Detroit, Michigan has a lot of cheap housing, but much of it desperately needs renovations.
Residents have avoided buying houses in the city, looking instead to rent or move to the more expensive suburbs.
That’s partly because lending policies make it hard to get money to buy an old house and fix it up.
On February 18, 2016, Detroit Mayor Mike Duggan Clinton Foundation President Donna Shalala announced an unprecedented new multisector partnership, led through the Clinton Global Initiative, that aims to tackle the problem.
The new Detroit Home Mortgage initiative is intended to fill the gaps in the city’s housing industry, which is perhaps most challenged by appraisals that notoriously undervalue Detroit homes and often torpedo purchases.
Unlike the city’s existing patchwork of efforts to boost homebuying in specific neighborhoods, and the residential incentives offered to people who rent or buy in Downtown and Midtown, the Detroit Home Mortgage initiative gives people the freedom to choose any house they wish, in any neighborhood they want.
Detroit Home Mortgage offers buyers a mortgage for the cost of the house, plus a second mortgage to cover up to $75,000 of repairs.
The goal is to deliver 1,000 of those renovation loans over the next three years, at a fixed rate of 5 percent interest with no bank fees.
The partnership has put together a $75 million package to support Detroit home mortgages. The Community Reinvestment Fund and CGI partners involved also offer an additional $40 million in second mortgages to fund essential rehab efforts.
The deal is sweetened by $6 million from the Michigan State Housing Development Authority for affordability enhancements, and $6 million from the Kresge Foundation for guarantees and credit support. A further $475,000 from Kresge, along with $400,000 from the Ford Foundation, will pay for the project’s startup.
Frank Altman, president and CEO of the Minneapolis-based Community Reinvestment Fund, USA, which will administer the program, called the mortgage effort a “solution that we think is going to change the game” in Detroit and other U.S. cities dealing with depressed property values.
Rip Rapson, president of the Kresge Foundation, which pledged $6 million to the effort, said the project is an “extraordinary symbol of a new way of working in Detroit, where every sector of the community and every level of government is stretching beyond the fence line” to overcome a significant problem.
Duggan hopes this will spur homeownership in the city and kickstart a housing market that’s been languishing since the city’s financial troubles began. “If you have a steady job and a good credit score, you can go in today… and you can get a mortgage regardless of the appraisal,” Duggan said. “You can buy that house, you can have ownership.”
Note from Storm: Mayor Duggan is earning top marks on my revitalization scorecard. In a city with a long history of mayoral corruption, Duggan is also reportedly inspiring new local confidence in Detroit’s future by running the first honest government most citizens have ever seen.