Low incomes keep Detroit far behind as US housing recovers

DETROIT / AP

Ann and Oscar Mack had fallen behind on property taxes and knew they faced foreclosure on their home of 20 years. But they didn’t know their house on Maiden Street, in a blighted east side Detroit neighborhood, was already listed for auction.
No one “let us know we were about to lose our house,” Ann Mack said. “Nobody ever came out and knocked on our door.” The United Community Housing Coalition stepped in and bought the home for $1,000 at a foreclosure auction, then returned the deed to the family. It and other nonprofits are the final options for hundreds of Detroit residents fighting foreclosures, auctions and evictions.
“Complete strangers helped us get our house back,” said Ann Mack, 48. “We would have been out in the street.”
A decade after the nation’s housing bubble peaked before bursting in a ruinous crash, much of America’s residential real estate has rebounded. Many owners have enjoyed rising equity and lower housing bills as mortgage rates have sunk. Yet Detroit is a glaring exception. Despite efforts by the mayor’s office, lenders and community groups, home values remain depressingly low.
A big reason has been oppressively low incomes in the city. Even as home prices have dropped, too few can afford to buy. Only a sliver of the population — better-paid and relatively new residents moving into downtown-area condos, apartments and rehabbed Victorian-style homes — has been able to capitalize on modest purchase prices. Most of the rest have been thwarted by stagnant incomes. Nearly 40 percent of residents are impoverished, compared with about 15 percent of Americans overall. Detroit’s median household income was about $28,100 the year before the housing collapse. It’s since shrunk to $26,095 — not even half the median for the nation, according to the Census.
Contrast that with the gains some other cities have experienced. The median household income in San Francisco rose from $68,000 in 2007 to about $78,000 by 2014. Seattle’s climbed from $58,000 to over $67,000, Pittsburgh’s from $32,300 to $40,000.
“Like most pre-crash markets, the Detroit housing market was very strong,” said Douglass Diggs, chief executive of The Diggs Group Heritage economic development consulting firm and former Detroit Planning and Development director.
“There were plans for approximately 7,000 new housing units,” Diggs said. “There was a strong demand for existing for-sale housing in our stronger neighborhoods.”
Much of that dried up after 2008 in the aftermath of the housing bust. Even Dave Bing — a pro basketball Hall of Famer, businessman and future mayor — put off plans for a $60 million riverfront residential development because banks were slow to release construction funds.
A 60-year population dive in which Detroit lost 1.1 million residents appears to be slowing. But the exodus has left portions of the city abandoned and desolate, even with nearly 700,000 residents remaining.
On many blocks where lived-in homes once stood, vacant houses and lots abound. A task force survey in 2014 found that 40,000 vacant structures needed demolition. Under Mayor Mike Duggan blight eradication plan, the city has torn down more than 10,000 houses and other structures in 2½ years.
“But we still have 30,000 to go,” Duggan told reporters recently. “The magnitude of the blight problem in this city is enormous.”
The task force survey also concluded that 38,000 additional houses were in such poor shape that they were edging toward blight. The value of the city’s owner-occupied housing stock also plunged from about $88,000 in 2005 to $45,000.