Woodward Corridor Investment Fund: Fostering Sustainable Community Development in Detroit
By Elizabeth Luther, Detroit Program Manager
Between 2000 and 2013, Detroit lost one-quarter of its population—more than 244,000 residents. When the city filed for bankruptcy in July 2013, the exodus continued, with residents leaving the city in record numbers. Vacant homes and shuttered businesses meant that those who remained had little support and far fewer employment prospects to keep themselves and their communities going.
As the city and the state were preoccupied with the massive task of restructuring Detroit’s finances, others set about initiating community stabilization efforts necessary to stop the flight of residents and bring investment back to the city. Capital Impact and our partners—such as Midtown Detroit, Inc., Invest Detroit, and The Kresge Foundation—focused on sparking inclusive growth with the goal of attracting new residents to the city to drive economic activity and join existing residents to foster vibrant communities that provide opportunity and quality services for all residents.
As a mission-driven Community Development Financial Institution (CDFI), Capital Impact Partners’ goal is to create communities of opportunity, working in areas and neighborhoods specifically because they need support, even when they look too “risky” in the eyes of other financial institutions. By making vacant properties available and working with communities to provide critical social services in main corridors, we begin to increase density and spur investment in cities like Detroit to help residents thrive.
In 2013, Capital Impact and The Kresge Foundation launched the Woodward Corridor Investment Fund (WCIF) to finance mixed-income, mixed-use housing projects in Detroit’s Woodward Corridor. We saw this as a first step in bringing investment and vitality back to the city following the bankruptcy. Six years later, that innovative idea spurred new housing and other projects that is now spreading beyond the Woodward Corridor into Detroit’s neighborhoods.
An Innovative Investment to Spur Community Growth
The $30 million multi-investor Woodward Corridor Investment Fund (WCIF) was built to increase density and establish a healthy income mix in communities along Woodward Avenue—a main artery and home to many of Detroit’s largest institutions and employers, as well as arts and entertainment venues—which could then benefit surrounding communities. By focusing on the Woodward Corridor, the Fund aimed to build off of existing assets to attract residents and commercial activity, establish a model sustainable corridor, and expand economic opportunity for all residents. This effort built on the early post-recession Living Cities Integration Initiative, which sought to revitalize the area through investments like the rehab of the Woodward Garden Theater, the development of the Auburn – the first new construction along the Cass Corridor since the recession – the rehab of the Argonaut building, and the Live Midtown program.
As fund manager of WCIF, Capital Impact was able to provide fixed-rate loans under terms that were not available in the area through traditional financial institutions. Capital Impact worked with partners in Midtown to provide construction financing to nine catalytic real estate investment projects along the Woodward Corridor, delivering more than 200 new or rehabbed multifamily units to serve the housing needs of new and existing residents, all located within a quarter-mile of public transportation.
Properties financed include:
- HR Finn Apartments
- Casamira Apartments
- Elliott Building
- 207 E Baltimore
- St. Regis Apartments
- Nailah Commons
- James Scott Mansion
- The Shoppes
Evaluating WCIF’s Impact
In 2019, Capital Impact reviewed its investments through WCIF, revealing several demographic trends. Between 2010 and 2016, population density in Midtown increased by 30 percent, while Detroit’s overall population decreased by approximately 7 percent. In addition, between 2013 and 2016, new small businesses moved into the community, joining established businesses that remained. Most businesses were able to retain their employees and 33 percent of businesses were able to hire new employees. These two statistics indicate that the investment was having the intended effects of increasing neighborhood vitality and economic activity.
The median rent in Midtown increased during the same period, while it decreased in greater Detroit. Median property values substantially increased between 2012 and 2019 in Midtown, by approximately 75 percent, while Detroit experienced a nearly 21 percent drop in median property values. At the same time, income diversity in Midtown was unchanged, indicating that longer-term residents across the income scale were able to remain in the community. Increased rental rates are a necessary component of stabilizing the market and spurring further development, but must be accompanied by programs such as Capital Impact’s Stay Midtown and the City’s Affordable Housing Leverage Fund to make sure that affordable housing remains in the neighborhood.
As economic opportunity increased, crime rates decreased by 40 percent in Midtown and 23 percent across Detroit.
In addition, WCIF helped create an environment in which other investors felt comfortable investing in Detroit’s corridors. It showed that investments in Detroit could have positive community impacts and financial returns for investors.With improved benefits for residents and businesses living and operating along the corridor, the commitment of financial institutions and philanthropic organizations helped foster an environment focused on inclusive growth and transformative change for communities.
After the launch of WCIF, JPMorgan Chase invested $100 million in the city’s revitalization, which has led to other funds like the Capital Impact-managed Detroit Neighborhoods Fund, which are supporting revitalization in an increasing number of communities across the city.
In partnership with JPMorgan Chase, Capital Impact initiated the $30 million Detroit Neighborhoods Fund (DNF) to provide financing for multifamily residential properties, mixed-use real estate, and grocery stores. The goal has been to increase affordable housing options and help eliminate “food deserts” or other areas with limited access to fresh, healthy foods. DNF was launched as part of Chase’s $100 million investment in Detroit.
The Ford Foundation also invested $3 million for development of mixed-use, mixed-income projects.
Sustainable community development takes years of investment. The full impact of WCIF is still coming into focus, and will play out over a number of years. We also understand that other changes occurring at the same time—including macroeconomic trends and investments of local, community-based organizations, as well as larger projects like the Little Caesar’s Arena—make it difficult to fully determine WCIF’s impact in Detroit. We continue to examine trends and outcomes to help explain the Fund’s impact over time.
Lessons Learned to Mitigate Rising Rents and Displacement
While these investments have helped put Detroit on a path of continued investment and revitalization, additional steps are necessary to ensure that the city’s growth is truly inclusive. Capital Impact has taken several steps to connect more Detroit residents to the opportunity being created through this investment. First, we took a hard look at displacement in our communities through our Baseline Study to Address Displacement and Relocation. We found that increased density could lead to community displacement, as properties could transition from natural affordability to market-rate rentals, particularly when it came to occupied multifamily properties slated for renovation. Within our WCIF evaluation, we also found that, while Midtown residents feel that increased density has given the community more of a neighborhood feel, they are also concerned about rising rental costs.
To maintain housing affordability, CDFIs like Capital Impact need to focus on lending and policies that prioritize existing residents, allowing individuals and families to return to affordable housing in their current buildings after renovation or providing aid for residents to relocate and secure affordable housing elsewhere.
Capital Impact created the Stay Midtown program with Midtown Detroit, Inc. to help mitigate the impact of rising rents on existing residents. Stay Midtown provides rental subsidies to current Midtown residents like Rachel Barker who earn between 30-80 percent of the Area Median Income. The program aims to preserve the neighborhood’s character, preserve long-time residents’ access to the neighborhood, and continue the work of increasing opportunity for all residents who wish to live in Detroit neighborhoods. Since its inception in October 2016, Stay Midtown has enrolled more than 100 eligible households, helping them avoid displacement and retain affordable rental units.
Second, Capital Impact is working with our partners to push more investment into neighborhood corridors. We understand that the new investment coming into the city will only create opportunity for existing Detroiters if that investment goes into the neighborhoods where most Detroiters live. Since WCIF’s launch, Capital Impact has invested almost $90 million in projects outside of the Woodward Corridor and the Central Business District.
Focusing on Racial Equity for Sustainable Community Development
Displacement is only one issue facing Detroit residents. Historical and structural disinvestment have led directly to racial inequality, which keeps communities of color from accessing resources that break barriers to success. Capital Impact has begun centering racial equity as an integral measure of our support to communities, so that as we work toward justice for our communities, we are addressing the true root issues that perpetuate inequity.
Capital Impact created the Equitable Development Initiative to address the racial inequity we saw in who was receiving new development dollars coming into the city. The Equitable Development Initiative (EDI) was born after Capital Impact realized that, despite Detroit’s population being 90 percent people of color, only about 10 percent of our lending went to real estate developers of color. To address that disparity, Capital Impact created EDI to increase access to capital for real estate developers of color in Detroit. Since its launch in early 2018, the program has supported 47 participants with real estate training, technical assistance to support efforts to develop real estate in Detroit, one-on-one mentorship, and the potential for project financing. Capital Impact closed its first two loans with EDI program participants in 2019.
Community development doesn’t happen overnight; it requires more than short-term investments to create desired impact. WCIF was an important step in supporting continued investment in the city as it came out of bankruptcy, and it also helped inform us—and our community-based partners— about the necessary steps to move Detroit closer to shared prosperity across all income levels. The lessons learned from WCIF informed our investment strategy in Detroit and shifted our organizational strategy, changing the manner in which we structure loans.
Detroit has made tremendous progress since it emerged from bankruptcy in December 2014, but it still faces many unique challenges related to population density and equitable housing development. We are committed to working with our partners and local communities across Detroit to address barriers to opportunity while empowering individuals and families – especially in communities of color – to achieve equity, inclusion, and justice.