Detroit has become the model city for what not to do over the past decade. Journalistic pieces from other cities, such as Chicago, are always asking threatening questions such as, “Is Chicago the next Detroit?” But now Detroit is attempting to remove the pejorative connotation from that question and make it something much more hopeful.
Detroit’s new housing plan is an example of how the city is trying to turn its fortunes around. Detroit has a lot of cheap housing, but this housing is in desperate need of renovation. The problem is that banks base the amount of a home loan on the appraised value of a house. If the house doesn’t need any renovation, that’s fine, but when it can take tens of thousands of dollars to make it livable, a home loan based on the home appraisal won’t cut it.
That is where Detroit’s new lending program comes it. Detroit Home Mortgage will not only offer a mortgage for the cost of the house, but will also offer a second mortgage that can cover up to $75,000 worth of repairs. Over the next three years, they hope to provide 1,000 of these renovation loans at a fixed rate of 5 percent interest with no bank fees.
The hope is that this will allow more people to purchase homes and give the city’s housing market a good jolt.