The Rocket Community Fund and City of Detroit announced on Wednesday a joint $5 million investment in the Rehabbed & Ready program, a public-private partnership that renovates homes, creates new homeowners, and increases access to financing in Detroit neighborhoods that have an appraisal gap, according to a press release.
The program, created alongside the Detroit Land Bank Authority (DLBA) in 2015, rehabilitates land bank-owned single-family homes in neighborhoods with an appraisal gap that is preventing Detroit residents from accessing financing. The DLBA oversees renovations, turning blighted properties into move-in ready houses complete with all-new mechanical, electrical, and plumbing systems. Additionally, through a partnership with Emerging Industries Training Institute, the program supports skilled trades education to develop local talent. As a result, each property creates job opportunities for local contractors.
“The Rehabbed & Ready program has made affordable homeownership possible for a lot of Detroiters who may not have been up to the challenge of renovating a vacant Land Bank house themselves,” said Detroit Mayor Mike Duggan. “Scaling up this program will create this opportunity for more residents across all Strategic Neighborhood Fund neighborhoods while reducing blight and stabilizing property values.”
The investment from the City of Detroit and partner Invest Detroit are being made through the Strategic Neighborhood Fund—a fund created from public, private, and philanthropic resources that brings targeted investment to 10 neighborhoods throughout Detroit.
The Rocket Community Fund, the philanthropic arm of Rocket Companies (NYSE: RKT), founded the program with an initial $5 million investment, bringing its total commitment into Rehabbed & Ready to $7.5 million. The new investment – part of the Rocket Community Fund’s $150 million, ten-year commitment to Detroit – will finance renovations, as well as provide a backstop to cover the gap between construction costs and the sales price of homes in the program.
“We are driven to ensure that every Detroit resident has reliable access to sustainable housing and has the opportunity to grow wealth through programs like Rehabbed & Ready,” said Laura Grannemann, Vice President of the Rocket Community Fund. “Sales through this program not only chip away at blight and repair issues, they also provide appraisers with new home sale comparisons that stabilize the values for surrounding homes and increase access to financing for Detroit residents and their families.”
How it Works
Rehabbed & Ready was a direct response to the artificially low values of Detroit properties and few mortgages – which together signaled a failed housing market. As of 2013, there were fewer than 375 mortgages yearly across the city, and the median sales price was less than $10,000.
Through Rehabbed & Ready, the Detroit Land Bank Authority identifies vacant homes in Strategic Neighborhood Fund areas to be renovated by local contractors. The DLBA works closely with the City of Detroit and Invest Detroit to ensure any surrounding blight is removed before the property enters the Rehabbed & Ready pipeline.
“We are proud to be able to use our existing housing stock for a program that benefits entire neighborhoods across Detroit,” said Detroit Land Bank Authority Executive Director Saskia Thompson. “Rehabbed & Ready also allows us to work with Detroit contractors to create accessible, turnkey properties for Detroiters.”
Once the home enters the pipeline, it receives a complete, top-to-bottom renovation that ensures the property is move-in ready. This investment will also support the DLBA’s new Rehabbed & Ready to Renovate initiative, which tackles major structural and mechanical repairs but offers buyers the flexibility to complete finishing touches on their own. Homes are listed for sale on the Rehabbed & Ready page of the DLBA’s website and on the MLS, and qualified homebuyers (who can receive financing through Rocket Mortgage or the lender of their choosing) are able to purchase their new home.
The program is only available to homeowner-occupants; investors and speculators are not eligible to purchase these homes.
As a result, this transaction provides the necessary recent home sale comparison that appraisers subsequently utilize to conduct proper home valuations for homes that are being financed in the nearby area. The result over time is a healthy, thriving housing market.
Progress to Date
The Rehabbed & Ready program began in four west side Detroit neighborhoods: Bagley, Crary/St. Mary’s, College Park and Evergreen/Outer Drive. These neighborhoods were selected due to the housing stock and appraisal gap that was preventing access to financing for neighbors.
To date, 85 homes have closed, and 40 additional houses are already moving forward in the pipeline. The average combined cost of the properties and renovations is $114,540, and the average sales price of the homes is $97,711 – a 15% loss covered by the backstop from the Rocket Community Fund.
The new investments from the Rocket Community Fund, City of Detroit and Invest Detroit will scale the program across all 10 Strategic Neighborhood Fund areas and develop a pipeline of at least 200 new homes. This investment also coordinates with the additional Strategic Neighborhood Fund investments in streetscapes, parks, and commercial corridors to work toward the ultimate goal of a better quality of life for Detroit residents through a holistic approach.
While scaling the program will provide at least an additional 200 rehabbed houses, it is the quality of renovation and quality of comparables that provides neighbors with the ability to access the financing and equity they have earned.
Rehabbed & Ready will be the City’s primary single-family intervention in Strategic Neighborhood Fund neighborhoods, conducted in conjunction with blight remediation strategies afforded through Proposal N.
The Rocket Community Fund and Detroit Land Bank Authority commissioned a study by the University of Michigan’s Ginsberg Center to measure the efficacy of Rehabbed & Ready, prior to today’s announcement to scale the program across Detroit.
The study, authored by Chris Mueller and Paul Fontaine, found that median sale prices grew an additional 11.5% per year in Rehabbed & Ready neighborhoods during the program’s first three years (2016-2018) compared to neighborhoods without the intervention, stabilizing values in the four target neighborhoods. The percentage of homes in Rehabbed & Ready neighborhoods purchased with a mortgage grew an additional 5.6% per year over the three-year treatment period – eventually reaching 42.2%, or nearly double the entire city’s 21.6% average.
The study benchmarks that a neighborhood becomes economically self-sustaining once it achieves a median sale price of greater than $50,000, as well as 50% mortgage sales.
“Rehabbed & Ready was effective in thoughtfully stabilizing a market failure in specific neighborhoods across Detroit, demonstrating the power of public and private partners in jump-starting the housing market,” said Chris Mueller of the University of Michigan’s Stephen M. Ross School of Business, and the lead author of the Good Deeds report that analyzed the program. “Scaling this program throughout the city, especially in neighborhoods that are on a tipping point, will establish the value of move in ready homes, increase the number of mortgage-backed buyers, and ultimately stabilize property values for the entire neighborhood.”
The entire report can be read here.
Completed homes are available for purchase at the Rehabbed & Ready website. The website also provides information for prospective contractors interested in working with the Detroit Lank Bank Authority to renovate properties, as well as information on the home buying process for potential applicants.
For more information, visit RocketCommunityFund.org, visit buildingdetroit.org or http://www.InvestDetroit.com.