The North End/New Center part of Detroit was named an area with some of the most attractive opportunities in the U.S. for housing developers to take advantage of federal reinvestment tax benefits.
The largest and most active developer in the New Center area is Detroit-based The Platform, led by Peter Cummings. The company owns and is renovating the Fisher Building, and late last year opened The Boulevard, a six-story, 356,000-square-foot, mixed-use development on the northwest corner of Third Avenue and West Grand Boulevard. Other projects are in the works across the city, as well.
Large tenants in New Center include the State of Michigan, Strategic Staffing Solutions, The Christman Co., Henry Ford Health System, HAP, Wayne State University, Albert Kahn Associates, and Detroit Public Schools Community District.
ATTOM Data Solutions, a California-based curator of a national property database and first property data provider of data-as-a-service teamed up with CityBldr, a Seattle-based firm that uses artificial intelligence to realize the best use of land. The companies determined that a widespread group of mostly impoverished, densely packed urban neighborhoods across the U.S. offer these opportunities.
The data highlights 11 neighborhoods in seven states and Washington, D.C. with some of the best potential for using Opportunity Zone tax benefits designed to spur revival in low-income communities across the U.S. The zones were established by Congress under the 2017 Tax Cut and Jobs Act.
Along with the Detroit neighborhoods, the following neighborhoods were named: Anacostia in southeast Washington, D.C.; the South Shore area of Chicago; City Heights in San Diego; Mid-City in Los Angeles; Parramore in Orlando; Central District in Seattle; West Colfax in Denver; Spartan Keyes in San Jose; Buckman/Kerns in Portland; and Hilltop in Tacoma.
Most of the areas are notably poorer and more densely populated than the U.S. as a whole, with lower income and educational levels and a higher percentage of renters than homeowners. A few have above-average education levels, however, and most have home values that exceed the national median home price. They also have seen a wide range of median home price increases and decreases over the past year.
“This data tells us that housing developers should consider investing in these neighborhoods because they have an immense amount of potential, plus tax benefits aimed at realizing that potential,” says Bryan Copley, co-founder and CEO of CityBldr. “What we’ve done with this study is create a standardized score to compare every opportunity zone in the U.S. to determine which areas would yield the highest average return on investment.”
Todd Teta, chief product officer with ATTOM, noted that his company contributed another key element showing home price changes form the first half of 2019 to the first half of 2020 in those areas.
“Factoring in home values and how they’ve done in the past year adds a critical piece of data to the picture,” says Teta. “Developers can get a demographic snapshot of what these areas look like, plus the hard numbers on how home prices are changing.”
Median household incomes in the areas range from $20,205 in Tacoma to $57,009 in San Jose. Seven of the areas have median household incomes below $40,000, and all 11 are beneath the national level of $61,937.
Population densities in the areas range from about 2,400 people per square mile in Detroit’s North End/New Center to 19,400 per square mile in Chicago. Nationwide, the number is 93 people per square mile.
All 11 areas have poverty levels that are higher than the national rate of 13.1 percent, running from 16.3 percent in Los Angeles to 49.4 percent in San Diego.
Between 53 and 98 percent of households rent homes in the areas, compared to 36 percent nationwide. The lowest rental rate is in Detroit’s North End/New Center, and the highest is in Orlando.
In three areas, the percentage of adults with college degrees outpaces the national figure of 32.6 percent: San Jose (37.5 percent), Seattle (48.7 percent), and Portland (56.5 percent). Levels in other areas range from 3.6 percent in Orlando to 31.5 percent in Denver.
Despite relatively high levels of economic distress, the typical home sells for more than the national median home price in eight of the 11 areas, according to data collected by ATTOM in the first half of 2020. However, the lowest median home prices are in North End/New Center ($40,501), Orlando ($105,000), and Tacoma ($217,000). The highest are in Seattle ($795,500), Los Angeles ($860,750), and San Jose ($885,000).
The largest increases in median home prices from the first half of 2019 to the first half of 2020 based on ATTOM data were North End/New Center (up 25 percent), Orlando (up 31 percent), and Chicago (up 91 percent). The biggest declines were in San Jose (down 7 percent), Los Angeles (down 12 percent), and Tacoma (down 32 percent).
The overview looked at areas that would offer the greatest value to be gained by investors for building multifamily apartments, rowhomes, or townhomes.