[00:00:00] Annalise Frank: Hey there and welcome to Facts Matter, a podcast by Citizens Research Council of Michigan. I’m Annalise Frank, a local reporter for Axios Detroit. I’m guest hosting the Facts Matter podcast today with Eric Loefer, president of the Citizens Research Council. Good morning. Good morning. Good to be here.

[00:00:17] Eric Lupher: Glad you could take the time to do it.

[00:00:19] Annalise Frank: Yeah, of course. So Eric, you and I recently spoke about some news that came from the district Detroit developers the Illich family’s Olympia development and their partners for their new district Detroit vision Stephen Ross’s related companies. The project has sort of been on a delay and they recently announced that they’re putting construction of a new office building in front of Comerica Park on hold because financing for new office space just isn’t attainable in today’s market.

And instead, they’re sort of looking to focus on residential and hotel space. And so, I was hoping we could talk about why this. Maneuvering of the development and its timeline is important for the public to be keeping tabs on.

[00:01:04] Eric Lupher: Yeah, and so the backstory is the Illich’s and Ross and the investors had the vision for the area around the stadium, stadiums, I guess we should say plural trying to develop what they call District Detroit that includes both Both commercial and residential investment.

And they began the work on that some time ago and lo and behold, along comes a pandemic and people are changing work atmosphere do they need to be in the office? At all, do they need to be in the office five days a week? So the demand for office space in Detroit, in Ann Arbor and Grand Rapids and New York and San Francisco and everywhere has gone down and a lot of commercial developers are struggling with this.

So it’s not a great time to be putting a shovel on the ground to build a new commercial office building. Clearly there’s need for residential space. We have an affordable housing issue that policy makers have been talking about at the state and local level for a long time. So, they’re pivoting.

And as you and I discussed. If it were not for the Illich’s doing this and some of their track record of over promising and under delivering on past development, probably nobody would bat an eye with this. It makes perfect sense. Their history sort of raises a flag and say, Oh no, what are they up to now?

I think we give them the benefit of the doubt when we understand the context of everything that’s going on.

[00:02:49] Annalise Frank: The yeah, the, the context here is, is so interesting. You know, I think when City council was looking to approve some tax abatements for this project. There was a lot of discussion about the office market and challenges in it.

And sort of the, the pitch that the developers made was, where there’s a lot of older office space in Detroit and what we’re looking to provide is this sort of like luxury lifestyle office space that does accommodate people going in a couple days a week and kind of wanting different amenities and a different experience.

And so I think there’s been. From, some people that we’ve talked to, a couple city council members that kind of are saying, we had these concerns a year ago and it seems like they’re coming to fruition but then there’s also been people, including the mayor who has recently said, that this is just a reality of the market and a smart city.

And so it seems like there’s kind of differences in reaction to this latest news of, of the delay.

[00:03:43] Eric Lupher: The developments aren’t going to happen overnight. It takes a while to build any building of any size. And they’re talking about some pretty substantially sized buildings. So, they pivot to the residential and we’re all hoping that commercial space, rebounds and the demand for that space increases and people see the value of being in the office.

And maybe by the time they’re done with the residential development, there is a demand for the commercial and they can carry out everything that they pledged for.

The important part too, as we think about what this means for Detroit you mentioned going to city council and the mayor’s office, there’s a pretty substantial public investment co investing in, in this through tax abatements and of different types. And it’s important for everyone to understand those, that public investment only happens when the private investment happens.

So the city of Detroit or the state of Michigan, Wayne County is not. Out any resources as delays happen or, or other things like this occur. The tax abatements happen when the development occurs and you hit sort certain benchmarks that say this development has happened. And then the tax abatements will reduce the property tax burden for the newly built buildings.

So some change of the change we’re talking about affects the timing of when some of these tax abatements kick in. As I said, there’s different types that are being used. So instead of what we thought was going to be used first, now a different one will be used first. But it doesn’t really change the nature of the public investment through the city of Detroit, or how much the Illich’s and Ross’s stand to benefit from those, that public investment.

[00:05:59] Annalise Frank: Yeah, I think that is important to note. And I think that , the developers have also said that they’re continuing to work on their community benefits deal with the city and the benchmarks within there which are, also some have time elements to them. So I just think that’s important to note and also still be thinking about.

Right. Let’s see. Recently the new renderings of another sort of important like pivotal project in the district, the U of M center for innovation. So that’s, you know broke ground in December and is underway. The housing development that Olympia is now focusing on is right next to the center for innovation.

And they’ve said they want to support that since it’s in the works. And it’s sort of. Being seen as this catalyst for the area and sort of the other district development, even though it’s, you know, being built by U of M, not being built by Stephen Ross or Olympia, although they’ve donated to the project.

But anyway, as it is sort of paired with district Detroit and its effect on the city and its economy. What are you watching for in regards to that? project, the U of M one.

[00:07:06] Eric Lupher: You have the hope, I think the hope with all of these, but the U of M project really exemplifies the goal of.

bringing people into the city. So how do you justify the public investment? Well, part of it for the city of Detroit is they agree to forego some level of property taxes in exchange for income taxes that they’ll gain from workers and residents being in the city. But the U of M project I think is much bigger in that there’s a Idea of bringing young adults who will spend time in that building and trying to do all the fantastic things that the building is intended to help facilitate.

But then go out into the sidewalks and visit the stores nearby and, and have lunch and, and do all the other things. So the spinoff benefits I think as we bring young people in and their opportunity to explore, really what we’ve missed for a long time in Detroit is that. Young, vibrant crowd. And we’ve seen it some with Gilbert’s investments and building up the downtown.

But I think really that U of M project to me really stands out the opportunity to other businesses to benefit from this particular Cooperation between the city and the school.

[00:08:34] Annalise Frank: Yeah, I think it’ll be really interesting to see how it shakes , undeniably people who go to this school are going to live in Detroit and some won’t.

And I’m interested to see sort of if, certainly. The, the director of the U of M center for innovation, who I had spoke to last week talked about how, he wants to see, of course, students living in this housing that, the district Detroit is developing and sort of like living, working, studying all in this area.

But I’m curious to see, how much of this will be, commuter school, how much will, they’re building a big parking deck. Obviously people are going to be commuting. but people also be living there. Yeah, I guess we’ll sort of see what the spread is and sort of what that, means.

[00:09:15] Eric Lupher: Yeah. You know, that’s an interesting dynamic to think about it that way. There was a promise to build. Low income housing is, you know middle market housing and low income housing. And in Detroit, the need for low income housing is apparent. We’ve documented the low rate of income for Detroit residents and everything.

But we also know that students on the whole tend to be low income. They’re not living the high life and they haven’t reached a point in life that they can generally afford the. Even a middle income housing. So that low income housing to my mind was really the thought of how do you continue to lift the people of Detroit and the residents providing opportunities for housing, opportunity to get out of mom’s basement and out on your own.

I think part of, as we watch this, will there be some competition for that housing between the student population and the low income? Certainly we benefit from mixing that. That’s a different dynamic that I’m, I’m just thinking about as we talk about this. The opportunity to interact with people that are on a upward life trajectory and doing really fantastic things in the school.

So yeah, I’m anxious to watch your writing as you follow that and track what’s going on in that development.

[00:10:51] Annalise Frank: I think, a lot of, affordable housing advocates advocate for, like, a truly sort of mixed environment of, like, different people from all walks of life living near each other.

Yeah, that would certainly include students there as well as non students. And of course, that development also has a Pretty large focus on workforce development programming, as least as far as it’s been discussed so far certificate programs and the director of the innovation center seems pretty focused on that programming.

I think we’ll. Sort of see how there’s, , a lot of workforce development programs. the mayor has Detroit at work and other things like that. Looking to help people get new skills and Detroit has a great need for, Accessible middle income jobs with career trajectories attached to them.

And so, I wonder how because U of M historically hasn’t done that kind of programming, workforce development, and so that’ll be new for them, and I’m very curious to see yeah, how they’re going to fit into that very long and very complicated conversation. That’s right. Yeah. In Detroit.

[00:11:59] Eric Lupher: A lot of great work ahead for you.

[00:12:02] Annalise Frank: Yeah, there always is. There always is. Yeah. It’s yeah, it’ll be interesting to see. Yeah, are there any other sort of implications or stakes here at play for the District of Detroit development overall in terms of, what we’re looking at, what it means for the city that you wanted to talk about?

[00:12:20] Eric Lupher: That whole area, as you think about, you The surrounding the stadiums, it really is a great opportunity for live work and play to, to create a community in that. Sub area that very specific area within downtown that sort of the go between you have the business district on one side and in the neighborhood starting on the other.

So really hopeful that the promise the discussion of their vision for that development can live up to expectations. It’d be a very dynamic and exciting place to. Visit and for those people living down there, really interesting. So it differs a lot from what we’ve seen in the past, but as we think about the future, not far up the road, what do they call it?

The future of health project with the Henry Ford hospital and Michigan state university, the Detroit Pistons. Kind of the same vision. In a different geography, right? Putting housing and work the hospitals and health centers really creating that. So as we think about the changing nature of Detroit it always has been very strong in the neighborhoods and very strong in single unit housing.

So these investments. Very important for the future. We’ll have to see how that plays out on the, in the neighborhoods. Now, will there be increased investment and interest in building, rebuilding the housing that’s been lost and investing in the housing that remains?

[00:14:13] Annalise Frank: I think the question of what to do, how to rebuild housing in the neighborhoods whether that’s renovations or like infill housing in Vacant lots.

I know that’s something that is certainly on a lot of people’s minds and on my mind when I, when I talk to folks and ask them what, what they want to see happen in their communities. But that’s a whole other conversation, but I always want to talk about how people think Affordable development can work and like infill housing and neighborhoods that have a lot of vacant land that needs to be put to use in a way that helps those neighborhoods and the people who live there.

I think that the conversations around the future of health and district Detroit are are pretty similar in the ways you mentioned. And we’re sort of going through this time period where each of these developments goes through a community benefits process. And there’s a lot of conversations around how.

Big developments like this with powerful forces kind of help or harm, depending on your perspective and how you’re looking at it. I think it is really hard to see until they come to fruition, which both of these have committed to do it’s hard to know what’s going to happen until it happens, but our job is to predict these things and try to steer conversations in helpful directions.

[00:15:29] Eric Lupher: We recently published our assessment of Detroit’s economic condition and.

A critique of its economic development efforts. And one of the key findings in our research for that why these public investments are necessary. We’ve talked about two pretty substantial investments the city’s making in cooperation with these investors. There generally isn’t high demand for space in Detroit.

Whether that’s commercial, Or residential. So the rents that you can receive with your, you know, building these buildings, even talking about single unit housing, the, the projected return on investment just isn’t there. So as you said, these are significant projects. The promises are pretty substantial.

But there are major steps in trying to build up that demand. That’s going to come over time to eventually get to a point. We hope where people want to be in the city again, as they were not that long ago in the big picture and the investments from the city won’t be as important as they were as they are now right at some point.

An investor says, I want to be in the city. I want to have space to put up a high rise or do whatever, because I know that the return on investment will be there. So clearly these projects stand out on their own now, but as you think about that trajectory going forward, it becomes all that much more important.

These are two major steps in building up that demand for wanting to be in the city.

[00:17:18] Annalise Frank: Yeah. And I, I think like my. My question in that regard is, and has always been sort of like, what are these developers responsibilities, if any? Whether that be statutorily with the community benefits process, or like morally from, whatever perspective you’re coming from to the communities they’re developing in, or is there The project and the fact that the project will exist enough of a benefit and yeah, that’s kind of, I think what we’ve been sort of struggling with, with these recent projects in the community benefits process is what, what does that mean to help a community and what are their responsibilities, if any?

Interesting times to be watching this, isn’t it? Yes.

Well thank you Eric. Again, I’m Annise Frank with Axios Detroit, and I have been speaking with Eric Luer with the CRC of Michigan. You can find them online at crc MIC h.org and on Twitter at crcm IH CRC Michigan. This is Facts Matter, a podcast presentation of the Citizens Research Council, and you can also sign up for my newsletter, the Axios Detroit newsletter at axios. com slash local slash Detroit.