Home Improvement: Laying Detroits Firm Foundations for Truly Affordable Housing

HOME IMPROVEMENT L a y i n g D e t r o i t ’s

F i r m Fo u n d a t i o n f o r Tr u l y Affordable Housing

HOME IMPROVEMENT L a yi n g De troit ’s Fir m Fo u n dation fo r Tru l y WRITTEN BY

ACKNOWLEDGEMENTS

Sophie Ordway &

T h a n k y o u t o a l l t h e DJ C s t a f f a n d i n -

Eric Williams

terns, as well as community partners and grassroots organizers who contributed t o t h i s p a p e r, i n c l u d i n g b u t n o t l i m i t e d t o W h i t l e y G r a n b e r r y, E r i n K e i t h , M a r k B e n n e t t , Ti f f a n y H a r v e y, J o e M c G u i r e and Lauren Thomas. A special thank you t o D e t r o i t P e o p l e ’s P l a t f o r m f o r p r o v i d ing constructive feedback and insight, as well as leading the fight alongside countless community organizers for truly equitable housing policy in Detroit.

CONTENTS

I NT RO DUC T IO N & OVE RVIEW E X EC UT IVE SUMMARY

PART 1

Affordable for Whom?: Defining the Concept WHAT IS ‘AFFORDABLE HOUSING’?

AREA MEDIAN INCOME (AMI) What Is It? Why Does It Matter?

THE CURRENT HOUSING CONTEXT IN DETROIT DETROIT’S AFFORDABLE HOUSING MIX Low Income Housing Tax Credit (Lihtc) Properties Rent-Assisted & Income-Restricted Properties Public Housing Naturally occurring affordable housing

PART 2

Dilapidated by Design: How We Got Here NATIONAL IMPACTS: TOWARD PRIVATIZATION DETROIT TIMELINE

PART 3

The Basic Blueprint: The City’s Current Affordability Approach Types Of Homes & Level Of Affordability Funding Plan Targeted Locations For Development Recent updates HOW THE CITY’S AFFORDABLE HOUSING STRATEGY FALLS SHORT Not Enough Housing Proposed Rent Limits Too High Disproportionate Focus On Small Rental Units Inadequate Quality And Security

PART 4

Repairing Trust, Brick by Brick: Recommendations for Real Affordable Housing 1. FUND COMMUNITY LAND TRUSTS (CLTS) 2. REVISE THE INCLUSIONARY HOUSING ORDINANCE 3. CREATE A MORE EQUITABLE AMI 4. FUND SOCIAL HOUSING 5. PRIORITIZE (I.E., FUND) QUALITY, SAFETY & STABILITY 6. COMPENSATE DETROITERS DAMAGED BY CITY POLICIES

CON C LUSIO N

2 3 4 4 5 5 5 7 7 8 9 10 10 11 11 13

17 17 18 20 20 21 21 22 23 24 25 25 26 27 27 28 29 30

INTRODUCTION Safe and affordable housing is a basic human right. The impact of affordable housing – or the lack of it – touches virtually every aspect of community well-being, including safety, education, and public health. As a result, public policy, and public expenditures on affordable housing cannot be considered in isolation, but rather as components of the government’s mission to provide safety, health, and equitable opportunity to all its citizens. From this perspective, developing housing policies necessarily requires addressing the past and continuing impact of both public and private actors on Black and Brown communities. This report is intended to advance the conversation on the role safe and affordable housing plays in a comprehensive strategy to make Detroit a just city for all its residents.

OVERVIEW

PA RT 1 A f f o r d a b l e f o r W h o m ? :

Defining the Concept

In Part 1, we examine the city of Detroit’s definition of affordable housing, actual affordability for Detroit residents, and Detroit’s existing categories of affordable housing.

PA RT 2

Dilapidated by Design: How We Got Here

In Part 2, we examine the origins of Detroit’s affordable housing crisis.

PA RT 3

The Basic Blueprint: The C i t y ’s C u r r e n t Affordability Approach

In Part 3 we identify and examine the shortcomings of Detroit’s current strategy for preserving and creating affordable housing.

PA RT 4

Repairing Trust, Brick by Brick: Recommendations for Real Affordable Housing

Part 4 contains our recommendations for creating more deeply affordable housing and prioritizing the needs of long-term, low-income Detroiters over newer, wealthier, residents.

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We acknowledge that our recommendations will not, by themselves, solve Detroit’s affordable housing crisis. Indeed, the complexity of the issue demands re-examination of virtually every aspect of Detroit’s policies on housing, public safety, public transportation and more. However, our hope is that these recommendations contribute to the discussions about the status of affordable housing in Detroit, the limits of current policies, and the changes needed if our government is to meet its obligations to all Detroiters.

EXECUTIVE SUMMARY The City’s current plan for creating and preserving affordable housing will not create enough affordable housing that is perpetually sustainable and serves Detroit’s long-term lowest-income residents. Detroit’s affordable housing landscape is clearly in need of some ‘Home Improvements.’ We strive to offer a few suggestions to help realize a dream many in Detroit have long been fighting for: quality, affordable housing for everyone.

Our recommendations are: 1. Fund Community Land Trusts 2. Revise the Inclusionary Housing Ordinance 3. Create a More Equitable AMI 4. Fund Social Housing 5. Prioritize (i.e., fund) Quality, Safety and Stability 6. Compensate Detroiters Damaged by City Policies

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PA RT 1

Affordable for Whom?: Defining the Concept

WHAT IS ‘AFFORDABLE HOUSING’?

The U.S. Department of Housing and Urban Development (HUD) defines housing as “affordable” when an individual or household pays no more than 30% of their income on housing costs, including utilities. Households that spend more than 30% of their income on housing costs are considered ‘housing cost-burdened’. Households spending more than 50% of their income on housing costs are classified as ‘severely cost-burdened’. This ‘30% rule’ can be traced back to an amendment to the Fair Housing Act in 1968. Its rationale is that when housing costs exceed 30% of income, households are unable to afford other necessities, such as food and clothing, or save money. Whether 30% is universally appropriate, particularly for extremely low-income families, is subject to debate. However, the underlying rationale is sound: No one should spend so much on housing that they cannot afford other necessities.

Using HUD’s criteria, in 2022 roughly 61% of Detroit’s renters and 31% of Detroit’s homeowners were housing cost-burdened. [1] In 2021, Thirty-four percent of renters spent more than 50% of their income on housing costs. This burden is not distributed evenly. Detroiters, particularly Black Detroiters, are housing cost-burdened at significantly higher rates than their White and suburban counterparts. This situation is the result of two distinct factors – high housing costs and low incomes. However, it is the low income of Detroiters that is the predominant factor, demonstrating the necessity of developing affordable housing policies that work in tandem with policies that also address low wages, employment rates, effective public transit, quality education, and more. These policies must also address rising housing costs that have accompanied Detroit’s recent economic recovery. Detroit’s housing policies predominantly rely on funding that is subject to federal AMI guidelines, guidelines that ignore the reality of poverty in Detroit. The result is that in Detroit, not only is there not enough affordable housing, but even housing that is technically affordable is in fact far beyond the reach of those Detroiters most in need of affordable housing.

1 Census data estimates that in 2022, there were 243,243 occupied households in Detroit: 121,020 owner-occupied and 122,223 renter-occupied.

Roughly 61% (65,943) of renter occupied households and 31% (16,503) of owner-occupied households spent more than 30% of their income on rent or mortgage payments.

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AREA MEDIAN INCOME (AMI) What is it?

Area Median Income (AMI) is the number that determines how affordable housing is defined, measured, and allocated in cities across the United States.

AMI is the median (midpoint, not the average) household income (adjusted for household size) for a given region. The Department of Housing and Urban Development (HUD) calculates AMIs annually for every region in the U.S. based on the American Community Survey, a broad survey comparable to decennial US census.

The AMI calculated by HUD determines the income limits for any affordable housing developed with federal funding. In Detroit as in most of the country, federal funds provide the vast majority of funds for affordable housing. The income limits are defined as ‘extremely low income’ (30% of AMI), ‘very low income’ (50% of AMI) and ‘low-income’ (80% of AMI). Rental housing rates are then calculated using these income limits in combination with the ’30% rule’.

For example, if the AMI for a one-person household in a specific area is $50,000, people living in that area who make $40,000 per year (80% of the AMI) are considered low-income and should be able to qualify for affordable housing in which their rent is no more than $1,000 per month.

Why Does it Matter?

It is important to note that the area used to calculate AMI is not an individual city or county. Instead, The boundaries are determined by HUD using Metro Fair Market Rent Areas (HMFA) data. [2] For Detroit, that means the AMI includes not only the City of Detroit, but also Livonia and Warren, cities with far higher median incomes than Detroit. The Detroit-Warren-Livonia AMI is also used to calculate rent limits for Wayne, Lapeer, Oakland, Macomb and St. Clair counties. We will call this the ‘HUD AMI’.

The HUD AMI for a two-person Detroit household in 2022 was $71,600 (based on the Detroit-Warren-Livonia Fair Market Rent Income Limits); according to the 30% rule, their rent and housing costs should be no more than $1,800 per month.

• • •

80% AMI (low-income) 2 person households made roughly $57,300 in 2022 and should have paid no more than $1,400 per month on housing costs.

50% AMI (very low-income) 2 person households made roughly $35,800 in 2022 and should have paid no more than $900 per month on housing costs.

30% AMI (extremely low-income) two person households made roughly $21,500 in 2022 and should have paid no more than $500 per month on housing costs. [3]

2 The Office of Management and Budget typically defines metropolitan areas based on commuting patterns. However, changes made to the OMB defined areas in the early 2000s dramatically shifted Fair Market Rent and Median Family Income, prompting HUD to create subareas, the HMFA. 3 These numbers were found on HUD’s ‘user portal’. HUD uses a 4-person household as the benchmark for Median Family Income, but they provide income limits for households ranging from 1 to 8 people. We chose to stick with a 2-person household because that is what the City of Detroit typically uses as a benchmark. However, it is important to note that 1/3 of the City’s population lives in homes with 3 or more people.

Complete list of ‘Official’ (HUD) Income and Rent Limits in Detroit by household size for 2020 (not 2021).

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But the median household income for the city of Detroit, excluding suburbs, was actually $36,450 in 2022. We’ll call this number the ‘Real Detroit AMI’. This amount is nearly half of the $71,600 the HUD AMI states is the ‘median income’. 34% of Detroiters lived in technical poverty in 2022, compared to Livonia, where 5% of the population lived in poverty and the median household income was $92,125, and Warren, where the median household income was $60,285 and 14% of the population lived in poverty. Including Livonia and Warren when calculating Detroit’s AMI skews income limits upward, which results in ‘affordable housing’ rent limits that are not actually affordable for Detroiters in need of housing.

The table below compares the HUD AMI and Detroit AMI and their respective rent limits.

AMI/ Rent Limit (per month)

HUD AMI (2022)

Real Detroit AMI (2022)

100% AMI/ Rent Limit

$71,600/ $1,800

$36,450/ $900

80% AMI/ Rent Limit

$57,300/ $1,400

$29,200/ $700

50% AMI/ Rent Limit

$35,800/ $900

$18,225/ $450

30% AMI/ Rent Limit

$21,500/ $500

$11,000/ $300

Cit y of f ic ials h ave lon g be e n aware of the H U D AMI / Re al De troi t A M I dis par it y an d it s impac t on those wi th l ow and ve r y l ow i ncome s. In 20 1 6, th e C it y c on t rac t ed HR & A Advi sors, Inc ., Grounde d Sol uti ons Ne t work, and C a pital-Impac t Par t n er s t o inform the Ci t y’s i ncl usi ve housi ng pol i cy. The De tro it In c lu s ion ar y Hou s in g Pl an & Marke t Study found that whi l e the avera ge m o n t h ly ren t in Det roit was affordabl e for pe opl e maki ng cl ose to 70% A M I a nd above, les s t h an 25% of al l uni ts avai l abl e i n the Ci t y we re afford a b le to p e ople mak in g 3 0% AM I or l e ss. [4] The re port e stabl i she d that the mos t u rg e n t n eed f or af f ordable h o usi ng i n De troi t i s for those wi th ve r y and e xtre m e ly low in c omes. In Ju ly 2021, the De troi t Ci t y Counci l ’s Le gi sl ati ve Po lic y Div is io n prepared a repor t on AMI whi ch e xami ne d the fe asi bi l i t y of cal cu la tin g a nd applyin g a ‘ Det roit-onl y AMI’.The re port concl ude d that whi l e l e g a l, th is a p proac h w ou ld h ave mini mal i mpact on affordabl e housi ng avai l abi l i t y be c a u s e it c ou ld on ly be u s ed for proj e cts that di d not i nvol ve fe de ral fund in g. Projec t s u s in g f ederal f u ndi ng are re qui re d to use H U D’s AMI for i nco m e c a lc ulat ion s an d f ederal dollars are an i ndi spe nsabl e compone nt of fundi ng fo r th e vas t major it y of af f ordabl e housi ng proj e cts.

4 The average rent at the time was $702 per month, and people making 60% AMI could afford roughly $660 per month in rent.

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THE CURRENT HOUSING CONTEXT IN DETROIT In 2017, Detroit Future City (DFC ) published 139-Square Miles, compiling data on Detroit’s people, institutions, and infrastructure. The report found the majority of Detroit’s housing stock, unlike that of other major cities, is single-family housing. In addition, Detroit housing is distributed at a ‘suburban’ level of density, reflecting the land left vacant in the wake of Detroit’s population decline from roughly 1.8 million people in 1950 to its current population of approximately 675,000. Most of these homes are older and in need of significant repairs. In addition: • • •

Single family homes make up roughly 73% of the City’s housing stock.

Over 50% of Detroit’s housing stock was built before 1950.

92% of it was built before 1980.

The number of older, single-family homes reflects Detroit’s long history as a majority homeowner city. The condition of these homes is the legacy of Detroit’s foreclosure crises. In 2008, the real estate market collapsed across the country, dramatically lowering home values overnight. Despite this, the City Assessor failed to reassess many homes, leading to inflated property tax bills. In excess of 100,000 families lost their homes between 2012 and 2017, turning Detroit into a majority-renter city. The City remained a majority renter city until 2021. While homeowners are once again a majority in Detroit, the impact of the foreclosure crisis remains. Many homes lost by owners remained vacant and the new owners, primarily banks, mortgage companies, and out of town speculators, failed to secure or maintain the homes, spreading blight, lowering property values, and creating public safety hazards.

Since 2015, there have been notable improvements in the Detroit real estate market. The vacancy rate has gone from 30% to 22%. [5] The average selling price has increased to $102,000 from $19,000. This period also produced an increase in Black mortgage applications, albeit from a very low starting point. However, upon closer examination it appears that long-time and low-income Detroiters have not benefited from improvements in the housing market. Most jarringly, in a city that is 77% Black, only 50% of Black Detroiters owned homes in 2021, compared to 59% of White Detroiters.

DETROIT’S AFFORDABLE HOUSING MIX There are four occasionally overlapping categories of affordable housing in Detroit: (1) low-income housing tax-credit properties; (2) rent-assisted and income-restricted multifamily housing buildings; ( 3) public housing units; and (4) naturally occurring affordable housing.

5 Detroit’s vacancy rate remains significantly higher than that of its surrounding suburbs; Metro Detroit’s vacancy rate in 2019 was 7%.

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Low Income Housing Tax Credit (LIHTC ) Properties The Low-Income Housing Tax Credit, created in 1986 as part of the Federal Tax Reform Act, funds tax incentives to developers constructing or rehabilitating rental properties. Nationally and locally it is the most common method of funding affordable housing developments. The tax credit moves from the federal government through state governments to private developers, and then is usually passed along to the private investors who fund the development of these properties. Investors or developers use the tax credits to reduce their taxes.

In exchange for receiving LIHTC, developers agree to rent out a certain number of their units at a rate that is considered ‘affordable’ for low-income renters (80-60% AMI or lower). Most LIHTC agreements require a 15-year affordability period, with the option of extending for another 15 years. Property owners have the option to convert the ‘affordable’ units to market-rate rent prices once they reach the end of their agreements. In Detroit, the incentive-based approach of LIHTC has a number of distinct disadvantages: •

Tax Credit Expiration: According to Detroit’s Multifamily Affordable Housing Strategy from 2018, over 14,000 LIHTC units have been developed in Detroit since LIHTC first went into effect and over 4,500 of those units have passed their 15-year mark. [6] Economic incentives dictate that in strong rental markets or when the living conditions improve in formerly distressed communities, owners of LIHTC developments will convert the units to market rate, frequently displacing residents.

•

Low Quality Housing: LIHTC economic incentives in weak rental markets will encourage development owners to maintain affordable units even after the expiration of the affordability period. However, this reflects the owner’s inability or unwillingness to maintain or upgrade the unit. A recent case study of Detroit's LIHTC market found that, although many LIHTC-funded projects continued to provide affordable housing, nearly 15% experienced mortgage or tax foreclosure (a much higher percentage compared to the national average of 1-2%), “and many units became permanently uninhabitable, increasing disinvestment in neighborhoods.” In other words, property owners that accepted the ‘affordable’ rates for those units provided low quality housing.

•

Affordability and Quantity: Affordability in LIHTC funded housing is based on HUD’s standards, which as discussed above, are not actually affordable to Detroiters in need of affordable housing. Further, such developments include only a small percentage of units that are affordable, the majority are typically market rate, which is insufficient to meet Detroit’s massive affordable housing needs.

6 We conducted a brief search of LIHTC units in Detroit using the HUD User LIHTC Database. We found that at least 113 buildings (900 units) that received LIHTC funding between 1987 and 2003 are no longer monitored, meaning they are no longer required to remain affordable. This is likely an underestimation.

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•

Expensive Implementation: LIHTC developments are typically more complex than traditional development deals. Accordingly, they require significantly greater expenditures on lawyers, real estate professionals, and tax experts to broker the deals between developers, the local government and property owners. This is in addition to the engineers, architects, and various consultants that are needed for any housing development. The complexity of the process prolongs project schedules, increases project costs, and negates the system’s original rationale of market efficiencies. The federal government spends almost $11 billion per year on LIHTC deals.

Rent-Assisted & Income-Restricted Properties

Detroit’s rent-assisted and income-restricted properties are primarily multifamily buildings subsidized through rental contracts with HUD’s Federal Housing Administration. The program is intended to provide long-lasting affordable housing units through loans from the federal government and guaranteed rent payments.

There are several programs that provide rental assistance, including Section 8 Project-Based Housing and Section 8 Housing Choice Vouchers. These programs are primarily funded by HUD and managed by state and local agencies. The Section 8 Housing Choice program provides rental vouchers that effectively limit out of pocket housing expenses to 30% of income by paying landlords the difference between market rate and what the renter can afford.

Unfortunately, rental assistance programs like Section 8 are severely underfunded. In Michigan, an estimated 225,000 households rely on federal housing assistance, including 53,900 who receive housing choice vouchers and another 52,800 who benefit from project-based vouchers. The average wait time to obtain a voucher is 26 months. Recipients then have 60 days to find a landlord that will accept the voucher, which can be harder than obtaining it in the first place. If they don’t find housing within that time frame, they lose the voucher. Despite laws designed to protect tenants and housing rights, landlords routinely discriminate against people with Section 8 vouchers. As of March 2023, there are more than 74,000 households on the waiting list for a housing choice voucher in Michigan.

These tragic figures still fail to convey the extent of the problem: Only 25% of households eligible for rental assistance will receive it. Further, while rental subsidy contracts are designed to either end, extend, or transfer to another property as the loans reach expiration, there is no guarantee private owners will renew.

As of 2018, there were approximately 9,500 households in Detroit funded through these rent-assisted contracts.

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Public Housing Public housing is housing owned by HUD and administered by local Public Housing Authorities (PHAs) exclusively for very and extremely low-income renters, people with disabilities, elderly people, and families. At least 40% of people living in public housing must have extremely low incomes ( 30% AMI or less).

Unlike LIHTC funded developments, public housing affordability does not expire. However, because its funding originates at the federal level, national conversations explicitly about class and implicitly about race, as opposed to local needs, have largely determined its funding. As a consequence, no new public housing has been built nationally since the 1990s and it is estimated that the nation-wide cost to the federal government of long deferred maintenance is roughly $70 billion. In addition, the Faircloth Amendment of 1998 prevents any net increase in public housing stock from the number of units that existed as of October 1, 1999. The Detroit Housing Commission manages roughly 3,300 public housing units.

Naturally Occurring Affordable Housing Naturally Occurring Affordable Housing (NOAH) is unregulated and unsubsidized. It is considered affordable because the market rate rent is low enough to be considered affordable based on a location's AMI. Detroit defines NOAH as housing that is affordable for people and families making up to 60% AMI. According to Detroit’s Preservation Action Plan, in 2015 roughly 67% (or 13,000 units) of the Cit y’s non-regulated, market-rate multifamily housing stock was considered NOAH. NOAH is affordable for a reason, such as the location or the physical condition of the unit. Most of Detroit’s NOAH is very old and in desperate need of repairs or complete renovation. Many suffer from other habitability concerns, such as mold or rodent and bug infestations. When owners do invest in NOAH, the result is often rent increases and the end of NOAH.

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PA RT 2

Dilapidated by Design: How We Got Here

Detroit’s affordable housing crisis is the product of a myriad of factors, including wage stagnation, inflation, construction costs, and the influence of racism and classism on policy decisions at the federal and local levels. However, our failure to craft meaningful solutions is rooted in our refusal, unlike many of our peer nations, to recognize housing as a basic human right.

NATIONAL IMPACTS: TOWARD PRIVATIZATION The current federal approach to housing stands in stark contrast to earlier efforts which considered affordable and safe housing a national priority. [40] At least for some Americans. Following the Great Depression, the federal government created a number of agencies and programs to improve working and living conditions as part of the New Deal, including creation of Federal Housing Administration, and passage of the G.I. Bill (1944) and the Housing Act of 1949. While these efforts did assist millions, they also explicitly or implicitly excluded Black Americans and other communities of color, depriving these communities of the opportunities to access resources and build generational wealth because of the color of their skin.

The racist policies of the 1940s and 1950s were magnified by the federal government’s shift in the 1970s towards incentivizing private development for affordable housing, rather than direct federal involvement. President Nixon’s housing moratorium in 1973 began the reduction in federal funding for affordable housing. These cuts continued through the Reagan administration, which reduced federal funding for Section 8 and other housing assistance by half after attempting to eliminate such funding altogether. The Faircloth Amendment of 1998 put a cap on federal public housing funding. [41] As a result, the number of affordable housing units plummeted. In 1970 there was a surplus of lowcost rental units compared to households that needed them. By 1985, the number of low-cost rental units had reduced by nearly a million and the number of households in need had grown by almost three million. The disparity continues to grow.

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The impact of these racist policies is still felt in Black communities across the countr y. While explicit racist policies are gone, additional barriers to safe affordable housing remain for Black residents, as well as those who are living with a disabilit y, extremely low-income, or otherwise marginalized. Tellingly, formerly redlined areas (discussed below) suffer from higher rates of cancer and asthma, and other illnesses. These areas are also more vulnerable to Covid-19 and the impacts of climate change. Furthermore, algorithms used in artificial intelligence often perpetuate these disparities, a phenomenon known as “technological redlining.” Even federal programs designed to address segregation and concentrated poverty in public housing, such as Hope VI (1992) and Rental Assistance Demonstration ( 2012), have only had marginal success as they tend to displace their lowest-income residents.

Today, the Low-Income Housing Tax Credit Act of 1986, a product of an era that deprioritized affordable housing, is the primary tool for creating affordable housing and the United States is one of only two nations that has refused to ratify a United Nations declaration that housing is a human right.

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DETROIT TIMELINE 1939

The federal government redlined Detroit on June 1st.

The term “redlining” comes from the use of color-coded maps by the federal government to rank the loan worthiness of neighborhoods across the country.

Neighborhoods in red were ineligible for government financial housing assistance. The Homeowners Loan Corporation (HOLC ) and the Federal Housing Administration (FHA) labeled all Black and immigrant neighborhoods as red or yellow, while all white and mostly white neighborhoods received a green or blue grade. This racist practice excluded Black and Brown people from building community wealth and receiving government investment and the impact continues to this day.

1941

Birwood Wall built.

The Birwood Wall, also known as the Eight Mile Wall or the Wailing Wall, was built by real estate developer James T. McMillan to physically separate Black homeowners from a nearby all-white subdivision. This physical manifestation of redlining enabled McMillan to access FHA loans, which under FHA guidelines were not available for housing developments near Black neighborhoods.

19431965

Whites Only Community Associations In just over a 20-year span, nearly 200 whites only community associations were created in Detroit, which required membership in order to be a homeowner in certain (white) neighborhoods. These associations, took the lead in enforcing racial covenants which barred Black people from buying, selling or renting homes. Today, while racially-restrictive covenants are still on the books, they are unconstitutional and unenforceable.

The McGhee’s fight against racial covenants

1944

Orsel and Minnie McGhee, a Black couple, bought a house at 4626 Seebaldt Street in a White only area on Detroit’s west side. The white neighborhood association threatened and abused the McGhees, eventually taking them to court, seeking an order to enforce the deed restrictions that prohibited Black ownership. The Michigan supreme court upheld a lower court ruling ordering the McGhees to leave their home. The McGhees appealed and in 1947, Thurgood Marshall argued on their behalf in the U.S. Supreme Court. In a landmark decision [ 7] , SCOTUS found racial covenants unconstitutional. Despite this, they continued to be used through the 1960s.

7 The case was consolidated as Shelley v. Kraemer, 334 U.S. 1 (1948).

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DETROIT TIMELINE 1940s1960s

Urban Renewal and the destruction of Black neighborhoods In Detroit, as in many other cities, urban renewal efforts during this period were nothing less than attacks on Black communities. Detroit’s plan for ‘Urban Renewal’ was led by then Mayor Albert Cobo, who had campaigned in 1949 on a promise to thwart the “negro invasion.” Cobo used funds from the Federal Aid Highway Act of 1956 to destroy numerous thriving Black neighborhoods, leading many Detroiters to call urban renewal Black removal. The Lodge Freeway (M-10) and the Edsel Ford Expressway (I-94), which began construction in the 1950s, demolished Black and Jewish communities near 12th street and west of Highland Park, as well as West Detroit and what was then known as Paradise Valley. The Chrysler Freeway (I-375), opened in 1964, completing the destruction of Black Bottom by replacing the vibrant thoroughfare of Hastings Street. The continued disenfranchisement of Black Detroiters is the lasting legacy of the government’s demolition of thriving Black business and communities.

1930s2000s

The Predatory Use of Land Contracts Land contracts serve as an alternative to traditional mortgages for prospective homebuyers who lack the funds for a down payment or the credit score to secure a mortgage. However, these contracts have historically been lightly regulated, if at all. Too often, land contracts provide few protections and allow the seller to retake the home and evict the buyer if a single payment is late, even after years of timely payments. Land contracts have been used to exploit poor and Black homebuyers who too often sign these agreements without a lawyer’s review.

Between 1950 and 1970, land contract sales expropriated between $3.2 and $4 billion from Chicago’s Black community. In Detroit, where few conventional mortgages were made and banks were more likely to reject Black loan applicants regardless of credit worthiness, land contracts dominated the housing landscape and remain an issue in today. Between 2005 to 2016, Michigan accounted for 25% of all land contracts in a database covering 45 of 50 states and over 407,000 transactions. Neighborhoods with higher utilizations of land contract sales tended to have higher rates of poverty, higher concentrations of Black and Hispanic/ Latinx populations, older housing stock, and lower home values.

1970s1980s

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White Flight Detroit’s population decline from its 1950 peak of 1.8 million began in 1945, however the sharpest decline was between 1970 and 1980. In that decade, more than 310,000 primarily white city residents fled for the suburbs. Consequently, Detroit’s Black percentage of the population rose from 43.7% to 67.1%, beginning Detroit’s reign as America’s largest majority Black City. The dramatic population loss devastated Detroit’s tax base. In response, the City increased tax rates, but was unable to prevent the deterioration of city services.

Today, the Detroit metro area remains among the most racially segregated regions in the country and Detroit is America’s poorest large city.

1980s2000s

Black Flight White Flight from Detroit is well documented. However, the often-overlooked Black Flight also plays a significant role in Detroit’s housing crisis. As Detroit’s financial position declined, schools, city services, and public safety deteriorated. In response, Black middle and upper-class families moved out of the City as well, seeking better schools, jobs, as well as lower taxes and insurance rates. As a result, between 1980 and 2000, the Black population in Detroit suburbs rapidly increased. Southfield, the immediate northern suburb, saw its Black population increase from 9% in 1980, to 29% in 1990, to 54% in 2000, to nearly 70% in 2010.

By 2019, the majority of Black middle- and upper-class households lived in the suburbs. The loss of middle- and upper-class Black communities contributed significantly to Detroit’s high poverty and low employment rates, among other issues, that make affordable housing a challenge for many long-term Detroiters.

Subprime Lending leading to Foreclosure Crisis

20042007

Between 2004-2007, predatory subprime lenders, including major banks such as Morgan Stanley, targeted Black Detroiters with virtually no regulatory oversight.

These mortgages included high and escalating interest rates. Because lenders frequently repackaged and sold the loans to investors, they cared little about the borrowers’ ability to pay. When housing values collapsed across the country, borrowers found themselves underwater on their mortgage – owing more than the home was worth – and unable to pay the interest. Black homeowners were significantly more likely to receive these subprime loans than white people with identical credit ratings. For example, “New Century’s African American customers in the Detroit area were 70 percent more likely to get a subprime loan than white borrowers with similar financial characteristics.” As a result, “by 2007, Detroit led the nation in foreclosure rates. Nearly 45,000 homes stood vacant by 2008, creating wastelands in once vibrant Black neighborhoods.”

20092016

Illegal Tax Foreclosures The Great Recession of 2008 dramatically lowered home values across Detroit. However, despite the Michigan Constitution’s explicit limit on assessments as a percentage of market value, the City continued assessing properties as if values had never changed. The illegal over assessments between 2010 and 2016 totaled roughly $600 million, leading to foreclosure on nearly 1 in 3 Detroit homes and 100,000 Detroiters being displaced from their homes. To this day, the City and county have yet to be held accountable for their actions or repay Detroiters the money stolen from them.

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DETROIT TIMELINE 2013

Bankruptcy

In 2013, Detroit became the largest American municipalit y to declare bankruptcy. More than a decade later, disagreement remains as to the cause, and even necessit y, of the bankruptcy filing. Most agree that a declining population and the resulting collapse of the tax base were major contributors. Legacy costs, including pension contributions and a disastrous 2005 deal to restructure cit y pension debt also played a role. However, there is little doubt that disinvestment from the Cit y, led by the State of Michigan, was a major factor. Michigan’s Republican dominated state government reduced Detroit’s state-shared revenue by 48% from 1998 to 2012, taking more than $172 million from the Cit y. For many Detroiters, these policies, and the racial dialogue that often accompanied them, made it clear that the state had no interest in meeting its obligations to Black Detroiters.

Racist Practices Continue

2015-

present

Practices inhibiting low-income Black Detroiters from participating in the formal economy are still alive today. In 2017, White people received nearly half of the mortgages issued in Detroit despite making up only 10% of the population.

The explicit and implicit racism found in both government policy and private sector practices continues to impact the ability of Black Detroiters to build individual and community wealth. The intentional disinvestment from Detroit, combined with the decrease in federal and state funding for deeply affordable housing created the current affordable housing crisis, a crisis that many experts say has lasted longer than any other affordable housing crisis in U.S. histor y. A crisis that has helped create two Detroits; one for Black residents and one for newer, whiter residents.

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PA RT 3

The Basic Blueprint: The City’s Current Affordability Approach

Detroit officially recognizes the existence, if not the severity, of the current affordable housing crisis. In 2018 the City published two reports, its Multifamily Affordable Housing Strategy and its Preservation Action Plan. These reports acknowledge the need for significantly more affordable housing in Detroit and lay out the City’s official approach to maintain existing affordable housing and build more.

Types of Homes & Level of Affordability According to the City, there are roughly 22,000 city-regulated affordable housing units. The majority of these units are in multifamily buildings developed using low-income housing tax credits. Nearly 10,000 affordable housing units will reach the end of their guaranteed affordability period in 2023, and it’s unclear how many have been renewed. The City’s housing strategy focuses almost exclusively on preserving and expanding affordable housing in apartments, mostly studios and one bedroom.

In August 2022, Detroit Justice Center received City data on all the existing regulated affordable housing buildings, including some planned developments. [8] The table below provides information on how many buildings and units are available at different AMI levels.

AMI Level

Number of Buildings

Number of Affordable Units

Percentage of Total (25,956)

Monthly Rent Limit(2021)

Up to 30% AMI

4

71

0.27%

$480

Up to 40% AMI

6

403

1.6%

$640

Up to 50% AMI

89

7413

29%

$800

Up to 60% AMI

129

9070

35%

$960

Up to 80% AMI

31

2887

11%

$1,280

Unknown

59

1207

4.7%

–

TOTAL

318

20,051

81% [**]

–

Absent from the data provided by the City is information on the distribution of AMI levels within each building. For example, in a building designated for renters making “up to 60% AMI” it is impossible to determine how many of those units are available for people making 30% or if any are available at market-rate prices.

8 The data identifies 21,051 affordable housing units, roughly 1,000 less than the number cited in other city documents. The City admits that some of the information on affordable housing is still difficult to obtain. ** Many affordable housing properties also provide some units at market rate. Based on the data the City provided to us in 2022, the total number of units among affordable housing properties was 25,956, while the total number of units designated as affordable was 21,051, meaning roughly 4,905 units are presumably market rate. This is why the total percentage is 81 and not 100.

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While hard data is scarce, news reports on renovations and new developments reflect an emphasis on housing for those at the higher end of AMI levels. For example, the Weber Apartments are categorized in the City-provided data as ‘Up to 80% AMI’, however it appears only 6 of the 44 units in the apartments are dedicated to people making at or below 50% AMI, and the rest are for people making 80% AMI. The disparity between HUD’s official AMI and Detroit’s actual median income means that units affordable at 80% AMI, $1,400 per month, are in fact market rate. As a result, this affordable housing development does little to address the lack of affordable housing for low and extremely low-income people.

As shown in the table above, only 0.27% of the affordable housing stock, 71 units, are designated specifically for people making 30% AMI or less. That number jumps to roughly 7,887 units, or 31%, when including units for people making up to 50% AMI but is still drastically less than the number of units designated for people making up to 60 and 80% AMI plus market rate units (16,862 units or 65% of affordable housing stock). These numbers demonstrate a clear misalignment between the City’s affordable housing objectives and the ratio of low income to very/extremely low-income housing being built by the City.

The Preservation Action Plan from 2018 notes one of the few exceptions to the focus on multifamily housing: roughly 1,200 single-family homes that were initially built with support from the LIHTC program. The City’s original goal was to have some of the families that were renting the homes ultimately own them at the end of the LIHTC 15-year period, but that has not happened. The goal at the time of writing the Preservation Action Plan was to convert some of the homes into affordable housing through ‘lease to purchase’ programs and keep the remainder as rentals. It is unclear what income bracket these homes were targeted toward and what progress the City has made on this goal.

Funding Plan The funding plan for the City’s strategy to maintain and increase affordable housing is complex. In 2018, the City estimated it will need $800 million to preserve and build a total of 12,000 multifamily affordable housing units; $500 million for new development and $300 million for preservation. The expectation is that approximately $550 million will come from traditional affordable housing funding sources:

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• • • • • •

Traditional bank loans Low Income Housing Tax Credits Tax exempt bonds Brownfields and historic tax credits Below-market-rate debt financing Grants

The Inclusionary Housing Ordinance created an ‘Affordable Housing Trust Fund’, [9] which sources its funding from public and commercial land sales in the City and is allocated money from the City’s General Fund. The City has also worked to develop other local funding sources to help provide the remainder of the $800 million. Examples are the Strategic Neighborhood Fund (SNF), a partnership between the City and investment company Invest Detroit, the Affordable Housing Leverage Fund (AHLF ) and the Detroit Housing for the Future Fund (DHFF).

The SNF provides loans to multifamily and mixed-use development projects with at least 20% of units reserved as affordable for low-income households (up to 80% of AMI - $1,280 rent limit per month), along with other projects that fall within the scope of ‘improving neighborhoods’, such as improving streets and streetscapes, parks and recreation areas, and developing or enhancing business corridors.

The AHLF is a $250 million fund managed by the City of Detroit, the MI State Housing Development Authority (MSHDA), and Local Initiatives Support Coalition (LISC ). The three different entities have slightly different responsibilities in terms of what types of funds they manage. The City manages $50 million, MSHDA manages $75 million and LISC manages the remainder $125 million. The City has also dedicated American Rescue Plan Act (ARPA) dollars towards housing development projects.

In September 2022, the City published an update on the various funding sources for housing. Although the report was meant to be a ‘comprehensive and exhaustive list’ of Detroit’s housing funds, it appears to only list a fraction of the total funds that are needed for the City’s affordable housing goals. [10] The SNF, AHLF, and DHFF funding is significant, but inadequate by any measure of Detroit’s actual affordable housing needs. ARPA funds amount to a one-time cash infusion. Much of the City’s current strategy relies on federal funding and the same market incentives that have characterized Detroit’s affordable housing policies since the 1970s.

9 The City officially titles this fund The Detroit Affordable Housing Development and Preservation Fund 10 A spreadsheet that visualizes the funds mentioned in this report can be accessed here (https://docs.google.com/spreadsheets/d/1e5xURO-

vd0gJhlAyy5Wa841LkpT45QUb-VaGaed-JnbI/edit#gid=1782226793). According to the source document, only $81 million of the projected $800 million needed is accounted for.

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Targeted Locations For Development In recent years, the most prominent development activity has occurred in the Downtown and Midtown neighborhoods. The City’s Strategic Neighborhood Fund is designed to encourage development beyond these areas and revitalize 10 different neighborhoods: • • • • • • • • • •

Northwest Grand River Warrendale/ Cody Rouge Livernois-McNichols Russell Woods/ NardinPark Campau/ Banglatown Southwest Vernor Islandview/ Villages Jefferson Chalmers East Warren/ Cadieux Gratiot/ 7-mile

Affordable housing is only a small component of the work funded through the Strategic Neighborhood Fund. Greater attention and funding are devoted to improving parks and recreation areas, retail centers, streets and walking areas.

Fuller descriptions of proposed development and community engagement, can be found on the City’s website.

Recent Updates In the summer of 2022, the City announced plans to expand affordable housing using $203 million in ARPA funds. The plan includes seven initiatives, focused on creating more affordable housing and improving conditions in existing affordable housing: • •

•

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Creation of a resource database with ‘affordable’ housing options and links to other resources including eviction prevention, property tax assistance, housing and financial counseling, and fair housing representation.

The Detroit Housing Network, comprised of six HUD-approved housing counseling nonprofits engaged in housing assistance, including property tax foreclosure prevention, home repair and maintenance programs, homebuyer and renter education.

Sale of twenty to fifty Land Bank homes to community development organizations for rehab and subsequent rental at 50-60% AMI for ten years, with the option of the renters becoming homeowners.

• • •

Down-payment and homeowner assistance funding for up to 600 Detroiters.

An estimated $5 million in funds to bring an as yet unidentified 1,000 rental units into compliance with city code requirements.

An estimated $10 million to job placement through Detroit at Work.

The affordable housing created by these and other projects pales in comparison to the immediate need for safe affordable housing. Consider, in 2021 the City was awarded a $30 million HUD Choice Neighborhood Initiative (CNI) grant to support a $200 million project to revitalize Detroit’s Corktown neighborhood. The proposed projects will build 842 new units of housing in the area by 2028, with 504 of those units to be affordable housing. This six-year target for new affordable housing falls far short of even replacing affordable housing that could be lost during that same period to LIHTC expiration and rent increases in naturally occurring affordable housing.

In addition, the affordable housing that is being created is at the higher end of the AMI range rather than at the 50% AMI and below, where the need is greatest. The first project in the Choice Neighborhood initiative, Left Field Apartments, located at the site of the now demolished Tigers stadium, will have 120 rental units.

Only five units will be rented at 50% AMI, or $900 for a one-bedroom.

HOW THE CITY’S AFFORDABLE HOUSING STRATEGY FALLS SHORT The proposals cited above are representative of a housing strategy that is inadequate both in the number of units created and the affordability of those units. The standard of 80% AMI tends to benefit new arrivals rather than long-term, low-income Detroiters. The policy’s reliance on LIHTC creates costly inefficiencies and gains that may be lost upon the expiration of the LIHTC rent restriction period. Further, the current approach relies heavily on one-time cash infusions, recycled programs, and does little to incentivize landlords to maintain naturally-occurring, quality affordable housing. Finally, given the role tax over assessments played in Detroit’s housing crises, the current approach does little to help Detroiters stay in their homes and give them more autonomy over their housing.

Not Enough Housing Proposed Official sources differ on the current and needed number of affordable housing units. A rough estimation of Detroit’s affordable housing needs can be made by adding the number of cost burdened households to the number of individuals experiencing homelessness. 2022 census data places the number of cost-burdened households (renters and homeowners) at 82,446 households. [11] 11 Census data estimates that in 2022, there were 243,243 occupied households in Detroit: 121,020 owner-occupied and 122,223 renter-occupied.

Roughly 61% (65,943) of renter occupied households and 31% (16,503) of owner-occupied households spent more than 30% of their income on rent or mortgage payments., https://data.census.gov/table/ACSDP1Y2022.DP04?q=2022+selected+housing+characteristics+Detroit that some of the information on AMI levels for particular developments is inaccurate, as it was difficult to obtain. Please reach out with corrections.

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A 2022 point-in-time report by the Homeless Action Network of Detroit found there were roughly 1,211 homeless households in Detroit on any given night, 262 of whom were considered chronically homeless. The resulting total is approximately 83,657 households in need of affordable housing. According to City records, there are currently 22,000 regulated affordable housing units and 13,000 naturally occurring affordable housing units. The City plans to create 2,000 more units, for a total of 37,000 units. This is just over 46,000 affordable housing units short of the number needed to alleviate the housing crisis. [12] Although not Detroit-specific, the National Low-Income Housing Coalition estimates there is a shortage of 191,717 affordable rental units for extremely low-income renters in the entire state of Michigan. As the largest city in the state, a substantial portion, if not a majority, of that shortage is undoubtedly located in Detroit.

Regardless of the exact number of affordable housing units needed, the City of Detroit is desperately in need of more quality affordable housing units. The reality is that the current affordable housing proposals fall woefully short of meeting that need.

Rent Limits Too High As previously noted, the rental rates for affordable housing based on the City’s Area Median Income (AMI) are simply too high for most Detroiters. Our analysis on page 13 of affordable housing data provided to us by the City indicates that approximately 31% of affordable housing is designated for residents making up to 50% AMI, while 65% is designated for those making up to 60% and 80% AMI, or is market rate. The applicable AMI for 5% of units is unknown. The table below provides details on how many units fall within the different AMI levels based on a second analysis of a dataset we created, focused on new affordable housing development within the last 5 years. [13] AMI Level

Number of Units

Percentage of Total

Monthly Rent (2 person household)

Income Based

239

6%

30% of income or less

Up to 30% AMI

102

2%

$500

Up to 40% AMI

65

2%

$700

Up to 50% AMI

582

14%

$900

Up to 60% AMI

649

15%

$1,100

Up to 80% AMI

795

19%

$1,400

Market Rate

1757

42%

$1,800+

Total

4080

101%

Average = $1,422

12 It is also important to note that in many instances, particularly with regard to housing the chronically homeless, simply providing them housing will

not be enough. A comprehensive approach to affordable housing must also address needs such as permanent supportive housing for people living with chronic mental and physical illnesses and in need of wraparound services.

13 Our analysis is based on information published on the City’s website and online news reports related to affordable housing. A database of the 53 affordable housing developments cited by these sources can be accessed here (https://docs.google.com/spreadsheets/d/1NqzFIUSmGO8j3PJc9OmScV1fWg8Kq1Zu/edit#gid=984585671). Twenty of these developments are included in the data the City provided, and many are scheduled to be completed between 2022 and 2024. It is likely that this database is missing information on other developments. We will do our best to keep it updated, but if you know of any developments that need to be added, please feel free to reach out to sordway@detroitjustice.org. It is also possible that some of the information on AMI levels for particular developments is inaccurate, as it was difficult to obtain. Please reach out with corrections.

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Compared to the data the City provided, an even smaller percentage of these new developments or renovations will be available to people making up to 50% AMI: only 24%, or 986 units, of the total number. And only 102 units, or 2% of the total, will be available specifically for people making up to 30% AMI, the income level where there is arguably the greatest need. Conversely, 42% of the new developments will be rented at market-rate prices and 19% to people making up to 80% AMI. That’s a majority of the newly developed housing stock that the City publicizes for its ‘affordability’. The City also emphasizes that units rented to people making between 50 and 60% AMI (15% of the total units) are considered ‘deeply affordable’, but we disagree.

The official HUD AMI for Detroit sets a $900 rent limit for a 2-person household making 50% AMI ($35,800). However, for a two-person household making 50% of the actual median income for Detroit ($18,225) the rent limit should be closer to $400-$500. To target those most in need of ‘deeply affordable’ housing, AMI targets should be 30%-50%. This is where the need is greatest, yet only 19% of the newly developed rental units will be at this rate (or 24% if units exclusively using project-based vouchers are included). Similarly, units designated for people making below 60% AMI still only make up 40% of the new developments. In contrast, 60% of all units are either at 80% AMI or market rate prices. (Many developments are described as including units designated for “up to” 60% or 80% AMI, which could theoretically include 30% AMI. That is seldom the case.)

In 2018, Detroit City Council enacted Section 14-12- 1 through 14-12-16 of the Detroit City Code, the Inclusionary Housing Ordinance. The Ordinance mandates an affordable housing component (20% of units) in any project containing at least 20 rental dwelling units that has received a designated level of government support in the form of land or other funding. However, the ordinance can be satisfied by offering units at 80% of AMI. As previously discussed, this amounts to market rate in Detroit, not affordable housing. An early draft of the ordinance that targeted 50-60% AMI was eliminated by amendment shortly before passage. The result is that legislation designed to provide affordable housing fails to reach those who need it most.

Disproportionate Focus on Small Rental Units One size does not fit all and the general shortage of affordable housing units is compounded and complicated by the mismatch between the size of available units and the needs of prospective tenants. At present, most affordable housing is in multi-family rental units, often limited to studio and one- bedroom apartments. Two-bedroom apartments are a rare exception.

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Of the 31 housing developments for which we were able to find unit size data, only 20% will be 2 bedrooms and a mere 1% will be 3 bedrooms, 79% are either 1 bedrooms or studios. However, roughly one third of Detroit’s population lives in households of three or more people. The result is that families with children or elderly parents, those most vulnerable to being unhoused, are unable to find housing with enough space.

As previously noted, Low Income Housing Tax Credits are the driving force behind most affordable housing developments. Multifamily housing with smaller units is the most profitable option for developers and the most readily converted to market rate after expiration of the affordability period. The housing policy reliance on market incentives effectively puts long-time Detroit residents in competition for housing with younger, more recent arrivals to the City.

Inadequate Quality and Security The safety and quality of affordable housing are as important as the quantity. However, here again City efforts fall short of the immense need. Support for low-income Detroiters facing foreclosure is scarce and there are few resources to assist those living in dangerous or poor-quality housing. For example, the City recommends that tenants who are experiencing unsafe and poor quality housing conditions report code violations to the Buildings, Safety Engineering, and Environmental Department (BSEED). However, only 8,300 of the approximately 82,000 rental properties in the City currently comply with the housing code and BSEED lacks the capacity to compel additional compliance. A University of Michigan survey found that roughly 91,000 Detroiters live in housing with inadequate conditions and that landlords of these properties are less likely to respond to maintenance requests. Seniors and people with disabilities are particularly at risk.

Low-income renters are also at increased risk of unlawful evictions. A recent report from the University of Michigan found that after a brief respite during the height of the COVID pandemic, evictions in Detroit are quickly returning to pre-2020 levels. Roughly 21% of Detroiters faced eviction in 2022.

The report also found that despite an increase in legal representation, only 1 in 5 people facing eviction have a lawyer and landlords are 4 times more likely than tenants to have a lawyer. Additional challenges for those low-income Detroiters include landlords claiming tenants are squatters, retaliatory evictions in response to maintenance complaints, and con artists posing as landlords.

The City’s most recent responses fall far short of actual need. Repair funding through Renew Detroit will provide funding for roughly 750 homes. The right-to-counsel law, which ensures Detroiters facing eviction and earning at or below 200% of the federal poverty threshold has a lawyer, is vastly underfunded and its future funding is unclear.

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Repairing Trust, Brick by Brick: Recommendations for Real Affordable Housing

PA RT 4

There is no single project or policy that can remedy Detroit’s affordable housing crisis. We present our recommendations as starting points to be used in conjunction with poverty reduction and public safety initiatives supporting living wage jobs, quality education and quality healthcare. The complex causes of the current housing crises demand a creative and holistic response. However, the most necessary change is a change in mindset, acknowledging the humanity of our city’s most vulnerable residents and recognizing housing is a basic human

1. FUND COMMUNITY LAND TRUSTS (CLTS) The City should make CLTs a priority for public land slated for residential development.

Community Land Trusts (CLTs) are community-led nonprofits that acquire and hold land while leasing it to community members for residential, commercial, and agricultural purposes. Members of the CLT own the buildings on CLT land and lease it with a 99-year, renewable ground lease for a nominal monthly fee. CLTs, which have their roots in the rural civil rights movement, are used across the country in both urban and rural settings. Unlike LIHTC developments, the affordability of CLT housing does not expire and there is no need to subsidize the same units again and again. Other CLT benefits include: • • • • • • • •

Preserving and creating deeply affordable housing Preventing speculation, unwanted land uses, and displacement of longtime residents and businesses Discouraging predatory lending Reducing foreclosure rates Community wealth creation Promoting local entrepreneurship Creating economically diverse communities Supporting community-led development;

CLTs also provide the opportunity for homeownership, something not found in most other affordable housing contexts. In addition to liberating low-income tenants from frequently predatory and negligent landlords, CLTs provide affordable housing options for larger families and the ability to save for basic needs other than housing.

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Detroit is particularly well situated for the creation of community land trusts. The pieces are there. The Detroit Land Bank Authority (DLBA) currently holds title to roughly 71,000 properties across the City, overcoming the most significant barrier faced by most urban CLTs – land acquisition. Detroit’s resources to support affordable housing are currently in excess of $46 million (as of September 2022), this includes both philanthropic and government funding.

[14] Major banks, as well as Fannie Mae, Freddie Mac, and HUD accept CLTs in financing real estate development and consumer home mortgages. Perhaps most significantly, dozens of community groups across the City have already laid the necessary groundwork for CLTs in their area. CLTs should be a prominent part of the City’s Affordable Housing Strategy. Coordination and partnership between these groups is a necessary first step to breaking the economic cycle that created and sustains the current housing crisis. Specifically, we would like to see Detroit: A. Explicitly commit to the community land trust model as part of its affordable housing policy, establishing criteria for community land trusts and identifying existing community groups interested in forming community land trust.

B. Coordinate the DLBA,the Detroit Planning and Development Department, and the Detroit Housing and Revitalization Department (HRD), to facilitate the transfer of real estate to appropriate groups in a way that furthers the City’s overall development objectives.

C. Establish a Detroit Community Land Trust Fund to align CLT stakeholders and their resources, including the City / DLBA, state government, foundations, banks and community development financial institutions (CDFIs).

D. Prioritize degree and duration of affordability in the use of funds from the Affordable Housing Leverage Fund, the Affordable Housing Trust Fund, and the City’s general budget.

2. REVISE THE INCLUSIONARY HOUSING ORDINANCE Among the most heralded of Detroit’s affordable housing efforts is the Inclusionary Housing Ordinance (the “Ordinance”), which mandates the inclusion of affordable housing units in larger developments relying on substantial public support. In addition, the ordinance also establishes the Detroit Affordable Housing Development and Preservation Fund capitalized through an annual budget allocation (20% of net sales receipts of city-owned commercial property) and fees paid by developers who do not comply with the ordinance.

14 This number was estimated using the previously mentioned update provided by the city on funding sources. It is likely an underestimate given the

Affordable Housing Leverage Fund was originally $250 million.

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The Ordinance is designed to ameliorate some of the problems inherent in market driven affordable housing development. However, the Ordinance contains a number of provisions that undermine even that modest objective.

The Ordinance uses the household income limits derived from the Detroit-Warren- Livonia MSA Area Median Income and targets 80% AMI for developments using City land transferred below market value or $500,00 in direct support from the City. The impact of using HUD’s AMI on true affordability is discussed at length above, as is the unaffordability of 80% AMI. To be truly impactful, we recommend the AMI target should be 60% or less, ideally as low as possible. [15]

3. CREATE A MORE EQUITABLE AMI The City’s AMI report was clear on their stance that they are unable to create a ‘Detroit AMI’ that does not include Livonia and Warren incomes, but City Council and other local and state politicians could advocate for a federal restructuring of how AMI is calculated. An inequitable AMI plagues other major cities and the affordable housing crisis is only getting worse across the nation. Detroit can be a leader in advocating for reform that creates truly affordable housing for the people who need it most. It is up to us as residents to demand that our elected officials advocate for a more equitable AMI at the federal level.

The City also recently announced a new tool they are piloting with the Detroit Economic Growth Corporation and the Downtown Detroit Authority. [117] Essentially, the tool incentivizes the creation of more deeply affordable units (50-70% AMI, not as deeply affordable as needed but better than 80% AMI) by providing scaled construction subsidies: the lower the AMI, the higher the subsidy. While we prefer that this tool be used with local developers that don’t have histories of exploiting Detroit, and that it be used all across the City, not just Downtown, the concept has potential.

It is the type of strategy that can get around the notion of only using a ‘HUD AMI’.

The City could also incentivize the use of a Real Detroit AMI in developments using local funding, combined with HUD funding. All the City has to do to ‘create’ a Real Detroit AMI is commit to developing housing that is deeply affordable (at 30-50% HUD AMI). The City will not lose HUD funding simply because we are focusing more on deeply affordable compared to ‘just’ affordable.

4. FUND SOCIAL HOUSING Social Housing refers broadly to a type of housing that’s permanently affordable, with rents capped at a percentage of renters’ income. This approach goes directly to the heart of Detroit’s housing crisis – low incomes.

15 The Ordinance’s deeper affordability for projects using Community Development Block Grants (CDBG) and the federal HOME Investment

Partnerships Program is virtually meaningless. Federal requirements guiding these subsidies supersede City policy and CDBG funds have not been used on any Detroit residential projects in almost a decade.

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Unlike the current system, which relies on market forces and private developers to create affordable housing, social housing embodies the principle that housing is a human right and thus society’s collective responsibility. As such, the government has a clear obligation to protect its most vulnerable individuals and communities from homelessness and the plague of consequences that accompany it. [16] Social housing uses a mixed-income universalist model that is designed to become self-sustainable over the long-term with higher-income residents helping to subsidize lower-income residents. The process of direct government development may seem expensive at the outset, but this model produces cost savings for all involved, including the government. The long-term cost of subsidizing social housing models pales in comparison to the amounts currently spent subsidizing the temporary inclusion of affordable housing in private developments. While this approach is more established abroad ( Vienna offers one model [119] ) the Cambridge Housing Authority in Massachusetts has several recent examples of how federally-funded housing can be both deeply affordable and high quality.

The history of affordable housing demonstrates that market forces are limited in their ability to provide housing for those most in need. It has similarly exposed the dark side of traditional public housing – racial segregation and localized poverty. The City of Detroit must explore more than simply different ways to fund what has been failing for years. Rather the City should embrace the opportunity, the need, to consider different approaches to creating and preserving affordable housing.

5. PRIORITIZE (I.E., FUND) QUALITY, SAFETY & STABILITY Programs to address evictions and other hazards low-income renters face are woefully inadequate. The recent creation of the Office of Eviction Defense and the legal right to counsel for those facing evictions are good policy, but they are inadequately funded. For example, City Council recently approved a budget increase of $18 million in ARPA funds over three years to fund this program. However, according to the 2022 ‘Stout’ report, a fully funded Right to Counsel will need roughly $17 million annually, not over three years. The report also notes that such funding would in fact be an investment that would save the City roughly $59 million annually.

16 Countries like Austria, Finland and Sweden (https://perma.cc/Q6SE-CHXL) have been providing social housing for decades, and there is much to learn from their successes and challenges. Here in the U.S., places (https://perma.cc/H82T-9LLT) like Seattle (https://www.axios.com/local/seattle/2023/02/21/seattle-social-housing-initiative-passes-next-steps) and California (https://perma.cc/6MEL-593G) are molding the social housing model to their needs.

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6. COMPENSATE DETROITERS DAMAGED BY CITY POLICIES For years, the struggle for quality affordable housing has been led by dedicated individuals and community organizations such as Coalition for Property Tax Justice, Detroit Eviction Defense, Charlevoix Village Association, Detroit People’s Platform, and the Detroit Tenants Association. We support the following demands in solidarity with these organizations and other activists: • • • • •

Fully compensate Detroiters who lost their homes to illegal tax foreclosure Ensure Detroit homes do not continue to be over-assessed Improve and increase code enforcement for rental properties Allocate more funding to home repair programs for all low-income Detroiters Ensure fair housing practices, including but not limited to: • •

• •

Remove rental application fees for low-income Detroiters Ensure tenants who have an eviction case filed (that may or may not have led to an eviction) do not have that case held against them while seeking new housing Implement a Right to Renew ordinance, protecting tenants against displacement simply because their lease ends Protect tenants against retaliatory and negligent landlords

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CONCLUSION Detroit’s affordable housing crisis cannot be viewed in isolation. Its history encompasses economic policies, market forces, as well as racial and social prejudices going back decades. Its present implicates public health, education, safety, and economic development in ways few other issues do. Its future is the future of Detroit. If Detroit is to become the just city its people, both long-term residents and new arrivals, deserve, then the City must bring all its resources to bear. This includes not only money, but imagination.

The City’s current affordable housing strategy doesn’t go far enough. It relies heavily on incentivizing private development, which cannot create the level of affordability Detroiters need. The free market also dictates that such housing is either temporary and a source of displacement or destined for poor maintenance.

The recommendations we have laid out are the seeds of a new strategy to create affordable housing that matches the needs of Detroiters. It is a strategy that cannot be implemented in a vacuum. Addressing Detroit’s affordable housing crisis will also require living wages, quality education and healthcare, and community-led responses to violence and harm.

It’s time to dream bigger.

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