Detroit is showing the world how a city can pull itself up by its bootstraps, and become a showcase for urban renewal. It’s a city that’s rising from the ashes of urban decay with an already renovated city core, and millions of dollars flowing in for neighborhood improvements from corporate donors. (1)
Record Corporate Donation for City Upgrades
Detroit recently announced the largest corporate donation in the city’s history for this project. Seven major companies with a presence in Detroit donated $5 million each. The money will go into the Strategic Neighborhood Fund that’s being used to pay for physical upgrades to distressed neighborhoods. Of course, this helps not just the city and the residents who live there, but the entire business environment, including the rental market and real estate investors.
There’s a five-point plan for neighborhood improvements. (2)
1 – To refurbish existing parks and create a new one with amenities that fit community needs.
2 – To fill vacant storefronts with mixed-use and multi-family projects in commercial corridors.
3 – To make streets more attractive and walkable with pedestrian lighting, safer street crossings, repaved sidewalks, and bike-share lanes.
4 – To stabilize neighborhoods by renovating and preserving vacant single family homes, and the removal of blighted homes.
5 – To increase the supply of affordable housing units, and prevent displacement in areas of development.
Money to Benefit 10 Neighborhoods
The latest $35 million is part of a second round of funding that began with a $15 million contribution from the Kresge Foundation. The seven new donors include American Axle, Blue Cross Blue Shield of Michigan, Chemical Bank, Fifth Third Bank, Flagstar Bank, Huntington Bank, and the Penske Corporation. The city’s goal is to raise $130 million to rebuild 10 neighborhoods. It hopes to meet that goal by the end of this year. The first round of funding raised $42 million for improvements to three neighborhoods.
Mayor Mike Duggan says of this massive urban renewal effort, “Today we are seeing a major shift within the corporate community toward investment to our neighborhoods, and residents can expect real, physical changes coming in the next few years.” He says, “We are taking the strategy that worked in Midtown and scaling it citywide to bring more development to neighborhoods.”
One of the city’s goals is to create “20-minute neighborhoods.” Those are areas where it takes just 20 minutes to walk to a central district with stores, parks, schools, and public transit. It’s also working to boost the growth of small businesses and to create more affordable housing.
The affordable housing plan includes a fundraising goal of $250 million. The money will be used to preserve 10,000 affordable housing units and create another 2,000. The mayor says, “We are not going to grow as a city unless we do everything in our power to keep the residents we have and attract new residents.”
Detroit’s Housing Market
Individual investors have also discovered Detroit’s housing market. Detroit’s single-family rental market is one of the best in the nation. You can buy extremely affordable homes that provide cash flow and appreciation. The median home price is about $80,000, but you can buy fully renovated properties for as little as $65,000 and rent them for 1.18% of the purchase price. That’s a monthly rent of $767 for a $65,000 home. Detroit offers the potential for more monthly rental income than most other U.S. cities.
Quicken Loans founder Dan Gilbert is also optimistic about Detroit’s rebirth. He’s one of two billionaires who are committed to the rebuilding of Detroit and is pouring money into various redevelopment projects. Crain’s reported recently that Gilbert isn’t worried about a recession. (3) He says even if one hits us within the next two years, his building projects will continue. He’s launching them by self-funding, and then refinancing them at a later date. He says he’s had no trouble refinancing the projects once they are done, and by self-financing during construction, he’s able to simplify the process of construction, and have more flexibility.
According to Crain’s, we can expect his construction spree to continue. Gilbert says, “We are working on some really exciting, unique things which I can’t talk about yet. It’s really exciting. It’s all connected — there might be some office and residential — but there’s another theme, and I hope it comes to fruition.”
(1) Fortune Article