Detroit: Big Upside

Detroit’s woes are well known — abandoned properties, an exodus from downtown, failed manufacturing industry. However, there are signs of life in the Motor City. When one thinks about tech innovation, thoughts of Silicon Valley and Seattle come to mind. Now you can add Detroit to that list. The Motor City is flush with initiatives to bring young entrepreneurs to the area, including cash incentives and new housing programs. “For a long time Detroit was reliant on the auto industry and manufacturing. For the economy to survive, the city needed to transition to a brain economy,” says Ross Sanders, executive director of Bizdom, a nonprofit web and tech-based company startup accelerator founded in 2007 by Dan Gilbert, founder and chairman of Quicken Loans and Rock Ventures.

Committed to Rebuilding

Rebuilding Detroit is no easy job. It requires collaboration from national, state, private and local entities. However, it all started with one man: Dan Gilbert, who moved Quicken Loans headquarters and some 8,000 employees to downtown Detroit and dedicated himself to rebuilding the city. According to the National Journal, he now controls more than 40 downtown properties — covering nearly 8 million square feet of real estate — and his family of companies employs more than 12,000, all working in downtown Detroit. To date, Gilbert’s total investment in Detroit nears $1.5 billion. There’s no doubt Gilbert’s influence is bringing energy to the transforming Detroit movement. “Dan Gilbert relocated his businesses to Detroit and launched the Downtown Detroit Partnership. At the same time, there are others, such as JP Morgan Chase, contributing with new economic initiatives, collaborating and pooling money for economic development,” says Sanders.

JP Morgan Chase committed to investing $100 million in Detroit, with $50 million going to community development investment, $25 million to fight blight and restore properties to productive use and the rest for small business growth, workforce training and the M1 Rail, a streetcar connecting downtown and midtown.

According to JP Morgan Chase CEO and Chairman Jamie Dimon, “We are for profit. We are investing in Detroit. With this investment, we are putting our resources and expertise to work to help Detroit chart a course back to economic prosperity.”

Signs of Life

Eric Larson, CEO of the Downtown Detroit Partnership, a partnership of corporate, civic and philanthropic leaders that supports and develops programs and initiatives designed to create an inviting Downtown Detroit, is excited about the changes. “For the last 40 years, we have been fighting an uphill climb. A number of companies have kept the city on life support, such as Blue Cross and the auto companies. When Dan Gilbert moved his companies into the city, our occupancy rate went from 55 to 60 percent to 90 percent. We’re almost full,” says Larson. “Rent has increased from the low teens to the mid to upper 20s. That provided us with a stable foundation.”

That foundation allowed private and public entities to expand the infrastructure. “There is so much going on in Detroit right now,” says Tiffany Hart, president and CEO of Hart & Associates and an affiliate member of the Detroit Association of REALTORS®. Her company recently won a contract to work on the infrastructure of the M1 Rail project. “This project is a catalyst for major development. So many opportunities can sprout from this, businesses will develop along the line, and people want to live downtown. We’re seeing new residential construction for the first time in a long time,” says Hart. “People want to be a part of Detroit now, and it’s exciting.”

Young Entrepreneurs

In addition to the M1 Rail, new programs are bringing young entrepreneurs into the city. “In early 2012, Bizdom changed its business model and launched an accelerator bringing young tech entrepreneurs to the city,” says Sanders. “We now have 17 active businesses, and just under 70 jobs created. In January 2012, we had zero, so we’re making progress.”

One such company is foodjunky, a one-stop delivery service that allows business owners to place an online food order with local restaurants. Co-founder Travis Johnson relocated from Chicago to Detroit to expand. “My cofounder, Andy Waldman, and I founded foodjunky in Chicago. I went to an industry investor event and met some Bizdom executives who convinced me to come out and see what was going on in Detroit,” says Johnson. “I saw the culture and energy and got excited. I made the decision to move my life and company to Detroit in May 2013. Andy stayed to run our Chicago branch,” he says.

What made the difference for Johnson is the support for startups such as his. “If I ever need anything, I just pick up the phone,” says Johnson.

Brian Bosche, founder of TernPro, a full-service video company, agrees. He started his company after participating in Venture for America, a program for young, talented grads to spend two years in the trenches of a startup with the goal that these graduates will become business owners.

“It is an unbelievable community of support. I got connected with other start-up company founders, Quicken Loans leadership, established close connections with investors and built a network of local business owners,” he adds. Both entrepreneurs live in downtown Detroit as well, which leads to another key to rebuilding the city: housing.

Innovative Housing Programs

Detroit is flush with innovative housing programs geared toward everything from rehabbing vacant properties and saving neighborhoods to attracting young people to the area. One such program is Live Downtown. Employers such as Blue Cross Blue Shield of Michigan, Compuware, DTE Energy, Marketing Associates, Quicken Loans and

Strategic Staffing Solutions offer financial incentives to employees to live where they work. “New homeowners get a $20,000 forgivable loan toward the purchase of a primary residence and renters receive a $2,500 funding allowance toward the cost of their first year, among other things,” says Larson. “In the downtown, we expect a 3,500-unit demand over the next three to five years. We have an absorption rate well in excess of 500 to 1,000 a year. The program is a little less than three years old, and we have 1,100 participants,” he adds. In that same three-year period, Larson has seen rents increase by around 20 percent. “Our average price per square foot was $1.65 and now it’s closer to $2 per square foot. That was our magic number to support new construction,” he says.

Rebuilding Neighborhoods

Another entity helping to stop the blight and encourage homeownership in downtown Detroit is the Detroit Land Bank (DLB), a public authority dedicated to returning Detroit’s vacant, abandoned and foreclosed property to productive use. “It started small, buying homes, rehabbing them and auctioning them off,” says Craig Fahle, director of public affairs for the Detroit Land Bank. “We scrapped the old model a few months ago,” he says. The new model is to auction off homes as is and give the buyer six months to get the home up to code. “The goal is to keep out the investors and speculators and get actual homeowners into these homes, so we limit the number of auctions people may participate in,” says Fahle.

The DLB offers two auctions a day and buyers may purchase only 12 properties per year. “We want people to invest in a home that they otherwise couldn’t afford. We have partnered with banks to come up with rehab loan programs, so buyers can restore the home and live in it,” he says. The DLB is also filing nuisance abatement orders against those not taking care of the properties. “These are mostly filed against landlords. They have three days to respond and enter into an agreement with us to fix up the homes. Sometimes they just deed the property over to us; sometimes they fix it up,” he says. Since the new program started in January 2014, most of the homes are just starting to get up to code and completed.

Another DLB program offers side lots for $100. “People have been asking for this for a long time. Most of the single-family homes have small front and back yards. If they buy the side lot, they can build a garage or have a yard,” he says. “With no marketing, we’ve already sold 50 side lots and the demand is high. We expect to sell several hundred within six months.”

“The hope is that we stabilize these neighborhoods and stop the bleeding. People want to stay in the neighborhoods, and this gives them a reason to stay and be proud of where they live,” says Fahle. Working in concert with the DLB is Reclaim Detroit, which was founded in 2011 and is applying their in-depth research to push for deconstruction — or taking apart a building by components for re-use, recycling or waste management — of 10 percent (about 8,000) or more of the city’s abandoned buildings.

From the smaller start-up companies and housing initiatives to the mega investment programs, Detroit is seeing a resurgence in those committed to rebuilding the city. While the city is far from recovery, these signs of life are encouraging. “We’ve made great progress,” says Sanders. “With the venture capital and business leaders committed to the city, there is a lot of opportunity in Detroit.”

Larson agrees. “We have a lot of work ahead of us. While the core downtown — a 7.2-mile stretch — has seen a tremendous amount of stability, we still have a city that is 139 square miles, and a number of neighborhoods and communities that need our attention,” he says. However, with business and municipal leaders committed to proactive and thoughtful stewardship, “we’ll continue rounding out the edges on our downtown and midtown. It’s a great place to be.”

Burgeoning Art Community

One of the newest homeownership programs is called Write-A-House (writeahouse.com). Founded by Toby Barlow, creative director at the advertising agency Team Detroit, and Sarah Cox, Write-A-House (WAH) is a Detroit-based organization that is leveraging the easy availability of distressed housing in order to promote vocational education, homeownership, neighborhood stabilization and creative arts. Homes are given away free to writers. According to the New York Times, as part of the launch of the program, three homes have been donated or purchased (for $1,000 each), and the Detroit bungalows will undergo a $35,000-to-$70,000 renovation from the nonprofit group Young Detroit Builders. In addition, Power House Productions, an artist-run non-profit, is marketing vacant properties for public art installations.

Tracey C. Velt is an Orlando-based freelance writer.

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