Back From the Edge

With people less willing to live in outlying communities because of the recession, rising energy prices, and falling investments, they’re finding that living in established communities is providing them with untold benefits.

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A  curious thing happened in metro Detroit last summer: The ever-growing ring of development that started more than 300 years ago when Antoine de la Mothe Cadillac edged his canoe onto the shoreline of the Detroit River began to ebb.

While at first blush this inward migration might not seem like good news to home builders and the numerous industries that support the housing sector ­— like contractors, landscapers, retailers, or even politicians who advocate new housing initiatives to grow their community’s respective share of property taxes — there’s no escaping the fact that the region’s appetite for new homes and apartments in outlying communities has waned.

To some, the ramifications of the collapse of the housing bubble and the slow, yet steady migration back to established neighborhoods and central cities like Birmingham, Rochester, Northville, or Ann Arbor may be simply tied to Michigan’s seven-year recession, but there are myriad other factors at work in the region and the country that, added together, are encouraging people to move back to a density they once shunned for a bigger, and more private, slice of the planet.

“While home sales, whether new or used, are down considerably from five years ago, most of the homes that are selling today are in established communities like Troy, Birmingham, even Detroit,” says Paul Robertson Jr., president of Robertson Brothers Group in Bloomfield Hills. “To be honest, most of our calls are from people who want information about living in Detroit. You’re also seeing the trend on the condominium and apartment side.

And it started happening before the escalation of gas prices last summer.”

Indeed, Robertson, whose late father, Paul Robertson Sr., began building homes in Berkley following World War II, says the spike in gas prices helped propel people to shorten their daily commutes. But that was just one of many factors encouraging more and more people to stay put, move in with relatives, or relocate to mature communities. Other reasons include job insecurity, a lack of mortgage funding, rising environmental awareness, a younger generation more willing to live in older cities, and the desire of many people to be more personally efficient by living closer to work, schools, shopping centers, and entertainment venues. There’s also the state’s cap on property taxes, often referred to as Prop A, or the pop-up tax. It discourages homeowners from moving because property taxes are reassessed after a home is sold. But prior to any sale, annual taxes are capped at 5 percent or the rate of inflation, whichever is less.

Consider the most recent data from the U.S. Census Bureau, which shows that migration around the country has significantly slowed. From the latest yearly report, ending on July 1, 2008, the data shows that the slowdown in migration is among the sharpest since the Great Depression. And while in past recessions people often had the ability to move from one region to another (the 1980-82 recession saw thousands of Michiganians leave the state for fast-growing markets in the South), the most recent recession has largely put an end to that trend. And unlike other downturns, the current recession has touched nearly every industry, meaning once fast-growing states like California, Nevada, Texas, and Florida are seeing fewer arrivals and, in some cases, more people are moving out than in.

“People have started to realize that there’s a cost to living on the outskirts of [a] region in terms of quality of life as it relates to personal efficiency,” says Leonard Siegal, president of Siegal/Tuomaala Associates Architects and Planners Inc. in Southfield, who has spent more than 50 years working in the design industry. “We started noticing it a few years ago, and now it has escalated. It’s very encouraging when you consider the way our region developed over time. We kept pushing out and leaving the bad things behind instead of dealing with them.”

According to the Southeast Michigan Council of Governments (SEMCOG), growth in the region since 2000 has slowed considerably. The total population grew less than 1 percent over the last eight years, by approximately 39,000 people. But from 1990 to 2000, overall population growth in the region was up 5.3 percent, to 4.8 million people — or a gain of about 200,000 residents. One interesting trend in the data showed that new and renovated condominiums, loft apartments, and dormitories (mostly Wayne State University) added in Detroit over the last eight years were drawing a largely younger population.

With more people staying put or moving into established communities, Siegal and his design company are in the process of transforming a portion of the business that was once centered on new construction to the assessment of existing commercial structures. The effort, scheduled for rollout out this summer, involves an energy-efficiency report for older buildings. “We’ll charge a fee for the initial inspection, which will be under $5,000 and based on the size and age of the building,” says Lonny Zimmerman, vice president of Siegal/Tuomaala. “The resulting report will detail how a building owner can save money by adding more energy-efficient windows, new insulation, a new roof, or new heating or cooling equipment. And if someone wants to be more environmentally conscious, we can offer ways to add a green, living roof or a wastewater collection system for watering the landscaping.”

Siegal believes the energy-assessment program will be successful. Thomas A. Duke, president of Thomas A. Duke Co., a large commercial and investment realty firm in Farmington Hills, says he’s anxious to see Siegal’s new offering. “Overall, I do see people moving closer to where they work, and part of that is the rising cost of energy, both now and into the future,” Duke says. “We’re just starting to see how volatile the energy markets can be, and I think it will be a bigger factor going forward.”

To be sure, last year Gov. Jennifer Granholm signed off on legislation that requires that, by 2015, 10 percent of all electricity generated in the state comes from renewable sources, meaning wind, solar, or bio-fuels. The added cost of meeting the mandate will largely be passed on to consumers.

President Barack Obama and Congress are also seeking to implement a so-called “cap-and-trade” system, where a finite number of permits covering greenhouse-gas emissions are issued to companies. Those businesses that emit high levels of emissions, such as an automotive or energy plant, would be able to buy added permits from companies that don’t emit much carbon dioxide into the atmosphere. Most experts predict such a system would raise energy costs that, again, would be passed on to consumers. There’s also talk of adding more nuclear plants, an effort pushed by U.S. Sen. John McCain during the presidential campaign. All of these efforts, and others, are designed to reduce the nation’s dependence on foreign oil, the proceeds from which some overseas despots are using to support terrorists or build up arms, including nuclear armaments.

While rising energy prices are encouraging more people to shorten their commutes by living closer to work, other factors are driving the trend, as well. A. Alfred Taubman, the former chairman of Taubman Centers Inc., a luxury-mall-development company in Bloomfield Hills that often built properties ahead of population growth, says metro Detroit, more so than any other region in the country, would benefit from a movement of people back to core cities. 

As Detroit shook off its rural roots and entered the industrial age more than a century ago, the city’s status as the automotive capital of the world brought unintended consequences. While the Detroit River and an abundance of natural resources helped propel the advent of the auto industry, so, too, did topography. Because of the river, the city grew from a 180-degree radius. What’s more, the land was largely flat, which made it easier to build roads and move around quickly. In turn, all those automotive and parts plants required large swaths of land, which further contributed to sprawl.

The high wages automakers provided was another factor that encouraged outward migration. “Banks and insurance companies, which in the days before computers were dependent on large workforces, couldn’t compete for labor against [auto] wages,” Taubman says. “These essential white-collar institutions, along with the massive office buildings required to house their employees, did not flourish in Detroit. Cleveland, Chicago, Pittsburgh, and other cities developed more balanced economies and more dense downtown business districts.”

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