutional real estate.

Expanding beyond the city core

Over half of mission lending and subsidy investments we tracked from 2013 to 2015 went to the Central Business District, Lower Woodward, and Middle Woodward neighborhoods.

Investing in neighborhoods outside Downtown and Midtown poses several challenges. There are greater subsidy needs for projects in weaker markets where lower rents can cover only a small share of debt financing. And many subsidies that work in large projects downtown can’t be replicated for smaller neighborhood projects. Many neighborhoods also do not have experienced developers working in them.

What are the options for spreading this investment beyond the city core so more neighborhoods can benefit from reinvestment? To address these challenges, public officials, philanthropists, and stakeholders can help spur investment by

  • creating flexible subsidy financing sources for smaller projects,
  • investing in capacity building and technical assistance for local developers,
  • improving the local regulatory environment,
  • allocating subsidies strategically, and
  • improving collaboration and visibility for Detroit’s community development industry.

Despite its long-standing struggles with its local economy, Detroit now has a robust development community that has grown in sophistication and coordination. Mission capital providers have played an important part in this growth. By making good use of policy and philanthropic supports, mission lending actors can expand progress to more Detroit residents and neighborhoods.


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The Urban Institute podcast, Evidence in Action, inspires changemakers to lead with evidence and act with equity. Cohosted by Urban President Sarah Rosen Wartell and Executive Vice President Kimberlyn Leary, every episode features in-depth discussions with experts and leaders on topics ranging from how to advance equity, to designing innovative solutions that achieve community impact, to what it means to practice evidence-based leadership.


Research Areas Neighborhoods, cities, and metros Housing
Tags Capital flows Community and economic development
Policy Centers Metropolitan Housing and Communities Policy Center
States Michigan
Cities Detroit-Warren-Dearborn, MI
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