William Pulte says the only way to truly save Detroit and get the housing market functioning properly again is to destroy large swaths of the city as quickly as possible.
Pulte, a scion of the family that created PulteGroup Inc., the largest U.S. homebuilder by revenue, has already knocked down 10 blocks on Detroit’s southeast side as part of the proposed nonprofit Detroit Blight Authority program. It’s a preview of the effort he says is needed to get ahead of the metal strippers and arsonists devastating the city’s property values.
“We’re trying to do total blight elimination,” Pulte said, standing in the middle of the blocks his group cleared in February. “You can go tear down one home here and then tear down one in another area, but if you go into one area and take down everything, that’s what really makes a difference.”
Housing markets in Detroit and other cities such as Cleveland and Buffalo are hampered by decaying, vacant homes even as sales of existing homes hover around a three-year high nationally. Pilfering of vacant units in urban areas cut the number of U.S. homes with complete plumbing by about 10.4 percent from 2008 to 2011, according to U.S. Census data compiled by Bloomberg, including 66,722 such homes alone in Detroit.
Blight has made Detroit unmanageable. As the tax base shrinks, the cost of municipal services such as police and fire protection, bus service and garbage collection, stays the same or even rises. Sparsely populated neighborhoods see increases in crime and fires, including arsons. The state has appointed bankruptcy attorney Kevyn Orr as emergency financial manager to take over the city finances and he has said bankruptcy is an option to lessen the burden of about $15 billion in debt.
“We have a city built for 2 million and only 700,000 people living here,” said John George, who has run the grassroots Motor City Blight Busters organization for the last quarter century, tearing down about 300 dwellings mostly by hand in the city’s impoverished Brightmoor neighborhood. “We have to get rid of what we don’t want, don’t need and can’t use.”
On some streets in Brightmoor, just one or two houses per block are occupied, with another two or three fire-damaged, while the rest stand open to the elements, stripped of anything of value.
Pulte, managing partner at Pulte Capital Partners LLC, a fund that invests in building products businesses, said he wants to prove the expertise his family has gained building homes can help the city knock down 13,000 vacant homes a year — about the size of Paducah, Ky., or Juneau, Alaska, and clear brush and other debris from hundreds of other lots.
A demolition project on the scale of the Detroit Blight Authority would be a welcome relief, said George.
“To target 10 to 15 blocks at a time is genius,” said George during the demolition of a house last week. “Property values and spirits would soar. It’s hard to get people to make an investment in a war zone.”
Increasing value
Attention is shifting to the role that demolishing buildings can play in bolstering the value of the remaining dwellings, said Nigel Griswold, principal at Griswold Consulting LLC in Stockbridge, Mich. His 2007 study of Flint, Mich., determined that the demolition of 435 structures there increased real estate values surrounding those sites by about $112 million, he said.
“There is tons of this research happening because of the foreclosure crisis,” he said. “The post-industrial, Rust Belt cities are having their day, kind of.”
A similar 2007 study in the New Kensington neighborhood of Philadelphia found that vacant land improvements increase the value of surrounding homes by as much as 30 percent, or by about $12 million in the area studied, said Susan Wachter, a professor of real estate and finance and co-director of the Institute for Urban Research at the Wharton School at the University of Pennsylvania.
A similar push to knock down abandoned structures in the South Bronx area of New York City in the 1970s and 1980s was a big part of New York’s eventual rebound, she said.
“So although it looks hopeless in many of these cities, there is hope if you can get ahead of the problem,” she said.
10 blocks in 10 days
Pulte, who worked in the family house-building business during the summers when he was in high school, is relying on the expertise of his grandfather and namesake, the founder and chairman emeritus of the home-building company. The elder Pulte built his first home in Detroit in 1950, which his grandson says is still standing. PulteGroup, which last year built more than 5,000 new homes, isn’t involved.
For the first project, crews with 30 to 40 pieces of heavy equipment took 10 days and four waves of work to demolish 10 blocks and clear all the brush and debris, he said. The nonprofit was able to clear the area for about $5,000 a building, or about half the market rate, Pulte said. About 94 percent of the material was recycled, he said.
The scale of the project would be beyond anything underway in the U.S., said Alan Mallach, a senior fellow at the Brookings Institution in Washington who has published research supporting demolishing homes in blighted areas to improve conditions.
“Nobody has done homes in the volume of 10,000 or more, there’s been nothing of that scale,” he said.
Cleveland project
The most ambitious project underway elsewhere in the U.S. is the Cuyahoga County Land Reutilization Corp. in the Cleveland area, Mallach and other researchers said.
That group has spent about $20 million in federal and local funding since 2009 to demolish 2,000 vacant homes, said William Whitney, chief operating officer for the Cuyahoga County organization. He estimates that another 20,000 properties still need to be knocked down.
“It’s making a huge difference to the neighbors,” Whitney said in a telephone interview. “Some of the land is able to be reimagined and reused into green space and fairly sophisticated gardens and parks.”
The group, which has another $5 million of funding, is acquiring 100 properties a month and demolishing about 900 of them a year, he said.
While other cities aren’t demolishing as many homes as Detroit and Cleveland, it’s a relatively common practice in places that are experiencing population loss, said Michael Brady, vice president of policy at the Washington-based Center for Community Progress, a nonprofit group that advises communities on returning abandoned properties to productive use.
Large-scale effort
Communities that have demolished homes include Flint, Youngstown, the south side of Chicago, New Orleans, St. Louis, Louisville, Kentucky and Buffalo, New York, he said.
The scale of demolition in some areas is limited by funding, not need, he said. In other cities, the housing market is strong enough to take care of the vacancy problems, he said.
“You’d be hard pressed to find the scale of demolition in Detroit or Cleveland,” Brady said. “There are other places doing it, but nothing close.”
Detroit now has eight people per acre, down from 21 per acre in 1950. The city, which peaked at 1.85 million residents in 1950, has lost a quarter of its residents since 2000. The population fell to 701,475 people last year, according to U.S. Census estimates released last week.
Dan Gilbert, the founder of mortgage lender Quicken Loans Inc., and owner of the Cleveland Cavaliers basketball team, is leading an effort to encourage development in Detroit’s downtown, buying up buildings and moving thousands of jobs and new ventures to the area. That’s also increasing demand for downtown housing.