Rental unit demand grows near downtown

Posted on June 5, 2012

Rental apartments from Midtown to Corktown to downtown are filling up because more workers and students are choosing to relocate to Detroit.

Brad Jones, 25, a member of the marketing team at Detroit-based Quicken Loans Inc., found a 1,100-square-foot apartment at the Woodward Loft for $750 a month. But it took some luck.

“They had one vacancy open because a gentleman had moved out the day before,” Jones said. “I was extremely lucky to find a place. All of the other six buildings I stopped into were full and were going to be full for five to six months.”

The squeeze is likely to continue even as developers begin to complete new apartments by renovating old buildings, instead of building new structures. For example, the Newbury Hall Building in Midtown already has leased all of its 28 apartments, while the Broderick Tower in downtown has reservations for 90 of its planned 124 rental units.

Finding rental housing has been a struggle for many. Robert Guttersohn, 28, stayed with relatives for a short time after moving from Ohio, until he came across an opening at the Villa Lante Apartments in Midtown.

But experts say new construction is bound to rise as demand for rental units increases and the availability of loans improves.

Jones took advantage of the Live Downtown incentive, which gives up to $2,500 the first year and $1,000 the second year for new renters in the downtown, Corktown, Eastern Market, Lafayette Park, Midtown and Woodbridge areas.

To date, 445 employees of Detroit companies have participated in the Live Downtown and Live Midtown programs that pay workers to relocate to Detroit or stay in the city.

In the Midtown program, the Detroit Medical Center, Henry Ford Health System and Wayne State University offer employees either the cash for rent, a $20,000 forgivable loan for new homeowners or up to $5,000 in matching funds for existing homeowners to do exterior improvement projects of $10,000 or more.

The downtown program offers practically the same incentives for employees of Quicken Loans, Blue Cross Blue Shield of Michigan, Compuware Corp., DTE Energy, Strategic Staffing Solutions and Marketing Associates.

Vacancy rates in Detroit hot spots such as downtown and Midtown, as well as in many suburbs, have fallen and continue to decline.The Midtown vacancy rate is below 4 percent and about three-quarters of apartment complexes in the area have raised rents during the past six months, said Sue Mosey, president of Midtown Detroit Inc., the nonprofit that is a major development force in the area. The rate cited by real estate companies is a higher 12 percent, because it includes other neighborhoods in the general area. The same is true for downtown, whose 9.1 percent vacancy rate includes Corktown to the west and Indian Village to the east.

Some relief is coming. About 100 newapartment units will be available in Midtownby the end of the year and nearly 200 more are slated to open by 2013, Mosey said.

Normally, high demand for apartments would lead to new construction. But new rental construction has remained absent from the city because of tougher lending standards following the 2007 financial meltdown and recession.

The need for developers to provide more upfront cash has led to a decline in Detroit building permits for apartments and rental housing, which plummeted from 1,882 permits in 2003 to 114 permits in 2009 and up to 309 last year. No permits were issued through April of this year.

Renovations of existing structures in Detroit have been more popular among developers, though the situation may soon change, said David Di Rita, principal at Roxbury Group, Detroit-based developers of The Auburn in Midtown, set to open this fall, and the downtown David Whitney Building, set to open in 2014.

The state’s historic preservation income tax credit, which offered federal and state income tax incentives and grant programs to support the rehabilitation of historic and older buildings, expired last year. That helps level the playing field for an upswing in new rental housing construction and development, Di Rita said.

“As the market improves, the availability for financing (for new construction) is improving, albeit slowly,” he said.

“We’re looking at projects again from a new perspective that, a couple years ago, we couldn’t make work.”

Midtown may be ground zero for new housing construction, Mosey said.

“We’re really focusing on creating more product,” Mosey said. “That’s why you’re going to see a lot more construction over the next six months to a year.”

If the new projects are anything like the last few rental developments in Midtown, the units will be claimed quickly.

Union at Midtown, a 150-unit building, opened last year and has no vacancy. Studio One is full, too, and has been occupied for two years. There’s a waiting list, said Marcel Burgler, principal with Grand Rapids-based Prime Development Co.

“There are a lot of smaller projects going on in Midtown because it is easier to get the equity,” Burgler said. “These projects take a long time to put together. The confidence in the construction industry has not yet caught up to speed.”

Midtown’s housing dilemma is amplified by the growing number of Wayne State University undergraduate students choosing to live in Detroit, rather than commute from the suburbs.

The university’s roughly 535 apartment units have a 2 percent vacancy rate, said Tim Michael, chief housing officer at Wayne State University.

WSU has no immediate plans for more, though Michael said he “wouldn’t rule out” expansion during the next five years.

“We want as many students to live in the Midtown area as possible,” he said.

“We think there’s room for more growth.”
By: Karl Henkel and Louis Aguilar, The Detroit News