Can a cash infusion from China help save Detroit? While downtown Detroit has experienced much revitalization, in part thanks to Dan Gilbert and Mike Ilitch, much of the city outside Motown’s center and the Woodward Avenue corridor suffers. Once home to over 1.8 million people, the city’s population cratered over the past decade and now stands at just over 700,000. Speaking of home, the government of this city of houses, not apartments, has razed thousands of homes. Many have been empty for years; homeowners simply walked away from others as that option was a more favorable proposition than trying to sell or rent them.
As the city stumbled into what is now the largest municipal bankruptcy outside of Orange County’s 1994 crisis, countless houses faced few prospects other than demolition because no infrastructure exists to support them. Despite a declining population, an incompetent and often corrupt city government was still determined to provide services at the level of a city of almost 2 million people when only one-third that number actually lived there—and often failed at that.
Now, tales of Chinese investors willing to snatch Detroit homes by the handful are all over social media sites in China and the U.S. press. Could a massive investment in homes and offices help Detroit recover?
The evidence suggests no. The Detroit housing market, already struggling, was hit hard by the “sub-prime” and then foreclosure crises of the late 2000s. During 2007 and 2008, press reports were buzzing about British investors flying across the Atlantic to scoop up several houses at a time. It all sounded seamless: buy several properties for several thousand each or even total, fix them up, rent them out, and if three out of five properties thrived, you come out ahead.
But, it did not turn out that way. Like much of the country, Detroit’s real estate market continued to decline in value. And some Brits even lost their shirts in a scam promising foreclosed homes turned into revamped and rented properties. Tales droned on about homes that foreclosed, were bought and then foreclosed on again as owners did not pay property taxes. Homes have fallen as low as $500 at auction—the minimum amount a foreclosed house can go for within Detroit if bank-owned.
That has not stopped the buzz across the Pacific. As The Atlantic pointed out, the cooling but still red-hot Chinese economy has left many Chinese loaded with cash but no place to plunk it. Real estate in China’s largest cities is hideously expensive, and capital controls makes investing in large portfolios of securities or real estate difficult. So for the price of a bizarre tour of outlet malls in Europe, an investor from China could buy a house, or two, or three.
Of course, then the reality hits: dealing with city bureaucracy, the cost of refurbishing these homes, many of which are stripped, and attempting to deal with contractors from many time zones away—or risking the possibility of falling prey to yet another scheme. Nevertheless, the buzz is still there. One of China’s largest social networks, Weibo, is full of tales about Detroit, its decline and hope for the future.
But Detroit’s hope lies not in those who wish to make a quick, or even long-term, buck from abroad, but from those who take the risk to buy property and actually become a stakeholder in the city. One of them is Darin McLeskey, who has bought several properties, co-founded an urban farming project and now calls Detroit home.
The Michigan Farming Initiative is just one social enterprise slowly transforming the city. Newcomer McLeskey and long-time Detroit natives face plenty of hurdles. The mayor’s office, for example, is going after small businesses for a bevy of reasons, from permit violations to chipped paint within a store—a strange policy considering the vacuum of commerce and employment throughout the city, especially in neighborhoods where Chinese nor Californian investors would probably never venture.
Meanwhile, other investors are sending chills through the city’s spine. Detroit’s emergency financial manager, Kevyn Orr, has invited the auction house Christie’s to appraise a portion of the Detroit Institute of Art’s collection for a cool $200,000 (I thought Detroit had no money?). While donor restrictions could prevent some of this fine museum’s collection from leaving Detroit, the city’s creditors are eyeing the DIA as one path towards recouping their past investments in the city. Selling off museum pieces would only harm Detroit’s prospects in the long term because it would make the city an even less attractive place in which to live and work—and the possibility of investors from China, or anywhere, ending up with pieces from this civic jewel should worry anyone concerned about the city’s future.
Based in Fresno, California, Leon Kaye is the editor of GreenGoPost.com and frequently writes about business sustainability strategy. Leon also contributes to Guardian Sustainable Business; his work has also appeared on Sustainable Brands, Inhabitat and Earth911. You can follow Leon and ask him questions on Twitter or Instagram (greengopost).
[Image credits: Leon Kaye]