While most of the country has all but forgotten the Great Recession of 2008, its effects are still painfully felt in several neighborhoods throughout Detroit. Now with the city struggling to recover from the pandemic, and the resulting unemployment that peaked at nearly 40% in June 2020, residents have been given new hope after Detroit native and billionaire Dan Gilbert announced he would be investing $500 million into the struggling neighborhoods over the next 10 years.
This philanthropic investment will be made jointly by the Gilbert Family Foundation and the Rocket Community Fund with a contribution of $350 million and $150 million, respectively.
The first $15 million has been earmarked for one of the city’s most pressing problems, delinquent property taxes. This amount is expected to cover the back taxes on roughly 20,000 homes, saving thousands of low-income homeowners who are facing tax foreclosure. It’s estimated that this will preserve about $400 million in wealth and home equity in Detroit.
Dan Gilbert has been a catalyst for the positive changes that have already been seen in Detroit with his $5.6 billion in real estate investments that have brought new life into many of the vacant downtown buildings that had been eyesores for years. His real estate investment company also waived rent, expenses, and parking fees for their restaurant and small business tenants in 2020 for the months of April, May, and June in the wake of COVID-19.
Gilbert is the founder of Rocket Companies (NYSE: RKT), one of Detroit’s largest employers; owner of the Cleveland Cavaliers; and founder of the Detroit commercial real estate firm, Bedrock.
What this means for the future of Detroit real estate
It’s not yet clear what the remaining $485 million will be used for after the delinquent property taxes are paid, but that $15 million investment alone will have a significant impact on the city’s real estate market.
Detroit was one of the hardest-hit cities during the Great Recession of 2008, and the unprecedented number of foreclosures sent property values to unimaginable lows and tens of thousands of houses being abandoned. Over 10 years later and the city is still demolishing vacant houses it hasn’t been able to sell.
With thousands of homes still going through tax foreclosure each year, the city is struggling to gain much traction in improving property values and ultimately improving the wealth of the residents. By taking 20,000 homes off the chopping block, the number of distressed properties available for sale will decrease, and many homeowners will hopefully be able to make investments in the upkeep of their properties.
One of the biggest issues the city faces in terms of real estate values is that many neighborhoods still need to be rebuilt. Abandoned houses and vacant lots are holding down the value of the homes that are still standing. By stopping the tax foreclosures, houses can remain occupied instead of being abandoned, giving these neighborhoods a chance to change direction.
Can investors make money in Detroit?
Several patient investors have already done quite well by investing in Detroit real estate. While there are still a lot of neighborhoods that need to be rebuilt, the city has already made a lot of progress in bringing many areas back to life.
The city saw a 20% increase in property values in 2020, which is a promising sign. With Dan Gilbert’s $500 million commitment, Detroit’s real estate market should see continued growth over the next decade.