Density & Income Mix Strategies for Detroit's Mixed-Use Corridors

Toward Inclusive Growth In Detroit

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Toward Inclusive Growth

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An Inclusive Growth Partnership Led By

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Contents

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Figure 1 Corridor Areas

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Executive Summary

How can Detroit achieve inclusive growth?

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If we genuinely seek to increase economic opportunity for current and future residents, how can Detroit achieve inclusive growth? is a vital question for our city. And, we believe, it is an ongoing opportunity for Detroit’s community development sector to strategically allocate resources that can encourage growth while preserving affordability and assets for all residents.

Recently, the Detroit Corridor Initiative (DCI), a cross-sector partnership led by Capital Impact Partners, began to explore this question in depth.

Our initial goal was to fully understand the economic and household changes that have taken place since 2000 in Detroit with a focus on the city’s mixed-use corridors. We then applied recent trends and patterns—using a combination of local data sets, land-use policies and real estate ‘rules of thumb’—to explore scenarios for inclusive growth across the city. DCI’s working definition of inclusive growth incorporates increasing density and working towards a healthy income mix at the neighborhood scale.

The results are thought provoking. At its best, this analysis can inform Detroit’s investment priorities over the next 5-10 years by encouraging the development of forward-thinking policies and practices now. The development scenarios and income mix strategies outlined can help shape future neighborhood stabilization and revitalization efforts that will lead to more opportunity-rich neighborhoods that foster economic mobility for all Detroit residents.

This study–Toward Inclusive Growth in Detroit–is relevant to how we approach community stabilization, revitalization, and development throughout the city for two main reasons:

  • First, it addresses scenarios for cultivating mixed-income neighborhoods. Research shows that such neighborhoods can increase economic opportunity and mobility for all residents–particularly those with low and moderate incomes. Yet few policies in Detroit address this shared knowledge in a way that recognizes the unique characteristics, strengths, and trajectories of Detroit’s diverse neighborhoods.
  • Second, it provides a methodology for investing within the context of inclusive growth, recognizing that real-time investment requires combining live data sources to stay on top of the changing real estate market and keep partners continually engaged. This study has helped us understand how and where market rate developments may be enhancing rather than inhibiting neighborhoods’ economic health; future applications of this frame will continue to develop this knowledge base.

The trends and investment scenarios developed in this report reveal some sobering realities. Despite significant investment efforts in Detroit’s Woodward Corridor since 2000, we are far from realizing the full potential of the city’s land use and development capacity. Even in Midtown, the heart of mixed-use investment activity during the past 15 years, there are 212 developable acres in the district. Additionally, no volume of place-based revitalization efforts can fully mitigate the macroeconomic trends that have contributed to systemic issues like huge job losses in southeast Michigan and increased economic inequality globally. Yet signs of promise and momentum are clearly evident following the 2008 recession and the 2013 municipal bankruptcy.

We examine this momentum and pose scenarios to help community development and finance professionals think through which development trajectories could help cultivate a healthy income mix in order to best serve Detroit neighborhoods in the long term. The trends and scenarios incorporate broad assumptions; they are meant to start a much deeper conversation around fostering healthy neighborhoods over the long term. We believe this work is achievable through citywide policy development and neighborhood planning processes that incorporate further market research, community partnerships, and resource planning.

The Corridor Initiative defines inclusive growth as development that increases density and provides for a healthy income mix at the neighborhood scale.

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Background

Detroit Corridor Initiative 2000-2013 Baseline Research Scan

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Overview

The Detroit Corridor Initiative (DCI) works to accelerate economic opportunity through strategic cross-sector partnerships that create quality mixed-income districts and job growth in Detroit. In 2015, DCI explored 2000-20131 trends to develop a set of economic development policies aimed at achieving inclusive growth. DCI deems growth strategies as inclusive when they improve quality of life for everyone in the neighborhood while preserving access and affordability for current and future residents. DCI’s measures for inclusive growth include increasing density and working towards healthy income mix profiles at the neighborhood scale.

Priority Objective: Determine how Detroit’s economic development partners can concentrate investment and development strategies to best increase density and achieve healthy mixed-income neighborhoods, thereby improving opportunity and economic mobility for residents.

Questions: This report considers the following key questions regarding recent trends and potential long-term investment scenarios in Detroit’s mixed-use corridors in order to address the priority objective:

  1. Are any of Detroit’s corridor areas achieving inclusive growth based on measures of jobs, density, and income mix?
  2. Where is population increasing in Detroit’s corridor areas?
  3. As population is changing, how is income mix changing?
  4. What does the Detroit Future City (DFC) strategic framework recommend for development potential in Detroit’s corridor areas?
  5. What income mix targets are achievable and equitable in stabilization and revitalization efforts in Detroit’s corridor areas? What does this mean in the context of a very high-poverty city?

Assumptions: Our focus is on mixed-use corridors, density and income mix because these are neighborhood characteristics that can have a positive effect on resident opportunity. And, more importantly, these neighborhood characteristics can be meaningfully addressed through strategic partnerships, community development, planning, and real estate development.

Figure 2 Methodology

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Why does density matter?

A combination of good planning, good design, and higher densities can support healthy, interactive, walkable areas with concentrations of services and amenities that can support households across the income spectrum. For instance, as density increases, so does transit ridership, particularly once the density of residents and employees combined surpasses 30 people per acre.2 Residential densities past 15 housing units per acre encourage people to walk more.3 And generally, higher densities of people support the development of services like retail, facilities like health care, and schools.

The highest housing density by corridor area is 5.8 occupied housing units in East Riverfront/Elmwood Park. Midtown is the second most dense area with an estimated 5.1 occupied housing units per acre.

Why does income mix matter?

Measures of household and per capita income can be telling indicators of a neighborhood’s wellbeing and overall trajectory. Median household income is a common measure; other measures include ratios of aggregate income by quartile or quintile, or measures of evenness and diversity across income categories. While there are limitations to what we can extrapolate about neighborhood health from this income data, evenness across proportions of lower-, middle-, and higher-income households is generally thought to affect neighborhoods positively. Some research suggests that the healthiest neighborhoods avoid high concentrations of extremes (wealth or poverty) and that lower-income populations generally benefit more from proximity to middle-income households than high-income households.

More specifically, research has shown that when 10 percent or more of households are below the poverty level, housing markets can begin to devalue; when 20 percent or more of households are below the poverty level, (i.e., a Census-defined “poverty area” or a Brookings-defined “high-poverty neighborhood”) there can be negative impacts such as school leaving (e.g. drop-outs and truancy issues) and crime; and when 40 percent or more of households are below the poverty level, the Census defines that area as a “Category IV” (highest) area of concentrated poverty, and Brookings defines it as a “distressed neighborhood.”

Figure 3 Income Mix, 2013

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For the purposes of this report, “corridor area” describes one or more census tracts adjacent to mixed-use and traditional commercial nodes and corridors as identified in the 2013 Detroit Future City Strategic Framework. We highlight the Midtown, University of Detroit Mercy/Marygrove, Corktown and Grand River/Southfield (a set of Census tracts that overlaps with a portion of the five neighborhoods in the Grandmont-Rosedale area) because they are either where the DCI currently focuses its efforts or areas of relative strength. These four areas are poised for investment due to their respective proximity to downtown, strong housing stock, low residential vacancy, strong commercial centers, or other neighborhood assets. In total, DCI analyzed 25 corridor areas across the city. These areas represent a wide range of neighborhood types, assets, demographics, and built environments.

High job concentrations in Midtown and the Central Business District put the combined density of residents and employees there well above 30 people per acre; the same density measure in all other corridor areas falls below 19 people per acre.

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Are any of Detroit's corridor areas achieving inclusive growth based on measures of jobs, density, and income mix?

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Several of the 25 corridor areas across the city4 show relatively healthy baseline or trend characteristics, although no one area contains all of the following: higher densities, increasing population, and a healthy income mix. Figure 45 highlights the corridor areas’ “scores” in the Kirwan Institute’s “2014 Detroit Neighborhood Opportunity Index.” This index measures the relative economic opportunity across the city’s census tracts by combining three categories: Education, Economic Mobility and Opportunity, and Housing and Neighborhoods. For this cross-corridor comparison, note that the scores for Detroit’s corridor areas all fall below 0 (the index scores range from -2 to 2 across the region). Based on this subset comparison, the two highest-opportunity Detroit corridor areas are Grand River/Southfield (a subset of the Grandmont-Rosedale neighborhoods) and the Avenue of Fashion/Palmer Woods (an area just north of the University of Detroit Mercy/Marygrove corridor area). These areas have higher median household incomes and education levels than most other corridor areas. Yet they continue to lose population (particularly middle-income households) and struggle to maintain healthy commercial centers.

Other highlights include the following:

  • Hamtramck and Southwest Detroit have the highest gross densities of all corridor areas, at 17 housing units per acre in Hamtramck and 13 housing units per acre in Southwest Detroit. These two areas contain some of the most walkable commercial corridors within Detroit’s boundaries6, which are likely supported by the adjacent population density. Yet both areas continue to lose population.
  • Corktown, represented by a relatively small census tract, saw a population increase during 2000-2013, yet it is still a relatively low-density area due to large tracts of vacant, undeveloped land.
  • Detroit’s Downtown and Midtown corridor areas, along the Woodward Corridor, are both regional and city job centers. Together, they contain more than half of the jobs in the city (2011).
  • Some mixed-use nodes within Midtown have high population and housing densities compared to the rest of the city, yet district-wide the density is low for a “district center.” Contributing factors to its low density include recent population losses, higher levels of vacancy, land speculation, and large surface parking lots. Midtown’s income mix has been skewed toward high percentages of low-income households, though recent market-rate development may be balancing it out.
  • Based on Detroit Future City’s 10-year land-use recommendations, the Mack/East Warren corridor area has high potential for mixed-use development despite high rates of poverty and population loss in 2013.

Figure 4 Overall Highlights, and Kirwan Opportunity Index, 2014*

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Where is population increasing in Detroit's corridor areas?

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Between 2000 and 2013, Detroit lost one-quarter of its population (an estimated 244,605 residents). Given such a large drop, it should not be surprising that only one of Detroit’s corridor areas—Corktown—saw a population increase during that time. The Corktown corridor area comprises only one census tract and has a relatively low population: 1,369 residents and 586 occupied households in 2013. Thus, its 9.2 percent population increase represents a 13-year influx of just over 100 residents.

Every other corridor area, including Midtown, the University of Detroit Mercy, and Grand River/Southfield, lost population during the same time period. Midtown’s population loss roughly parallels Detroit’s with a decrease of 3,953 residents (-23.3 percent of 16,955), bringing the population to an estimated 13,002 residents in 2013. Ongoing Revitalization efforts in the the Midtown and Downtown areas resulted in 445 new housing units7 in 2014, which, with a near-full occupancy rate8 and average household size of 1.7 residents per household, suggests the 2014-2015 population could be closer to 14,000. Relatively high occupancy rates and neighborhood stabilization efforts in Grand River/Southfield likely contributed to a smaller population decrease of 11 percent in that corridor area.

Figure 5 Population Change Map, 2000-2013*

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Figure 6 Population Change, 2000-2013

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As population is changing, how is income mix changing?

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The largest concentrations of investment capital in Detroit are landing in the greater downtown area. Yet between 2000 and 2013 the population increased in only one of Detroit’s corridor areas: Corktown.

Meanwhile, Detroit’s poverty rate increased from 26.1 percent in 2000 to an estimated 39.3 percent in 2013. This increase manifests itself differently across corridors. From 2000 to 2013, the percentage of households earning $25,000 or less per year in both Midtown and Corktown decreased, yet there was an increase in the same group in the UD Mercy/Marygrove and Grand River/Southfield corridor areas. In Corktown’s case, we can attribute a portion of that change to a population increase (i.e., an influx of middle- and higher-income residents and a possible out-migration of some lower-income residents). Similar patterns could also be the case in Midtown.

One definition of a middle-income household is that its reported income falls within a range that is neither 50 percent lower nor 50 percent higher than the area’s median household income.9 For metro Detroit in 2012, that income was roughly $52,000/year, and for the city of Detroit it was roughly $27,000/year.

It is important to consider policies that both increase wealth for low-income households and support the growth of middle-income households in many corridor areas.

We look at the number of households that fall roughly into this category ($25,000-$75,000/per year), below it (<$25,000/year), and above it (>$75,000/year) as proxies for middle income, lower income, and higher income.

Of Detroit’s corridor areas, none has a higher percentage of upper-income households than lower- or middle-income households. Additionally, only a handful of corridor areas—including Corktown, Grand River/Southfield, and University of Detroit Mercy/Marygove—have a higher percentage of middle-income households than lower-income households. In short, the income mix in most corridor areas skewed toward a high concentration of lower-income households. Figure 8 illustrates that the percentage of lower-income households is increasing throughout the city, while in the corridor areas currently seeing higher levels of investment—Midtown and Corktown—it is decreasing while the percentage of both middle-income and high-income households is increasing.

Figure 7 illustrates the poverty rates across the corridor areas highlighted in this document. Objectively, the poverty rate is too high across all of Detroit’s corridors for any one place to be truly considered a ‘high-opportunity” area. That said, Figure 9 shows estimates for what a healthy neighborhood income mix might look like in Detroit and then compares that framework to the corridor areas across each low-, middle-, and high-income category. In this light, only the University of Detroit Mercy/Marygrove area and the combined MSA have between 40-60 percent of households considered middle-income. If the presence of middle-income households is more beneficial to low-income households than the presence of high-income households, it is important consider policies that both increase wealth for low-income households and support the growth of middle-income households in many corridor areas.

Figure 7 Estimated Poverty Rate, 2013

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Figure 8 Household Income Mix, 1999 and 2013**

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**percentages may add up to 99 or 101 due to rounding

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What does the Detroit Future City (DFC) Strategic Framework recommend for development potential in Detroit's corridor areas?

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Detroit’s excess of vacant land provides both challenges and opportunities. To better understand one opportunity for the city’s vacant land—its growth potential in mixed-use corridors—we used DFC’s 10-year land use recommendations to apply growth scenarios to Detroit’s developable land. Understanding what the results of DFC’s recommendations look like in different areas allows us to discover potential for new housing development and to think about which income mixes those future developments could target and which income mixes different neighborhoods could sustain over time.

Figure 9 illustrates one way of thinking about these growth scenarios in a few different geographies: citywide, and for Midtown, University of Detroit Mercy/Marygrove, Corktown, and Grand River/Southfield.

Assumptions include:

  • Detroit’s current zoning designations will influence near-term development;
  • Current uses that won’t be developed in the near term include universities, parks, landmarks, open and active schools, hospitals, and museums;
  • DFC-recommended densities are a fair proxy for future City policy;
  • All “developable” land will eventually be developed to “highest and best” use, and
  • “New build and vacant rehab” development costs are based on an estimated $200,000 cost per unit.10 Note that “New build” references development that could take place on currently vacant, developable land.

Figure 9 Maximum Build Potential, 2014*

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What income mix targets are achievable and equitable in stabilization and revitalization efforts in Detroit's corridor areas? What does the mean in the context of a very high-poverty city?

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We now know that research suggests a healthy neighborhood income mix includes low poverty levels and a bigger middle class. But, how do we apply that research to neighborhoods in Detroit–a city lacking a substantial middle class and comprised of neighborhoods that are largely lower-income? And, given these dynamics, what does development likely mean for current residents?

Using these questions as a guide and the “maximum build” scenarios from Figure 9, we can begin to extrapolate how housing preservation and development scenarios that are income inclusive could play out in Detroit.

Midtown, for example, currently has 8,055 occupied units and “max-build” capacity for 6,180 new and rehabbed units. Midtown’s current income mix distribution is roughly 63 percent low income (HH earning < $25,000/year), 27 percent middle income ($25,000 - $75,000) and, 11 percent high income (>$75,000).

Figure 10 explores how new and rehab development in Midtown, Corktown, Grand River/Southfield, and University of Detroit Mercy/Marygrove could target a healthy income mix comprised of preserved housing for lower-income residents and at least 40 percent middle income households. The figure also explores the number of households that would, in a growth scenario, need to emerge from poverty to lower each area’s poverty rate below 10 percent.

A few notes on these scenarios:

  • Based on Census and local data, Corktown’s population has grown and Midtown’s population is likely starting to grow. In corridor areas where we are seeing growth, it’s logical to imagine a maximum build scenario and housing development policies necessary to cultivate an inclusive income mix in alignment with that growth trajectory.
  • In the areas that are still losing population, the idea of a “maximum build” scenario requires longer-term planning and thinking. Supporting a healthy income mix in areas like Grand River/Southfield and University of Detroit Mercy/Marygrove will require policies that focus on retention of current households, especially those that can leave Detroit if they so choose.
  • Some of the most effective tools for cultivating a healthy income mix in both areas where population is decreasing or increasing will include preserving affordability while improving neighborhood safety, access to quality services like schools, health care, etc., and access to quality jobs across the income spectrum.
  • Finally, at 39 percent, Detroit’s poverty rate is too high for a citywide approach to deconcentrating poverty solely through the development of mixed-income neighborhoods. Wealth-building strategies like improving access to quality education and workforce development services are necessary to bring households out of poverty and create healthy neighborhoods.

Figure 10 Scenarios for Inclusive Growth

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What’s Next?

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Determining whether one or a combination of these scenarios is both achievable and equitable requires more analysis. We anticipate such efforts would require community planning processes coupled with a deeper understanding of the citywide context. These policies, along with smart practices and ongoing commitment from the philanthropic community, as well as City, State, and Federal governments, will preserve and stimulate healthy mixed-income development across the greater Detroit region. To learn more, we suggest a process that includes:

  • Engaging community leaders in discussions around current trends and whether those trends will cultivate healthy mixed-income communities;
  • Supporting these discussions with additional market data; a review of the available and required real estate capital sources (including subsidized grants and loans); additional demographic analysis, such as migration patterns, disaggregating of income data by race and other drivers of household opportunity, like educational attainment and employment;
  • Envisioning development scenarios and determining the appropriate strategic approach in each corridor area;
  • Securing a clear understanding of which land use, growth, and development policies the City of Detroit will support and enforce;
  • Securing commitment from CDFIs and philanthropic partners to develop patient, long-term financing tools that will support inclusive growth of mixed use and single family housing, while preserving affordable housing, and
  • Complementing real estate development efforts with policies and programs that support household wealth-building and development strategies that equally invest the required time, resources, and community supports needed to fuel opportunity for individuals and families in each corridor area.
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Endnotes

  1. We used 2000 and 2010 census data and the 2009-2013 American Community Survey data to complete this analysis.
  2. Transit-Supportive Densities and Land Uses, Puget Sound Regional Council, February 2015, http://www.psrc.org/assets/12239/TSDLUGuidancePaper.pdf
  3. Operational Definitions of Walkable Neighborhood: Theoretical and Emperical Insights, Moudon et al, 2006, http://activelivingresearch.com/files/JPAH_7_Moudon.pdf
  4. See Companion Document for map and listing.
  5. The maps in this document represent trends within the city of Detroit with a beige-to-blue scale, generally assigning lighter shading to trends that show a corridor area weakness, and darker shading to trends that show strength. Classifications are designed to show variation across the city, recognizing that a regional analysis would highlight relative weakness by many measures citywide.
  6. Hamtramck is a separate municipality from Detroit that lies within Detroit’s boundaries.
  7. Midtown Detroit Inc., January 2015
  8. Midtown Detroit Inc. rental rate inventory, January 2015
  9. What it means to be middle class today, Geoff Williams, April 2014, http://money.usnews.com/money/personal-finance/articles/2014/04/24/what-it-means-to-be-middle-class-today
  10. $200,000 cost per unit represents a rounded, average unit cost of Capital Impact-financed projects in Detroit from 2010 through early 2015. These costs estimates reflect total development capital.
  • Maps dated 2013 reference American Community Survey (ACS) estimates from 2009-2013. ACS estimates have varying reliability at the Census Tract level, and should be viewed as an approximation rather than a definitive value for their particular geography. Maps dated 2014 reference the Kirwan Opportunity Index and USPS Vacancy