According to the logic of Robertson and Leumer, there's plenty of money to be made buying up houses in Detroit for pennies and renting them out to the remaining souls there. Donald Trump doesn't seem to be interested in doing so. The Koch Brothers would rather store petroleum coke on the river-front than build houses. And the owners of the sports franchises in Detroit seem more interested in extracting subsidies for their stadiums than in making bank in distressed real estate. If those self-styled progressives are as smart as they think they are, why aren't they Detroit real estate moguls?I now discover that, as smart as the self-styled progressives might or might not be, they're still slower than local entrepreneurs.
In downtown Detroit, at the headquarters of the online-mortgage company Quicken Loans, there stands another downtown Detroit in miniature. The diorama, made of laser-cut acrylic and stretching out over 19 feet in length, is a riot of color and light: Every structure belonging to Quicken’s billionaire owner, Dan Gilbert, is topped in orange and illuminated from within, and Gilbert currently owns 60 of them, a lordly nine million square feet of real estate in all. He began picking up skyscrapers just three and a half years ago, one after another, paying as little as $8 a square foot. He bought five buildings surrounding Capitol Park, the seat of government when Michigan became a state in 1837. He snapped up the site of the old Hudson’s department store, where 12,000 employees catered to 100,000 customers daily in the 1950s. Many of Gilbert’s purchases are 20th-century architectural treasures, built when Detroit served as a hub of world industry. He bought a Daniel Burnham, a few Albert Kahns, a Minoru Yamasaki masterwork with a soaring glass atrium.I suppose the Perpetually Aggrieved will object that Quicken exemplify precisely the predatory lending that helps keep the poor poor. But there have to be more glamorous places to locate the corporate headquarters, and the purchase of commercial real estate presupposes the opportunity for some sort of future gain. And Detroit has locational advantages that transcend metal-bending.
Some of the city’s competitive advantages remain, including a world-class transportation network of roads and rail and waterways, with almost half of U.S. imports from Canada passing through. Even Detroit’s bankruptcy filing in December (making it the largest American city ever to take such a step) has its upsides. For everyone other than the city’s 32,000 pensioners and 100,000 creditors, the default should make Detroit less dysfunctional and more attractive. And in downtown, at least, Gilbert’s campaign seems to be paying dividends: Occupancy in residential real estate has climbed to 99 percent, and office vacancies are at 11 percent, the lowest rate in decades.Yes, and government officials that would like to have some tax revenue to pay for government services ought to understand that taxing income presupposes income, taxing sales presupposes sales, taxing use presupposes use. (And the absence of government services leads to substitutes for government emerging, including, in Detroit, office owners installing their own street lights.)
There are no real assurances that gains will be spread democratically across the city, or that city planning and public resources will serve the needs of everyday Detroiters. But the hope is that private individuals will keep the greater good in mind. Heaster Wheeler, the assistant chief executive of Wayne County and former executive director of the Detroit branch of the N.A.A.C.P., the nation’s largest chapter, sent me a list of Detroit real estate investors who were committed to reviving the neighborhoods through their work. “Black Dan Gilberts,” he called them. Since 2000, Wayne County has held one of the world’s largest real estate auctions, offering about 20,000 properties a year that were acquired through foreclosure — some 5 percent of Detroit’s housing stock. Last year, 2,300 bidders took possession of 10,500 of these properties, with a dozen buyers each scooping up more than 100 houses. Some speculators have sat on the inexpensive homes, leaving them vacant as they await a recovery. Wheeler was talking about other buyers who have repaired the houses and rented them out, creating an income stream while adding a layer of stability to tottering sections of the city. African-Americans make up 83 percent of Detroiters, but from 2000 to 2010 their numbers fell by a quarter. “The city’s true heroes, its real saviors,” he told me, “were the African-Americans who had a choice to leave Detroit, who had the means, yet stayed. In spite of the public debacles, the racial insensitivities, the public transportation that goes nowhere, the taxes up the wazoo, the unfair auto-insurance costs, they still committed to making Detroit home.”City planners and public resources are sometimes useful, but far too often unproductive. And, apparently, the low-hanging fruit has among those distressed houses has already been harvested.
A decade ago, [nascent housing moguls Gary] Alexander and [Siegel] Clore started buying real estate together, but that was right before the housing bust. “We took some hard knocks,” said Clore, who is tall and placid; Alexander is shorter, stockier and more excitable. In 2009, after Clore was laid off by Merrill Lynch, they persuaded relatives and friends to invest in their venture and began combing the thousands of properties in that year’s county auction. They looked for bungalows in middling neighborhoods near the border with the suburbs. They bought 15 houses at the auction for a total of $60,000. Seven of them rented immediately. The next year, they acquired 21 more, at an average of $3,000 apiece.There is, apparently, some money to be made, and there are incentives for aspiring housing moguls to pay attention to the neighborhood.
Clore and Alexander have become authorities on the vicissitudes of blight, both in its broader boundaries and in the arbitrary shifts it can take from block to block. They try to fix up the abandoned properties next to their houses. They paint boarded-up windows white, mow lawns, pick up debris. People sometimes call to ask if a rental property is in Detroit and hang up when they hear the answer. But Alexander said many of their tenants were native Detroiters moving back to the city now that rents were on the rise again in the suburbs. They spoke with nervous excitement about plans to add to their portfolio of homes and even to buy multifamily buildings. Clore plays golf competitively, a 2 handicap, and on the links he sometimes networks with local business types who say they want to invest in his growing business. He and Alexander already manage an additional 50 rentals for out-of-state owners who acquired the properties at auction. If credit eventually eases, they said, they will begin selling off some of their holdings, turning a profit that way.The key, dear reader, is to recognize the opportunities, and not to rely on Someone In Authority.
[Clothier Rufus] Bartell is an unrelenting proponent of the free market, and as he ran the weekly meeting of the Independent Business Association in one of his empty storefronts on a weekday morning, he kept the focus on the moneymaking possibilities in his city’s demise. Of the 20 small-business owners there, all but two of them were African-American. A retired civil engineer named Prema Qadir, who built websites and was looking to start a catering service, complained about the failure of city government to properly educate anyone. Bartell cut her short: “That sounds like an opportunity. Pose it in the form of an opportunity.” Someone else worried over the fate of Detroiters who have stuck it out in homes while all around them their neighborhoods turned to field and ash. “To grow Detroit,” Bartell pronounced, “you have to shrink it. There are opportunities with vacant land.” Buildings were going to be torn down, junk hauled off, land cleared. Those were all potential businesses. “If it was my grandmother living on a street with one house, ‘Sorry, Grandma, you got to move.’ ”There's still a lot of work to be done in Detroit, but the article notes a new source of entrepreneurial alertness. Chinese investors recently outbid Quicken for a 38-story downtown office tower.