Detroit real estate developers rebuild city amid budget deficits

A new wave of development is rippling through downtown Detroit.

“Walking in Detroit in 2008 or 2009 is not the same as walking around in 2022,” said Ramy Habib, a local entrepreneur. “It’s absolutely stunning what has happened in those 15 years.”

Only 708 new housing structures were built in the city of Detroit between 2010 and 2019, according to the Southeast Michigan Council of Governments.

Much of the new construction can be traced back to the philanthropic wings of large local companies. Ford Motor, for example, is nearing completion of a 30-acre mixed-use facility at Michigan Central Station. The station stood abandoned for years when the city went bankrupt.

According to economists, Detroit’s decline into insolvency came amid 20th-century globalization in the auto industry. The city’s population dropped from 1.8 million to 639,000 in the most recent but controversial US Census census. “As the population moved out and the infrastructure stayed in place, that put pressure on the city. Over time, they started to accumulate cumulatively,” said Raymond Owens III, a former senior economist at the Federal Reserve Bank of Canada. Richmond.

The Great Recession of 2007-08 left another scar on the city as dozens of homes were sold. The US Treasury Department has since funded the removal of 15,000 destroyed buildings in the city. “A lot of black people are leaving the city. So sometimes that identity can change and shift in certain communities,” said Alphonso Carlton Jr., a lifelong resident of Detroit.

Local leaders have used tax and spending policies to promote inner-city economic development. In July 2022, the Detroit City Council finalized a tax cut for real estate developer Bedrock to fund Hudson’s $1.4 billion site project. The discount can be worth up to $60 million over a 10-year period. Bedrock is part of a family of companies controlled by billionaire investor Dan Gilbert, who relocated several of his businesses downtown in 2010.

Bedrock told CNBC the decision was consistent with the council’s handling of other major developments, due to high local tax rates. A local analysis suggests that the effective 2020 real estate tax rate in Detroit was more than double the national average. Detroit’s new tax, spending and placemaking policies have sparked interest from bond investors in recent years, providing a new source of revenue for local government.

Watch the video above to learn more about Detroit’s bankruptcy breakout.

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