Wednesday, May 28, 2014

Detroit's Real Real Estate Irony

This ain't no McMansion.

At over 16,000 square feet, with 15 bedrooms, this Tudor Revival home surrounded by mature trees commands a prime location in one of the most prestigious neighborhoods in one of America's most well-known cities.  From stained-glass windows to intricate brasswork and iron ornamentation, the custom touches lavished on this grand residence testify to a craftsmanship that is almost extinct today.  It's been family-owned since being built in the Roaring Twenties, and features an indoor swimming pool, cathedral ceilings, and manicured gardens.  Its kitchen has been recently updated, replete with frosted glass cabinet doors, granite countertops, and one of those enormous fire-breathing commercial-grade furnaces foodies call a stove.

Its asking price?  Well, it's the highest price for a family residence its hometown has seen in at least ten years.

For how much could it sell in your community?  Here in Dallas, according to today's listings on, it could probably fetch between $10 to $12 million, with its age likely being its single drawback, since homebuyers in Texas tend to prefer newer construction over older.  On the coasts, its price would likely be even higher.

But, unfortunately for this house, it's located in Palmer Woods, one of Detroit's last residential neighborhoods that doesn't look like a war zone, or a Majority World country.  It's being auctioned off today, with its owners hoping to get $1.5 million for what was once the personal home of Alfred J. Fisher, the famed automotive industrialist.

Meanwhile, on the same day one of Detroit's legendary estates is scheduled to be auctioned off, city leaders are pouring over a just-released study on Motor City's even more famous blighted properties.  According to the Detroit Blight Removal Task Force, tens of thousands of dilapidated and abandoned houses and industrial sites need to be cleared, at an estimated cost of nearly two billion dollars.  And while nobody's really surprised at the scope of Detroit's "ruin porn" problem, or the cost of removing it, the task force's report still packs a staggering wallop of reality for those grappling with the largest municipal bankruptcy in American history.

Over half of the city's population has left, and almost all of its manufacturing jobs.  Blame racism, unions, corrupt government bureaucrats, suburbanization, incompetent politicians, and scheister bankers all you want - and they all have various levels of responsibility for how Detroit has become what it is.  Nevertheless, the city has a dire situation on its hands when it comes not only to how it will survive bankruptcy, but how to manage all of its vacant property.  Property that not only weighs on the psyche of Detroit's remaining residents, but invites crimes like arson and narcotics trafficking, and consumes strained services like firefighting.

Some pundits have suggested that the city needs to physically consolidate itself, and re-organize its remaining residents and businesses within a much smaller footprint and street grid.  Of course, the problem with that is that people and businesses are still fleeing the city, with the exception of Detroit's downtown core, a nearby new urbanist experiment called Midtown, and a couple of surprisingly preserved silk-stocking subdivisions, like the one where the venerable Fisher mansion is located.  How much less room will a Detroit of the future need?  It's hard to tell - Motown hasn't stopped shrinking yet.

Not that other rust belt cities aren't struggling with similar woes of joblessness, high crime, suburbanization, population declines, and abandoned properties in the wake of industrialization's bust.  But Detroit's crisis is magnified beyond all others by data like the Blight Removal Task Force report.  If you haven't been to Detroit to see how bizarrely empty and appallingly decrepit the city is, the scope of the situation may elude you.  Even the folks who live there often seem blind to the devastation the rest of us can plainly see.

But is spending two billion dollars to remove blighted properties a good use of money?  And you can bet that it will almost all come from taxpayers in one way or another.  The chances that property owners who let their homesteads and factories decay can be forced into paying for their demolition are slim to none.  Environmentalists lament the hazardous materials in these properties being allowed to contaminate the soil and water, but how much fossil fuel will be needed to bulldoze down and truck away tens of thousands of structures?  And where will all of that debris be dumped?

According to the basic tenets of capitalism, new life should be able to revisit Detroit if innovation is allowed to flourish and new ideas are brought to the marketplace.  Businesses would establish themselves, people would move back, and these abandoned properties would be taken care of, one by one, as new owners took control of them.  Businesses would refurbish old office and retail sites, and probably ask for government funds to help do hazardous material remediation to the factories that are likely still laced with dangerous chemicals.  New homeowners would likely buy up vacant lots first, constructing new houses, and then as prices rose for empty lots, moving on to dilapidated, boarded-up houses to fix up.  In the process, a lot of these abandoned buildings still may have to be torn down, since they've been vacant for so long, but even then, private individuals and companies would be paying those costs, not taxpayers.

This is what's been going on in derelict parts of New York City, Philadelphia, Boston, Chicago, Miami, Los Angeles, and even Dallas.  In Fort Worth, a neighborhood that was virtually empty a decade ago has since sprouted luxury apartments and hip urban villages in a re-make that has rendered the near west side unrecognizable for longtime residents.

It's not that people don't want to live in urban America anymore.  Quite the contrary.  The suburbanization and white flight that helped empty big cities has reversed itself in recent years, and indeed, some of Detroit's better-preserved 'hoods are finding their popularity being revived by young urbanists who view grunge, grime, and gritty city life as some bold new adventure.  But those pockets of reinvestment are very few and very far between in Detroit.  Which is why city leaders think clearing away blight could help with speeding up recovery efforts.  Fewer abandoned buildings makes the slate even cleaner for redevelopment.

But that's not how it works, is it?  Maybe on a case by case basis, with particular structures long infested with cancer-causing pollutants, some taxpayer incentives are necessary to make a larger rehabilitation project more economically viable.  Especially when the original owners of that pollution are no longer around, and cannot be held to account for the problems they created three decades ago.  Otherwise, however, on a massive scale such as Detroit's, where there has yet to be any discernible economic or residential need for Detroit's land, the two billion - Two Billion! - dollars it would take to significantly attack the city's blight seems ill-advised at best.

Supply and demand?  In Detroit, there's too much of the former, and hardly any of the latter.

Perhaps it's no coincidence that Dan Gilbert, the founder of Quicken Loans and one of the key players in whatever exists of downtown Detroit's real estate rebound, chaired the Blight Removal Task Force.  Of course he would be a champion for public funding of the city's clean-up campaign.

In a way, it's more business as usual for Motor City.

And it's also yet another warning from Detroit to the rest of America.

There is no such thing as a perfect city.  Put hundreds of thousands and millions of diverse people into the same jurisdiction, and charting the public's good - let alone paying for it - will be an exercise fraught more with discord than affection.  We all know that Detroit is the poster child for everything that can go wrong with a municipality.  But we also need to recognize that democracy, that institution we all say we cherish, can be complicit in a people group's downfall.  The more a majority of voters think the same unproductive things, and exercise their voting rights with a misfocused worldview, the deeper into holes people can vote themselves.  All the while, praising the virtues of democracy.

It's no secret that Detroit's voters, by and large, both black and white, over the span of generations, have tolerated levels of racism, corruption, and incompetence that other cities were somehow able to balance out through other means.  A healthy economy?  Nope - Detroit was all-in with manufacturing, and when that deteriorated, they didn't bother to diversify.  A vibrant cultural community?  Apparently not - since even the city's crown jewels over at the Detroit Institute of Arts are on the bankruptcy table.  Good schools?  The graduation rate for the city's public schools in 2008 was less than 25%.  It's almost tripled since then, but the number of students has sunk, distorting the data.

Meanwhile, there's no news yet as to whether the Fisher mansion sold at its $1.5 million asking price.  And it's supposed to be at the top end of the city's real estate valuations.

In the world of better homes and gardens, it may be quite a steal.

Two billion dollars to clear the city's blight, however, is still highway robbery.

Update:  I'm sorry, but it appears I mis-read the wording in the Detroit Free Press article describing both the sale of the Fisher mansion estate and the estate sale that was held yesterday at the mansion.  Apparently, the house wasn't up for auction yesterday; just its furnishings.  But the asking price is indeed $1.5 million.

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