Demand for Downtown/Midtown housing continues unabated...

**PaulieG63** · September-21-12, 12:46 PM

From Mlive:

DETROIT, MI - The demand to live in the downtown, Central Business District and Midtown areas of Detroit cannot keep up with available housing, Susan Mosey, who heads Midtown Detroit, Inc., told a meeting of Detroit Young Professionals last night.
"We're desperately trying to bring more housing product in the neighborhood, that's the next thing we're spending a lot of time trying to do," Mosey said.
The downtown and Midtown areas are now at occupancy levels of 97 percent and 96 percent, respectively, she said.
At the same time, the Live Midtown and Live Downtown programs continue to see high interest and show no signs of waning, as they plan to spend $2 million a year on attracting young workers to post up in Detroit proper.

The program was launched last year as a partnership with Henry Ford Health System, Wayne State University and Detroit Medical Center as a way to get young workers to live in the Midtown area, by offering $2,500 in annual rent assistance or a $20,000 down payment on a home purchase. The effort's initial $5 million was matched by the Hudson River Foundation, the Michigan Housing Development Authority and the Kresge Foundation.
Large employers in the downtown area took note of the program, and soon Compuware, Quicken Loans, Blue Cross Blue Shield, Strategic Staffing and DTE Energy added another $5 million to the effort to draw their young workers downtown.
About $2 million has been spent so far, Mosey said, and the program plans to continue to spend $2 million each year for the next four years. It recently accepted its 676^th applicant.
"We haven't seen any slowdown or interest, in this program, in downtown or Midtown," she said.

PaulieG

**MidTownMs** · September-21-12, 02:02 PM

It must be true about Midtown. The first weekend in March, 2012 I had an open house. An offer was made less than a week later. Closed on March 31, 2012.

**rutlev** · September-21-12, 04:07 PM

What can be done about perfectly good housing that was
snapped up by an out of state investor about 7 years ago and has been left to sit? It is boarded up, and it was lent out to a movie company a few years ago for a fake explosion, but to date nothing.....just sitting there, 3 units - and people all over looking for rental property.

**gameguy56** · September-21-12, 04:12 PM

Originally Posted by antongast

That's nice. Maybe if they're trying to keep folks around long-term they should think about addressing the bedbug epidemic, though.

what's that?

**Detroitnerd** · September-21-12, 04:15 PM

Well, in my opinion, the great retrenchment of metro Detroit is off to a start. People moving into selected city neighborhoods, the vast oversupply of exurban housing still reeling from the foreclosure crisis, young people driving less and waiting to get licenses. All we need is sensible, modern, rail-based rapid transit in Detroit to speed the trend.

**scottn55** · September-21-12, 04:40 PM

Boy just imagine how many units you could squeeze into the Book Tower/Building, Stott Tower, United Artists Building, Park Avenue Building, Hotel Charlevoix, etc... Any hardy deep pocketed investors out there?

Too bad we don't have the Statler anymore...

**mikeg19** · September-21-12, 04:51 PM

Originally Posted by scottn55

Boy just imagine how many units you could squeeze into the Book Tower/Building, Stott Tower, United Artists Building, Park Avenue Building, Hotel Charlevoix, etc... Any hardy deep pocketed investors out there?

Too bad we don't have the Statler anymore...

You beat my thought with your comment by about ten minutes!

I find it so hard to understand why these buildings can't find investors/financing to renovate them. You've gotta imagine in those buidings along are probably around 500 residences that would be filled in no time. I don't get how banks can still be so leery about lending with these projects when they see the occupancy rates and pent up demand for residences in those areas. It's great to see, I just wish we could fill the existing buildings instead of continually hearing about there being nowhere to live down there.

**313WX** · September-21-12, 06:15 PM

Originally Posted by mikeg19

You beat my thought with your comment by about ten minutes!

I find it so hard to understand why these buildings can't find investors/financing to renovate them. You've gotta imagine in those buidings along are probably around 500 residences that would be filled in no time. I don't get how banks can still be so leery about lending with these projects when they see the occupancy rates and pent up demand for residences in those areas. It's great to see, I just wish we could fill the existing buildings instead of continually hearing about there being nowhere to live down there.

1, Credit lines are still frozen [[Dan Gilbert received a $200 Million dollar credit to help finance his developments, and Whole Foods received significant subsidizes as well), not necessarily because it's Detroit, but mostly because of what's happening with the international economy, the housing industry and the EuroZone crisis.

2. A lot of investors are still afraid that Detroit's market is too unstable.

Detroit's "comeback" [[assuming there is one) is going to be much slower than what it would have been had we started, say, in 1992, before the real estate boom.

**Hermod** · September-21-12, 06:50 PM

Originally Posted by mikeg19

I find it so hard to understand why these buildings can't find investors/financing to renovate them. You've gotta imagine in those buidings along are probably around 500 residences that would be filled in no time. I don't get how banks can still be so leery about lending with these projects when they see the occupancy rates and pent up demand for residences in those areas.

Once burned, twice shy?

**canuck** · September-21-12, 07:14 PM

Originally Posted by scottn55

Boy just imagine how many units you could squeeze into the Book Tower/Building, Stott Tower, United Artists Building, Park Avenue Building, Hotel Charlevoix, etc... Any hardy deep pocketed investors out there?

Too bad we don't have the Statler anymore...

That is the way to go for Detroit. Not building non-descript condo towers but rehabbing the stuff that is historically significant and many times more attractive than the glass and steel condo crap à la mode.

**313WX** · September-21-12, 07:24 PM

Originally Posted by canuck

That is the way to go for Detroit. Not building non-descript condo towers but rehabbing the stuff that is historically significant and many times more attractive than the glass and steel condo crap à la mode.

The reason the "glass and steel condo crap a la mode" isn't being built is because Detroit has a glut of abandoned building that can be simply rehabbed, which IS much cheaper.

If Detroit lacked these type of structures to rehab, you better believe the crap a la mode would be popping up [[of course Detroit's given its situation is a LONG way from that point).

**wolverine** · September-21-12, 08:20 PM

This issue is unusual in Detroit. You have demand for affordable priced housing and then deliver sky high rent prices in renovated vintage buildings. Then on the other hand, you have available units in aging structures in dire need of upgrades for lower rents. So in the end, you're left with a very limited list of affordable units in buildings of good condition. One of the reasons I won't move back to Detroit because I can't find anything that's being built in those "glass and steel condo crap a la mode buildings." I seriously believe there's demand to build several of those downtown.

Looking at the Broderick rents, they're laughable. I pay about the same amount in the $1500-$1600 range on a high floor here on the Mag Mile in Chicago, but at least the shopping, lakefront, restaurants, bars, and proximity to the loop comes with it.

In summary, downtown Detroit rents need to come down, housing quality must go up.

**Hypestyles** · September-21-12, 08:38 PM

break up the bank oligopolies, there will probably be more development loans, etc.

**mwilbert** · September-21-12, 09:08 PM

Originally Posted by wolverine

In summary, downtown Detroit rents
need to come down, housing quality must go up.

This is a strange interpretation of a rental market that is apparently extremely tight. Of course it would be good for renters if rents came down and quality went up, but it doesn't appear to be necessary.

What seems more likely to be needed to me is that more units be produced, which is more likely to happen if rents stay up than if they drop. I do think that it would be sensible for landlords to come up with more gradations of quality between luxury and pit.

**401don** · September-22-12, 07:59 AM

Not sure what's taking Gilbert so long to start on residential. With all the employees he has downtown he knows there will continue to be demand and he knows he needs more residents to support the retail he wants.

**professorscott** · September-22-12, 08:40 AM

Originally Posted by 401don

Not sure what's taking Gilbert so long to start on residential. With all the employees he has downtown he knows there will continue to be demand and he knows he needs more residents to support the retail he wants.

Residential isn't his game. I think he'll be involved with this but in more of a behind-the-scenes way, helping people get through the government maze, lining up financing for projects, etc.

By the way, the person a few posts ago who said the rents need to come down - I see where you're coming from, bro, but you need to take ECON 101. When there's a shortage, prices go up.

This is what an old business colleague of mine referred to as a high-class problem. We have so many customers demanding widgets that we can't produce enough widgets! The kind of problem every businessperson dreams of having

**Mikeg** · September-22-12, 09:13 AM

I think everyone who has posted here - with the exception of 313WX and Hermod - need to take ECON 101.

Subsidies always distort the normal supply vs. demand pricing mechanism. The developers are still having to rely on economic development subsidies to make their business case and now the new CBD and Midtown residents are relying on $2,500 annual or $20,000 one-time payments to make their housing decision "business case".

**DetroitPlanner** · September-22-12, 09:19 AM

Originally Posted by professorscott

Residential isn't his game. I think he'll be involved with this but in more of a behind-the-scenes way, helping people get through the government maze, lining up financing for projects, etc.

Really? Well residential wasn't Taubman's game but he did Riverfront. I guess Gilbert's being in the residential mortgage business and owning half of downtown makes him know nothing about residential real estate.

I would agree with you on the fact that Gilbert has had been a bottom feeder when it comes to buying his properties and that the cost of doing business by WSU may be too high for the return.

**Hermod** · September-22-12, 10:10 AM

Originally Posted by Hypestyles

break up the bank oligopolies, there will probably be more development loans, etc.

Lots of smaller banks out there as well. Try getting an unsecured construction loan from them. They aren't lending unless the borrower has a lot of skin in the game.

**Wesley Mouch** · September-22-12, 10:17 AM

Originally Posted by PaulieG63

...offering $2,500 in annual rent assistance or a $20,000 down payment on a home purchase. ...

Econ102: Subsidies put into a market go to the profit of the developer. The users just pay $20,000 more [[or $2,500 a year more rent).

Its quite simple.

In the end, this program simply raises rents/prices for these units.

If you don't' believe it, add more subsidies and watch.

**Jason** · September-22-12, 02:01 PM

Rents can vary a lot from city to city but construction costs don't vary as much.

Detroit is a very low rent place, but buildings are still just as expensive to build.

In order for new construction/renovations to make business sense, rents need to be higher. But I don't know enough about the subject to know what to do about it. I can't imagine rent going up very much unless the neighborhoods become less patchy, but the neighborhoods can't become less patchy without new construction and new construction needs higher rents.

**wolverine** · September-22-12, 02:29 PM

Originally Posted by Jason

Rents can vary a lot from city to city but construction costs don't vary as much.

Detroit is a very low rent place, but buildings are still just as expensive to build..

Cost of construction is the same as most other midwest cities except Chicago and Minneapolis. I don't think high rents are a result of construction costs. It's developers banking on consumer ignorance and short supply with high demand.

**Detroitnerd** · September-22-12, 03:59 PM

It also has to do with the tools in our toolbox here.

For decades, government and business heavily funded new construction and demolition. In fact, the amount of public money that has gone into funding the wrecking ball here in town is astonishing.

That sort of funding has created a concentration of demolition and wrecking companies in the metro area.

Only very slight funding has gone to rehabs, renovations, repurposing, re-use, upgrades, etc. And if you hardly fund re-use, you tend to get planners and architects who don't consider re-use. If you hardly fund rehabs, you get engineers with a tear-it-down-and-start-over mentality.

My point is that you get the skill sets that you subsidize.

That is why it would have been better to put people to work rehabbing lower floors and mothballing upper floors of some of the buildings we knocked down. The cost would have been about the same, but we would have been building those skills locally. And it's beginning to look like we need them, yes?

**Jason** · September-22-12, 07:21 PM

What I mean is that construction costs are basically the same, but rents aren't, and the rents they can get might not justify the construction costs.

**wolverine** · September-23-12, 01:52 AM

Originally Posted by Detroitnerd

It also has to do with the tools in our toolbox here.

For decades, government and business heavily funded new construction and demolition. In fact, the amount of public money that has gone into funding the wrecking ball here in town is astonishing.

That sort of funding has created a concentration of demolition and wrecking companies in the metro area.

Only very slight funding has gone to rehabs, renovations, repurposing, re-use, upgrades, etc. And if you hardly fund re-use, you tend to get planners and architects who don't consider re-use. If you hardly fund rehabs, you get engineers with a tear-it-down-and-start-over mentality.

My point is that you get the skill sets that you subsidize.

That is why it would have been better to put people to work rehabbing lower floors and mothballing upper floors of some of the buildings we knocked down. The cost would have been about the same, but we would have been building those skills locally. And it's beginning to look like we need them, yes?

Construction labor is transient. The workers will appear when there's demand.