Rocket Mortgage, Detroit pledge $5 million to rehab more homes
The Rocket Community Fund and the City of Detroit have committed a total of $ 5 million to expand a program to renovate and sell ready-to-move country banking houses.
In an announcement expected Thursday, the Rehabbed & Ready program, launched in 2015 by Quicken Loans and the Detroit Land Bank Authority, will be expanded to 10 neighborhoods across Detroit through the city’s Strategic Neighborhood Fund. The aim is to develop a pipeline of at least 200 homes for sale.
“We’re excited about the opportunity to scale,” said Laura Grannemann, vice president of the Rocket Community Fund, the philanthropic arm of Quicken Loans’ Rocket Mortgage. “And over the past five years we’ve really proven the model that investing in properties that used to be publicly owned in strategically located locations not only eradicates the disease, but also ensures that the house is sold works wave effects that can be felt by all homeowners in this neighborhood. That’s really what we’re about. “
The Rocket Community Fund is donating $ 2.5 million, part of the Rocket Community Fund’s initial $ 150 million, to a 10-year $ 500 million commitment to Detroit that it announced late last month.
The city and its partner Invest Detroit are investing US $ 2.5 million through their Strategic Neighborhood Fund, a city initiative that uses philanthropic dollars to revitalize 10 areas of the city.
“I love the way the city works with Land Bank to create homes that are truly affordable for people in fantastic neighborhoods around the city of Detroit,” said Donald Rencher, Detroit’s group leader for housing, planning and development . “I’m always grateful for Quicken, who apparently always supports many of our initiatives to increase the vitality of the neighborhood and the housing options for the people in the city.”
Quicken Loans launched the program with an initial $ 5 million in 2015, and since then Detroit Land Bank has refurbished and completed the sale of 85 homes, with 40 more in the renovation pipeline. Other partners in the program are The Home Depot.
The Rehabbed & Ready program, one of several programs run by Land Bank, began in four West Detroit neighborhoods selected for their poor housing stock and a valuation gap that made it difficult for potential buyers to close a home after finance real estate crisis. These neighborhoods are: Bagley, Crary / St. Mary’s, College Park, and Evergreen / Outer Drive.
In 2013, fewer than 375 mortgages were taken out across the city and the median sales price was less than $ 10,000. The program aimed to rehabilitate homes and provide comparable selling prices that could give buyers access to finance and equity.
The average cost of a property and renovations is $ 114,540 and the average sale price is $ 97,711. The Rocket Community Fund covers the loss.
“The ability to be a loss leader, going to a neighborhood early and completely redeveloping a home at a price that allows other people to stay behind and have a comp in their neighborhood, has been an integral part of our strategy from the start. ” said Saskia Thompson, executive director of the Detroit Land Bank Authority. “I think the program has proven its worth.”
Before expanding the program, the Rocket Community Fund hired the University of Michigan’s Ginsberg Center to investigate whether its efforts were paying off.
The study found that in the first three years of the program, average retail prices in Rehabbed & Ready neighborhoods rose 11.5% more per year than neighborhoods without the program.
“It was a confirmation to see what really happened,” said Thompson.
Chris Mueller, a professor at UM’s Ross School of Business and lead author on the study, said it would take a philanthropic effort, including the loss of redeveloped homes at a loss, to boost mortgage-backed sales in the neighborhood.
“Once this has happened several times, appraisers and banks can determine what the market value of a fully renovated house is,” he said. “And once that happens, private investors can start investing again. And more mortgage-backed buyers.” can start getting mortgages on surrounding homes in this neighborhood. “
Mueller said that a neighborhood becomes economically self-sufficient once the median selling price is more than $ 50,000 and when 50% of sales are covered by mortgages. Mortgage rates in the Rehabbed & Ready neighborhoods rose 5.6% each year to 42.2%, almost double the rate in the city as a whole (21.6%).
Veronica Johnson, property redevelopment manager at Landbank, said demand for renovated homes is strong in Detroit. It takes approximately 50 days from completed home listing to completion, including the time it takes for the buyer to secure funding.
Johnson said there is a need for more general contractors and specialist contractors, including landscapers and home cleaning companies. The program includes a partnership with the Emerging Industries Training Institute, which offers training to become a craftsman.
“We have to produce a lot more houses to meet current demand,” she said. “People want houses that are ready to move into. People want to live in the districts in which the program is currently investing.”