WTF? Detroit News op-ed: Ease building secondary dwellings in Detroit | Is no solution to lack of housing demand

Before my life disintegrated with the death of my father, the middle house is where we lived in Detroit.  Our Congresswoman lived down the street.  The Zillow estimate is $242,000.

The op-ed ("Ease building secondary dwellings in Detroit," Detroit News) argues that the solution to Detroit's broken micro-economy is making it easier to build accessory dwelling units.  He suggests lowering permit fees, among other steps.

ADUs can pull double duty for the city. They build generational wealth for Detroiters, while supporting housing affordability. It’s a simple amendment that does not upend the general plan of the city and frees citizens to utilize their properties how they please. It’s time to start building back a city meant for everyone, not just the few who can afford it.

This is misguided.  Detroit has tens of thousands of vacant properties and lots ("Detroit Shrinks Itself, Historic Homes and All," Wall Street Journal, 2010).  From the article:

Mayor Dave Bing has pledged to knock down 10,000 structures in his first term as part of a nascent plan to "right-size" Detroit, or reconfigure the city to reflect its shrinking population. When it's all over, said Karla Henderson, director of the Detroit Building Department, 

This house, in the upscale Palmer Woods neighborhood, was demolished but looks recoverable to me.

"There's going to be a lot of empty space." Mr. Bing hasn't yet fully articulated his ultimate vision for what comes after demolition, but he has said entire areas will have to be rebuilt from the ground up. For now, his plan calls for the tracts to be converted to other uses, such as parks or farms.

Even when the demolitions are complete, Detroit will still have a huge problem on its hands. The city has roughly 90,000 abandoned or vacant homes and residential lots, according to Data Driven Detroit, a nonprofit that tracks demographic data for the city.

... "Neighborhoods that are considered stable are now at 20% vacancy," said Deborah Younger, a development consultant involved in the demolition effort.

Making ADUs a little easier to build isn't the answer to an "over supply" of recovarable properties.

At a conference a number of years ago, Alan Mallach and I had a conversation where we expressed incredulity that advocates in Baltimore were advocating for inclusionary zoning, when the city has thousands of vacant properties.  The same goes with ADUs in Detroit.

This op-ed discusses "gentrification."  Yes, some neighborhoods will experience inward investment and this brings sometimes unwanted change.  But the solution to disinvestment is investment, and that's part of the equation of gentrification.

Detroit has tens of thousands of vacant properties and lots.  It is in desperate need of increased demand for housing.  

In the meantime the city demolishes hundreds of buildings each year because of lack of demand ("City of Detroit demolished 6000 homes since 2020," CBS, Detroit Demolition Program, "Detroiters spent $49M on demolition. Where did the money go?," BridgeDetroit).  

The City of Detroit has spent more than $10 million demolishing blighted homes in District 7 on the city’s west side. Some residents say they are glad to see vacant properties being torn down, while others wonder how the money is being spent. (BridgeDetroit photo by Bryce Huffman)

Looking at images of distressed homes in Detroit is particularly depressing.  From the article:

2023 was as a special year for Detroit. For the first time in decades the city gained 1,852 new residents, reflecting a city finally out of its rut and ready to prosper again. True to Detroit’s commitment, property values across the city increased.

On paper, this seems like nothing but fantastic news, but if you ask Detroiters, they tell a different story of gentrification. Gentrification is a process where less wealthy neighborhoods have money invested into them. This can be advantageous for only those who can afford it. With rising property values come higher property taxes. High taxes can be a factor that pushes original residents out of the area, and it’s no secret that many Detroit neighborhoods are ripe for gentrification. 

The article argues that zoning is used to maintain segregation, although rather than term it race based, it expands the definition economically, according to income and the cost of a property.

Detroit, for example, still supports civil-rights era zoning codes that actively enforce segregation based on income. This is slyly done under the guise of mandating setback lines and density maximums to force builders into only one type of development: single-family homes. 

The article suggests that ADUs can help bring about affordability.  Detroit has decades of affordability ahead because of lack of demand and a huge overage of potential housing supply.

A single-family home is not a vice within itself, it is the overabundance and lack of affordable units that artificially spikes housing prices, leaving those less fortunate in the dust. This is not what Detroit needs.

Besides Detroit having lots of small lots, making it a bit harder for ADUs to have space, the reality is that they aren't "that cheap" to build.  Yes, you don't have to pay for land, but you do have to pay for utility hookups including sewer, water, and electricity, and that can be expensive.  A $300,000 or more new to build ADU is a lot more expensive than it is to renovate a $25,000 house.

Plus, in a weak market like Detroit an ADU is harder to finance.  Since it's possible in Detroit to buy and renovate houses for much less than $300,000, an ADU isn't likely to appraise at the cost of construction for a mortgage loan, because it is higher priced than the market.  So ADU builders will have to self-finance.

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By contrast, in Pittsburgh, Robert Fragasso recommends another course ("What the city of Pittsburgh can do with abandoned houses," Pittsburgh Post-Gazette).  It's nothing new, been done by cities over the decades.  But renovation is better than demolition.

Pittsburgh has 10,000 abandoned houses and empty lots, of which 1300 have reported code violations, and restoring these properties to the tax rolls would go far in helping to balance the city and school district budgets. Using the average city property tax of $2500 on those 10,000 properties, adding $25 million in new revenues.

Our political leaders seek governmental solutions to this problem, solutions the city cannot afford, when the private sector offers a potential answer. Here’s my proposal: Instead of expending scarce public funds for demolition and leaving empty lots behind, allow individuals to buy properties for $1 in return for a signed contract to demolish or gut the structure within 60 days (unless it can be successfully rehabbed), build a new residence within 12 months and agree to owner-occupy.

... Once renovation begins in a neighborhood more follows. We have seen this in areas that have been restored.

There is a conundrum.  If you offer such properties to lower income households out of the goal of equity, they may lack the capital necessary to fix the house in 12 months.  OTOH, if you focus on developers, the houses end up being rentals, disallowing individual homeowners the opportunity to build equity.

Note the math compared to an ADU.

The math for the buyer is compelling. The cost of home construction in Pittsburgh begins at around $150 per square foot. Remember the land was obtained in the original $1 transaction. The median home size in Pittsburgh is 1500 square feet, which equates to a construction cost of $225,000. /p>

If the buyer can do some of the work, the resultant cost could be less. That total cost would be much less if the existing structure could remain, be gutted and rebuilt from the inside out. Add $10,000 for demolition or gutting of the structure and the upward estimate of total construction would be $235,000. That is about the average cost of an existing home in Pittsburgh, but this would be a new home.

In Detroit, the cost of demolition is about $20,000.