Summary and Introduction
A basic necessity in the United States is the need for affordable housing where one can settle. Many of the citizens are hopeful to acquire a home within various cities which can meet up to their expected standards. Over the past few years, the Real estate industry within the United States has been active. The need to ensure the citizens with the capacity to afford a home is provided with one has been seen as an urgent matter. For this reason, many of the individuals continue to choose to acquire mortgages that, with full payment, would leave them owning houses. Many housing schemes are being developed to ensure accommodation of all social class individuals. In his research, Lan Deng (2011) noted a rising demand for the need to provide housing settlements in cities that continue to grow rapidly. However, an area of concern lies in Detroit, where there is an oversupply of housing units, with most of them lying bare and unoccupied (Deng, 2011). A major factor that contributed to the increase in the number of abandoned housing units was as a result of the national Foreclosure lending crisis which occurred in July 2008 (Dayen, 2014). Currently, 65% of the housing units foreclosed remain vacant. There is thus a need to develop strategies which will allow relocation of persons into these homes, or consequently, other strategies on how best to use the homes or land on which they occupy. From the crisis, the requirement to develop a valid strategy that can see the houses utilised is required. In this paper, an analysis of the various strategies and plans that can be employed is determined supported by details from other researchers and the statistics acquired.
Congress, in response to the crisis enacted the Housing Economic Recovery Act of 2008 which was to assist in the operations of acquiring, rehabilitating, demolishing and redeveloping many of the homes that had been foreclosed and abandoned, most of which were residential properties (Cockrel, Diggs, & Winters, 2009). The Act entitled all Cities and counties to receive 3.92 billion dollars for the purposes listed above. In 2009, Mayor of Detroit Kenneth V. Cockrel submitted a detailed report with the plans and strategies developed to find a way to stabilise the neighbourhoods within the City, most of which concentrated on the use of the funds for demolishing and constructing other structures that would be beneficial within that particular neighbourhood. He had developed, together with his team, a detailed plan which would aid in the ultimate use of the land and housing space that has been left unutilised to promote returns for the city. The report stated Detroit as one of the cities with the weakest real estate market with the city having a high unemployment level (Cockrel et al., 2009).
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The Housing Economic Recovery Act of 2008 provided the necessary funds required for the rehabilitation and redevelopment of cities that were being deserted. It acted as an avenue through which the Government could recuperate the abandoned neighbourhoods by promoting new and innovative ways of house and land utility. Amongst them was the development of subsidised and affordable houses in areas with low earning capacities. In a research conducted by Lan Deng, he identified various housing developments that are supported by Low Income Housing Tax Credit (LIHTC) program (Deng, 2011). These housing developments projects had a positive change in the neighbourhoods. In the research, Deng defined the various advantages that are set for the Developers and neighbourhoods which utilise the LIHTC for housing development in low-income rental housing. However, currently, the industry continues to face a lag after the occurrence of the crisis. Many investors are withdrawing from a program that was once successful in rehabilitating various neighbourhood’s (Deng, 2011).
In Detroit, the success of LIHTC was seen in the rehabilitation of abandoned homes, more than in the development of new homes. Between 1987 and 2007, the number of rehabilitated houses was numbered at 12,297 while new projects were 76. The construction of small housing units makes them affordable to families that are earning 50 or 60% of the Area Meridian Income. The funds provided by the Housing Economic Recovery Act could act as a guiding principle to allow the LIHTC program to continue running within Detroit. The LIHTC could also be partnered with the plans as stated by the mayor to accomplish better utilisation rates in areas where there is slow or little demand for housing units.
Analysis and Evaluation
With the information provided on the benefits derived from the use of LIHTC programs, the required statistics of the same have been highlighted by Bai, Goodman, Kaul, Woluchem and Webb (2016). The research conducted by Bai, Goodman, Kaul, Woluchem and Webb (2016) highlighted important details about Detroit’s Housing development, sales, loans and other factors between the year 2004 to 2015/6. The report showed a comparison between the sales of housing units between Detroit and Wayne County between the years of 2005 and 2015. As compared to Wayne County, Detroit recorded very low rates of sales ranging below 40 thousand Dollars between 2008 and 2015. In 2015, Detroit recorded its highest mean and median sales rates being at 19 thousand Dollars, compared to Wayne County with 45 thousand Dollars. The houses were however not new and were real Estate owned houses that had been rehabilitated.
With the details provided, the study also gave an analysis of the housing sales prices within Detroit according to the various Districts. The Woodward Corridor and East Riverfront Districts recorded the highest sale prices compared to all other districts. From this information, it is clear that all other districts have relatively lower income earning persons while people continue to migrate to the Woodward Corridor and East Riverfront. The number of Foreclosures in the two districts was also relatively lower than all other Districts between the years of 2009 and 2015. However, Bai et al. (2016) recorded a relative drop in the number of homes that were sold in the year 2015 as compared to 2014. Most of the homes being sold were Real Estate Owned Homes amounting and had dropped by 23.9% in sales. The unemployment rate had also dropped and thus attributing to the loss of housing sales.
From the research, the positive impact that had been conducted through the LIHTC program with the rehabilitation of neighbourhoods to foster new living arrangements that could be affordable to low-income earners is evident. The rehabilitation of these neighbourhoods led to the development of economic status within those neighbourhoods. Attributed to the presence of rental housing projects developed by the LIHTC programs.
Solutions and Conclusions
In this stead, it is important to continue with the programs within the LIHTC. The need to continue investing in the programs ensures the development of housing units that gradually uplift the economic situation of any given location. In the event of the demolition of these empty and vacated houses, the need to develop infrastructures and building complexes that can offer valid opportunities to the people residing in those areas is important. Mayor Cockrel’s strategy for demolishing such housing units and constructing other building amenities that could well allow for the development of the economy is valid. However, the scarcity of persons within those neighbourhoods would ultimately lead to the failure of such projects. Construction of low-income rental housing units would lead to the pull of population to such areas. Presence of people can thus lead to the development of other projects or economic programs that could lead to the development of the City’s Economic Status. However, as Deng states, the areas where the LIHTC projects are concentrated must be ones where the projects are clustered and not scattered, and there requires to be a presence of housing demand for the success of the projects to be evident (Deng, 2011).
References
Cockrel, K. V., Diggs, D. J., & Winters, M. M. (2009). Planning and Development Department Neighborhood Stabilization Program Plan (No. NSP rev 01/09) (p. 45). Detroit: City of Detroit.
Dayen, D. (2014, August 25). You Thought the Mortgage Crisis Was Over? It’s About to Flare Up Again. The New Republic . Retrieved from https://newrepublic.com/article/119187/mortgage-foreclosures-2015-why-crisis-will-flare-again
Deng, L. (2011). Building Affordable Housing in Cities after Abandonment: The Case of Low-Income Housing Tax Credit Developments in Detroit (CLOSUP Working Paper Series No. 31) (p. 40). Ann Arbor: University of Michigan. Retrieved from http://closup.umich.edu
