DETROIT – For those of us who remember downtown Detroit pre-bankruptcy, there was that tumbleweed-feel about the place.
You could roll a bowling ball down Woodward and not hit anything.
Well, now that we're post-bankruptcy and post-Dan Gilbert, today is a new day. My photographer and I set out to find a sandwich shop around noontime recalling it wasn't so long ago you used to have to drive 15 minutes to the burbs to find one of quality. Today we discovered there was so much building and street construction along with foot traffic we needed that same 15 minutes just to traverse Campus Martius. We hardly recognized the place.
Downtown is a boomtown and a turnaround there is well underway. One of the things galling Detroiters about this, though, is the big money is downtown. That tumbleweed-feel remains in the neighborhoods. Thus the oft heard complaint about Detroit's resurrection; it's mostly corporate.
Detroit Mayor Mike Duggan has a good ear for such concerns and a full understanding he is mayor of the entire city, not just downtown. So, he has been working on things like trying to get lower auto insurance rates for everyone inside the city limits and regain control over Detroit Public Schools. But it is obvious restoring the neighborhoods begins and ends with people living in houses. Blocks and blocks of vacant homes need one of two things: either to be knocked down [if it's not restorable] or rehabilitation by a new, live-in owner. You will see demolition crews around town taking down the occasional wreck. What you don't see are moving trucks bringing suburbanites into the city.
Now, as we learned in the bankruptcy trial, the difference between a bureaucrat and a business person is the bureaucrat sees problem-solving only through a political prism. The business person of even limited skill sees opportunity in disaster and improvement through incentives. Duggan is a longtime politician but also spent a long time as a businessman running the Detroit Medical Center. He sees this "vacant housing problem" as opportunity. He knows city employees have taken a financial beating in the bankruptcy. He also knows when the state of Michigan prevented cities from forcing employees to live within the city limits as a condition of employment, a lot of Detroit city employees sped off to live in the burbs. So you have empty homes that, with a little t.l.c., could be occupied, and a desire to give city residents a reason to come back and live where they work.
Duggan went to Michigan-based Flagstar Bank, one of the nation's top 10 mortgage lenders, and asked CEO Sandro DiNello to see if he could come up with a way to design a mortgage program that could allow city employees to buy an existing vacant home through Detroit's Land Bank, but also discount not only the sale price but the mortgage AND the renovation. Sounds like a tall order. Flagstar had to speak with regulators to allow the issuing of "upside down" mortgages. But, somehow, they got the green light.
View press release: New Mortgage Program Aims to Boost Employee Residency in Detroit, Increase Wave of Home Renovation Projects
So, today, Duggan rolled out publically what he did internally at City Hall three months ago. So far 44 city employees have purchased homes from the Land Bank and are eligible for the discount program. There are roughly 10,000 Detroit city employees. It is likely a fraction of that will participate.
Still, Duggan believes this is a good option and a way to work out the kinks in a pilot program. If it fails, there's little lost. If it succeeds, it can become the model for wider use. There is no way to know right now whether this will work. Yet, that legendary journey of a thousand miles begins with that single step. This is a unique attempt at bringing back the neighborhoods bureaucrats had no answers for previously.
Should this work, it might be a spark that could gain some momentum. Let's not get ahead of ourselves and believe this will blossom as quickly as downtown has. Detroit is 134 square miles wide. This is likely to take a decade or more. But it's a start and one with a dramatically different approach than Detroit is used to. It's a constant you will hear from economists: incentives work. This incentivizes neighborhood growth. What a concept!