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.”
The lack of a mass-transit system has hurt the region, as well. Because areas around transit stations are often more dense than others, land use — along with road and utility infrastructures — are set up more efficiently. But lacking a mass-transit system (the automakers, starting in the 1920s, encouraged the demise of the city’s streetcar system by stacking Detroit’s transportation board with its own people), residents had no option (other than buses) than to buy a vehicle to move themselves around. Employee discounts on vehicles contributed to the situation, as well.
As a result, sprawl became a way of life in Detroit. As people found it easier to move away from the city and all of its problems, roads and utility lines were extended. That’s one reason suburban politicians are almost consistently adamant about getting control of Detroit’s water department. The reasoning: Controlling the distribution of water provides the suburbs with the ability to create more residential areas as a means to increase property taxes. As one politician once said: If Detroit ever wanted to see its population rebound, all it needed to do was to stop issuing permits for new water lines.
The region’s high ratio of large manufacturing facilities, as well as the lack of a mass-transit system, creates other challenges. Metro Detroit has one of the highest percentages of owner-occupied homes in the country (another factor of having a booming auto industry), but all those vehicles inside all those garages require parking spaces elsewhere. Combined with all the factories and their large parking lots, managing the sewer system has become a major hindrance, especially during heavy rains. We may live next to the largest percentage of freshwater in the world, but we haven’t been very good at managing one of the major sources of that water, namely, the heavy rains that fall on acres and acres of concrete and asphalt.
Because everything is so spread out in Detroit, it’s not uncommon for the outlying suburbs to bear more than their fair share of utility failures, such as downed power lines, floods, and sewer overflows. This is often where the utility system is weakest. While most people might think that building a wall of sandbags is a rather archaic solution to combat flooding — and may only see it on TV during hurricane season — it’s practically a cottage industry in metro Detroit. For evidence, just look at what happened in White Lake and Hamburg townships when heavy rains surged through in mid-March. After one particularly heavy downpour, Hamburg Township Supervisor Patrick Hohl found himself distributing sandbags to residents while helping work crews tamp the rising water levels along lakes and rivers.
There are other inconveniences, as well. Roads closed because of flooding make it harder to get around. And the roads may need to be repaired before they’re opened back up for traffic. In turn, with everything so spread out, it takes longer for crews from DTE Energy or Consumers Energy to fix the power lines. Over time, if more people stay put or move closer to core cities, the region’s infrastructure wouldn’t be as taxed as it is today.
Sprawl has also contributed to the region’s image problem, which is largely propagated by outside media outlets that neglect to thoroughly research how Detroit developed the way it did and why there are so many abandoned buildings in the city. The cost of supplying vehicles to the rest of the world, along with contributing mightily to the nation’s defense during World War I and World War II, affected Detroit like no other city.
“We’re definitely paying a price for the way the region developed that caused us to be so spread out,” says Chris Webb, director of the ESD Institute in Southfield, a public-advocacy group connected to the Engineering Society of Detroit. “We’re looking at ways to encourage more density, and I think the advent of a light-rail system in Detroit is just one way to boost our density.”
If all goes according to plan, a three-mile stretch of rail line will be put in place along Woodward Avenue over the next two years, stretching from downtown Detroit to the New Center. The $100-million project, which is largely being funded through private donations and the selling of naming rights of 13 stations planned along the route, is being supported by a host of businesses and individuals, including Penske Corp. Chairman Roger Penske, Quicken Loans Chairman Dan Gilbert, Ilitch Holdings Chairman Mike Ilitch, and Compuware Chairman and CEO Peter Karmanos.
“That rail line is just the first piece of a larger system that will stretch from downtown Detroit to Pontiac,” Webb says. “And if you look at how the federal government is distributing stimulus money, the people who get out in front of a project and offer a better way to accomplish something will be rewarded more than others. It’s in our best interest to build the rail line and look at other ways that our region can be more efficient and inclusive.”
While the struggling auto industry has affected Detroit like never before, there are some positive developments that have occurred as a result of the downturn caused by the global economic meltdown. The banking crisis, along with the implosion of the housing market, has affected all sectors of the economy, the result of which has been a sharp drop in the price of homes. But while foreclosures are up, it also means that homes are more affordable. And once the federal government, along with the Federal Reserve, figures a way out of the financial morass, lending will pick up and existing home sales will rise. Already, homes in Detroit are going for as little as $100, and many are being bought up by the creative class, whether it’s artists, musicians, or filmmakers. As research has shown, the arrival of artists is often the first indication of a revival.
“I think we really need to encourage our community planners to support new and renovated housing in existing places that need density or have been largely abandoned,” Webb says. “And certainly, new-home builders will realize opportunities, though it may be a little tougher to develop a home or building in or near a downtown district. But if we allow our growth to continue unabated during the next recovery, we’ll be compounding our problems even more.”
Despite all the region’s problems, Taubman says he’s encouraged about the long-term health of the region. “The world will find alternatives to fossil fuels, scientists and engineers will invent ever-more efficient fuel cells and faster computers, but … there’s no replacement for water, and many parts of our nation and our world are running out of it.”
To be sure, last summer the Georgia basin experienced near drought-like conditions, which affected the supply of water to surrounding states. Meanwhile, in California, a three-year drought has cost the state $1.4 billion in lost income, while accounting for around 53,000 lost jobs, according to figures from the University of California, Davis. The state is even asking farmers to hold back on planting and sell the water they would’ve used to a water bank (about $275 per acre-foot of water). And in Los Angeles, the water utility recently said it would tack a 15-percent rate hike on people who don’t conserve water.
If managed properly, water could become our greatest asset. “If you think about it, we really have the ability to grow fresh water,” says U-M Dearborn vice-chancellor Ed Bagale, who’s played a major role in improving the health of the region’s lakes and streams, most notably the Rouge River. “Right now, we just let water evaporate. But if we collected rainwater properly and kept it from evaporating, we could sell it to those that need it.”