What will Detroit look like in 20 years?

[animatedmartian]

Detroit can't deliver new or renovated apartments as fast as Chicago can. People want apartments in new or historic buildings that have been fixed up nice and have better finishes and conditions. There's a lot of housing available in Detroit, but it's worn out or needs major repairs. It's just not something young professionals want.

It seems like alot of new development in Detroit comes with tons of layers of creative financing unlike Chicago. You hear about buildings securing all sort of odd loans and grants from government agencies, non profits, various programs, etc. I'm willing to bet the complicated nature of securing financing in a market that has traditionally struggled is suppressing developer's abilities to deliver hundreds more apartments to a market that really needs them.

Pretty much the fact Detroit has so many vacant buildings is what limits Detroit's ability to grow, ironically enough. Vacant buildings have to be either renovated or demolished, they can't just sit there.

However, renovation, especially of large ornate buildings, costs a lot of money. Prices have to be at a certain point for private lenders to justify taking the risk and expecting a return [[see example Book Cadillac). If prices aren't at that level, then everything will be subsidized or have these complicated funding sources that have been apparent.

Of course, demolition tends to be frowned upon in Detroit for obvious reasons, but otherwise vacant building are a very real drag on the market. They're both a symptom of a falling market and a limiter of a rising market.

[jimmyr]

It seems like alot of new development in Detroit comes with tons of layers of creative financing unlike Chicago. You hear about buildings securing all sort of odd loans and grants from government agencies, non profits, various programs, etc.

Why do you think it's so hard to develop and get financing for a Detroit project? What do you see that bankers and economists obviously don't?

[douglasm]

I actually think Cleveland has a fair amount to do with this thread. 35 years ago, city government and the economy began to implode but as I understand it, has made remarkable progress since the I don't think it will ever lose it's "Mistake by the Lake" image, but from what I read it has made a decent recovery since the 1978 default, and might be a model that Detroit can look towards.

[animatedmartian]

I actually think Cleveland has a fair amount to do with this thread. 35 years ago, city government and the economy began to implode but as I understand it, has made remarkable progress since the I don't think it will ever lose it's "Mistake by the Lake" image, but from what I read it has made a decent recovery since the 1978 default, and might be a model that Detroit can look towards.

Really, you could look at any Rust Belt city and see the similarities they have with Detroit. The only difference with Detroit is that a larger mass of the economy was taking up by manufacturing and the auto industry. Detroit has/had some of the largest factories in the Midwest and so many of them at that. They're the only reason the city was even able to approach 2 million residents.

[jimmyr]

Pittsburg is relevant to this discussion, as they have been booming. But Detroit isn't run nearly as well as Pittsburg. Outside of the Cleveland Clinic--which is actually a huge asset--I haven't heard much good news out of Cleveland. Someone please correct me if I'm wrong.

[corktownyuppie]

Why do you think it's so hard to develop and get financing for a Detroit project? What do you see that bankers and economists obviously don't?

I'm in banking, and part of the problem is that our systems for modeling and analysis are based on assumptions that just don't hold true in Detroit, which artificially causes all sorts of difficulty in getting financing.

For example....let's look at Whole Foods. Put aside the questions about tax subsidies and profitability for a moment, because those are all questions about profits net of expenses. For years, people argued that even on the revenue side, the money just wasn't there to support a store using traditional metrics.

Like look at average household income. In Midtown a few years ago, that number looked abysmal. It was less than $30k a year. Barely above the poverty line, let alone enough to support an above-average cost grocer. But once you dig deeper into the numbers, you can see what the traditional analytical process misses... that avg. household income is artificially low because of thousands of students -- who have disposable spending habits -- but very low top-line income. It also misses the thousands of high income professionals who work near the location but reside outside the city and don't show up on the numbers.

Or most grocers [[and rightfully so) look within a certain radius of the location. But Whole Foods will draw Detroiters from 25 miles away who have the income to spend there but would never drive that distance just to go to Kroger.

Banks are also prone to looking at collateral/appraisal numbers based on estimated liquidation value....which is derived from recent comparable sales. But the problem is that in an illiquid market, there are no recent comparable sales. Or there are, but they are meaningless...such as a vacant building sold for $20,000.

Look at the Packard Plant. How the hell can one appraise that thing? I mean, if it sells for $2 million, does that bring down the comps for my Corktown townhouse? Or if it sells for $20 million, does that raise my comps?

Or consider the strangeness of using a certain distance radius for analysis. Anyone from around here knows that 1 mile east of the vacant train station is a totally different world from 1 mile west.

I don't blame bankers in total, they are just doing what they are used to doing, and they work in a system that was never designed to operate in this context.

But I dispute the concept that bankers are unwilling to do deals because they are rightfully afraid. I think they are simply unsure, and because they don't understand the markets here, they'd rather ignore potential opportunities rather than take a chance.

Though, that was more like 3-4 years ago. Now even banks in Ann Arbor are seeing that Detroit is worth a 2nd and 3rd look. So that is changing and will continue to do so.

[iheartthed]

Pittsburg is relevant to this discussion, as they have been booming. But Detroit isn't run nearly as well as Pittsburg. Outside of the Cleveland Clinic--which is actually a huge asset--I haven't heard much good news out of Cleveland. Someone please correct me if I'm wrong.

Pittsburgh has two good universities within its borders that attract students from around the world. I'm sure that has helped a bit too.

But I was in Pittsburgh for work recently and I wouldn't necessarily call it "booming." It's clean and there are fewer abandoned buildings downtown compared to Detroit but it doesn't really feel that vibrant. It felt more like Detroit than not, IMO.

[mwilbert]

If rents downtown were unreasonably high, I would expect there to be more vacancies than there seem to be. As other people have said, there is limited supply [[because rents are apparently not yet high enough to allow unsubsidized construction of new units, and there are only subsidies available for a limited number of projects) and so you don't need a huge amount of demand to drive up prices. The rental market works differently in places where rents are high enough to generate new construction on their own--normally regulation is the constraint on the production of new units.

Based upon what I have seen, rents are almost high enough now to make construction economic. Once we start seeing minimally subsidized building, we will get a better sense of the depth of the demand for downtown units. It may be that almost everyone willing to pay the current prices is already there, or it may not. If so, reaching the point where construction is economic won't make much difference. If not, we should see a fairly rapid expansion of the number of downtown units and residents.

I expect in 20 years you will see a more populated downtown and midtown with more businesses. You may see a penumbra of development around the core area, especially up Woodward and out Jefferson. You may see significantly more and higher-income people in the Palmer Park apartment district. But I don't think you are going to see the bulk of the city with more people than it has now.

[douglasm]

I don't know if population is the issue. It is an issue, as is the quality of the housing stock. But I wonder if a stable, more responsive government [[all forms, city, schools, etc.) is more important to an improved city and the quality of life therein.

The one thing that really bothers me is I haven't seen a "plan" for Detroit's revival. I'll admit the little town I'm a councilman in doesn't come close to comparing with the D, but we're in the middle of creating a 10 year comprehensive plan for our little berg that includes housing, infrastructure and economic development [[among other things). If there's one for Detroit, I assume it would be ballyhooed [[and criticized) all over this board. But I haven't seen one yet.

[unclefrank]

I see a Detroit of around 200,000 people with vast tracts of overgrown land and some farms. Very little industry. A small downtown play area for the surrounding area.

[Jason]

I think in 20 years, greater downtown will be more stable and more consistent, and that the "good" areas will be contiguous between downtown and New Center.

I think neighborhoods like Indian Village and Boston-Edison will see their fortunes rise as there are more people whose lives are centered around downtown, but want a big old house to live in.

I think greater downtown will be big and expensive enough that we'll be seeing the normal big-city dynamic of cheap areas becoming trendy and then made expensive, as older expensive trendy areas become cheaper.

I think between the bankruptcy and better leadership in the mayor's office and city council, I think city government will be more functional. There will still be the usual city problems of bad schools and high crime, but this will be closer to other cities in that there will be more low crime areas, and that the magnet schools, charter schools, and private schools will improve.

I think that neighborhoods that don't become oriented towards downtown will deteriorate in ways that even today we'd find shocking.

[factoryrat]

Detroit is it's own worst enemy. One solution would be for the city to downsize, give back all the townships that it annexed 100 years ago. Let the city limit be bound to inside Grand blvd. The remaining land could go to the already existing townships ie: Redford, Gross pointe, Hamtramack, ect., or the one township that got completely dissolved, Greenfield.

[acer_ventura]

Detroit is it's own worst enemy. One solution would be for the city to downsize, give back all the townships that it annexed 100 years ago. Let the city limit be bound to inside Grand blvd. The remaining land could go to the already existing townships ie: Redford, Gross pointe, Hamtramack, ect., or the one township that got completely dissolved, Greenfield.

Some form of semi-organized/disorganized contraction is going to occur by year 20, almost certainly.

Are any of those townships avidly looking to reacquire these cut-off line neighborhoods?

[animatedmartian]

I don't know if population is the issue. It is an issue, as is the quality of the housing stock. But I wonder if a stable, more responsive government [[all forms, city, schools, etc.) is more important to an improved city and the quality of life therein.

The one thing that really bothers me is I haven't seen a "plan" for Detroit's revival. I'll admit the little town I'm a councilman in doesn't come close to comparing with the D, but we're in the middle of creating a 10 year comprehensive plan for our little berg that includes housing, infrastructure and economic development [[among other things). If there's one for Detroit, I assume it would be ballyhooed [[and criticized) all over this board. But I haven't seen one yet.

There's a 50-year plan in huge PDF files but it's mostly filled with infographics.

http://detroitfuturecity.com/framework/

[sumas]

This a hard question that I have been pondering, we are more into being historians. Detroit can never be what it was. I have good feelings that it will be renewed and vibrant again. No clue what form it will take. That is for the upcoming generation.

[corktownyuppie]

Originally Posted by douglasm

I don't know if population is the issue. It is an issue, as is the quality of the housing stock. But I wonder if a stable, more responsive government [[all forms, city, schools, etc.) is more important to an improved city and the quality of life therein.

The one thing that really bothers me is I haven't seen a "plan" for Detroit's revival. I'll admit the little town I'm a councilman in doesn't come close to comparing with the D, but we're in the middle of creating a 10 year comprehensive plan for our little berg that includes housing, infrastructure and economic development [[among other things). If there's one for Detroit, I assume it would be ballyhooed [[and criticized) all over this board. But I haven't seen one yet.

That plan has been in existence for almost an entire year. It's very long, detail-oriented, though generally friendly to the untrained reader.

You've heard little about it [[though it has been brought up many times over the last year....including by me in this thread about 8 posts back) because for many people it's easier to complain and/or be angry then to actually think about the problem, let alone put forth effort to solve it.

The plan is not perfect, but it addresses a lot of the realities on the ground, included hundreds of Detroit citizens for input, and it was very well funded.

That plan serves as a strategic vision. As for the actual plan of execution, you'll have to look at the recently submitted plan of adjustment in bankruptcy court, which should free up a few billion which can now be used to beef up city services and work toward that vision.

Judge Rhodes has insisted on having local government testify about their intentions and opinions about the vision going forward, so there will be some teeth and accountability.

[sumas]

I keep thinking about this. I have great faith that Mayor Duggan will do alot to stabilize our city. The future will rely on our youth. We need to invest heavily in them. Kids clamor to show us report cards and are proud they do not flunk. We need to do more. If we have a work force that can do tech jobs etc. the future is bright. If we fail our kids it is grim.

[Hermod]

Some form of semi-organized/disorganized contraction is going to occur by year 20, almost certainly.

Are any of those townships avidly looking to reacquire these cut-off line neighborhoods?

Not to mention that the courts have taken a very dim view of incorporated entities "spinning off" their problem areas.

[313WX]

I see a Detroit of around 200,000 people with vast tracts of overgrown land and some farms. Very little industry. A small downtown play area for the surrounding area.

^^^I tend to agree with this.

No way Detroit remains above 500,000 people.

[DetroiterOnTheWestCoast]

Have to disagree with you there. Downtown Grand Rapids has cultivated a great city vibe; high rises, clean, safe, two great hotels, terrific restaurants, bars, entertainment, concerts, universities. Grand Rapids will probably grow to over 200k soon. It doing a hell of a lot better at drawing in college grads than Detroit proper.

Ann Arbor, Birmingham [[but more so Royal Oak) have the vibe of a Chicago neighborhood, not necessarily the vast major city. When you live in Chicago you're not taking advantage of the entire city, you're in your neighborhood the majority of the time. Walkability, restaurants, thousands of college educated people living within a mile of you, tons of foot traffic all the time, etc. No Detroit neighborhood currently offers that.

But I still miss Wurzbergs, Steketees and Herpolsheimers.

[illwill]

Pittsburg is relevant to this discussion, as they have been booming. But Detroit isn't run nearly as well as Pittsburg. Outside of the Cleveland Clinic--which is actually a huge asset--I haven't heard much good news out of Cleveland. Someone please correct me if I'm wrong.

They have a world class symphony in Cleveland. It's sad to think Detroit can use Cleveland, A2, Grand Rapids & Royal Oak as an example. Scary!

[illwill]

Jimmyr, I too often think Detroit is shooting itself in the foot charging such high real estate prices in the city center and nearby areas. But as someone stated earlier, It's very simple... it is supply and demand. However, my argument about supply and demand is how long will there be a demand when people are already being priced out this early in the recovery? Eventually people will look at other cities that are more affordable or cities that can offer more. Such as Cleveland, St. Louis, Pittsburgh etc...

One thing that I always point out about Chicago is back in the 80's when Downtown Chicago looked like Downtown Detroit, the price of real estate remained dirt cheap for decades. The thing is, back then, Cities were the last place anyone wanted to live in those days. It took Chicago several decades for the downtown population to build for young creative types and professionals. When Chicago began it's downtown growth, condos were selling between $19,000-$39,000 in the gold Coast. It stayed like this for years! This is why the Loop is so heavily populated today, because Chicago's downtown was dirt cheap for so long. Prices didn't start out at $350K and it wasn't all about the granite, amenities offered etc. It had a very solid base. If they had been trying to charge top dollar prices back then, people would have said "screw that!" And moved to greener pastures. That's my fear for Detroit.

A couple of beginner chefs teamed up with some old timers that had old warehouses and they brought in new restaurants, bars, nightclubs etc. But keep in mind AGAIN, city living wasn't trendy back then. So prices still remained low. But cities are different now and so are the people wanting to live in them. Prices are purposely being driven up and it's because the new NIMBY's want cities to look a different way. Not saying I feel one way or the other...If ANY city was to do this stuff right now, prices would sky-rocket because of the greedy developers/banks. In turn, forcing people to look else where to live. This is why I think Detroit is slow to grow and I fear this "might" cause a bubble in Detroit's city center. The prices are already scaring people away. I asked my college age nephews and nieces and their friends if they'd like to live downtown Detroit and they said yes, but it's too expensive. So they'll continue living in Ann Arbor and elsewhere. Already, Detroit has already priced out young successful people.

Detroit is notorious for always missing the boom at the right time.

[Dan Wesson]

I'm thinkin' that what's missing in this discussion of pricing right is the fact that the official policy of this nations moneychangers is a 2% increase inflation rate per year of the dollar.

We all know that the numbers are fudged by the powers that be and the 2% is lower than actual.

This all leads to a devaluation in your purchasing power. So are the prices being asked for really out of line?

[stasu1213]

In 20 years Detroit will have a lot of greenspace. I think that a park, the size of
Central Park in New York will be in the middle of the eastside where blighted neighborhoods once were. Midtown will be a shopping, living, entertainment destination where a Target or a store like it will be inside the New Center One shopping center with other middle end stores. G.M. will no longer own the RenCen but another reputable corporation will own it and put it into good use. The city airport will be compatible to Detroit Metro Airport and Gratiot will become a highway leading to it starting at Van Dyke to 7 mile road. Schools would be privatized only to the neighborhoods or communities that they are in. Crusise Ships would dock at the Port Authority and Woodward would be a destination of retail, office, entertainment, and commerce. Indian Village, Sherwood Forest, Palmer Woods, Green Acres, East English Village will still remain but the neighborhoods outside of them will mostly be greenspace.. Woodward, Michigan, Gratiot, and Eight Mile will have the rail system while Jefferson will be left for busses and cars for more of a scenic route

[corktownyuppie]

In 20 years Detroit will have a lot of greenspace. I think that a park, the size of
Central Park in New York will be in the middle of the eastside where blighted neighborhoods once were. Midtown will be a shopping, living, entertainment destination where a Target or a store like it will be inside the New Center One shopping center with other middle end stores. G.M. will no longer own the RenCen but another reputable corporation will own it and put it into good use. The city airport will be compatible to Detroit Metro Airport and Gratiot will become a highway leading to it starting at Van Dyke to 7 mile road. Schools would be privatized only to the neighborhoods or communities that they are in. Crusise Ships would dock at the Port Authority and Woodward would be a destination of retail, office, entertainment, and commerce. Indian Village, Sherwood Forest, Palmer Woods, Green Acres, East English Village will still remain but the neighborhoods outside of them will mostly be greenspace.. Woodward, Michigan, Gratiot, and Eight Mile will have the rail system while Jefferson will be left for busses and cars for more of a scenic route

I think that's pretty accurate. We're moving toward a "drive-to-walk" society. For example, I don't mind driving 15 minutes to Royal Oak. But once I'm parked there, I'd like to walk from place to place. Same with Ann Arbor or Birmingham. Detroit will be similar, with solid neighborhoods surrounded by greenspace.

313WX also put it succinctly....a mix of Atlanta, Portland, and Delta City