Carrie Lewand-Monroe oversees Invest Detroit’s work in neighborhoods through the Strategic Neighborhood Fund. In her blog piece, she discusses the purpose of the fund and how we’re working ourselves out of a job.
Economic vitality in distressed areas begins when groups of risk-takers are willing to throw all they can into a project, leveraging partnerships and existing strength to make that project work. Invest Detroit successfully did that for decades in Downtown and Midtown and we’ve seen the results of an increasingly stable and fruitful market. Now our tools are needed to stabilize neighborhood markets and spark the economic vitality that Detroit’s residents deserve.
That’s why we worked with the City of Detroit and our numerous corporate and philanthropic partners to create the Strategic Neighborhood Fund (SNF). This $56 million philanthropic contribution will be leveraged by another $74 million from the public sector. When you combine that with the estimated debt and equity invested in these development projects, we’re looking at a total of $243 million to be invested in 10 neighborhoods over the next five years! This combined fund will be used for five primary tools:
- Neighborhood planning to understand community needs;
- Improving streetscapes to create safe and walkable neighborhoods;
- Redeveloping parks to offer attractive and active public spaces;
- Rehabilitating single-family homes to stabilize residential communities; and
- Strengthening commercial corridors to support commercial, mixed-use, and multifamily development.
So how do we spark this economic growth to create these healthy markets and make this vision of Detroit’s neighborhoods come to life? First, we recognize the need to leverage and coordinate with multiple partners to maximize the capacity and resources being deployed in a geographically-targeted area. Tackling this work alone isn’t possible, but utilizing existing strengths and assembling multiple collaborators can result in a more comprehensive approach to maximize our investment.
Second, we rely on local leadership to understand the needs and desires of the residents to more thoroughly represent the interests of these neighbors and ensure the success of our investments. That’s why every neighborhood strategy begins with a community-led planning study to better incorporate resident perspectives into our investments.
Finally, when it gets down to funding a development project, we use our resources to fill gaps. In a healthy market, the costs to develop a project are less than the return on that investment. But in distressed areas the undervalued market limits the returns on those projects making them financially impossible. The gap between the cost and return can sometimes be filled by loans and subsidies, but in severely distressed markets that just isn’t enough. That’s why our lenders go the extra mile to put together extremely complicated capital stacks in order to eke out a return. And when there’s still a gap, we’ll use a portion of the $56 million fund as a non-serviceable gap filler for mixed-use real estate projects in strategically located commercial corridors. These “SNF recoverable grants” are the last dollars into a capital stack that we hope will be repaid if the project works but know they could convert to a grant if the profit doesn’t come to fruition as predicted.
The first project in an area is always the most difficult. The gaps are high and the risks even higher. But investment begets investment. And once you build one project more tend to come – especially in a city with as much momentum as Detroit. Ultimately, we’ll eliminate the existence of gaps by creating healthy markets. The more projects that come into an area the healthier the market becomes. Eventually our tools won’t be necessary because the development gaps will be filled through traditional lending and subsidies alone.
Yes, it means we’re working ourselves out of a job. But I’m not worried because if we do it right, thanks to the economic growth that we’ve sparked, there will be plenty of other employers in the City of Detroit who will hire us.