Detroit: From Motor City to Housing Incubator

DETROIT — Bank of America and JPMorgan Chase, the country’s two largest banks, trace their roots in Detroit back decades, when they helped finance the city’s once-booming auto industry.

These days, Detroit is still struggling to recover from the 2008 financial crisis, and the two banks have pledged to help resuscitate the city and its crippled housing market. So, guess how many home mortgage loans these two enormous banks made last year in this city of 637,000 people.

Bank of America made 18. JPMorgan did just six.

Detroit’s hometown lender, Quicken Loans, made the most — a mere 90.

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An abandoned home on the city’s east side. Major banks have made just a handful of mortgages in Detroit over the past year. CreditErin Kirkland for The New York Times

Midwestern cities like Detroit have long embodied the American can-do spirit. Over the course of a century, Motor City melded assembly-line prowess with freedom-of-the-road ideals to help define a nation. In the postwar years, Detroit became the epitome of the American dream, a place where factory workers without college degrees could make enough money to buy a house of their own.

Yet as home prices soar across the United States — particularly on the coasts — Detroit remains a poster child for the economic crisis and housing collapse of a decade ago. Boarded up homes and rubble-strewn fields litter the landscape.

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Today, a house can be bought here for the price of a used Chevy Caprice.

What is truly surprising about that, though, is how difficult it still is for buyers to actually buy. Basically, prices are too low for lenders (who see the deals as too small or risky) but too high for buyers (who may be cash-poor). There aren’t enough houses in move-in-ready condition — and not enough money to fix them up.

This strange situation has turned Detroit into an unlikely petri dish for experiments into how to kick-start a housing market that is, depending on your perspective, either slumbering or comatose.

Will a neighborhood of “tiny houses” for the poor help fix things? Or how about rehabbing city-owned homes, and selling them at a loss, to jump-start the action? Other more conventional — if risky — ideas involve providing no-interest financing to fix up tumbledown properties. Or offering mortgages for homes that normally would be too small to be worth a banker’s trouble.

One local financier is even trying to beautify bulldozed neighborhoods by planting thousands of trees on 160 acres of vacant land his firm has gobbled up.

And while Detroit is worse off than most big cities, housing-policy makers nationwide are keeping a close eye to see what lessons can be learned.

To understand how far Detroit has fallen, consider the statistics. In the mid-2000s, banks were writing some 7,000 mortgages a year. Then, the financial crisis nearly destroyed the American automotive industry, Detroit’s economic heart. Jobs disappeared; citizens fled. Last year, there were more than 700 mortgages made in Detroit, up from 200 at the depth of the crisis but barely 10 percent of the level a decade earlier.

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