How to Build a New Detroit

Detroit's plight is sad, but the city can use innovative housing ideas to reverse its fortunes.

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Following a half-century of economic decay and depopulation, there was a tragic inevitability to Detroit's decision last week to declare bankruptcy. Motown must now restructure $18 billion in debt owed to 100,000 creditors and bondholders, deciding who gets paid, how much and when.

That's the plan to deal with Detroit's past. But what about a plan for the city's future?

Like Pittsburgh, Baltimore and other former industrial hubs, Detroit must now reinvent itself. At this stage, no one knows what a New Detroit might look like. So before they start courting businesses and looking for investments that generate new jobs and tax receipts, city leaders should focus on the fundamental preconditions for an economic revival. 

That means making Detroit safe and livable for its citizens, and "right-sizing" a city that once was home to 2 million people but now has only 700,000 residents. How do you do that? One answer lies in the 78,000 abandoned homes that litter Detroit proper.

In 2010, Mayor Dave Bing launched a pilot program called "Project 14." The city took 200 foreclosed homes and offered them to police officers for $1,000. They then used federal stimulus funds to offer up to $150,000 to owners to re-hab the homes into good condition. That's a start, but with a murder rate at a 40-year high, 5,000 fires a year and an ailing public school system, Detroiters still have plenty of good reasons to flee for the suburbs.

[See a collection of political cartoons on the budget and deficit.]

To help staunch the bleeding, the city should engage in wholesale "urban homesteading": Take those 78,000 abandoned homes and offer them for free – that's right, for free – to new police officers, firefighters, EMS and public school teachers.  This would create a new infusion of human capital into Detroit, and help it emulate the success of other big cities in bringing down crime rates and replacing "dropout factories" with new and better schools. It would implant the backbone of a new middle class.

Detroit has also some fine universities, such as the University of Detroit Mercy and Wayne State. The city could also allot a number of empty houses to these universities to house, at low cost, scholarship students and military veterans who have returned from service and would like to pursue higher education.

Obviously, many of these properties need improvement to make them habitable. Their new owners would incur the cost of upgrades. And, in a virtuous circle, the resulting surge in construction would create thousands of new jobs that the city desperately needs. No doubt some hard-hearted conservatives will decry the housing "giveaway," but the alternative is to let vacant properties keep decaying.

[Weigh in: Should Detroit Have Filed for Bankruptcy?]

The second challenge facing Detroit's leaders is to match the city's size and government to its present population. Trying to serve a sprawling urban landscape that once held 2 million residents strains vital services like first responders and lends to widespread neglect and urban blight. For the  new Detroit to thrive, the old Detroit must shrink.  

In urban planning terms, Detroit needs to consolidate and promote density. One way would be to create a program that targets the stricken downtown area and promotes migration to specific parts of the city by waiving or severely discounting property taxes on new homeowners, say for five years.  

As the city begins to coalesce again around downtown, new homeowners will come in, and real estate values will begin to rise again. As the outer bands start to diminish in population, those parts of the city can be properly re-developed.

Detroit's plight is sad, but the city has assets it can use to reverse its fortunes. Tens of thousands of vacant homes can be a magnet for entrepreneurs, young people, upwardly mobile minorities and immigrants. By itself, a housing plan may not turn Motown around, but at least it would be leveraging its assets to set the stage for a civic comeback.

Jason R. Gold is director of the Progressive Policy Institute's "Rebuilding Middle Class Wealth Project" and senior fellow for financial services policy. Keep up with his work at PPI here and follow him on Twitter at @PPI_JGold.

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