Detroit has obviously been experiencing difficulties with its economy (to say the least). They filed for bankruptcy almost two years ago and have since been struggling to get themselves back up and running. 
While in D-Town last year, we visited a satellite branch of the Chicago FED, located in Detroit’s historic district. The beautiful building housing billions in cash presented our class a juxtaposition to the blocks of burned down row homes and deserted houses that are just yards from the FED. We learned that at one point over two million people inhabited urban Detroit, and now just over 700k live there.
The manager of the branch of the FED said that the first step on getting the economy on track is making people move back to Detroit. But this creates a problem. How do you give people incentives to move to a city that is basically in the gutter?
The answer is www.BuildingDetroit.org. This website works as an auction house for the city’s 16,000 empty houses. With bidding starting at just one thousand dollars, these homes can be extremely desirable. To buy one of these homes you must have intentions to fix it up and sell it or move into it. This is a way to prevent speculators from buying all the property and just sitting on it, which would do nothing for the city itself. 
The homes listed are almost all in desperate need of attention, with many homes not even having roofs, heaters, or running water. But with a price of 1k, you could put 10k into it post-market and it could be an 11k dollar beautiful Victorian house in the heart of a city that was once an industrial capitol of the world.
If this works, then many families will be able to move to Detroit cheaply and start their lives there, giving to the economy greatly. This could also potentially give the auto industry a reason to stop moving facilities to other states like it has been doing. If it has more workforce then it will be able to grow instead of shrink.
Market Watch did the story on this website, I will attach links to both the article and the auction website below.
Links:
1. http://www.marketwatch.com/story/detroits-1000-houses-may-be-a-lousy-deal-2014-04-16
2. http://www.buildingdetroit.org/
3 Comments
The housing crisis in Detroit seems to be dealing with the same coordination failure problems that developing countries struggle with. The houses are certainly a great deal, but no one will want to purchase one unless others do as well, which means it isn’t rational to be the one to make the first move. For a price like that, though, hopefully people began to take notice.
Since I wrote this article Detroit’s bankruptcy plan has been approved and a partnership between private firms and the government has been formed to raise money. So far 7 billion of the 18 billion dollars of debt has been paid off or erased. Companies and key figures such as Warren Buffet are heavily investing in Detroit. I see the future of the city being a slow but sure recovery to a Pittsburg like entity.
This is the first I am hearing about BuildingDetroit.org though it may be because I am not in the Detroit area. How much has this been marketed? Are there banks or loan offices that are pushing this as an option in the Detroit area? Despite the very low prices, what other incentives are there for people to buy these homes?
On another note, although you are supposed to have an intention of fixing up or moving into the home is this enforced? Can speculators still buy the property or is there too much red tape for that to happen?
Just some questions to consider.
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