Detroit Mayor Mike Duggan on Tuesday announced a new fund to address housing instability in Detroit that would offer developers low-interest loans, private grants and other financial tools to preserve and create affordable housing.
The public-private partnership begins with an initial investment of $48 million, which includes a $15 million commitment from JPMorgan Chase and $10 million guarantee from the Kresge Foundation. The overall goal is to raise $75 million.
“If you want to hold rent low enough that people of low income can afford it, but your housing costs to build are the same as every place else, you lose money,” Duggan said. “Nobody is going to build apartment units where the cost of building it costs more than they get back.”
The partnership — called the Detroit Housing for the Future Fund — will finance housing for residents whose income is at or below 60% of the area median income or AMI, which amounts to $33,000 for an individual and $47,100 for a family of four. However, priority will be given to housing developments for people with lower incomes.
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Developers can go to www.detroithousingforthefuturefund.org to apply or learn more about the effort.
Sonya Mays, president and CEO of Develop Detroit, a nonprofit real estate company, said the high rent of new developments burdens seniors and working Detroiters.
“In Detroit, it costs more to renovate an apartment building that can be paid back and commit yourselves to keeping those rents affordable. This is the dreaded funding gap.” she said.
With “more flexible capital,” organizations like Develop Detroit will be able to create affordable housing quickly to keep residents in “stable high quality housing situations,” she said. The fund has already doubled the group’s ability to preserve affordable housing.
Peter Scher of JPMorgan Chase said a combination of philanthropic grants and low cost lending for developers will address the city’s housing needs.
“When you talk about neighborhoods, you have to talk about affordable homes, because that is really the launchpad to resilient families, to resilient neighborhoods, to well paying jobs. But access to the quality and affordable homes is not adequate,” Scher said.
Maurice Jones president and CEO of Local Initiatives Support Corporation, a nonprofit community development financial institution that will manage the fund, said it will include “multiple products that will fill niches in the market” for developers.
This includes pre-development grants, assistance with capitol needs, low interest loans and a “developers of color” grant for Black developers and people of color.
“Housing is much bigger than housing. This is about the health and the wealth and the prosperity and the security of residents of Detroit at the end of the day.”
Jones said the fund’s partners need to raise $27 million dollars to reach it’s $75 million goal.
The new partnership announced Tuesday includes funding from the following groups:
- JPMorgan Chase: $15 million commitment, including $12.5 million in low-cost loans and a $2.5 million philanthropic investment.
- Flagstar Bank, Citizens Bank and First Independence Bank: $15.5 million in low-interest loans
- The Kresge Foundation: $10 million loan guarantee
Previous commitments amounting to $17.5 million also came from Blue Cross Blue Shield of Michigan, Fifth Third Bank, Flagstar Bank, TCF Bank, Ford Motor Company, Penske Corporation and Huntington Bank.
The fund will be managed by the LISC.
The Detroit Housing for the Future Fund is the privately funded portion of the city’s 2018 plan to preserve 10,000 existing units and develop 2,000 new units. The city has used $12.2 million of $50 million to develop 424 units, to date.
Duggan in March announced another public-private partnership to preserve affordable housing units with federal tax credits that are set to expire.
Nushrat Rahman covers issues related to economic mobility for the Detroit Free Press and Bridge Detroit as a corps member with Report for America, an initiative of The GroundTruth Project. Click here to support her work.
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