New Thirst for Urban Living, and Few Detroit Rentals

Posted on December 12, 2012

Abandoned houses with overgrown yards may be the image most people associate with Detroit, but the city’s downtown and midtown neighborhoods have the opposite problem: a shortage of rental apartments to meet a growing demand for an urban lifestyle.

Developers say occupancy rates in these areas are at least 96 percent, spurred by young professionals, students and empty nesters who want an easy commute to school or work and a short walk to local cafes and bars.

“To us it feels like there’s an insatiable demand,” said Fred Beal, manager of Motown Construction Partners, which led the recent renovation of the 124-unit Broderick Tower downtown.

Built in the late 1920s, the 34-story building near Comerica Park had been vacant for decades, but is fully leased after opening in November. Penthouse units that are 2,300 square feet command $5,000 a month, Mr. Beal said, though most of the studios and one- and two-bedroom apartments rent for $2,000 or less.

To take advantage of tax credits available for renovating historic buildings, the apartments must be rented, not sold, but developers say the demographic currently testing the waters in Detroit — many young, first-time city dwellers — isn’t ready for the commitment of buying a condominium anyway.

These tax credits make it easier to renovate old buildings than build new ones, but one exception is the three-story Auburn building, which also opened in November. Located near Wayne State University in midtown, the Auburn has 58 apartments and 11 retail spaces, that are “leasing very well,” according to David Di Rita, a principal at the Roxbury Group, one of the building’s developers.

Retail tenants include a spinning studio, a bookstore, a Thai restaurant and a home goods store, Mr. Di Rita said, while the apartments — mostly one-bedrooms around 600 square feet — rent for “just south of $1,000 a month.”

The thriving apartment market in these neighborhoods is a bright spot in an otherwise grim financial picture for Detroit. Once the nation’s fourth-largest city, its population has dwindled and its finances are floundering. State officials have warned that a state-appointed emergency financial manager may be in the city’s future, so enticing former suburbanites to live and not just work or go to school in Detroit has involved some financial incentives. But a crucial factor is creating the thriving neighborhood hubs that places like San Francisco and New York have long offered.

“It turns out it’s the same thing that attracts people in other cities,” Mr. Di Rita said. “We just never tried it.”

The challenge in downtown Detroit has been figuring out how to reuse high-rise buildings and turn an area that once emptied out at night into a 24-hour community. The smaller scale and college-town feel in midtown Detroit, however, make more modest new developments feasible.

“It’s possible to put together a project of reasonable scale and have a huge impact on the neighborhood,” Mr. Di Rita said.

While the Auburn was a $12 million project, his company is also working on an $82 million renovation of the nearly century-old David Whitney building downtown, across the street from Broderick Tower. Plans are for 108 apartments and an Aloft hotel, and completion by early 2014.

There is still an approximately 10-block gap between midtown and downtown “where the urban fabric drops off,” Mr. Di Rita said. That area is gradually filling in, but he acknowledged that much of the city was still struggling with empty buildings and abandoned single-family homes.

“Detroit has figured out a solution for its center city, which maybe encompasses five to seven square miles of a 140-square mile city,” he said. “The predominant condition outside those strongholds is substantial vacancy.”

A factor that has helped draw people to live in apartments either in midtown or downtown is up to $3,500 in rental rebates available to employees of companies like Quicken Loans and Blue Cross Blue Shield of Michigan, which have brought jobs back to Detroit.

Wayne State University, the Detroit Medical Center and the Henry Ford Health System, longtime anchors in midtown, also participate in the rental rebate program, which is supported by participating employers, foundation grants and the Michigan State Housing Development Authority.

“A key strategy for the neighborhood for quite some time has been about introducing a lot more residential options,” said Susan Mosey, president of Midtown Detroit, a nonprofit organization that supports economic development in the neighborhood.

The group was involved in the Auburn project and is also a partner in the renovation of the historic Forest Arms building, which will add another 75 apartments in midtown.

Along with these real estate projects, Midtown Detroit is also helping to attract or develop the amenities that city dwellers want around their apartments, like bike paths, parks where residents can walk their dogs, and places to eat and shop. A Whole Foods is to open in midtown next year, and a light rail project is in the planning stages.

“These are all pieces of a larger revitalization puzzle,” Ms. Mosey said. “If you’re not doing all of it, you’re never going to be successful.”

Another important factor is the degree to which developers, employers, community groups and public entities are working together to bring about the types of changes long overdue.

“This is truly a public-private sector driven strategy,” said George Jackson, president and chief executive of the Detroit Economic Growth Corporation. “What’s interesting is that the momentum and the partnerships are getting stronger even in light of the city’s financial situation.”

Mr. Jackson said many of the current efforts began in preparation for the Super Bowl Detroit hosted in 2006, with improvements along downtown streets that led to a more robust night life and an opportunity to persuade suburbanites to live closer to where they work and go out. “You build an entertainment district — all of a sudden people are not going home at 5, they’re sticking around until midnight or beyond,” he said. “Next they’re saying ‘Why am I driving 20 miles back home?’ ”

But Mr. Jackson also acknowledged that there was much more work to be done, like redeveloping Detroit’s waterfront, attracting more businesses and improving local schools so young professionals don’t leave Detroit after they start having children.

“We’d be crazy to think that we’re going to fix everything at the same time,” he said. “We developed a strategy to work on several things at one time, but not all things at once.”

Susan Stellin, The New York Times