I watched the affordable housing panel session from the Mackinac Policy Conference 2024, which took place a couple of weeks ago in the only completely car-free, pedestrian-friendly, walkable corner of the state of Michigan, that is, Mackinac Island. It had some interesting points that I don’t hear too often from elected officials, namely the recognition that housing prices are largely a supply issue rather than an anything else issue.
At the Davos of the Midwest, the Detroit Regional Chamber’s annual who’s who of change-makers, movers and shakers, and other general creatures attracted to limelights, Detroit Mayor Mike Duggan cited a downpayment assistance program that the city developed in partnership with local banks, which, he said, was a smash hit. The pilot of the program served 400 renters who were then able to buy houses. Having worked directly on the development of novel programs like the Detroit Home Mortgage, Rehabbed-and-Ready (with the Detroit Land Bank), and Building Detroit Futures (RIP but a very cool idea), I can certainly appreciate the importance of utilizing innovative partnerships to get these things done. In a market where the math simply doesn’t work– or, certainly, simply didn’t work from perhaps 2009 until the past five years- one must get inventive, given the reality that it’s not simply a matter of capital scarcity, but rather of structural financial dysfunction.
For a trip down memory lane, it didn’t used to be that there were any products that could help you buy a house in Detroit. You either had cash, bought on a land contract, or bought in another municipality. I recall many a project in which we would renovate a house and try to sell it, only to have the appraisal fall flat, with few avenues for recourse. No comps, they’d say, and we’d say, “what about these,” providing them with a list, and they’d say, “sorry!” As a banker once related to me at the time, most banks were still psychologically reeling from the mortgage bubble collapse, and wanted to figure out any excuse to not lend in a geography that was considered remotely risky. Sure, it’s kinda like redlining, but this time they had the excuse that the entire banking sector might well have collapsed had it not been for massive federal bailouts. (Never mind that Chase Bank’s revolving line of credit committed to us to help develop housing was actually part of their settlement with the DOJ– they masterfully marketed it as a Commitment To Investing In Detroit, A City They Love!). This is essentially why the Detroit Home Mortgage was developed. And plenty of products have followed, accelerating the rate of real estate turnover in Detroit and contributing to what is now at least a substantially less unhealthy market (that’s about as optimistic as I’ll get these days).
Required Regulatory Innovation
Financial products are not going to be the only thing to get us to a more vibrant housing market, though. And less clear was the direction anyone wanted to commit to around the question of policy or regulatory innovation. Mike Duggan, in spite of how much he’s been able to get done for the city, still presides over a wildly dysfunctional building department that makes it extremely hard to build buildings, get permits, or, certainly, innovate. Anything that would speed up the process of permitting, entitlements, or inspections would be a win in my mind.
But it’s a question of how to get there.
See the whole segment below:
