Cash infusion from China, will it help save Detroit?
The bankruptcy of Detroit has experienced much revitalization; most of the city outside Motown's centre and Woodward Avenue corridor suffers, thanks to Gilbert and Ilitch. In the late 90's being home to over 1.8 million, city's population has cratered over the decade and now stands at just over 0.7 million. Uttering of home, authority of this city of houses, not apartments, has dismantled thousands of homes. Empty for years now; homeowners simply walked away to other places, as that option was a more favourable proposition.
As Detroit stumbled into what is called the largest municipal bankruptcy, only few houses had prospects other than the countless facing demolition due to lack of infrastructure support. In spite of the declining population, a fumbling and corrupt city government was still determined to provide services to people at the level as that of late 90's, when almost 2 million resided, and obviously it often failed.
Recently, narratives about Chinese investors willing to snap Detroit homes are all over social media. Could this massive investment in homes and offices by Chinese help Detroit recover?
The evidence clearly suggests NO. Detroit housing market was hit hard during the sub-prime and the foreclosure crises. Reports were buzzing about British investors flying across to scoop up several houses in the city. It all sounded unseamed: buy properties for several thousand, fix them up, rent them and if three out of five thrived, investor came out ahead.
However, it did not turn out the way it was supposed to. Detroit's real estate market continued to decline in value. Brit investors lost their shirts in the swindle. Stories droned about homes that foreclosed, were bought and foreclosed again, as owners did not pay taxes. The direct impact, homes in Detroit saw fall as low as US$500 at the auction.
As The Atlantic pointed out, red-hot economy has left Chinese investor loaded with cash, but no place to clunk it. Real estate in Urban China is monstrously expensive, and in addition, capital controls makes investing in large portfolios or real estate a very difficult task. Therefore, for the price of a bizarre tour of outlet malls in Europe, Chinese investor would buy a house in Detroit.
Later in time when reality hits: city bureaucracy, cost of refurbishing, and an attempt to deal with contractors from many time zones away, or falling prey to yet another scheme, in any case, the buzz still remains. China's social networks, Weibo, has been full of tales about Detroit, its decline and hope.
Detroit's hope does not lie in investors who wish to make a quick buck from abroad, but from those who want to take that risk and actually become a stakeholder in the city. Darin McLeskey is one of them, who has bought several properties, now calls Detroit his home.
Michigan Farming Initiative is just one social enterprise slowly trying to transform the city. Mayor's office is going after small businesses for various reasons, from permit violations to chipped paint within a store. Strange policy considering near absence of commerce throughout the city, especially where neither Chinese nor Californian's would venture.
In the meantime, investors are sending chills through the spine. Financial manager of Detroit has invited auction house Christie's to appraise a portion of the Detroit Institute of Art s collection for $200,000. Donor restrictions could prevent some of these fine collections from leaving Detroit; city's creditors are eyeing the DIA as a path towards recouping their investments. Auctioning museum pieces would harm Detroit's prospects to revamp as it would make the city an even less attractive place. Should this worry people, concerned about the future of this city? We shall have to wait and watch to answer this. Hoping concerned authorities take realistic and practical steps to revive.
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