Recently, the City of Detroit issued the first $150 million of the $250 million in bonds approved by voters (Proposal N) in the 2020 November elections. The City characterizes the debt as “social bonds,” which will be spent on socially conscious goals, prominent among them, affordable housing. There is little doubt that a shortage of safe, affordable housing is among the more serious challenges facing Detroit residents. However, meeting this challenge requires more than new money. It requires new ideas. Now is a perfect opportunity for Detroit to explore creative alternative approaches to making safe and affordable housing available to all Detroiters.
Housing insecurity in Detroit predates the pandemic. In 2019, more than 10,000 Detroiters experienced homelessness, including 2,326 who were chronically homeless. COVID-19 has only worsened the situation. In just the first month of 2021, more than 3,500 Detroiters requested rental payment assistance from Michigan. Tens of thousands more remain at risk of eviction. In short, there are simply not enough habitable, safe homes that most Detroiters can afford.
“Speculation, low wages, and access to capital play disproportionate roles in Detroit’s housing market.” – Eric Williams
Detroit, like many municipalities, relies heavily on Low-Income Housing Tax Credits (LIHTC) to finance the acquisition, construction and rehabilitation of affordable housing. However, developers who create affordable housing with LIHTC are required to keep the housing affordable (as defined by the US Department of Housing and Urban Development) for only a limited time. Once the tax credits expire, the units can revert to market rate. This process is expected to eliminate thousands of affordable housing units in Detroit over the next three years.
In response to the impending loss of so much affordable housing, Detroit announced its five-year Multifamily Affordable Housing Strategy to preserve 10,000 units of multifamily affordable housing and create 2,000 new units by 2023. Estimated cost: $800 million, including $300 million specifically to preserve existing affordable housing. While this investment is commendable, it is treating the symptoms rather than curing the disease.
Detroit is not San Francisco, New York, or Chicago. The shortage of affordable housing is not the consequence of natural demand exceeding supply. Speculation, low wages and access to capital play disproportionate roles in Detroit’s housing market. In addition, despite the need for affordable housing, the City has a legitimate vested interest in home value appreciation. The City’s need to see home values (and tax receipts) rise will always be in conflict with the need for affordable housing. A stable market of affordable housing requires addressing all of these issues.
Detroit’s housing situation isn’t unique. What stands out here is the lack of creativity deployed to develop affordable housing solutions. Rather than continue to rely on limited or flawed systems, other cities and counties are embracing alternative systems, including community land trusts. The land trust model, born in the rural civil rights movement, divides ownership of the land and the homes on it. The land is owned by a community-run nonprofit, while the homes are owned by individuals. The result is a community of permanent affordable housing. This approach also reduces the displacement of gentrification, provides a community framework that supports residents, limits their overall exposure to debt, and reduces foreclosures in bad times. More than 225 community land trusts can be found in cities, suburbs and rural areas across the country, including Atlanta, Chicago, Houston, Oakland, Calif and New Orleans. One of the largest, the Champlain Housing Trust in Burlington, Vermont, has more than 2,000 household members in rental apartments, co-ops, single-family homes and condominiums.
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Community land trusts rely heavily on the engagement of the community. However, land acquisition and development require the resources of government, the philanthropic community and the private sector. Detroit has already marshalled these forces to support the Affordable Housing Leverage Fund. To date, the fund has access to an estimated $250 million. Clearly the city can find money and the will to address housing insecurity. It’s long past time to pair those with a little imagination.
Eric Williams is the managing attorney of the Detroit Justice Center’s Economic Equity Practice. A native Detroiter, Eric is a transactional attorney with an emphasis on equitable development and the legal needs of Detroit’s entrepreneurs, small businesses and nonprofits. Eric previously served as the director of Wayne State University Law School’s Business and Community Law Clinic, as well as the director of the Wayne Law Program for Entrepreneurship and Business Law.