May 22, 2024 - Real Estate

Few new homes built in Detroit, but that may change

The three homes sit side by side. One is off-white, one is white and one is grey.

Greatwater's homes on Fischer Street between Kercheval Avenue and St. Paul Street. Photo: Courtesy of Greatwater

New construction of single-family homes is exceedingly rare in Detroit, but a recent project could be an indicator of whether that's about to change.

The big picture: Detroit issued only 18 permits for new house construction last year. Among those testing the waters of new-build demand is developer Greatwater Homes, which recently completed three homes in East Village.

  • It has two more nearing completion and plans 18 additional homes in the area.

State of play: Mayor Mike Duggan called Greatwater's development "the beginning of a trend over the next couple years … I think you will see more and more people building market-rate houses in neighborhoods."

By the numbers: Greatwater's homes are priced at $339,000, $439,000 and $459,000, advertising amenities including garages and air conditioning. The developer aims to give buyers an option who don't want to undertake the difficulty and unpredictability of a fixer-upper, Greatwater co-founder Matt Temkin tells Axios.

  • "[The project] was a risk, but our goal was to deal with that risk by just making a great product, and leave it out there for the market to respond, and it did," Temkin says.
  • Two of the first three homes have sold, and a made-to-order home has been presold.
A column chart that displays the annual number of permits issued by the city of Detroit for new construction of single-family dwellings from 2019 to 2023. The chart shows a general upward trend, with the number of permits increasing from 1 in 2019 to 18 in 2023, despite a slight dip to 7 in 2022.
Data: City of Detroit; Chart: Axios Visuals

Some real estate professionals in Detroit are monitoring this development closely.

What they're saying: If successful, it could "drastically change the investment landscape in the city" by creating a rush of similar projects, says Sami Abdallah, a Detroit real estate investor and owner of Re/Max City Centre in Southfield.

  • On the flip side, though, Greatwater's homes aren't "very affordable," which could present challenges, Abdallah tells Axios.

Context: Preserving old homes by rehabbing them is an essential part of retaining neighborhoods' culture.

  • New construction is also a "necessary component" of community development to fill in vacant land, says Angela Carlberg, senior director of community development ecosystem building for Community Development Advocates of Detroit.
  • Yet, affordability and other factors remain major concerns. "It's a really big leap to presume that what's being built, as far as new construction, is going to serve who's here," Carlberg tells Axios.
  • Developers can hire contractors from communities to ensure more economic benefit for the neighborhoods they enter.

Flashback: While Detroit is known mostly for its historic housing stock, a decade-long trend that started in the 1990s left scattered subdivisions of vinyl-sided suburban-style homes, Outlier reported.

  • While new housing is a logical solution for filling up the city's large swaths of vacant land, "the cost of the taxes on a single-family home makes it impossible" to build new ones, Duggan told the Detroit News last year. Plus construction costs and the state of the housing market.
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