Energy And The Onus of Design Standards For Publicly Funded Projects

As the Michigan legislature debates– and will invariably pass- a bill that will open the floodgates for massive public expenditure on private development in downtown Detroit, it is time we start demanding increased accountability in the sustainable execution of these projects. My proposal? Energy benchmarking for every commercial, industrial, or mixed-use development that receives public subsidy or tax abatement, say, with a total development cost of over $250,000. In my ideal world, we would be requiring benchmarking of everything, forever and always, but I’ll take what I can get. The failure of the more aggressive Community Benefits Ordinance last November– but the passage of the other- indicates that this is feasible in the current market.


SB 111-115 is essentially a kind of super-TIF, and it was cleverly crafted exclusively to fund a three quarters of a billion dollar development of the Hudson’s site (but could easily be used for future projects as well, and only in Michigan cities over 600,000 population). TIF, or Tax Increment Financing, is a tax capture method used to offset the high cost of new development. Simply put, it is a way to incentivize private development in a specific area by providing a subsidy, grant, or other cash payment to cover a portion of the development costs, and that payment comes from projected future returns. Borrowing on the future sounds risky, but that’s essentially what a bank loan is. The different is that this is public money.

At its best, it can be used to transform neighbourhoods, remediate blight, improve commercial corridors, and develop disinvested districts by helping finance new development, thereby reducing risk. TIF’s are often applied to districts (theoretically), which means that they can, again, theoretically, be used to improve entire areas as opposed to subsidizing a single developer. But at its worst, TIF is essentially applied by cherrypicking development projects and giving monolithic handouts of taxpayer money to mega developers. For projects that, you know, might not ever happen (remember Paul McKee’s Northside Regeneration in North St. Louis? Now he wants in on that damn soccer stadium).

There are, depending on how you count, ten pieces of legislation governing TIF in Michigan, dating back to 1975, a full six of which have been created in the past thirteen years. A small minority of the 600-some TIF plans in the state actually report to the state, a perfunctory point of non-compliance that Chicago’s Civic Lab has also pointed out as a problem.

Do we even need Super-TIF?

It is debatable that we even need this kind of massive public subsidy when the residential real estate market can support rents at $2.00 per square foot, as apartments are now renting for in neighbourhoods like Corktown and Woodbridge, where supply is severely limited, as well as downtown Detroit, where plentiful supply is quickly being absorbed– even at $2 a foot (as of mid-May 2017, they weren’t biting as far as the $2.25 a foot at Briggs Houze). $2.00 a square foot isn’t much less than some of the hottest markets in the United States (I pay about $1 a foot in Corktown).

Napkin math: $2 per square foot gross, $24 per square foot per year gross, and you mean to tell me you can’t afford to build a building that costs even a couple hundred dollars a square foot without up to $40 million a year in subsidy?

Chicago’s Civic Lab has explored the use of TIF’s extensively and concluded that, while plenty of TIF money goes to public infrastructure and development, a lot of it goes straight into the pockets of corporations. Michigan’s Super-TIF bill would not only fund the development out of sales taxes but also income taxes. And, here in Detroit, we are less abashed about the whole corporate subsidy, since Dan Gilbert is, after all, the Great Saviour Of Our City. Or Mike Ilitch, I can’t remember anymore.

But whether or not it’s a good idea to give hundreds of millions of dollars in handouts to billionaires like we did to Mike Ilitch (it isn’t, by the way), it’s important for us to ask questions about how to make that public investment a lasting one. Because it is going to happen.

Demanding Resiliency and Fiscal Sustainability

Publicly funded projects should be held to high standards of quality and design. What is good design? Frankly, I don’t care how it looks, though Bedrock’s proposed flashy envelope, more glazed than a Krispy Kreme, is attractively shiny in the renderings. And invariably, anything that is proposed for the Hudson’s Site will elicit screeches that we aren’t providing enough parking, that we need more parking, more parking is needed. But I’m thinking beyond parking and more in the realm of energy usage.

Just as energy is a critical concern, as I’ve explored before, for tenants and homeowners, so, too, is it a critical concern for property managers and commercial building owners. DTE should be invested in this since they’ve had to eliminate a quarter of their generating capacity and are just slowly catching up to the novel notion of energy conservation as virtual generation.

Benchmarking– And Onward

Energy benchmarking is a process that involves tracking a building’s energy and water usage over time to encourage conservation among occupants and tenants and to reduce operating costs for building owners. EnergyStar Portfolio Manager, offered through the Department of Energy, is more or less the industry standard for how these things get done.

Mandated benchmarking for large commercial buildings has been explored in a number of jurisdictions including Chicago and, starting in 2018, New York. Chicago even has an extensive system of incentives and bonuses for sustainable development.

The Institute for Market Transformation has noted in a number of case studies that benchmarking can reduce energy consumption by 20, 30, or 40%, in many cases, simply by identifying energy usage in a more visible format. Even at two dollars a square foot, energy bills are a substantial portion of the annual cost structure, and are a huge portion of the physical operating costs of the building.

Markets are often transformed disruptively, a.k.a. “lower-cost product changes the game,” and are sometimes transformed by regulatory nudging, which, depending on how strongly it is done, may elicit kicking and screaming, as it did in Michigan’s adoption of modern energy codes. in Detroit, anecdotal evidence I’ve heard from folks who have worked with Dan Gilbert’s Bedrock and Fams (the FoC or “family of companies,” as they lovingly call it) suggests that Bedrock is more interested in technological glamour than the nitty-gritty, under-the-hood details. So, it wouldn’t be a stretch to suggest that they wouldn’t like benchmarking, but if they were required to comply with it, it’s also not a stretch to suggest– based on hard data- that it would have a positive impact on their bottom line.

Regulatory incentives toward LEED development arose in the 2000’s, and LEED v4 even has some parameters that might actually make buildings more sustainable. I make no secret of my skepticism of LEED, but it is a universally recognized standard– and it’s important for us to think about how when we are investing public money, we should be demanding some kind of independently verifiable standards. But energy benchmarking is easy.

Bottom line: If you’re trying to demand 50% of the income taxes of anyone who lives or works within this district for the next 20 years, shouldn’t we think about stepping up our demands as well?

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Detroit Tries On Form-Based Code in Brush Park

On Tuesday I attended a two-hour session at the MSU Detroit Center on Woodward Avenue in Midtown about the proposed implementation of form-based code in Brush Park, a neighbourhood just north of downtown where just this past week construction broke ground on the City Modern project, which will bring 410 units to a block and a half in the center of the district. The project is the largest residential district development currently going on in the city, followed by the 270-some units in McCormack Baron Salazar’s Orleans Landing, which just started leasing.

In the future, there will be robot baristas– made out of Corten steel. The City Modern office, to the east of the principal area of development, which just broke ground. Facing south. (Photo by NMZ.)

The City of Detroit’s Planning and Development Department (PDD) is implementing the new code in the roughly 180-acre (73 ha), 22-block area, from central arterial Woodward Avenue on the west to I-75 on the east, and from Mack Avenue on the north to I-75 on the south, in conjunction with Detroit-based Hamilton Anderson Architects and Boston-based Utile.

Around a full third of Detroit’s roughly 188-acre Brush Park neighbourhood remain completely undeveloped. The northeast quadrant is occupied by low-density housing while handful of the neighbourhood’s remaining signature, Victorian mansions occupy mostly the east-west streets between John R. and Dequindre. Woodward Avenue is pictured on the far left, across which the Little Caesar’s Hot & Ready Arena will be developed, and upon which the M1 Rail will ferry contented denizens of the New Detroit in comfort and speed between New Center and Downtown!

To those unfamiliar with comparisons between form-based code and use-based, conventional, or Euclidean zoning (named for Euclid, Ohio), form-based code is a newer regulatory framework that guides design principles for neighbourhoods as opposed to uses, while conventional zoning code restricts or guides uses, first and foremost, and regulates form as a secondary guideline, but typically weakly and still typically based on use. In 2009, I did a study of a neighbourhood in North Philadelphia, and found that the city was at that time battling with form-based code itself– to simplify the 56 zoning classifications that it currently had. Some of them had been designed specifically to suit types of development that didn’t exist when the zoning code was designed (basically a classification for “strip mall”).

I’ve found that regulation tends to become sluggish when it doesn’t undergo periodic reform. Below is a couple of pages from the B4 classification which says what you can and can’t build and which setbacks apply to which types (you can build a 35-foot tall Motor Vehicle Filling Station but you can’t build a 60-foot apartment building with first floor storefronts). Conventional zoning can be a very “Simon Didn’t Say” kind of approach to regulation.

This is old school zoning code. Dig the B4 classification, a zoning code which covers the entirety of Corktown between Michigan Avenue and I-94 (M-10 on the east). Can I at least get some doodles to illustrate what the heck all of these setbacks mean?

The general idea of form-based is to encourage diverse uses of space, encourage mixed-use development (which can be cumbersome in some jurisdictions– remember my piece on East Chicago which referred to the poor guy who had to get a variance to open a barbershop in a commercial building), and make sure that the design of buildings in a specific district fit some sort of general standard.

This idea is fundamentally pretty old, but its implementation by municipal governments is relatively new. Cities have always existed, but city planning and especially urban design are very new things; Haussman’s renovation of Paris (1853-1870), for example, or Franz Joseph I’s nearly simultaneous, monumental development of the Ringstraße in Vienna (1857-1865) are massive examples of the implementation of district-wide redevelopment (development) that focused specifically on consistency in design standards and architectural form. But I digress– form-based code in its modern conception is a post-1970’s-everything-getting-critically-dismantled-era reform.

Form-based code in Detroit is an attempt at not only regulatory reform but also an attempt at smart redevelopment. Similar to how Detroit Future City explored the idea of long-term districts, somewhat more vague than the form-based code typologies, or how the 7.2 report looked at a specific geography to encourage and analyze development in the urban core, form-based code attempts to create a vision based on district-wide thinking as opposed to conventional, lot-by-lot thinking, which has successfully developed plenty of lots but often failed to encourage neighbourhood development on a larger scale.

Attendees were concerned about a few things. A couple of folks said it sounded as though the proposal was to increase the density as much as possible (I’m very into that). Maurice Cox pointed out to one woman who complained about the prospective of limited parking (you don’t say!) that we often forget that Detroit’s historical population density, when the city was considered to be at its peak, with all of its buildings intact, was two or three times what it is now. It’s often true that we forget about that. In case of the City Modern project, adding 1.75 residents per unit would increase the neighbourhood density by over 2,500 people per square mile (50% over the Detroit city average), or, based on the figures below, an increase in density of 7,800 people per square mile.

From the PDD/Utile presentation, comparing a lower-density redevelopment strategy (left) with a higher-density development strategy, which could add 8-10k persons per square mile to the neighbourhood.

I would love to see the blue blocks in the above image focus on development along Woodward– building ten or twenty story buildings- but I think that is a bit unlikely at this point. Maybe if the QLine/M1 Rail is a smash hit, it will encourage the city to adopt density bonuses similar to those in Chicago’s TOD ordinance. (Heck, I haven’t driven my car hardly at all since it got warm– maybe they’ll put a streetcar down Michigan Avenue!)

Make no mistake: It is possible that form-based codes can become as monstrously complicated and bureaucratic as conventional zoning codes (they cited Los Angeles’ new form-based code, which is very, very, very long), but the general idea of a form-based code encourages city planners to work with developers and residents toward a district-wide vision, say, broader than a single lot, and based on the idea that cities can be built based on encouraging general form rather than restricting oddly specific uses of spaces.

I am looking forward to seeing what CityModern brings– and hopefully much more development (and zoning reform) to come.

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Density & Energy Efficiency: An Geometric Perspective

We know that Detroit, city of the yeoman driver, is also the city of the yeoman homeowner. Model D Media wrote an exhaustive historical overview of the issue, addressing the “double-edged sword” of single-family homeownership that was “literally forged in Detroit”– by factory workers who earned a sufficient wage to buy a home and buy a car to drive to and from that home. At a national level, this paradigm is changing slowly, but we still embrace it, measuring the health of the economy based on new housing starts.

I wanted to see if there is much in the way of research out there around comparative energy efficiency of multi-family versus single-family housing, and, separately, whether there’s a good way to think about the diminishing returns of densification with regard to energy. Taking that a step farther, can we develop good rules of thumb, irrespective of zoning limitations, that can help us understand a good level of density with respect to energy?

This is a timely discussion: Sky-high demand for housing in what southeast Michiganders call “downtown” (the city limits of Detroit), or, what Detroiters might call the 7.2, is pushing multi-family new development and pushing up rents. Or, it’s being pushed by a general recognition that Detroit doesn’t suck. That’s a market trend that I won’t fight, because I’m not a troglodyte, and because I harbour the radical notion that fewer cars and more public transit is a good thing. The NAHB cites regulation as a restrictor of supply, but also admits that there just isn’t that much greenfield space left to develop. Realistically, governments are realizing that sprawl is really expensive and people don’t need or want it. So, that’s good.

An extraordinarily simple, three-part illustration shows why a minimum FAR of 1.00 might be a really lousy way to encourage density (far left flat box).

Macro perspective: Understanding The Variables of Sustainability and Efficiency

Contrary to what Rick Fedrizzi would have you believe, the solutions to sustainable city-building are numerous and they don’t all involve money. Nor is there a simple solution to the question of efficiency and density. Sustainability in general involves so many variables and qualifiers, some easy and technically specific, some vague, and many conflicting with each other. Hence, I’m looking at indexing efficiency with density to think up a new metric.

Building folk often miss that “energy efficiency” is fundamentally different from “sustainability.” In terms of metrics and labels, you can get into an infinite greenfield of weeds here: Global warming potential of materials, for example (do you insulate the crap out of a house with polyisocyanurate to make it net zero, even though it’s made in an energy-intensive process with crazy toxic chemicals– or do you use blown cellulose, which is theoretically less resilient and requires more space but is made out of natural bits)– or the embodied energy of materials (concrete vs. wood vs. straw bales?). Did you build with CARB-compliant materials? Did you avoid ILF Red List materials?

Thenceforth it just becomes pear-shaped: There’s an important distinction between the modelled energy usage of a house and the observed energy usage, which is determined by the occupant’s behaviour. There are no metrics to account for the occupant’s behaviour outside the house. If you built a net zero house that is an hour away from work, and you drive a gas-guzzling Hummer to drive there, is it still a green house? Yes– but you’re not a green person. This has been studied a bit. The USGBC’s Rick Fedrizzi, Meek Mill to my Drake if Drake weren’t cool and Meek didn’t pay him any heed, is sort of the Al Gore of the architectural sustainability world– are you still really green if you fly around the globe, living large, driving fancy cars? (The answer is no, by the way.)

Here’s one: What about watts per square foot? That’s solid, right? You’re not considering your total utility bill, you’re considering it based on area of the home. Perfect, right?!

Micro Perspective: The Architecture of Efficiency in Multifamily Construction

Here’s one example to demonstrate the fallibility of these conventional variables: In terms of square footage, multifamily buildings are actually less efficient on a per square foot basis. Walter and Obrinsky note this really basic, structural deficiency in the way data on this subject are collected. If a 10,000 square foot house uses ten watts per square foot per year, can it really be said to be more energy-efficient than an apartment that uses 50 watts per square foot per year but only measures at 500 square feet? Five times the energy usage per square foot, but 1/20th the size…

But bigger houses have more space to heat, so shouldn’t they be more inefficient? Not necessarily per square foot, by virtue of the fact that there are fixed things that you have to install to heat every part of every house, no matter how large or small. You don’t get to turn off the heat in rooms you aren’t in, for example– the furnace has to be sized to to the entire house, and zoning rarely gets more complicated than, say, two or three zones unless you’re talking about a ginormous mansion. An apartment is, on average, much smaller, however, so it will typically have a lower overall footprint. Walter & Obrinsky also note the problem with apartments where tenants do not pay the heating bills, which further complicates studies, and it’s only possible to extrapolate estimates about what this does to a complete analysis of all housing units in a given market.

My hypothetical village, complete with a bike lane and a pond where gainfully-employed, college-educated, native species of birds and small mammals practice bikram yoga and flourish in a restored ecosystem…

On the above, roughly acre lot, we have up to 33 dwelling units, a respectable number that gets you into the territory of some LEED ND points for density. The Twin Cities (Minneapolis-St. Paul) Metropolitan Council has a great powerpoint that shows examples of what density comparisons look like in terms of dwelling units per acre, one of which is provided below, suggesting a density based on an adaptively reused industrial site converted to lofts in what is actually probably a lot denser now.

Citywide, here in Detroit, we aren’t there yet, noting that Detroit has the highest percentage of single-family detached homes of any major American city…

…but we’re getting there, slowly, through the likes of:

Brush Park, where there wasn’t really much in the way of the built environment left, is home to the City Modern project, which will develop 410 units on about 8 acres between Edmund Place and Adelaide Street just east of Woodward, a Big City density of over 50 dwelling units per acre, or an aggregated Big City density of 50-80,000 people per square mile! To give you a comparison, the average Detroit residential neighbourhood (what they say when they refer to “the neighbourhoods” of Detroit) has a density of about ten dwelling units per acre, an average lot often being about a tenth of an acre. Say what you want about Mr. G, but he is taking apart the automotive paradigm– for the better. (He doesn’t live in the city, though, so he’s gotta have a pretty big carbon footprint from all of that driving.) Or, a large development just announced for what they are calling Midtown West, or Woodbridge East (maybe MiWe or WoEa if we embrace those white people paradigms of neighbourhood nomenclature). Detroit also has its first micro apartments, spendy but charming in their tinyness, and they are also a growing trend (for whatever reason).

I don’t have geometric data on these, but suffice it to say that the micro apartments would likely perform quite well in my analysis even if they, like The Scott and plenty of other buildings, are stuck in mid-2000’s ASHRAE and don’t actually comply with current building codes.

Methodology of analysis

Because cities aren’t built based on energy-efficient wall assemblies (except maybe in Germany– the Germans would be super into that) but rather on individually apportioned lots, exploration of density questions seems to have largely been in terms of zoning regulation and, often, profitability. Joshi & Kono (2009), for example, explored a regulatory balance between minimum FAR’s and maximum FAR’s, while Colwell & Scheu (1993) explore a range of trade-offs and effects of regulatory constraints on profit maximization with regard to density. Older works from the 1950’s focus on the urban “problem”– the results of unchecked density on things like congestion or accessibility.

Jack Diamond’s “Residential Density in Housing Form” laments as early as 1976 Canadian urban development efforts that attempt to remedy the single-family paradigm by building high-rises (at the opposite end of the density spectrum), which, I would argue, probably fall quite far forward on my hypothesized logarithmic curve of diminishing returns.

My methodology was straightforward: Compare several general designs that optimize area and number of housing units within reasonable parameters of density by minimizing the amount of exterior area (building envelope or building enclosure), and figure out approximately at what point the return begins to diminish. In urban planning terms, that actually gets us to a pretty cozy level of density– tens of thousands of people per square mile- but it doesn’t overcrowd us and it doesn’t have buildings going sky-high.

Instead of focusing on Floor Area Ratio, I wanted to use a new metric of Envelope to Floor Ratio (let’s call it EFR)Mathematical optimization wasn’t of help because you’d come up with either a cube (which, architecturally, creates daylighting problems and won’t work on traditional skinny lots) or a sphere (which doesn’t lend itself to functional floor plans and, well, who wants to live in a sphere?). I also considered cutting unit sizes from a round, even 1,000 square feet to 500 square feet, too, to see what that would do.

The building envelope was the critical variable here because it is the most important component of a structure with regard to the structure’s resiliency and energy usage. Comprising the thermal boundary (regulating heat transfer between inside and outside), the pressure boundary (regulating the flow of air and vapour between the interior and the exterior), and the drainage plane, the envelope is typically the largest single cost of a structure and the one whose construction determines the lifecycle cost of maintaining that structure (utility bills).

Results of Analysis

Unsurprisingly, the single-family home loses out– pretty much every time. Envelope square footage of a 1000 square foot single-family home comes in at 3400 square feet. Double the square footage of the home (this would be a massive ranch), that EFR number only goes just below 3. Three stories versus one story still doesn’t fare too well.

Units Floors GFA Footprint Roof* North South East West ∑ s.f. EFR
1 1 1000 1000 1000 200 200 500 500 3400 3.40
1 2 2000 1000 1000 400 400 1000 1000 4800 2.40
1 3 3000 1000 1000 600 600 1500 1500 6200 2.07

What I wasn’t entirely prepared for was how badly all of the single-story and two-story buildings came out, even semi-detached or townhouses. I didn’t get appreciably below EFR=1.45 until modelling either very long 3-story buildings or “normal”-shaped 4- or 5-story buildings.

It was problematic to model a building that was improbably long– the 96-unit 4-story building is efficiently dense, but also 320 feet long. I’ve highlighted these in red because they get a very low EFR number but would also be weird and unrealistic to actually build.

As I predicted, building very tall had some but only minimal improvement. A 20-story building with the same, 4000 square foot footprint as the smaller ones came in at EFR=0.75, . Of course, at an average of 567 square feet per unit and a theoretical FAR = 20.00, that ends up being a fairly profitable building for a developer to think about, but it’s not going to make sense in most jurisdictions.

Notably, the FAR stayed exactly the same within each category. The only way it increased was if we added a floor. In this regard, I’m able to demonstrate a diminishing marginal return of density with regard to the costly construction of a building envelope– which suggests that the ideal density, in terms of energy efficiency, will produce buildings that are in the range of 4-8 stories. We can stick to the lower number there if we’re thinking over broader concepts of sustainability like using wood framing to build a 3-5 story building, something not presently feasible for an 8-story building, or something that can utilize less specialized labor and less specialized engineering design for a lower structure. Driving the EFR down toward 1 seems like a feasible goal.

Of course, the EFR goes out the window when you consider buildings that aren’t just blocks, so that necessarily requires architectural creativity alongside probably relying more heavily on the FAR model, but the purpose here was to illustrate that FAR isn’t a good be-all, end-all model (see the first photo) to consider density, and therefore the energy efficiency of dense, multifamily development can consider additional metrics to guide development.

Further reading:

Alter, Lloyd. “EPA Study Finds Where You Live Matters More Than How You Live.” From Treehugger. 24 February 2011.

Emrath, Paul, et al. “Tale of Two Markets: Single-Family vs. Multifamily Construction.” Housing Finance Policy Center. 13 July 2016.

Walter, Caitlin & Mark Obrinsky. “Energy Efficiency in Multifamily Rental Homes: An Analysis of Residential Energy Consumption Data.” Washington: National Multifamily Housing Council, 2015.

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Gentrification: Inevitable In Detroit, Still Not Actually Our Biggest Problem

Have you heard the good news? Detroit’s coming back! New stadia, high-density development, a 3.3 mile streetcar line, and the fact that everyone in the city of New York is suddenly super excited about The Next Brooklyn, all of this heralded by angels draped in gold Tyvek and playing trumpets made of scrap copper, have prompted increasingly heated debates over the dreaded ‘G’ word. Is it happening here? More broadly, is gentrification even possible in a city that has such low housing prices and such high rates of vacancy? If it’s happening, is it the biggest threat to the stability of housing in the city?

Yes, yes, and… no, no, probably not, not by a long shot. Gentrification is inevitable in central Detroit as a product of a lack of housing supply, if nothing else, and that lack of supply is, in turn, a product of lethargic capital markets. However, we can try to solve questions about equitability while solving problems of capital. That’s the good news. The bad news? Gentrification is dwarfed by a more insidious and farther-reaching problem that gets missed because it isn’t happening in the urban core.

Detroit in the Era of Austerity and the Wealth Gap

Detroit’s trumpeted rebirth has been surrounded by complex questions on the national stage about cities themselves and the people in them– most generally, how development can be equitable as the wealth gap continues a many-year trend of widening; questions of black erasure, at a time when we are asking whether everyone really does believe that Black Lives do Matter (definitely not everyone, by the way), and racial and economic justice, when we have a presidential administration that explicitly said it wanted to ban Muslims from the country– and then tried to, that appointed a man to run HUD who believes that poor people are poor because they’re lazy, and among whose sole nods to diversity is that they allows Paris Motherfucking Dennard to open his mouth ever.

Well, shit, that’s not a bad cover. How do I get a book deal?

It’s not necessarily a climate conducive to pluralistic dialogue. But we’re also trying to have that dialogue during the austerity era of city-building: Detroit has just emerged from a devastating municipal bankruptcy, the state of Michigan gives billions in handouts to big business while cutting funding to programs that help workers and low-income families, and so, well, stuff isn’t easy. On the bright side, especially given Detroit’s ascension to national coolness, we are afforded the spotlight to do it, not to mention some of the best and the brightest urban planners and thinkers who are committed to solving this problem equitably. I mean, maybe.

When I think about perception, I think about the questions I’ve gotten over the years in the following progression: What was first, “Oh, my God, Detroit! Do you own a gun?!” or “Do you have running water?” became, first, from the intelligentsia, “Oh, my, so many interesting things are going on in Detroit! I heard this great piece on NPR about this musician, I think his name is Jack White!” (Yes, I’ve heard of him.) or, frequently, “Detroit! Dude! Do you, like, live in a $500 house [like Drew Philp]? I read this article… [or it might have been this one]…”

It’s the same kind of snark I so desperately hope San Franciscans appreciate when I, upon finding out where they live, tell them that “I hear that the startup scene is lovely this time of year.”

Expropriation: Not A Virtuous Free Market Kind Of Thing

I don’t live in a $500 house, and I have never met Drew Philp. I pay affordable rent for a house that was renovated about 15 years ago, before Detroit was, you know, the Next Brooklyn. That doesn’t mean that I don’t live in perpetual fear that my landlord will kick us out to sell the house for, say, $200,000 cash (let’s say, 130-150% of the average regional home price) which is entirely conceivable, given some recent Corktown sales, and the sort of thing that happens in the real estate bubble of the 7.2. When I lived in the not up-and-coming, still-today-quite-abandoned Milwaukee Junction, a certain major property owner in the neighbourhood who shall remain nameless (a.k.a. some folks I did some consulting work for and in whose property I lived) told me and my roommate that we’d have to leave unless we wanted to pay $2700 a month in rent. (That was about $2 a foot– so, prices like Philly or Miami, but in a neighbourhood that lacked street lights and recycling pickup and snow plowing. But where artisans were making picture frames out of reclaimed wood, and down the street from the Shinola factory, so, you know, trade-offs.)

In the quest to push rents toward $1 a square foot, some real estate developers embrace the mentality that we must actually double the value for the rest of the market to catch up to where it “needs” to be. (I’m being a bit facetious here– especially younger real estate and private equity guys always take this perverted approach to what ‘should’ be based on what they read in a book in B-school or what they learned in a house-flipping seminar.) Of course, developers are getting takers at $2 a square foot– just not within 15 minutes. (In contrast, at Southwest, we were typically able to accept an offer on a house within days of listing– closing it was another matter, but more on that later.)

Gentrification is a hotly contested term, and few really agree on what it means, or whether it’s bad. Merriam-Webster goes so far as to include “displacement” as a frequent product of the new investment that it involves. (The Corporate Landlord, of Granite Countertops, Stainless Appliances, And Jacked Up Rents.) Some people just use it to mean “wealthier people moving into a neighbourhood, fixing up the old houses.” (The Benign, Well-Meaning, Double-Income No Kids White Folk With Tattoos, A Large Dog, And Good Jobs.) When the Michigan Daily recently weighed in, they defined the “process which low-income communities are renovated and rebuilt, attracting young professionals but also usually driving up real estate prices and relocating pre-existing residents and businesses.” Okay. It is generally acknowledged by both elitist free marketeers and the most rabid social justice warriors alike that there are more intentional ways of doing things that end up working out better for everyone, given the inevitability that markets are real, people do respond to markets, and the trend is that wealthy people will gravitate toward lower cost areas.

So, new investment resulting in expropriation is a bad thing, right? Market urbanist types will often abandon their “live and let live” mentality when it comes to upping prices in real estate, saying that the prices should be as high as the market can bear, and if people get kicked out of housing, that’s just the way the cookie crumbles. (Oh, sorrow! The housing supply is just too low! What ever could have been done?!) But while loath to admit that for-profit business has any culpability in bad things that go down ever, they are wont to point out that municipal administration can proactively or disastrously guide development, such as this example of how Dallas planners forced some bogus zoning overlay to overtly kick out people they didn’t want. They also argue that encouraging upzoning and densification increase supply and therefore decreases the likelihood that rents will go up based on basic supply and demand.

This may hold true, considered in the macro perspective– the whole market. It may also not, especially if it’s not spread out, and if demand for rentals remains steady or increases as it has been while supply of funding for affordable units does not increase:

Telegraph this out to a market-wide scale and this is how it works (maybe). Develop two properties comprising 6 units, and, let’s say, eight rental units increase in price because they can. Add 15 units in the vacant lot across the street, and the 21 new units will keep prices of existing rentals stable. Right? Kind of not right.

A perceptual problem here is the reality that no one even lives in the 7.2. We consider it the center of the city because, well, it is the geographic core of the city, but the density of it is basically like a somewhat kinda sorta dense suburb. Job density is high because of your General Motors, your Quicken, your State of Michigan in New Center, your Shinola factory cranking out shiny things, or your Henry Ford Hospital, but for every four story apartment building you have a giant parking lotRoyal Oak has a higher population density than the 7.2. Wyandotte has a higher population density than the 7.2. St. Clair Freaking Shores, with its boats and its ranch homes and its racist boat people, has a higher population density than the 7.2. Hamtramck has about three times the density of the 7.2. And yet the 7.2 is where the expropriation is happening, right?

2010 pop.
Municipality County 2010 pop. Area Density Classification
83 Hamtramck Wayne 22,423 2.09 10728.71 Urban
45 Lincoln Park Wayne 38,144 5.89 6476.06 Inner Ring
116 Hazel Park Oakland 16,422 2.82 5823.40 Inner Ring
24 St. Clair Shores Macomb 59,715 11.62 5138.98 Inner Ring
99 Ferndale Oakland 19,900 3.88 5128.87 Inner Ring
26 Dearborn Heights Wayne 57,774 11.74 4921.12 Inner Ring
1 Detroit Wayne 677,116 138.75 4880.12 Urban
27 Royal Oak Oakland 57,236 11.79 4854.62 Inner Ring
35 Roseville Macomb 47,299 9.83 4811.70 Inner Ring
34 Redford* Wayne 48,362 11.2 4318.04 Inner Ring

When we talk about rising rents in rental housing alone, probably, yes. We don’t have great data on it, just anecdotal evidence and ways to track rising rents, generally. There isn’t a database of people who got kicked out of their apartments. It’s not just long-time residents but also companies that made Greater Downtown a place you wanted to hang out and shop– Goodwell’s Natural Food, for example, or Café con Leche on Clark Park in Southwest Detroit. Some affordable units are included along with the advent of $5 coffee and “urban cabins.”, for example ,and attempts to keep Midtowners in Midtown are even being funded through basically cash grants from foundations. (One of those moments where I watch something happening and just say, “Huh,” because weird stuff happens in Detroit.)

Low Density Cass Corridor Living. About 9 acres of the 20 (excluding rights-of-way) pictured here are parking lots. Several formerly occupied lots on the 0-100 block of Forest are owned by a Bloomfield Hills speculator, and much of the rest of it is owned by Wayne State University.

The Equitable City: Densification Without Expropriation

I’m going to propose something radical for my Wharton and Ross friends who worship at the Holy Shrine of the Divine Market- and that’s that every citizen has the right to live without fear of eviction or expropriation. Does that mean that I should be able to lie about my income on a rental application and then not pay rent? Does that mean that I should be able to conduct criminal business inside my house and live there without consequence? Rent control forever and ever? I mean, no– we need to have a functional society where people take responsibility for things and where markets are allowed to function properly (I don’t even really believe in rent control, but that’s another article). But people should also have the right to live productive lives, enjoy the communities they live in, and enjoy access to the same market information.

Eviction and expropriation purely in the name of profit, the central theme of Matt Desmond’s recent book making the rounds in discussions among urban planners and mere mortals, have profound effects on the health of individuals, families, and entire communities. It is an ugly, horrible thing, and no one should ever have to go through it, full stop.

Back to my previous point about perception from outside the Detroit bubble, one of the biggest questions I get (aside from “but the schools,” which is akin, in my opinion, to “but her e-mails“):

“High prices, wow! But isn’t there a lot of vacant housing in Detroit?”

Well, there are a lot of vacant structures, but vacant livable housing? No. LOVELAND estimates that about 19% of the structures in Detroit are vacant, and about 31% of the parcels in Detroit don’t have structures on them. Since there’s no way to accurately estimate occupancy rates of livable structures in a city whose understaffed building department would probably lack the political will to aggressively enforce occupancy ordinances even if they had the staff to (I was once all but chased out of the building department when I requested a certificate of occupancy), I can only go off anecdotal evidence from working in a few portfolios of affordable and market rate housing– but the gist of it is that the effective occupancy rate in livable units is near 100% in much of the city. Southwest Housing, for example, has a weeks-long, sometimes months-long waiting list for one of its nearly 700 rental units.

Detroit is hardly bucking the national trend, as indicated in this graph from NYU’s Furman Center which shows that developers aren’t building as fast as demand is increasing, among particularly millennials abandoning the suburban, white picket fences of their parents’ generation.

The Supply Problem vs. The Capital Problem

So, vacancy is low, demand is high, and development is sort of happening. I will refer to another well-intentioned, though nonetheless misguided, question that I often hear:

“How can we have homeless people when there are so many vacant homes?!”

Yeah, I mean, I get what you’re going for there. I really do. We can’t house homeless people in vacant housing because buildings are really exorbitant to renovate, and because you can’t finance based on the possibility that people might end up being able to afford rent, and because in the Rick Snyder And Donald Trump Austerity Era, we don’t have easy access to affordable funding streams to provide either grants or affordable capital to build things (bruh, we done spent all that money on tax breaks for wealthy people and it shall trickle down like the purest April rain through a badly-designed building envelope).

Real estate isn’t like selling smartphone apps or widgets—you plop a few hundred grand down and suddenly you have a many-ton widget that, if all goes well, will be happily functioning for, well, literally centuries. Of course, if you screw up, your many-ton widget collects dust– and, say, spendy blight tickets. This is why debt, perhaps the most misunderstood subject involving money in America today, exists, and why debt and capital are critical to the real estate equation.

Downtown office space in Detroit is tight, with JLL noting that vacancy rates dropped in 2016 below 10% for the first time in, well, a long time. Despite new construction like the planned development of the Hudson’s site on Woodward (development á la “needless and expensive demolition of an iconic, monumental building to build another needlessly expensive, iconic, monumental building”), residential construction is taking its sweet time.

Though the Land Bank renovation biz is reasonably brisk, it’s not happening fast enough: when I left Southwest Solutions, we were one of the largest if not the largest of the community partners and we weren’t even doing two dozen homes a year (more if you count REO flips and the weird deals we would do for foreclosure prevention and relocation assistance for the Delray/Gordie Howe Bridge, but still not a whole lot). There is a decreasing interest in one-off, scattered-site, single-family new builds, even though plenty of folks still misguidedly believe in the single-family development paradigm. Multifamily new builds are few and far between, and even the sum total of everything currently in the works, including the new modern boxy buildings in Indian Village, the neighbourhood construction sites that are Brush Park and Orleans Landing (not exactly affordable at $2 a foot, so, up to $3,315 a month), and a smattering of high-density one-off buildings on West Grand Blvd., Howard (downtown), and elsewhere– it takes a long time to design things and a long time to build them. I can damn near count them all on two hands, and I can probably name every single project in the city right now.

High-density development is tough in a city where lenders are having to rewrite the rulebook while developers realize that the single-family paradigm is probably dead. And, while I assume this will change a wee bit by 2020, the revised 7.2 report noted that in a few short years, downtown Detroit had actually lost population. I am 100% sure that higher-density development in the works will change this by 2020, but I don’t know how much.

Below, an idealized illustration of how capital stacks work in normal cities in Detroit:

How the idealized capital stack works in a regular city. Very similar to how a traditional home loan works, except typically with refinancing if you’re going to hold the building. Debt loaned against equity and secured against the building. Easy-peezy!

Yet in Detroit, the rulebook must be rewritten. What they used to call “redlining” (literally drawing red lines around black neighbourhoods to limit mortgage lending there) they now call “risk mitigation,” and that means that banks have a harder time lending. When banks won’t lend, more money has to come from investment capital, and investment capital can be as little as 25% more expensive or as much as 300% the cost of bank capital. Wealthy people like their money and they want to make more of it, especially when there is a chance that the project will fail and they will be left holding the bag.

Sounds about right– new markets tax credits, senior debt from a lender but only after they have reviewed every financial statement in the history of every bank account you or anyone you have ever met has opened, mezzanine debt (1) from wealthy suburban investors, (2) weird funding from the foundation-industrial complex, state assistance grants cobbled together from at least two sources, hard equity comprising cash investment from me, you, and everybody we know, and then odds and ends of money scraped together, e.g. money your moms stashed under a mattress.

There is some promise in the idea of changing the way we finance. After all, markets retool all the time based on a balance of regulation and the trendy scheme du jour, what I refer to as “cycles of capital innovation.” (Think the trust-antitrust cycle, the era of leveraged buyouts, or the era of venture capital.) Dan Gilbert built Quicken into its current empire as the multi-trillion dollar mortgage market shifted from banks selling mortgages to non-banks selling mortgages (that’s a whole different blog article).

Strategies like crowd finance or the development of community land trusts show promise in terms of being able to structurally address the issues of social equity alongside capital, potentially helping us ameliorate gentrification while also providing capital to get stuff done. In the case of the former, however, I found that there was an extremely high learning curve, even among highly educated human beings, who don’t understand the difference between donating to a Kickstarter that will never deliver and investing money as equity or debt in a legally regulated instrument.

How CLT’s might work. From The Democracy Collaborative.

My only contention with the Detroit People’s Platform, a local platform for community land trust development, has always been that they are perhaps focused too much on the big picture of equitable community-building and focused too little on the technical and financial specificity that could actually help build the thing. If you want to talk about disruptive innovation, CLT’s are the way to do it.

Mortgage finance is similarly broken, as indicated in these data from RealComp via Crain’s that show that mortgage lending is only really happening in the fairly stable neighbourhoods of East English Village, University District and Bagley, Grandmont-Rosedale, and Boston Edison.

Fixing the mortgage market would probably go a long way to stabilize neighbourhoods, as I witnessed working in Marygrove, where Chemical Bank (née Talmer) committed a lot of dollars in what I can safely say was a successful attempt at shoring up values.

Fixing capital markets to fund higher-density development would, if coupled with a permissive city government, stabilize values– reduce a skyrocket to a gentle climb. It wouldn’t lower prices, though, without adding capital to fund the construction of specifically affordable units. For more on why not, check out this examination by City Observatory’s Joe Cortright, which doesn’t address the need for capital to fund affordable housing so much as it does the fact that new buildings are generally just more expensive and affordable ones have depreciated (simplification but I’ll take it):

So, we have plenty of information here that points to the reality that while the degree to which gentrification is resulting in expropriation within the 7.2 is somewhat unclear, that expropriation seems inevitable (the Duggan administration’s new requirements for affordable units will ideally encourage developers to drive up density and preserve affordable rents). But addressing the supply of housing units and capital, even aggressively within this geography, won’t fix the foreclosure crisis or the dearth of accessible capital that is plaguing the rest of the city.

The 7.2 has about 35,000 people. Compare that number to 65,000 bank foreclosures in ten years, and compare that to more than 37,000 tax foreclosures in the past five alone (peaking in 2012 but not really decreasing much since then). So, you could literally double the rents in every apartment– from the brick warehouses of Eastern Market to the great architectural canyons downtown to the expansive western skies of Corktown, and you would still, at most, end up threatening with expropriation fewer people than are threatened with tax foreclosure every year. The Detroit news has also noted that these foreclosures don’t really actually result in anything other than a net loss to the municipality, which ends up having to manage resulting blight after the foreclosing party can’t sell the home. It’s not just banks, either– rampant speculation by investors has aggravated the problem, as University of Michigan Robert Kahn fellow and urban theorist Eric Seymour has noted.

So, there’s your “free” market at work, but we need to recognize that it’s really not a free market, it’s a market that tolerates heavy subsidy to some and excludes others.

The 7.2 and a couple of neighbourhoods that have mortgage lending activity (red; East English Village and Greater Grandmont-Rosedale). Can we stabilize and increase demand in lower-price or lower-density areas (light blue) by increasing the density of the corridors (striped red)?

I don’t believe in trickle-down economics, but I do believe in radiate-out economics, easy in a city defined well by its axial, high-speed, ultra-low-density boulevards– if it means that upping density in the urban core will not only stabilize housing prices over the long term but also effect market-wide value increases that will actually benefit Detroit homeowners citywide and potentially put more tax revenue into the city to spend on novel, late 20th century amenities like street lights, schools, and recycling pickup.

The simplicity of it, though, is that we can’t talk about a Detroit renaissance at 4,200 people per square mile when that population density is barely holding steady. Fixing our capital systems is part of that. But we certainly can’t complain about gentrification without recognizing the damaging, widespread effects of a broken system of property tax assessment and resulting foreclosure. Addressing these issues in tandem will help ensure that we can help build a Detroit that not only offers a sustainable level of density but is also equitable for years to come.

Posted in Cities & Urban Planning, Density, Detroit, Finance, Real Estate, Residential, Tax foreclosure, Urban development, Urban Planning | Tagged , , , , , , , , , , | Leave a comment

Ontario Hydro vs. Michigan Coal: A Cross-Border Perspective on Energy Policy

Michigan’s neighboring state, also known as the Canadian province of Ontario, has been struggling for months with untenable increases in electric rates (what they call “hydro”). It’s gotten so bad that citizens have started organizing protests about bills. Let’s chew on that for a minute: citizens protesting the high cost of energy.

In Michigan, it’s been an uphill battle for me to convince real estate professionals that it’s even worth building to code with regard to insulation and air sealing, industry standard things that people here don’t seem to really believe in. Lansing is lax about commercial code, which is stuck in 2007 ASHRAE, and Detroit simply disregards state law, refusing to enforce IECC 2015, which was adopted formally in February 2016. (This may be a product of BSEED being grossly understaffed). Code noncompliance drives utility bills through the roof, which makes it harder for people to afford rent. Intuitive, right? But people are totally cool with it. One of my co-conspirators and colleagues, Kevin McNeely, jokes that code is the minimum standard necessary if you don’t want to go to jail. Some gems I’ve gotten on the topic of energy and energy bills:

“These people are going to be happy to have a roof overhead,” a union-appointed consultant from the illustrious Shelby Township with the AFL-CIO project told me. “They don’t need all this insulation crap. Trust me, I know. I’ve built hundreds of houses.”

“That’s just not something that’s important to us,” a Detroit nonprofit executive said, when I pitched the portion of my construction and design standards guide outlining the need for R49 insulation and air sealing to 6.0 ACH50, which would lower utility bills and make homes more affordable for low-income homeowners. He continued, “it makes the project unaffordable.” (Plot twist: It doesn’t.)

A commercial landlord shot down my proposal of plugging a gaping hole in the building envelope at my old office. “People here view it as a sunk cost that they’re going to have to pay for anyway, so it’s not worth us spending our money to reduce their costs.” But they had Nest thermostats, so we’re cool. And the property manager of that space told me: “Well, it’ll be spring soon.”

I can’t quite trace the origins of the self-imposed martyrdom that Americans– maybe more specifically Michiganders- embrace when it comes to the complete lack of interest in conservation and complete resignation to literally sending money up a flue pipe. Then again, Detroit’s a weird place. So I was interested in trying to understand some background about energy culture in Ontario.

(Photo by Dave Abel of the Toronto Sun. November 23, 2016.) “My head hertz because of these hydro bills”– ‘A’ for cleverness on that one!

First, some education for Michiganders who, despite having lived next door to Canada for their whole lives, have only ever been to Windsor once to get drunk when they were 19 and remain largely unfamiliar with the most populous province of America’s Hat: Ontario can be described as comparable to a cross between Pennsylvania, Ohio, and New York State– it hosts the country’s largest city, which Canadians both love and love to hate, it’s got a pleasant mixture of rolling hills, fertile plains along the Great Lakes, Drake, and an expansive Up North that goes on approximately forever (about 15% larger than Texas). It’s got highly urbanized and industrialized corridors with extensive highway and rail infrastructure, and has the largest GDP of any province (oddly not the highest GDP per capita, though, distinctions that fall to Alberta and the Northwest Territories, but that’s a story for another day). The 401, as it is called, is sort of a spiritual hybrid of I-95 and a Midwestern I-80/90.

Canadians refer to electric rates as “hydro” because of the historical widespread prevalence of hydroelectric power. Indulge me for a moment and let’s go on a historical journey to unpack that:

Canada’s First Stamp in 1851, featuring the crown, the beaver, flowing waters, flowers (Ontario’s own trillium, maybe?)– and, even, the man in the moon, center right, politely looking on.

A 1901 US stamp honouring (you see what I did there) the Pan-American “Fast Express.” Soot, you will note, is less idyllic than our pleasant beaver friend.









Water is ingrained in the Canadian mythos since forever. While the American pioneer travels west in a covered wagon ‘cross the plains, the Canadian voyageur paddles in a canoe. The American bald eagle soars over the golden prairie while the Canadian beaver beaves in a pristine lake. Canada has a hundred trillion lakes and 7-20% of the world’s fresh water, depending on how you quantify. So, naturally, Canadians are proud of what they’ve got and want to conserve it. A fictional twofer that profoundly illustrates both the classically Canadian inferiority/paranoia complex (about big brother America) and the country’s pride in its water is the 2004 Gemini-nominated, made-for-CBC miniseries H2O, in which the United States essentially annexes Canada to takes it water (and whose main protagonist/antagonist/antihero bears a kind of ridiculous narrative similarity to Justin Trudeau).

So, hydroelectricity availability, indeed, but also water, water conservation, and therefore a culture of conservation, are part of Canadian culture that surrounds the Ontario hydro debate (I hope no Albertans read this, because Alberta, the Texas of Canada, is all about them fossil fuels, so much of this will be irrelevant). More provinces than not generate most of their power from hydroelectric. The Ontario generation mix in 2012 comprised 56.4% nuclear, 22.3% hydro, 3.0% wind, and 2.8% coal, but by 2015-2016 had shifted— zero coal, now 11% wind, 1% solar. Renewable generation expansion was a central tenet of the platform of Premier Kathleen Wynne’s government. They expanded solar through aggressive and extremely generous feed-in tariffs (which funded the development of small solar generation at an inflated rate to incentivize adoption).

The hydro crisis has been widely covered in Ontario, and widely blamed on renewable generation: Wynne’s government finally caved to Conservative Party demands to walk back $3.8bn in renewable purchasing (which will enough on your monthly bill to buy a double double and a donut at Timmy’s). Joe Warmington (some serious nominal determinism for a guy writing about energy usage) lamented “phoney green energy initiatives” in the Toronto Sun, and Lawrence Solomon blasted the “squalid provenance” of the renewable contracts, which, he alleged, amounted to corporate welfare to foreign corporations (vitriolic but not without merit).  Wynne’s government has also been mired in controversy related to the heavily-contested development of gas generation plants that began before she took office.

While I lament the complete lack of awareness Michiganders have about the issue, the Canadian media has been lousy at explaining why hydro rates are so high. Untenable increases, citizens increasing debt loads, trying to feed a family, etc., but never a great explanation of the massively complex world that is utility politics, utility financing, infrastructure. I’ve written a lot about the topic of liquidity in real estate: a nuclear power plant, for example, is a rocket ship ride toward the illiquidity end of the spectrum, costing a bazillion dollars to build, requiring a bazillion dollars to operate, and generating a crazy amount of baseload power (thanks, atoms!) and that’s why I don’t work in utility finance. You can’t flip a nuclear power plant like you can a $500 house (I sense a science fiction novel coming on). [Learn some background about baseload vs. peak load.]

Ontario’s bureaucracy is partially to blame, as a sort of Illinoisesque/New Yorkesque Large State that is nominally progressive but problematically large, and its push for progressive energy policy that has invariably driven up costs through things that the media admits is extremely difficult to understand, like the global adjustment cost, or the cap-and-trade system, that I’m fairly sure zero people understand. The socialist party blames the privatization of HydroOne for rising costs, and the Conservative Party said that we could replace cap-and-trade with a carbon tax (can you imagine this debate in the US?).

Plumes of carbon dioxide, if you believe in that, and God knows what else, drifting over the Monroe (Michigan) Coal Plant, one of the largest ever– the eleventh largest generating facility in the United States and the second-largest coal plant in the country. From Wikipedia (Wikimedia Creative Commons license).

But here’s the real kicker: Ontario’s distributed rates, which include time-of-day pricing (which normalizes usage during energy-intensive summer days and winter nights), are basically the same as Michigan’s. And, for the most part, we have pretty much the same climate (cold winters, warm summers, lake effect snow in much of Michigan and large portions of Ontario). The distribution rate works out to a different bill across the border, because the province assesses HST on hydro bills while most utility bills in the states are exempted from sales taxes.

A comparative analysis from Quebec Hydro showed that the real distributed rate is actually higher in Detroit than it is in Toronto and actually just under three times what it is in Montreal– (but fails to control for additional taxes owing to the need for uniformity in their survey, indicating that the debate may be somewhat less about generation itself and more about municipal revenue and provincial governance).

Comber Wind Farm in Essex County, very close to Detroit. You can all but see the Renaissance Center in the background. (Photo by Sharon Drummond, via Wind Power Monthly.)

DTE recently got approval to hike rates. And people are totally cool with it. At Southwest, I worked with a builder who once told me: “I used to live in a house in Palmer Park, and my utility bill was $800 a month in the winter, and I don’t think there is a single thing that I could have done to lower that bill one bit.” Unfortunately, it is simply not a thing people care about here. $200, $300 a month in bills? Let’s do it!

Although they are lethargically creeping toward increased adoption of solar, DTE notably hasn’t in the past made more than a gestural commitment toward renewables– their generation mix is a garbagefest of coal-fired generation bolstered by a nuclear baseload that is actually more coal-reliant and less nuclear-reliant than the regional (Central/Eastern Midwestern) average. Dig this drab pie chart, wherein coal is making DTEMerica Great Again:

Let’s break it down as a percentage of housing cost:

According to the USEIA, the average monthly utility bill in Michigan is $94.52, below the US national average. At the average Michigan home price of $132,300, that’s a monthly payment of $568.46 principal and interest (10% down at 4.000% over 30 years), of which 17% would be your average monthly utility bill. I don’t know about most people, but I think the notion of getting an up to 17% discount on a house (100% of that if you’re talking about a net zero home) sounds pretty good.

A clever, interactive data set from the National Post shows that even with HST taken into account, the numbers aren’t really that much worse. An average of $188.87 in Windsor-Essex— that’s about $138, which is only about 20% higher than the average US bill (and with 0% coal generation in comparison– Michiganders can take a crack at the question of whether we value that or not). And taking into account the fact that the average home price in Ontario is a whopping $518,000 (egregiously skewed by the rampant clusterfuck of speculation that is the Toronto market), that number looks even smaller as a percentage of the total monthly expense (TO’s regionally adjusted $205.81 out of $2,225.71 a month P&I works out to 9.2% of the monthly cost, in comparison).

Where the stats become absolutely insane is when you look specifically at Detroit. Cut that home price by two thirds and keep the utility bill the same (realistically, increase it, given the degradation of low-income housing in the city, but DTE isn’t exactly all about the open data), and compare to Ontario:

So, in essence, Detroiters could be paying well over 56.41% of their monthly housing payment to utility bills, but we’re fine with that, while our neighbors across the border have in only a couple of years successfully organized a protest movement that has effected the province refinancing its long-term utility debt in order to lower bills.

I can’t speak for the half dozen people who read this blog, nor for the entirety of the Mitten, but I would gladly pay more for electricity if it resulted in cleaner air instead of the filthy air we are relegated to breathing in Southeast Michigan. Or if it resulted in cleaner air, and DTE wasn’t pulling in three quarters of a billion dollars in profit while still upping rates. Or increased resiliency of the grid: CBC reported that the March 2017 windstorm that left thousands of Southwestern Ontarians without power took days longer to fix in Michigan, where about three quarters of a million people were without power for days, owing largely to DTE’s agéd grid (while Ontarians have to choose between feeding their families and paying their hydro bills, we have to choose between $750 million in corporate profits and having modern, resilient infrastructure).

Maybe, in the meantime until we figure out that complicated debate (for example, we wouldn’t want to kick major Detroit polluter US Steel while they’re down), we can remain attentive to the Ontario conversation and figure out ways we can work toward that same culture of energy conservation– which ends up being a value-add for public health and a massive savings in operating capital, whether for households or for businesses. Capital markets are already retooling to accommodate less government subsidy and decreased installation prices in an era with less government green and more demand for green energy– now it’s time to retool our culture in how we think about energy.

Posted in Detroit, Energy Efficiency, Energy Poverty, Environment, Michigan, Ontario, Urban energy, Utilities | Tagged , , , , , , , , , , , , , , , , , , , , , | Leave a comment

O’Hare Loses Out On Coveted “Busiest Airport” Title

Colleagues who attended SISE 2014 will remember when David Robbins of the Chicago Department of Aviation presented on the massive O’Hare runway expansion and modernization project, which I covered previously that summer to suggest that we might save some meager transit budget dollars by investing in Gary’s airport instead of O’Hare’s, as a way of decreasing congestion at O’Hare and improving the sometimes quite literal train wreck that involves the Calumet Region’s tangle of highway interchanges, Canadian National freight yards and intermodal lines, and passenger rail.

Mr. Robbins explained how this was necessary to increase the amount of traffic that the airport could handle and, when pressed, explained that their objective was to make O’Hare the busiest airport in the country. As with every other project in the city of Chicago, it mysteriously cost $8 billion and contractors mysteriously got quite wealthy, but they are getting a lot of stuff done, and, though I did put him on the spot about the quest for the busiest designation, I give his team credit for working to make the airport substantially less un-sustainable.

Well, news out this week that O’Hare did lose out to Hartfields-Jackson by a measly 32,000 flights. I guess this means that economic unicorns like Boeing, JLL, Groupon, Aon, Blue Cross, will now all be flocking to the great Down South. Can we start talking about how to improve transit infrastructure instead of just chasing after the biggest number of large, costly machines that grace our local expanse of tarmac?


Posted in Urban Planning | Leave a comment

Low-Density Redevelopment of The Most Iconic Vacant Site In The City Is Just So Detroit

Construction crews recently broke ground on the long-awaited redevelopment of the former Navin Field / Tiger Stadium site in Corktown, which is to be turned, variously, into a youth sports facility for the Police Athletic League and a 105 apartments, 35 townhouses, and some retail. It’s a welcome bit of investment for the years-vacant site, but also highlighting how we could probably stand to think denser in a city that is facing an increasing shortage of good housing.

I might be wrong that this is the most iconic vacant site in the Detroit Metro, but I was hard pressed to come up with an alternative. After all, it was deeply rooted in Detroit’s history, throughout the city’s booms and busts, and was a legendary venue: 100 million fans saw the Tigers play here for nearly a century, from 1912 (the year the Titanic sank, a few years after the Chicago Cubs won the Series) to 1999 (just under two decades before the Cubs won their next Series). Dan Austin wrote a great piece on The Corner.

In comparison, the Hudson’s site downtown stopped attracting visitors when it closed in 1983 so, while more stately than the then pretty jank Tiger Stadium, its demolition predated the stadium’s by decades. The Silverdome in Pontiac, where the Lions played from 1973 to 2006, was truthfully, in its last years, more derided than recognized, and its decay long before its demolition prompted more descriptions of “postapocalpytic” than “charming bit of local history.” Runners up included the Packard Plant, which maybe we will get around to developing some time— iconic in its monumentalism, but more of a curiosity for urban planning geeks the Fisher Body Plant 21 in Milwaukee Junction (which bears the dubious distinction of being probably the most seen site on a day-to-day basis based on highway traffic on I-75 and I-94), and Moroun’s Folly, a.k.a. Michigan Central Station, also in Corktown.

The jank, but iconic, Tiger stadium shortly before its demolition. (Wikimedia.)

Kwame’s administration oversaw the demolition efforts, led by DEGC and the demolition contractor itself, which wanted to make money off the scrap metal. Sentiment at the time targeted even lower density, suggesting that “up to 100” residential units could be built on the 9.5 acre site.

The site sits at the northwest corner of Trumbull and Michigan Avenues, Trumbull being a major north-south arterial running from New Center (Henry Ford Hospital) through residential Woodbridge, then through Corktown and south to Fort Street, and Michigan, a.k.a. Zero Mile, is the major non-freeway linking Dearborn, Southwest Detroit, and downtown Detroit via Corktown. The sidewalks thronged and streets packed on game days with drunk white people headed to see the Wings, the eastbound stretches jammed with inbound commuters on weekday morning, and the westbound stretches the same in the evenings. Ten thousand cars per day down Michigan (up to 20,000 closer to Dearborn), 7,400 on Grand River (which feeds traffic onto Trumbull), according to MDOT.

Is A Denser Corktown A Thing?

The site is about 400,000 square feet, 9 1/2 acres, with 575 feet of frontage along Michigan Avenue which, thankfully, according to the renderings, appears to be occupied with four-story buildings. 151 units at 900 square feet apiece would actually work out to a reasonable density if we assume that only the southern third of the site is to be developed, a floor-area ratio of about 1.00. I can’t say I’m surprised that a largely suburban police force would contribute to the building of a largely suburban-style development, but my critique here may be an unfair extrapolation– what would a high-density urban sports recreation center even look like?

According to LOVELAND’s Motor City Mapping, Corktown, considered one of the “coolest nabes” in Detroit (…don’t say that, by the way), has a mere 449 structures, of which only 359 were definitively occupied as of their last survey, and 386 vacant lots. CityData counts 1,069 residents at a pleasant, Iowa farm town density of 2,604 people per square mile (about half of Detroit’s average), while Data Driven Detroit counts 1,196 residents (with slightly different boundaries). As I’m all about understanding how perception or misperception informs decisionmaking, I’d just point out that this density is pretty low.

I collected info on 30 vacant spaces, considering contiguous vacant lots to be single lots (to save time and hassle), and considering a “vacant lot” to be a large (majority) portion of any partially occupied lot.

Can it be developed? Who knows: As is often true with vacant land, ownership of the spaces is often somewhat mysterious, as in the case of the maybe-Livonia-based Khalil Brothers enterprise, for example, which owns a large swath of space. The total– excluding the spacious pair of lots that include the White Castle between Vermont and Rosa Parks- accounts for over a million square feet, of which the Tiger Stadium / Navin Field site occupies a full third (much of the vacant space to the immediate west of the stadium was used to supply surface parking for the games). The vacant, buildable land (1.15m s.f.) is almost exactly half of the total area in the entire district, that is, the whole way from 14th St. on the west to the Lodge on the east (streets included).

Considering the red lines along Michigan Avenue and excluding the White Castle (I ain’t trying to mess with anybody’s sliders) and the attractively landscaped parking lots for the Grinnell Lofts (we’ll let them slide), still about a full half of the frontage along Michigan Avenue is completely undeveloped, and that which is developed is almost entirely one or two story buildings. The Tiger Stadium site alone accounts for 1/3 of the total vacant frontage and about 1/6 of the total street frontage.

Detroit’s fantastically old school zoning maps, spreadsheet, Google Earth, and data bits. The B4 classification covers a bunch of the Greater Downtown.

How much could we legitimately squeeze in there? Assuming a floor-area ratio of 1.25 (see a cute little bit about visualizing density and FAR here), that would mean that we would build 1.25 square feet for every square foot of lot. Assuming your average sizes for apartments, which have been shrinking in recent years, this would work out to about 1,607 new units. Fortunately, the byzantine B4 classification, which allows pretty much anything and covers most of the district, permits FAR of up to 2.00 (even if it has preposterous setback requirements)– so let’s go up to 2.00, which brings us to 2,570 apartments.

At the conservative FAR = 1.25 and no variances required under the B4 classification (I honestly have no idea what zoning variances are like in Detroit but I bet they are easier to get than in East Chicago), we would increase Corktown’s population by 135%. Is Detroit ready for the resulting 20,000 people per square mile who would at that point occupy the 0.08 sq. mi. space between I-75 and Michigan Avenue? I mean, sign me up, but you’re talking about $150-200 million in investment to get that done.

I’m glad for the investment, but we may have to hold out for denser development elsewhere in Corktown, maybe Tony Soave’s actually decently high density, long-rumored Taxi Lofts, which would add 151 housing units just across the street on Trumbull. Scale is important: When these two projects are finished, we’re still talking an increase in population density of 4500-5500 people per square mile, which almost brings Corktown up to a reasonable density. But… baby steps!

Posted in Construction, Demolition, Density, Detroit, Michigan, Mixed-use, Residential, Urban development | Leave a comment

Open Streets Detroit: Fun In The Sun, And An Alright Start

On Sunday I attended Open Streets Detroit, possibly the Motor City’s first-ever effort at creating a contained version of an albeit completely Motorless City, in this case along a route that went from Campus Martius downtown, west along Michigan Avenue, and then west-southwest along Vernor Highway to Military St. (a.k.a. Campus Martius to the Martial Streets).

A juxtaposition along westbound Michigan Avenue in Detroit’s trendiest neighborhood of Corktown.

A partnership between the City of Detroit and numerous other stakeholders including DTE Energy  Southwest Solutions and the Vista Partnership, based in Southwest Detroit along the Vernor Hwy. portion of the route, the event was billed as an opportunity to showcase the city’s cultural institutions and highlight the health benefits of walkable, bikeable communities. USGBC-DRC even showed up.

Image from Open Streets Detroit.

I also attended both Open Streets events in Windsor, which ran in a sort of horseshoe from Ford City on the far east side of Windsor through Walkerville along Wyandotte (the main drag along Windsor’s largely east-west orientation, parallel with the Detroit River), the whole way down University Avenue into Windsor’s West End and Sandwich Town.

A good time was had by all. And it was an alright start– maybe to a new culture that emphasizes accessibility, open space, and walkability over the hegemony of the almighty automobile!

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The ADU as Community Development Tool?

While managing the Detroit Land Bank housing development programs at Southwest, I’ve come across a number of scenarios in which a single-family home might almost– but doesn’t quite- fit the bill of the desired housing arrangement for the purchaser. They want the quiet neighborhood, the location, the architecture, but they would really rather have a two-unit where mom can live upstairs, or where their daughter can live upstairs, or where the grandkids can stay when they come to visit. The two-unit is surprisingly common in Detroit, but the accessory dwelling unit, an age-old concept also sometimes known as the mother-in-law suite or granny flat, is a new idea for the Motor City.

The single-family home within the context of Detroit’s expansive, Leave It To Beaver neighborhoods, fits into a relatively narrow range of purchasing options. Homes are 1,600-1,800 square feet (149-167 m2) and sit on tenth-acre (0.04 ha, 405 m2) lots. You can’t buy condos in a four-story, mixed-use building in Grandmont-Rosedale. Availability of especially rental units in the farther-flung neighborhoods is severely limited. But one major asset of Detroit’s built environment is the scores of expansive, historic neighborhoods like Marygrove, pictured above– probably one of the nicer complete neighborhoods that is still fairly affordable, but this sort of block as pictured is not particularly rare.

On the financial, purchasing side, while there are plenty of federal, state, and local programs offering generous assistance to homebuyers, most notably the $15,000 HomeLIFT downpayment assistance program, well-branded by Wells Fargo as a way of “giving back,” if “giving back” means “you guys settled a $15 billion lawsuit with the federal government for selling bogus mortgages,” these are all geared toward owner-occupants of single-family homes.

Single-family housing in the Marygrove neighborhood. Highlighted is a home on Roselawn, developed as the fourth home in the Talmer Bank program, which would make a suitable candidate for ADU development. Garage in need of renovation.

So I got an idea: If we designed and built an accessory dwelling unit on the back of these properties, we could solve a few problems at once:

  1. Bolster levels of density within neighborhoods. The five-acre block of the pictured home above has 39 homes on 40 lots, so, 7-8 dwelling units per acre. Your density increase is overall pretty small.
  2. Increase the stability of the neighborhood and the block by increasing occupancy rates. Increased occupancy means increased traffic, increased vigilance (public safety) and social capital, and increased demand for local commercial amenities (currently lacking).
  3. Provide long-term revenue generation potential for the homeowner by creating a rental unit without impossibly complicating LTV/LTC.
  4. Save the need to rebuild a garage as a value add, coming up with a two-car garage for the finished home while also adding an apartment unit. Usually in these budgets, garage replacements just get cut from the final scope of work because they’re too spendy– so I’m thinking we add it at the beginning as an ADU+Garage to up the total saleable value of the home, killing two birds with one stone.

A 2008 HUD report has addressed these issues, which are admittedly more topical in markets with super tight supply and super high demand, but Detroit is moving closer to that point every day, and our programs in Northwest Detroit have had absolutely no problem finding buyers. (Closing the mortgage is another problem but hardly unusual in Detroit.)

Below is an idea for the ADU configuration, which could fit two cars and an apartment unit upstairs that could be a 350-450 square foot apartment constructed at a cost of under $50,000. The ADU Garage combo notably sits at the back of the lot just like the original garage did, leaving plenty of space between it and the house for a back yard.

While city is fairly permissive about zoning for two-family structures, which are plentiful but often count as nonconforming uses, it’s unclear whether they would be interested in allowing this sort of designation. But thinking about the total capital outlays required for this development and the staggering soft costs and staff time required to design and manage these programs, the incremental cost of adding $50,000 to a construction project that is one of a multi-million dollar development program is, while more than a drop in the bucket, a modest sum. Appraisal, of course, is another challenge. But with the funding commitment, why not try it out?

Posted in Affordable housing, Cities & Urban Planning, Community development, Density, Housing, Investment, Real Estate, Residential, Zoning | Tagged , , , , , , , , , , , , , | Leave a comment

Die Handgemachte Stadt Tours Sustainable Urban Infrastructure in Germany

I am pleased to announce that I have been selected to attend the Ecologic Institute’s Post-Carbon Cities of Tomorrow (POCACITO) program this June in Germany to tour the country’s model projects for sustainability, energy, and urban innovation. We will be headed to the port city of Hamburg in the north, followed by a trip to the Ruhrgebiet, a formerly heavily industrialized area that hosted plentiful coal mining and steel production and has had to cope with massive job losses as industry retools and heavy industry is shipped eastward (I suppose it’s not “overseas” when China is on an adjacent, if not very far away, land mass).

Ecologic is a DC-based policy and research organization that fosters international exchange on topics of sustainability and has hosted forums on Arctic policy, urban planning, climate, land use, security, and other subjects, and also produces the POCACITO program in partnership with a range of European and international organizations including Aarhus University, the Centre for European Policy Studies, the Leibniz Institute for Regional Development and Structural Planning, and others.

I will be gone for the better part of two weeks (which includes what I can safely call a much-needed vacation down to Stuttgart to visit some friends, one of whom I know from the GAAP exchange program I did in high school) and hope to post from Germany. 

Mach’s gut, y’all.

Posted in Cities & Urban Planning, Environment, Urban Planning | Leave a comment