Can Startup Real Estate Developers Revolutionize Urban Redevelopment?

Since the second half of the 20th century, we’ve seen a bevy of urban renewal projects take place in decaying urban areas in cities like San Francisco, New York, and Atlanta. Most of these projects follow the same pattern: corporate investors with no personal interest in the area supply money to build luxury residential and commercial structures, young professionals move to these areas and drive up the price of rent, and the residents who had lived there for years are forced to move out because they can no longer afford to live in the area. Or, gentrification, to put it more simply.

This pattern is a bit of a double-edged sword. On one hand, cleaning up a dilapidated area lessens crime, strengthens the local economy and brings a new vibrancy to the area. But on the other hand, it destroys and displaces the community that has formed there over decades and decades.

An article by Heather Hansman published in the Smithsonian sheds light on a small Detroit real estate startup that has devised a plan to try to get around this problem. The startup, Century Partners, is making an effort to get local residents involved. Instead of just buying residents out and leaving them in the cold, they’ve created a business plan in which they pay the residents for their property and also give each resident a share in their startup. By doing this, they’re helping native Detroiters and ensuring that the money stays in the hands of people with a vested interest in the neighborhood; the longtime residents of the neighborhood.

So far, the plan seems to be a success, which begs the question: if more startup real estate developers were to follow this same model, would it be possible to revitalize urban areas without gentrifying them? It would take a lot of startups with a lot of good intention, but because of possible backing from non-profit organizations, it could be feasible.

One of the Detroit properties, Century Partners has renovated and released.  Photo: Century Partners.

One of the Detroit properties, Century Partners has renovated and released. Photo: Century Partners.

One half of Century Partners, Andrew Colom, believes that many non-profits could potentially invest money, but that they are stuck in an old-school mindset wherein the non-profits would be responsible for fronting the money, and developing the area themselves. He believes that if these non-profits were to solely front the money and leave the developing to the startups, there would be one hundred homes renovated in Detroit in just 18 months.

And the best part about these homes is that they would be the property of people who want to see Detroit grow appropriately to accommodate people who already live there. There would be no outside interest pushing for high-priced commercial and residential development.

Though it’s yet to be seen whether or not non-profits would be willing to invest money into this sort of urban development model, it’s certainly an intriguing prospect. And a city like Detroit — which has been suffering for a long time in the way of urban redevelopment — could be the perfect guinea pig.

More: A Detroit Startup Is Trying to Shake Up the City’s Housing Market, Smithsonian.com, by Heather Hansman, March 7, 2016.

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