Detroit's Sweat Equity
Detroiters Seem to be Leading the Reclamation of Vacant Homes Since the Pandemic
Since the pandemic, the housing landscape in Detroit’s neighborhoods has quietly undergone a profound transformation.
Around 17,000 homes that were vacant as recently as 2019 are now occupied. This isn’t the normal housing churn of the 2000s or 2010s — a reshuffling of people and homes rather than a real gain — it seems, instead, to be part of a broader, sustained phenomenon that’s reshaping housing in neighborhoods across the city. It also coincides with Detroit’s first population increase in more than 60 years.
To illustrate what’s happened over the last few years, take a look at two homes on the same block, just north of Hamtramck:
The change is visually striking, but even more impressive knowing the background of the neighborhood. While Banglatown, east of Joseph Campau, has long had densely populated housing stock and significant rehab activity, the neighborhood to the west, where these homes are located, has comparably few standing structures, very high rates of tax foreclosure over the years, and trouble gaining control of what structures remain.
The stark contrast in the two areas is apparent just from an overhead view of the neighborhoods:
In recent years, though, rehab activity has finally appeared on the other side of what had been a fairly firm border at Joseph Campau Ave. About 20-25 homes appear to have been reoccupied since 2019. When I drove around the neighborhood a couple weeks ago, several more rehabs were underway.
The Campau area is far from alone in Detroit as a surprising center of rehab activity. Similar waves of rehab and re-occupancy are unfolding all over the city. I’ve called out a few interesting areas of higher concentration in the heat map below, but it is widely dispersed.
I first noticed this trend of vacant homes being rehabbed and reoccupied in surprising parts of the city in late 2021 and began researching and writing about it. In early 2022, Arielle Kass at Crain’s Detroit wrote an excellent piece which explained and built on my research with interviews from local rehabbers, developers, and residents. As I’ve continued to dig deeper since then, the changes have only grown more intriguing.
Since 2019, Detroit has seen a net gain of about 9,000 re-occupied 1-4 unit homes. 17,000 homes that were vacant in 2019 are now occupied in 2024, while 8,000 homes that were occupied in 2019 have gone vacant.
This analysis is based on city assessment data from 2019 and 2024 as well as data from Regrid that includes US Postal Service vacancy data, building footprint counts, and deeded owner data. The Postal Service data which indicates occupied vs. vacant homes, I find, is most useful when it shows sustained trends over time that can be supported by ground-truthed visual evidence. Those are the conditions I’ve found in Detroit in recent years.
The data shows that while new vacancies are still an issue in Detroit they continue to be, for the first time in many many years, outpaced by re-occupancy.
Even newly vacant homes tend to look different since the pandemic. The 8,000 homes that have gone vacant since 2019 don’t resemble the devastation I’d grown accustomed to documenting over the last decade in my project GooBing Detroit. Instead of burnt homes and crumbling roofs, I see boarded windows on structures that still appear largely intact.
I still have more questions than answers about this phenomenon, so I want to walk through what I’m seeing, pose some questions for further research and ideas of my own, and share where I think this activity can be supported.
Detroiters, Perhaps Surprisingly, Own Much of this Progress: I’ll go through the data that suggests Detroit residents, rather than outside investors, are taking the lead in owning and rehabbing long-vacant homes.
Outside Ownership of these Homes Seems to be Declining — Why?: Could rising home values, counterintuitively, be leading to a decrease in outside ownership of a portion of Detroit’s housing stock?
How Detroiters Have Capitalized on this Opportunity: What may be enabling residents to take advantage of rehab opportunities.
Why This Rehab & Re-Occupancy is Happening Now: What might be driving the recent wave of rehabilitation and reoccupation in Detroit’s neighborhoods.
1. Detroiters’ Ownership of Detroit is Growing
When I first noticed this phenomenon a couple years ago I was glad to see long-vacant homes rehabbed and re-occupied, but I wasn’t terribly optimistic about who stood to benefit financially from the new activity.
I assumed that many of the same actors who defined the negative trends in Detroit neighborhoods’ housing market in the last decade — suburban speculators and landlords, and a smaller number of out of state investors — had simply changed their business model and would make money from a new kind of market activity. But the more I explore the ownership behind this phenomenon, the more it defies my expectations.
Examining who actually owns these re-occupied homes as of 2024, I found that 55% are either owner-occupied or appear to be owned by a person living in Detroit, per tax bill mailing address data, not by some distant LLC. Contrast that with the 8,000 homes that have gone vacant since 2019, where outside ownership by LLCs is much more common. There, only 36% of homes are owned by an individual in Detroit.
In other words, ownership of these re-occupied homes appears favor local hands. This is part of a citywide trend: the share of outside ownership of Detroit property overall is showing modest declines since the start of the pandemic.1
Also notable is an increasing number of Detroit homeowners who appear to own rental properties in Detroit. In 2024, 9,500 Detroit homeowners are reflected as owners of rental properties, or have property tax bills for rental properties mailed to their homes (which can, but does not necessarily, indicate ownership). Those 9,500 homeowners, collectively, may own as many as 13,000 rental units citywide. That is up from about 4,000 homeowners who appeared to own rental properties in 2017.
The swings towards local ownership aren’t enormous, but the fact they exist at all amidst rapidly rising housing prices is very interesting and perhaps counterintuitive, because the story goes something like this:
Demand for housing, along with home prices, has grown rapidly across the country over the last five years. Simultaneously, people who have benefitted from owning and making money off of Detroit housing stock prior to the pandemic seem to be stepping back (somewhat) from the property they owned just as it’s gotten more valuable. How does that make sense?
I think you need an adaptation of a Yogi Berra line to explain at least part of the phenomenon, something like…
2. Detroit Homes Are Too Valuable; No One Makes Money on Them Anymore
One of the defining, and most pernicious, features of the Detroit housing market for the last 15+ years is the practice of “milking” rental properties. Joshua Akers and Eric Seymour, key researchers on the topic locally, defined it like this in their 2019 paper “The Eviction Machine”:
A home enters mortgage or tax foreclosure. It is purchased by a bulk owner or speculator. The home is either milked (rented without maintenance or repairs) or sold on a land contract on terms at or beyond the buyer’s means. An eviction occurs and the cycle repeats. The house is traded among bulk buyers often with quit claim deeds reflecting a nominal price of $1 (though this is unlikely the actual price). Once the house deteriorates beyond habitability it is abandoned to tax foreclosure.
In their paper, Akers and Seymour document more than 20,000 evictions that followed after tax sales citywide between 2009 - 2017. “Milking” was a widespread business model citywide prior to the pandemic, a major source of neighborhood instability, and a profit center for those engaged in it.
The key to milking property is that the owner does not see the real estate they own as valuable in and of itself. Rather, it is a means to an end: The extraction of rent.
Similar practices in other cities have been documented by researchers like Matthew Desmond who wrote in his 2016 book Evicted: Poverty and Profit in the American City:
The same thing that made homeownership a bad investment in poor, black neighborhoods -depressed property values - made landlording there a potentially lucrative one. Property values for similar homes were double or triple in white, middle-class sections of the city; but rents in those neighborhoods were not.
A landlord might have been able to fetch $750 for a two-bedroom unit in the suburb of Wauwatosa and only $550 for a similar unit in Milwaukee's poverty-stricken 53206 zip code. But the Wauwatosa property would have come with a much higher mortgage payment and tax bill, not to mention higher standards for the condition of the unit.
When it came to return on investment, it was hard to beat owning property in the inner city. 'You buy on the North Side because they 'cash flow' nicely,' said one landlord with 114 central-city units. 'In Brookfield, I lost money. But if you do low-income, you get a steady monthly income. You don't buy properties for their appreciative value. You're not in it for the future but for now.’
Or, as a landlord in Cleveland put it more succinctly a few years ago in a forum on investor activity:
The streets in Cleveland are paved in platinum, because the houses are so cheap and the rents have never declined.
In Detroit over the last few years as home prices have risen so too have things like mortgage costs, property taxes, and, perhaps to some extent, standards for condition of housing units. All things that Desmond explained made rent extraction less attractive in wealthier suburbs where those were common features of the housing market. The conditions that made milking a profitable business model in Detroit may be complicated as home values are rising.
I am much more posing a question for study than offering an answer: Is part of the explanation for increasing ownership of re-occupied homes in Detroit by Detroiters, and declining out-of-city ownership, due to reduced attractiveness of milking as a business model?
I am in no way asserting milking is completely over, less so evictions (which I assume are back to pre-pandemic levels) [Update as of 9/10/24: A friend at a local tenant legal services provider let me know that, in fact, evictions in Detroit in 2024 are at an all-time low, even below pandemic-era when stronger prevention mechanisms were in place. They see this is as additional evidence that milking is on the decline as a business model in Detroit.], and I doubt rental housing conditions have changed tremendously on the whole either (although I could imagine they are somewhat higher within this universe of newly occupied homes with recent rehab activity). But I do see the landscape here as potentially less supportive of milking as a business model than it was pre-pandemic.
One piece of evidence in support of this is found in the primary source of inventory for landlords engaged in milking during the 2010s: The Wayne County tax foreclosure auction.
The 2024 tax foreclosure auction contains the fewest tax foreclosed Detroit properties in 20 years. This is both a result of vastly improved tools to keep Detroit homeowners out of the auction and rising property values that make walking away from a rental home, as was a common practice amongst predatory landlords, much less attractive.
3. Why Might Detroit Residents be Able to Capitalize on this Opportunity?
Even if there has been some recent pullback within Detroit’s housing market by the outside investors of the 2010s, that doesn’t necessarily lead to Detroiters stepping into the void they created. So why does it seem that Detroiters have been able to capitalize on this moment instead of just some different class of outside, moneyed, investors willing to make money off Detroit’s housing stock in a different way?
I suspect government cash infusions during the pandemic may have played a role, but there are some more local factors as well. I’m sure this list is far from exhaustive, but these are a few reasons that come to mind for me.
Sweat Equity Favors Locals
Jon Zemke, a local developer and housing rehab expert, made a point in Arielle Kass’s Crain’s article I mentioned earlier that I think is relevant here:
It's more cost-effective to fix up even a dilapidated house than it is to build new, in part because zoning regulations have changed over the years, and new construction often requires more than one lot. That's even the case when what's for sale is 'bottom of the barrel stuff.' Sweat equity can make up for a lot of the costs.
If part of what makes the numbers work (as in, the potential to make money off rehabbing homes) is investing sweat equity to keep rehab costs low, then that’s perhaps a factor that favors locals who are nearby and more easily able to put that sweat equity into a home.
Certain Opportunities to Purchase Homes for Rehab Favor Detroiters
About 4,000 of the 17,000 (23%) reoccupied homes were owned by the Detroit Land Bank Authority (DLBA) as of 2019. Sales programs at the DLBA privilege local buyers and likely created a market for Detroiters that was less competitive and lower cost for these homes than it would otherwise be to acquire them. 86% of those DLBA-sold homes have non-corporate, individual, owners in Detroit today.
Rehabbing Land Bank homes brings its own challenges, but I think there’s little doubt that the DLBA inventory is playing a role in fueling local ownership of these re-occupied homes.
Local Nonprofits are Responding to Detroiters’ Desire to do Housing Rehab
There are also local organizations that are supporting Detroiters who want to take on rehab and development projects. Building Community Value is a prime example of this. Since its inception, Building Community Value has trained Detroit residents to become successful real estate developers within their own neighborhoods.
The organization’s “Better Buildings, Better Blocks” program graduated 376 Detroiters as of 2022, providing practical knowledge, coaching, and access to a network of industry experts and alumni. Building Community Value emphasizes the importance of community-centered development, providing a framework for real estate development beyond just economic returns.
The goal of Building Community Value is to ensure that the revitalization of Detroit’s housing is led by people who live here and, as I’ve detailed above, there’s some evidence that is happening.
4. Why Are Homes Being Reoccupied Now
From the days of Detroit’s bankruptcy up until the pandemic, the number of vacant homes in the city was stubbornly static. Tens of thousands of demolitions did nothing to reduce the overall number of vacant homes as tax foreclosures and evictions, among other factors, added a new vacant home for every one removed by demolition.
So why did thousands of vacant homes suddenly start getting rehabbed and reoccupied around the start of the pandemic? It’s not as if the desire to revitalize Detroit’s vacant homes and neighborhoods is new—city government, investors, and foundations have been trying to stimulate just that for years. What changed?
I don’t believe things finally “clicked.” In fact, this wave of rehab and reoccupation seems to be happening largely despite local policies, not because of them.2 The City’s massive investment in residential demolition, combined with a much too slow response to years of tax foreclosures and evictions, prevented progress, and removed potential rehab inventory, rather than spurred it.
Additionally, as I noted in earlier research on the topic, very few of these rehabbed & re-occupied homes have accompanying building permits or rental registrations. The regulatory programs designed to facilitate and guide this kind of activity have little connection to reality on the ground. I suspect those systems, in their current form, are much more likely to stifle this phenomenon than support it.
Instead, I think Detroit is part of a larger national trend of demand for housing. In this context, Detroit homes started to be rehabbed because, quite simply, people needed housing and Detroit had homes that could be rehabbed.
This reminds me of a line from a Marc Andreessen piece on product-market fit from 2007 (an unlikely source, I know, but bear with me). Andreessen wrote:
In a great market—a market with lots of real potential customers—the market pulls product out of the startup. The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along. The product doesn’t need to be great; it just has to basically work.
In this framing, Detroit was able to offer a “great” market the first viable product that came along.
Detroit’s Professional Investors
I posted an early chart from this research on Twitter the other day, and someone re-Tweeted it with this comment:
If I’m at all right about the “professional investors” that are stepping back from investments here, then I’m happy to see them go.
Much of what I’ve described above could be summarized as market actors stepping up to meet market demand. But I want to be clear: this is not an endorsement of a free-market approach to solving Detroit’s housing problems. If you want to see what a free-market approach has produced in Detroit, just look at that tax foreclosure auctions of 2008 to 2019. The tax auction system is the apex free-market solution—and an outright disaster.
To the extent market forces have mixed with a unique set of local and national circumstances over the last five years to produce the unprecedented level of rehab and re-occupancy of vacant homes we’re seeing, I think there's a degree of luck that it’s turned out the way it has.3
Just because many Detroit residents own these newly re-occupied homes today doesn’t mean they will tomorrow. Homes are bought and sold. A home owned inside the city today may be sold to someone outside the city tomorrow. Outside investors may return, outbidding local actors. Larger economic forces change, and so does where ownership sits, as we’ve just seen.
If we want these trends to continue, and grow, we need to support them, align regulatory and policy systems with them, and invest in the people behind them.
There are Detroiters out there, many feeling they haven’t been given a fair chance, taking a chance for themselves. These are our professional investors. We should support them with everything we’ve got.
It’s also worth stating that, just because local ownership is increasingly represented now doesn’t mean it will stay that way. Homes can always be bought and sold and where ownership sits can change with it.
I credited the DLBA’s sales programs earlier, I know, but it’s important to keep in mind the scale of those sales as compared to the other government policies (or lack of policies) mentioned here. The number of homes touched by things like demolition, tax foreclosure, and eviction dwarf the few thousand DLBA home sales I mentioned.
And, of course, part of that “luck” was massive federal spending as a result of a global pandemic. Not really the kind of thing you want to build your public policy around…
Great write up like usual!
Interesting analysis, and your research is always spot on, I think. Great read.