Bad Local Tax Policy Didn't Drive Detroit's Collapse

In 1949, Detroit was the most most prosperous city in the United States, and was near the top globally. Detroit has fallen far indeed from that point. 

There has been inflation since 1949 with $100 in 1949 worth $1,264.03 in 2024. In 2024 dollars, the median household income in 1949 in Detroit was $45,846.37.

The median household income in the U.S. is currently $75,149. It was about $3,100 in 1949 which is about $39,184.93 in 2024 dollars, which is up 91.7% in inflation adjusted terms. 

Detroit's median household income is $34,762, which is about 46% of the U.S. average, and is down 24.2% in inflation adjusted terms from what it was in 1949. Detroit's median household income as a percentage of the U.S. median household income has fallen 60.5% since 1949.

Detroit's population in 1950 was 1,203,368. Detroit's population has fallen steadily since then to 620,376 in 2022 (at 48.4% decline). The U.S. population in 1950 was 151.3 million. In 2022, the U.S. population was 333.3 million (a 220% increase). Detroit's share of the total U.S. population has fallen by 76.5%.

Detroit's aggregate city income is down 60.9% from 1949 after adjusting for inflation.

Between 1970 and 2000, 161,000 buildings were demolished. [As of 2010, there were] estimated to be 40 square miles of vacant property, with 33,500 empty houses and 91,000 vacant lots.

From here (citing a dead link to a newspaper website). 

I wrote the statement below, in response to a discussion of the role played by Detroit's local tax policies in its economic development, and the potential these have going forward for the city.

There is basically no reasonable interpretation of economic history in which Detroit's decline from 1949 to the present is a function of Detroit's local government tax policies. Detroit's economy collapsed because the U.S. manufacturing industry collapsed, and it fell the hardest and longest of all of the rust belt cities because its single minded focus on manufacturing is the very factor that made it so prosperous in 1949. 

Detroit was a victim of offshoring, declining demand for manufactured good exports as other economies rebuilt their own manufacturing bases in the post-WWII era, and automation that reduced the number of jobs necessary to meet U.S. demand for manufactured goods. International trade policy played a big role and so did indifference to the local economic consequences of a transition to a post-industrial economy. These effects are so great that even now, when Detroit's manufacturing sector is a mere shadow of its former self, this effect still swamps any effects attributable to local government tax policies. 

Detroit's most pressing issues are how to come to terms with a sustainable acceptance of its much smaller size in the post-industrial era, and how to diversify its economy. Policies to encourage positive growth are chasing the wrong dream. It should instead figure out how to be a stable, economically diversified small city.

Denver Murders In 2015 By Race And Ethnicity

Denver Homicides per the FBI for years 1985-2014 and per the Denver Police Department for 2015, via the Denver Post.  Note that this understates the extent to which homicide rates have declined in Denver in that time period because Denver's population increased by 31% from 1985-2014 and continued to grow from 2014 to 2015.  For example, it would take about 117 murders in 2015 to match the murder rate implied by the 90 murders in Denver in 1986.  The 50 murders experienced by Denver in 2015 correspond to a murder rate that would have produced 38 murders in 1985.

Murders In Denver In 2015

In 2015, there were 50 homicides not committed by police (police killed 7 people) in Denver, 28 black, 12 Latino and 10 white. As of 2014, Denver was 53.4% non-Hispanic white, 10.4% black, and 30.8% Hispanic (the remainder consists of Asians, Pacific Islanders, Alaska Natives, Native Americans and mixed race individuals who are non-Hispanic).

The murder rate per 100,000 people by race in Denver in 2015 was as follows:

* Non-Hispanic White 2.82
* Latino 5.87
* Black 41.35

There were no murders in other racial or ethnic categories in 2015, although some individuals classified as black or Latino in Denver's murder statistics may have been classified as having more than one race in census statistics.

The lack of murders in some of these other racial categories isn't too surprising, because the numbers of people in racial categories like Native American (2.0%) is small enough that one would not necessarily expect to see a murder in those racial categories every year in Denver, particularly if those racial categories have murders rates closer to non-Hispanic whites or Latinos than the blacks.

Small numbers in absolute terms, such as the number of murders in the City and County of Denver in a given year, are inherently subject to greater statistical fluctuations than large numbers, such as the number of homicides in the entire United States in a given year, due to the law of averages.

UPDATE January 18, 2016: Of the seven killed by police six were shot (several by non-Denver police officers) and one died in the jail. Four were Hispanic, two were black and one was Native American. Those deaths are not included in the murder rate, but including them would further broaden the racial disparity.

National data on deaths at the hands of police also indicate a racial disparity with almost exactly half of the victims being white based upon a Guardian newspaper survey of 776 such deaths in the U.S. in part of 2015, a figure which is much smaller than the percentage of Americans who are non-Hispanic white (96% of the victims were male). END UPDATE

The Larger Context

Some Minor Caveats

Of course, central cities like Denver almost always have crimes rates that are high relative to their resident population, in part, because the number of people in a central city is almost always higher than its residential population during the working day and during the evening and weekend hours when people come to central cities for a wide variety of entertainment, sports, dining and shopping opportunities. In contrast, many suburban areas have populations that are below their resident populations during a large share of all waking hours during an average week.

The distinction between resident population and the average number of people in the city during the waking hours is a particularly important factor, for example, in the high homicide rate of Las Vegas, Nevada, whose average population of non-resident tourists is very large relative to its resident population, even before considering any other factors at play in its high homicide rate.

A not insignificant share of the urban-suburban disparity between homicide rates would disappear if this adjustment were made, although this adjustment would still not explain all, or even most of the difference.

Historically, but less so recently, central cities have also been home to an outsized share of the deeply poor who are much more likely to be involved in gangs and commit serious crimes for reasons that are much more complex.

Race Greatly Influences Homicide Rates

In the entire United States from 2010 through 2012, according to polling and statistics site 538:

[T]he annual rate of homicide deaths among non-Hispanic white Americans was 2.5 per 100,000 persons, meaning that about one in every 40,000 white Americans is a homicide victim each year. By comparison, the rate of homicide deaths among non-Hispanic black Americans is 19.4 per 100,000 persons, or about 1 in 5,000 people per year.

Denver was above both of those averages in 2015, by about 12% in the case of non-Hispanic whites, and by about 100% in the case of blacks.  Since the base number of homicides in a single city is so small, the variability of this number is large in percentage terms, but the overall trend of homicide rates that vary dramatically by the race of the victim, is very robust.

The unfortunately reality, if you do linear regression comparisons of murder rates in various geographic areas to all manner of plausible statistics about those geographic areas is that the racial makeup of a geographic areas is the single best first order predictor of it murder rate when compared to comparable geographic areas (e.g. states to states, cities to cities, etc.). Race predicts homicide rates much more accurately, for example, than poverty rates or education level or the percentage of undocumented immigrants in an area.  Other measures like gun ownership rates or gun control laws in force, death penalty laws in force, or even police staffing levels, are similarly second or third order effects in predicting the homicide rate, at most.

Denver's murder rate in 2015 was still below average for the 30 largest cities in the United States, which isn't terribly surprising, given the longer term historical trends and given Denver's racial composition compared to many of the other cities on that list.

The murder rate experienced by blacks in Denver, for example, is roughly the same as the murder rate in Detroit, which is 83% black and 8% non-Hispanic white.  This is a quite unflattering comparison, considering that Denver, unlike Detroit, does not have a massively understaffed police department, does not have huge tracts of abandoned housing in its high crime areas (about 28% of housing units in Detroit are unoccupied), and has not experienced decades of economic decline.

The very low homicide rate in Seattle, Washington, in contrast (about 4.1 per 100,000), in significant part reflects Seattle's racial composition (7.9% black, 66.3% non-Hispanic white and 13.8% Asian).

Of course, that doesn't mean that racial composition is a terribly accurate predictor of murder rates. For example, Baltimore, Maryland has a much higher homicide rate (about 55 per 100,000) than Detroit (about 40 per 100,000), despite having that fact that it is 63% black and 28% non-Hispanic white (a significantly smaller percentage of black residents and larger percentage of non-Hispanic white residents than Detroit).  One factor that might lead to the distinction between Baltimore and Detroit could be that Baltimore is a metropolitan area in which a far larger share of middle class blacks than most metropolitan areas live in the suburbs rather than in the central city and a high cost of living, leaving the central central with an African-American population that has much higher rates of poverty that in turn lead to crime, but almost any explanation is to some extent speculation.

Incidentally, Seattle (pop. 668,342), Detroit (pop. 680,250), Baltimore (pop. 622,793) and Denver (pop. 663,832) are all the central cities of their urban areas with roughly similar populations in 2014 according to the Census Bureau.

Why Does A Victim's Race So Strongly Influence The Homicide Rate?

The Denver Post story on 2015 murders linked above didn't discuss the race of the homicide suspects, appropriately, because the perpetrator is unknown in 44% of those murders. But, nationally, over many years, the percentage of murders that are intraracial is very high, about 91% of blacks who are murdered are murdered by a black perpetrator, and about 84% of whites who are murdered are murdered by a white perpetrator.

This largely reflects segregation both socially and residentially.  Most murders are committed by acquaintances and family members, and most murders of strangers are committed by people who don't live very far from each other. For example:

"Because of the racial homogeneity of most neighborhoods, moreover, it is even true that most stranger killings are intraracial — 67 percent for white victims and 89 percent for blacks" based on data between 2000 and 2009, Fox wrote in his book The Will to Kill: Making Sense of Senseless Murder.

Put another way, the high murder rate for blacks in Denver and nationwide, is largely a function of the fact that murderers are disproportionately black, and that black Americans are much more likely to have acquaintances, family members and neighbors who are also blacks.

The Role of Gang Homicides

Another important factor, which the statistics quoted above don't demonstrate, but which appears to be true from other data is that a disproportionately share of variability in homicide rates from place to place, and from year to year, is attributable to differences in the number of gang related killings by young minority men (mostly black) by other young minority men (mostly black). It is no coincidence, for example, that 90% of murder victims in 2015 in Denver were men, and that the number of murders among people 21-30 was much higher than any other age range.

According to the Denver Post story linked above, just under half of murders in Denver were gang related, and a post at this blog from April of 2015 identified some reasons why gang related violence might be on the upswing in Denver.  In a nutshell, many historically black neighborhoods in Northeast Denver have seen the black middle class depart to the suburbs, and gentrification has pushed gangs that remain in Northeast Denver to compete for control of a dwindling territory of low income black neighborhoods.

Gang related killings are disproportionately likely to go unsolved. According to the Denver Post story linked above:

Of the 50 homicides, arrests have been made in 28 cases, a 56 percent closure rate, said Sonny Jackson, a police department spokesman. The closure rate drops when looking at the gang-related killings with suspects charged in only 40 percent of those cases.

In contrast, more than two-thirds of killings that are not gang related are closed.

In 2007, the head of Colorado's prison system estimated that 40% of its inmates were gang members.

Why Does Race Have Such An Outsized Impact On Homicide Rates?

Of course, that doesn't answer the $64,000 question of why murderers are disproportionately black, and any answer to that question is almost certainly complex and a full answer is certainly beyond the scope of this post.

An important clue, however, can be found in the fact that the rate at which non-Hispanic whites commit and are victims of murder is higher in the American South than it is elsewhere in the United States.  This fact is particularly notable considering that virtually all African-Americans outside the American South are migrants from that region within the last two or three generations, with much of that time period marked by intense de jure or de facto racial segregation.  This relatively recent history of migration, followed by prolonged segregation, has allowed the culture and regional dialect of the South to remain relatively undiluted in these communities compared to culture and dialect of migrants to other regions who are immersed in populations of natives of the region.

In the same vein, children of Korean immigrants from Buffalo, New York are generally much more assimilated into American culture than children of Korean immigrants from Los Angeles, California, where the Korean community has enough critical mass to resist assimilation into the larger American culture.  The more residentially segregated a community is, the less its members need to assimilate into the larger community where they live.

Anthropologists have described the cultural traits of the American South associated with high rates of violence both in the United States and in regions with similarly cultural values around the world as a "culture of honor."

Another clue that suggests that culture, rather than race (and by association, genetics), per se, is a key factor is that the murder rates now seen in African-American communities in the United States, are quite similar to those seen in early modern London and Amsterdam, for example, that have since seen dramatic declines in their murder rates rates to near global lows, despite experiencing only very modest tweaks to their racial composition during the time period when the murder rates declined.

Racism in the criminal justice system may account for a significant share of the disparity, but it is unlikely that a large percentage of the difference arises from disparities in homicide prosecutions per se.  There is no doubt that blacks are disproportionately victims of wrongful criminal convictions. But, the best evidence is that less than 10% convictions following a criminal trial are wrongful and that the percentage of people who plead guilty of a serious crime despite being factually innocent of that crime or another similar but perhaps less serious crime, is even smaller.  This percentage is not large enough to account for the roughly 100 times greater disparity in homicide conviction rates between African Americans and non-Hispanic whites, and likewise can't explain the huge disparity in homicide victimization rates by race.

Instead, if racism in the criminal justice system gives rise to some of the disparity, it is likely due to racial disparities in enforcement rates for lesser offenses (for example, African Americans are much more likely to be prosecuted for using marijuana than non-Hispanic whites), which taint young African-Americans (especially men) with criminal records and time spent in jails and prisons.  This, in turn, reduces their economic prospects in legitimate endeavors and also foster associations with criminal gangs, socializes them with experienced criminals and develops social expectations that this is their future as well.  It is much harder, however, to quantify the impact of this kind of racism as the amount of information needed to evaluate the impact of each individual offender's prior experiences is huge.  Basically, racism in the criminal justice system may facilitating the networking that is critical to the perpetuation of criminal gangs.  The latest catch phase to describe this phenomena has been "the school to prison pipeline."

Put another way, gangs may be more prevalent in African-American communities than they are in white communities, because few whites have enough exposure to the criminal justice system at a young age together with other youths who are their neighbors, to have the critical mass of convicted young criminals to make gang formation viable.

Falling into the habit of committing serious crimes is much more likely to happen if you are part of a criminal gang that socially supports that conduct than if you are not part of a gang.

Devil's Night Curtailed In Detroit

DETROIT (13abc, Action News) - . . . City officials said Saturday that only 28 fires had been reported over the first two days compared to 66 at the same time in 2014. More than 3,500 people volunteered to help patrol Detroit streets this year. The campaign is a long-running response to what used to be known as Devil's Night, the day before Halloween. In 1984, Detroit had more than 800 fires during the period.

From here.

Detroit Public Schools In Death Spiral

The Michigan Department of Education gave Detroit Public Schools deadlines this month for moving forward with a deficit-elimination plan.

The plan calls for closing 70 schools [out of 142] by 2013, increasing high school class sizes to more than 60 students, and outsourcing and consolidating services with the city and the countywide education agency between this year and 2014.

The cuts will meet the goal of eliminating the deficit, but [state-appointed emergency fiscal manager Robert] Bobb contends the plan is not in the best interest of educating DPS students and could drive students away. The district has about 74,000 students, down from about 175,000 in 1999. It is expected to drop to about 58,000 students in 2014.

From here

Two years ago, the Detroit Public Schools had 194 schools.

Starting this fall, the district plans to boost class sizes in grades 4-12 and at all grade levels by fiscal 2012, which begins July 1, to save $16.8 million. The plan would hike class sizes for:

Grades K-3 from 17-25 students to 29 in 2012-13 and 31 in 2013-14.

Grades 4-5 from 30 students to 37 in 2012-13 and 39 in 2013-14.

Grades 6-8 from 35 students to 45 in 2012-13 and 47 in 2013-14.

Grades 9-12 from 35 students to 60 in 2012-13 and 62 in 2013-14. . .

[T]he district . . . [may] save another $12.4 million from the school closures if it "simply abandons" the closed buildings. Past policy has been to keep the closed schools clean and secure, officials said, but the district could cut costs by eliminating storage, board-up and security. . . .

In the past year, debt in the district has increased by more than $100 million, brought on by a mix of revenue declines in property taxes, reduced state aid, declining enrollment and an unplanned staffing surge this past fall.

The Detroit Public Schools face a deficit of $327 million this year ($4,419 per student). The median salary of teachers in the Detroit Public Schools is about 30% below the median salary of teachers in Michigan.

About 54,000 students in the District attend charter schools, leaving the district with infrastructure and debts it lacks the revenue to support as its student base shrinks and the property tax base and population of Detroit decline.

The Detroit Public Schools are 90% African-American (and 2.4% Anglo), and 87.2% of Detroit Public Schools students are in the free and reduced lunch program because they are poor. Michigan public school students statewide are 20% African-American (and 71.2% Anglo), and 40.8% of them are in the free annd reduced lunch program.

Remarkably, despite the challenges it faces, the Detroit Public Schools managed a 62% graduation rate in the most recent year. The Denver Public Schools, which a much healthier economic environment and much larger proportion of middle class students, manages only a 52% graduation rate.

Detroit's Fires Burn 100 Homes

I didn't see a story on it in the Denver Post this morning, despite the fact that the news broke well before press time, but there has been large number of structure fires (about 100 homes, more than the Boulder fire that is raging now and is national news) in Detroit. Downed power lines in high winds and insufficient fire department resources (both attributable to insufficient infrastructure maintenance funds), rather than arson, seems to be the problem.

Not A Chamber Of Commerce Coup

The respective local Chambers of Commerce will probably not be bragging about the fact that their hometown is one of "America's Ten Dead Cities." The cities:

(1) Buffalo;
(2) Flint;
(3) Hartford;
(4) Cleveland;
(5) New Orleans;
(6) Detroit;
(7) Albany;
(8) Atlantic City;
(9) Allentown;
(10) Galveston.

I got married and started practicing law in Buffalo, have a shirt tail relative in Flint, got my undergraduate education just outside Cleveland, and went to law school just outside Detroit, so many of the cities on the list mean a lot to me.

The Fall of St. Louis

Steam Powered Opinions notes the decline of St. Louis, which appears to me as best described economically the Southern-most outpost of the Rust Belt. Its fate mirrors that of the more extreme case of Detroit. Like many central cities, its downfall was greatly furthered by urban planning approved, interstate highway assisted suburbanization. Timothy Lee's blog has explored the issue at length in multiple posts from his perspective as a libertarian, one who appears to be liberal leaning, or at least, free of some of the nasty "hate the world" cynicism that sometimes accompanies that label.

A comment to the post linked suggests that white flight from the central city was also a factor. While the comment doesn't reach this conclusion, most of the narratives of white flight point to school desegregation in the wake of Brown v. Board of Education and subsequent cases as a factor that was an important as the interstate highway system in the migration away from central cities. (Equally important, in my view, was the U.S. Supreme Court case follow up to Brown that held that desegregation efforts did not have to extend beyond racially neutrally drawn school district lines.)

One of the fascinating aspects of the fight over land use generally is the extent to which local politics in the United States are decoupled from national ones. You will find die hard Democrats and Republicans alike at both ends of the land use debates played out mostly in local politics, even when, as in this case, national policies concerning civil rights and transportation had a major impact.

You will find proponents of strong land use regulations in liberal strongholds like my Washington Park neighborhood in Denver (which has been home to much of the legislative leadership of the Democratic party in Colorado at one point or another), where the instinct is a preservationist/historic one, although also anti-density, and yet you will also find proponents of strong land use regulations in affluent, conservative suburbs like Cherry Hills Village and Greenwood Village to the Southeast of Denver.

Meanwhile, you will also find proponents of weaker land use regulations like myself, among proponents of infill development, who see urban density as mostly a virtue, for environmental and economic development reasons among other motivations, while weak land use regulations also find favor among conservative suburban developers of large lot tract housing.

The decoherence of local political ideology compared to national political ideology is probably one reason why it leaves open room for constructive engagement across traditional political identity boundaries. It is a place where “liberaltarian” common ground (what a god awful word!) is possible, as are other unlikely alliances.

Timothy B. Lee, who is confident enough in his own judgment to take libertarian heroes like Austrian school economist Ludwig von Mises with a grain of salt, and to recognize that issues that don't impact him personally are still important, is certainly an easier voice to hear libertarian rooted ideas from than most.

Detroit Exodus Continues

The 1990s marked a shift in the people who were leaving Detroit. Before then it was "white flight." In the 1990s and in the last decade, it has been a flight of the black middle class according to the Wall Street Journal.

[F]rustrated by plummeting property values and high crime, many diehards have hit their breaking point. Their exodus is consigning borderline neighborhoods to full-blown blight and putting prime residential areas at risk. . . . this year's Census will show a population drop of 150,000 people from the 951,000 people who lived within city limits in 2000. That would be roughly double the population loss in the 1990s, when black, middle-class flight began replacing white flight as the prevailing dynamic. . . .

From 1999 to 2008, median household income in Detroit dropped nearly 25% to $28,730, after growing 17% in the 1990s. . . . Over that period, the proportion of owner-occupied homes fell to 39% from 49%, while the proportion of vacant homes nearly tripled to 28%. . . .

The Detroit Police Department is short about 700 officers, says Warren Evans, appointed police chief in July 2009. The result is he must assign officers to the worst crimes. Homicides have dropped roughly 25% since he took the job.

Detroit has lost a population equal to that of the West Washington Park-Beyers neighborhood every single year for the last decade.

According to the Wall Street Journal account, a major factor in the departure of the middle class is out of control crime, fanned by a police force that can't respond to it and neighborhoods full of vacant homes that encourage crime.

In the case featured of a middle class black woman, Ms. Barham, leaving one of the city's better neighborhoods:

In seven years as a homeowner in Detroit, she endured more than 10 burglaries and break-ins at her house and a nearby rental property she owned. Still, she defied friends' pleas to leave as she fortified her home with locks, bars, alarms and dogs. Then, a week before Christmas, someone torched the house and destroyed almost everything she owned. . . .

Ms. Barham befriended a local policeman, who would drive by at night to check on her. But he was soon reassigned to another precinct. After that, if Ms. Barham felt unsafe returning home late at night, she would drive to a major road, flag down a squad car and ask for an escort home.

There was [a theft] at the house even before she moved in, she recalls, in which a contractor she hired lost his tools. "I was just thinking, 'Oh, it's a vacant house, and somebody broke in and stole some tools,'" she recalls. "'That happens sometimes.'" . . .

In February, Ms. Barham returned to the house on Atkinson along with her boyfriend. She plucked a few items from the ashes. Down in the basement, the copper pipes had been stripped by scavengers. On an earlier visit, she'd retrieved her late mother's Bible.

A neighbor who confessed to some of the burglaries and the arson originally reached a plea deal for 90 days in jail until the neighbor protested and the judge threw out the deal. "[A]bout a quarter of the 225 homes in this historic district surrounding Ms. Barham's old house are boarded up."

Her attempt to be a landlord failed:

During the five years she owned it, the two-family flat was rented for less than 12 months, and the dual mortgage payments strained her budget. After being laid off by Abbott in 2007, just as the mortgage crisis began to hit Detroit, she let the rental property go into foreclosure.

She stayed with a friend after the fire who had similar Detroit experiences:

Ms. Robinson, 40, born and raised in Detroit, had urged Ms. Barham to leave the city. Ms. Robinson has watched in recent years as her father's home was burglarized twice, his car was repeatedly stolen and he was held up at gunpoint at his Detroit home.

According to another one of her friends, "Ms. Barham was the last person in his circle of about 40 friends to leave Detroit."

This kind of development undermines the city's effort to stop the city's decline.

Further erosion of Detroit's middle-class could cripple a turnaround plan by government and private-sector leaders here. It calls for "right-sizing" the city's government and geography to fit a shrunken population. But it hinges on the city shoring up stable neighborhoods and retaining middle-class taxpayers, while converting blighted areas for such uses as parks or farms.

In short, the city may be nowhere near hitting bottom. Yet, there are no obvious answers in sight. The story of Ms. Barham, as told by the Wall Street Journal, is a story of someone who plays by the rules only to see all of her legitimate expectations defeated.

It is absolutely stunning that Detroit has been able to maintain its dytopic situation for so many decades, steadily declining.

Yet, Detroit is still not a small city and is not entirely abandoned. As of 2010, Detroit proper will still have more residents than Denver, Indianapolis, San Francisco, Columbus, Austin, Baltimore, Memphis, Milwaukee, Boston, Washington D.C., Nashville, Seattle, Portland (Oregon), Tuscon, New Orleans, Las Vegas, Cleveland, Atlanta, Miami or Colorado Springs. It has more people than the entire states of Alaska, North Dakota, South Dakota, Vermont or Wyoming.

Detroit has a population density 90% greater than Denver, despite having a similar land area (Denver has 153.3 square miles, Detroit has 138.7 square miles). Detroit is home to about one in twelve residents of Michigan, and its metro area is still the 8th largest in the nation.

Detroit remains the most populous city in Michigan. And, Michigan is ill equipped to provide much assistance. It is also home to the nation's long term murder capitol, Saginaw, to equally declining Flint.

Detroit is also deeply a story of Northern racial segregation. Just over half of the black population of the Detroit metropolitan area lives in the city proper which is more than 82% black; about 3% of the non-black population of the Detroit metropolitian area lives there. The only cities in the United State with more black residents than Detroit are New York City, Chicago and perhaps after the next census, Philadelphia. Detroit is by far the largest majority black city in the United States, with Baltimore being the runner up. The only major city in the nation with a larger percentage of black residents is nearby Gary, Indiana, which is suffering a similar Rust Belt decline.

Detroit Clears the Decks

In most central cities, the goal is "infill development." Detroit's goals, however, are a little different. You might call it "empty out development." The goal is to remove dangerous havens for drug dealers, and has strong community support. Federal stimulus money is being used to help fund the project.

[Detroit] officials announced plans to demolish about 450 of the most dangerous structures within the next two months. . . . Detroit's mayor wants to tear down 10,000 vacant houses over the next four years and, with them, evict the illegal drug and weapons operations that often move in after residents move out.

[Many of the houses are] dilapidated structures along a street dotted with vacant, weedy lots. . . . There are about 33,000 vacant houses spread across Detroit, while another 50,000 homes are in foreclosure, Mayor Dave Bing has said. . . . About 660 have been torn down since January, compared to 860 that were demolished in all of 2009. The 450 houses targeted by Wayne County are among 3,000 on Bing's demolition list this year.

Detroit religious leaders were asked to compile a list of abandoned houses near their churches. . . . Vacant houses have been a nuisance to communities and police for years in Detroit[.] . . . The number of abandoned and foreclosed homes has risen as Detroit's population plummeted. The 139-square-mile city was built for two million people, but could dip below 800,000 when 2010 Census numbers are collected.

Denver's urban planners have be struggling with ways to consolidate its reduced population. In a city like Denver, infill development is economically and environmentally attractive because it uses existing infrastructure to serve more people. In a city like Detroit, the cost of maintaining infrastructure built for a much greater population has created a burden, and narrowing the city's developed footprint is one way that the city would like to provide urban services to its residents at a lower cost.

Detroit's task isn't one that they usually teach urban planners, where the focus in the literature is overwhelmingly on how to manage growth, rather than on how to gracefully downsiize.

Detroit Still Downsizing

Mayor Dave Bing is proposing to abandon large swaths of the city, move the few people remaining to more functional neighborhoods, tear down the buildings left behind and let what's left become forests, pastures and farmland.
The consolidation, aside from eliminating square miles of eyesores, would cut the cost of services like police, fire, snow removal, water and sewage.

Already people are said to hunt pheasants in abandoned neighborhoods, and Detroit-grown produce is sold in farmers markets. The markets are important because not one national grocery chain has a store in the city. Soon, if the city wants to have food, it may have to grow its own. . . .

Between 1970 and 2000, 161,000 buildings were demolished. There is estimated to be 40 square miles of vacant property, with 33,500 empty houses and 91,000 vacant lots.

From here.

Detroit has a city budget deficit of about $350 per person, an average house value of under $80,000, below average incomes and lots of resiidents who live the city to shop, all making it very hard to bridge the tax gap.

Greater Denver, meanwhile is having more success attracting grocery stores. A California chain is snapping up half a dozen former Albertson's sites in Colorado from Longmont to the South suburbs and Sunflower, a small natural foods grocer, is looking into a new grocery store in North Denver which lacks them.

A former Cub foods location in Glendale, Colorado (which is surrounded entirely by Denver) is still a big vacant hole in that urban village.

Denver Housing Market Barely Busted

Denver's real estate prices have fallen less after the housing bubble collapse than almost any other major city in the United States. It is down 9.1% from its peak through June 2009 (only Dallas, down 4.9%, has done better).

By comparison, Las Vegas is down 55.2%, Phoenix is down 53.5%, Miami is down 47.4%, Detroit is down 45.3%, San Francisco is down 41.7%, San Diego is down 40.7%, Tampa is down 40.6%, and Los Angeles is down 40.5%.

Abandoned Cities

Forbes has ranked abandoned cities by residential vacancy rates measured by a composite of rental and homeowner owned homes in the 75 largest metropolitan areas as of the fourth-quarter of 2008 per the Census Bureau.

The national rental vacancy rate now stands at 10.1%, up from 9.6% a year ago; homeowner vacancy has edged up from 2.8% to 2.9%.

1. Las Vegas NV 16% for rentals and 4.7% for homes
2. Detroit, MI 19.9% for rentals and 4% for homes
3. Atlanta, GA
4. Greensboro, N.C.
5. Dayton, OH

Richmond, VA 23.7% for rentals
Orlando, FL 7.4% for homes

Detroit's population swelled from 285,000 in 1900 to 990,000 in 1920, reaching a peak of 1.8 million in 1950. But starting in the 1960s, Detroit began a precipitous decline. Detroit's population is now 900,000--half what it was in the middle of the century--and many of its neighborhoods languish in varying states of decay.

On a pedantic note, a weighted average of rental vacancies and home vacancies, based upon the total number of units in each category in each metropolitan area, would have been a more meaningful index of whether a city is abandoned (i.e. what percentage of its housing stock is abandoned) than the crude averaging that Forbes did to combine the indexes.

Percentage decline from peak population would have been a good parallel statistic; where that percentage is higher than the vacancy rate, there has been destroyed housing stock; where it is lower there has been overbuilding in response to growth that didn't happen.

Boston and New York are among the lone bright spots, while Honolulu is the nation's best with a vacancy rate of 5.8% for homes and a scant 0.5% for rentals.

Honolulu is exceptional, with a home vacancy rate much higher than Detroit or Las Vegas, but a very low rental vacancy rate, because much of its housing consists of second homes owned by absentee owners. This also leads Honolulu to be a high end outlier in terms of the relationship between per capita income and housing prices. The high incomes that drive the Honolulu housing market often aren't local.

Boston and New York are more interesting examples. Both are financial centers whose marquee high end employers were hit hard by the financial crisis, and the New York City commercial real estate market, at least, has tanked.

One important factor in New York City is that rent control means that many properties formally classified as rentals have many of the incidents of ownership, such as a disconnect between cost of ownership and the market value of the property. In other words, we would expect rent controlled apartments to behave statistically like owned housing rather typical rentals, with the associated much lower vacancy rates. There are rent controlled properties in Boston as well, IIRC, but they aren't as influential for the market as a whole, because there aren't as many of them.

Both New York City and Boston have also had quite stable populations during periods when the South and West have seen rapid growth, and the Rust Belt has experienced sustained decline.

How to Respond?

In the Rust Belt, the problem is clear. The decline is permanent and will probably get worse before it gets better. The issue is how to downside built areas and government infrastructure to fit current needs, so that residents are stuck with the high taxes necessary to support an oversized infrastructure, which in turn drives marginal residents away to greener pastures elsewhere continuing the vicious circle of economic and population decline. Achieving stability would be a virtue, and is difficult in cities that either never learned, or long ago forgot, how to manage without the manufacturing industry as a base.

In places where the housing boom got ahead of growing demand, producing a housing bubble that popped, the problem is different.

In Colorado, Grand Junction provides a good model. It built up public and private urban capacity in the oil shale boom, while remaining behind the curve in dealing with it. When the oil shale bust hit in 1983, destroying real estate values and demand for private amenities, the regional center stopped building and went dormant. Grand Junction primarily returned to its role as a hub of the Western Slope baseline rural economy, a role it was familiar with filling because the energy boom has not lasted very long.

But, when rising oil prices turned Grand Junction into an energy industry hub two decades later, the public and private urban infrastructure it needed was still in place ready to go. In the intervening two decades, Grand Junction used its abundant supply of cheap housing, commercial space, and industrial space, its depressed labor market, and its unstressed municipal resources let by people hungry for economic development to attract a more diversified economic base led by technology companies and ecotourism.

The peak of the current energy boom in Grand Junction is probably already past, although there hasn't been the same kind of dramatic bust that there was in 1983. But, two decades of economic diversification using its excess capacity, and the likelihood that some of the energy industry growth this time around will be sustained, as looming Peak Oil makes taking a long view towards high cost hydrocarbon resources in Western Colorado look like a good plan, still leave Grand Junction on better footing.

Some epicenters of the housing bust haven't had time to develop as much of an alternative economic base, but a strategy of hibernation until the next boom, rather than permanent downsizing, may still make sense in many of these places.

Vacancies and Homelessness

The raw numbers also make an point that remains evergreen. Homelessness is not primarily a function of insufficient housing stock. There are more than enough vacant rentals and homes to house everyone.

As many as 3.5 million people experience homelessness in a given year (1% of the entire U.S. population or 10% of its poor), and about 842,000 people in any given week. Most were homeless temporarily. The chronically homeless population (those with repeated episodes or who have been homeless for long periods) . . . [was] 123,833 in 2007.

From here.

Those who are homeless briefly look like a snapshot of the working class in America generally. The housing crisis, which has produced a record number of foreclosures, has probably had the effect of turning the demographics of the temporarily homeless in a middle class direction. Mostly, these individuals and families are suffering primarily from a shortage of money, and involve householders were are not the strongest contenders in the local job market and a bit short on hope and on the bureaucratic functionality needed to get help and respond to evictions and foreclosures and debt collectors fruitfully.

Government programs like Section 8 rent assistance can used this vacant stock to meet the needs of the "temporarily homeless." But, it often takes a long time to get into the program, many landlords are reluctant to participate for fear of an increased chance of getting a problem tenant who damages the property, annoys neighbors or is too demanding of the landlord. The program can also make eviction more difficult, forcing the landlord to bear some of the program tenant's high default risk. And, Section 8 participation can create a disincentive to find employment that disqualifies a family from the problem. Section 8 also requires a level of bureaucratic competence that the temporarily homeless frequently lack.

A better solution for the temporary homeless needs to cut red tape, develop better incentives, and get people back on their feet and into the secure mainstream of people who have homes and jobs, so that their brief period of homelessness doesn't produce permanent scars in their lives, in many cases the lives of children. Sometimes, where a householder has a job, the problem is as simple as providing a security deposit and first month's rent, to allow the family to get over the hurdle of getting into a conventional, often cheaper than temporary, rental situation. Sometimes more is needed. But, there needs to be intervention that is intermediate between Section 8 and emergency shelters.

I've also long advocated the idea of a tax credit to fully pay for a month or two of storage for the personal property of people who are evicted. Moving that property into a storage unit reduces the harm associated with an eviction and is good for the neighborhood by reducing a sense of disorder and starting a plunder rush. Those who do have personal property that is worth something can keep it while spending far less than the cost of actually finding themselves a new home.

This would take a couple hundred dollars more per eviction than the norm of dumping personal property in the front yard, but would reap huge benefits in terms of retained dignity and order, at a modest cost that the government could afford to subsidize as a form of homelessness transition funding.

The chronically homeless, in contrast, which is another name for vagrant, typically have multiple serious personal problems -- although "housing first" prioritization of those problems has proven to be one of the more cost effective ways to deal with these problems. This highly visible population is much smaller (estimate for Denver are 300-450 chronically homeless individuals). A chronically homeless individual frequently has issues with mental health and substance abuse, often have a criminal record -- at least of minor offenses associated with homelessness itself, and is often resistant to even active efforts from social workers to help - in part out of a sense of autonomy, and in part out of a desire not to have to follow rules that are tough on drinking, drug use or program involvement.

In addition to being cheaper on a case by case basis, and relieving the deep anxiety about societal inequality that the general population feels when confronted by the vagrant population, the chronically homeless are also classic "broken windows" -- visible signs of a community that doesn't care which promotes greater and more serious disorder. So devoting considerable resources towards helping this population, as Mayor Hickenlooper has done in Denver, is good policy.

Detroit Schools Reorganize

Forty schools in Detroit that employ about 2600 people who will have to reapply if they want to keep their jobs, are reorganizing during the district's current receivership. Limitations on the formation of new charter schools in the district have also been lifted as a result of the City's declining population.

GM and Chrysler Move On, Rust Belt Doesn't

The operating successor companies for both GM and Chrysler are now operating outside of bankruptcy, while creditors of the legacy companies fight over the pittance of assets that remain. Both companies have substantial union retiree trust and government ownership. Fiat is a major private shareholder of Chrysler. GM private bond holders have taken a 10% stake in the new company. Ford is now the only investor owned, publicly held American automobile manufacturer left.

Both GM and Chrysler are dramatically restructuring their businesses. Non-core businesses like financing arms and recently acquired brands have been jettisoned or are in the process of being jettisoned. Both companies are making dramatic cuts to their dealership networks. GM is selling its Saturn and Opel brands, and discontinuing the Pontiac brand and laying off about a third of its employees, leaving a new company which is only a shadow of its former self.

The Old And New Rust Belt

This means another 20,000 or so lay offs at GM, on top of additional layoffs at Chrysler and automobile industry suppliers and dealerships, with the brunt of the burden concentrated in the Rust Belt, the former hub of American industrial activity, more or less, from Pittsburg to Buffalo and then along the Great Lakes to Milwaukee. Interestingly, many of the workers were lured to the Rust Belt from the South in one of the greatest waves of internal migration ever seen in the United States, at the height of the American industrial era.

The manufacturing industry has been in decline in the United States for about four decades. Manufacturing industry growth, where it has happened at all (almost entirely outside the Big Three American auto makers, often in relatively small businesses), has been centered in the South, in a band from the Carolinas to Mississippi. These states are, accurately, perceived by management as less prone to unionization and environmental activism. the wage scales are lower there, the legacy of past industrial pollution can be avoided, and companies can quickly secure the political privileges that come with becoming dominant employers in the region.

Left In Their Wake

The impact of the automobile industry's most recent stumble have focused on its Detroit hub. But, cities across the Rust Belt have suffered. According to the UAW regional director in Flint, Michigan:

In the late '70s early '80s, there was 80,000 GM workers. Currently, we've got 6,100. That doesn't count the job loss from the supplier-base side[.]

These job losses so far have had a dramatic impact on the City of Flint (emphasis added):

At its peak, Flint was home to General Motors, with a growing population of some 200,000 people . . . . Today, the population is about half what it once was . . . . More than one-third of the homes in Flint have been abandoned. . . . Last month, Flint's acting mayor, Michael Brown, stirred controversy when he spoke publicly about "shutting down quadrants of the city." . . .

Alan Mallach, an urban planner with the Brookings Institution, says the debate in Flint is similar to debates in a number of other Rust Belt cities. . . . "There are certainly thousands of properties that need to be demolished — they're not fit for human habitation. . . . But it doesn't follow that the other residents on the block want to move to some other place. I don't think any city has figured out how to do this yet."

The county treasurer responsible for Flint uses an analogy that I've used before on this blog, Flint "looks like the Lower 9th Ward in New Orleans — a sort of a slow-motion [Hurricane] Katrina."

In Flint, as in Detroit, community gardens are being eyed as one of the most attractive ways to fill land that was once full of abandoned buildings.

In Milwaukee, real estate conditions are so bad in some cases, that lenders are choosing not to foreclose on mortgages that are in default, because the homes that form collateral for their loans have negative value net of liens for property taxes and condemnation issues for the abandoned properties.

Ideas to replace automobile industry jobs abound, but none have really panned out.

Traditional free market economic theory isn't surprised by the demise of the American automobile industry, which production efficiency, off shoring spured by lower foreign labor prices and cheap shipping, and a variety of other factors explain. But, free market economic theory claims that new investment should rush in to make use of cheap land and legions of unemployed people, something that hasn't been happening in real life.

Detroit Law Firm Layoffs And Other Detroit Updates

Law is a service industry. When those whom they serve do well, lawyers do well. When those whom they serve do poorly, the lawyers are hurt along with their clients. Thus, just as New York City transaction based firms are laying off people in the wake of financial industry troubles (although Goldman Sachs is paying record bonuses), Detroit's two biggest law firms are laying off people in sync with the automobile industry around them, which is doing the same (and has two of the big three firms, plus the largest supplier in bankruptcy).

In related news, Ford is talking to a number of parties about selling the Volvo brand, which it owns. A Chinese company is among the bidders although Ford denies that there is a deal in place.

Also, a payroll audit at the Detroit Public Schools, which is currently under state receivership, turned up 257 individuals out of 13,880 workers on its payroll who are not on approved leave and may be "ghost employees" who aren't actually showing up to work at the school district.

CORRECTION: The operational part of Chrysler left bankruptcy two weeks ago and is already undergoing major shakeups under the supervision of its new owners from Fiat:

[Sergio] Marchionne, also the CEO of Italy's Fiat, has compressed eight layers of management into five. . . . There are senior or executive vice presidents, rather than vice presidents, followed by directors and senior managers. Every other salaried employee is simply considered a Level 5.

The product lineup will change too:

[T]he upscale Alfa Romeo brand to come to North America to compete against established sellers of luxury European cars. Some of those Alfa models are to be built here, too, and possibly exported to Europe. Aside from the tiny Fiat 500, which will be assembled in Toluca, Mexico, and introduced in mid-2011, new models with a European flavor will be branded as Alfa Romeos. . . .

Fiat's 500 minicar will be produced in Toluca, Mexico, and sold through Chrysler dealerships as a 500, much as BMW maintained its Mini as a separate brand. . . .

An Alfa version -- called the GTX -- of the 2011 Jeep Grand Cherokee and Dodge Durango will be produced at the Jefferson Avenue assembly plant. There is a strong likelihood Fiat will export some of those SUVs to Europe. . . .

[As a midsized SUV the] most likely choice appears to be a rear-wheel drive car that will share the basic dimensions of the 2011 Chrysler 300 and Dodge Charger. Fiat has looked at designing an Alfa Romeo 169 off the same structure, but sources inside the company said that decision has not been made. . . .

Fiat's C-EVO platform will be the base for the next Jeep Liberty, a small crossover that replaces the Dodge Caliber and a third model to be sold as the Alfa Romeo Milano . . . . In a daring idea that invites second-guessing, Chrysler and Fiat also are looking at putting a Jeep badge on the small, boxy Fiat Panda, now assembled through a joint venture with Ford in Poland. The Panda, if it comes to market, would probably be built in Toluca along with the 500.

Detroit Least Healthy Big City In Nation

A new ranking of the economic health of the nation's hundred largest cities puts Denver (39) and Colorado Springs (41) in the middle, and Detroit at the very bottom in spot 100. "The study, out today, looks at changes in employment growth, the unemployment rate, gross metropolitan product and housing prices through the first quarter of 2009."

Also near the bottom are Cape Coral, Florida (99); Stockton, California (98); and Tampa, Florida (97). At the top are San Antonia, Texas (1); Oklahoma City, Oklahoma (2); Houston, Texas (3); and Austin, Texas (4).

After Detroit, "Of the next nine hardest-hit areas, six were in Florida, two in California and one in Ohio. Of the top 10-performing metro economies, five were in Texas, led by No. 1 San Antonio; two were in Oklahoma." California, Florida, Las Vegas and rust belt cities make up all but one of the bottom twenty cities in economic health.

The oil and gas industry appears to be driving many of the winners; manufacturing and the housing bust distinguish many of the losers.

Median Detroit House Is $6000

The median price of a house in May, 2009 in Detroit is $6,000, about half the price of a new entry level car from a Big Three auto maker. Clearly, the spectacle of two of the three of the Big Three automobile makers has not been good for real estate in the Motor City.

For the Detroit metro area as a whole, the median price for homes sold in May was $50,000, "a 44.3% drop from $89,700 in May 2008. Foreclosures continue to drag down prices. In May, foreclosure sales accounted for 60% of all homes sold."

Big Cuts At Detroit Schools

Many Detroit Schools are being closed by a receiver managing its financial affairs.

The state-appointed official overseeing the finances of Detroit's impoverished school district said Thursday that to close a $303 million budget deficit, he planned to shut more than a quarter of its 194 schools and eliminate the jobs of more than 10 percent of its teachers.

The plan calls for 23 schools to be permanently shut over the summer, leaving more than 7,500 students to be transferred to other schools. . . . An additional 30 to 40 schools will close next year . . . and as many as 600 teachers will be laid off this year.

By comparison, the Rocky Mountain News had a $14 million a year deficit, the Boston Globe is losing about $7 million a month, and GM is losing billions of dollars a year.

Lots of open questions remain after this brief report. Does Detroit have less to spend per student than other districts in Michigan? Are the closed schools doing a poor job, or just expensive and underfilled? What criteria are being used to close schools? What have recent enrollment trends looked like? What happens if Detroits collapse gets yet worse? When was the receiver appointed and why?

Ghost Neighborhoods In The Rust Belt

Unbossed has an essay full of details about the depopulated neighborhoods that fill the rust belt and their impact and economic meaning.

When I was in Buffalo, one issue seriously considered was simply disincorporating the city and returning it to unincorporated county jurisdiction. It didn't happen, but the sense of utter defeat was palpable.

We have relatively well worn paths to downsizing businesses. We have far fewer precedents for dealing with governments that are in a state of irreversible, long term population decline. It isn't that our country has no ghost towns. Brief descriptions of the ghost towns of Michigan alone fill a couple of volumes, and Colorado has some. But, it is one thing for a hamlet that barely made it into conscious recognition to give out, and it is another to see the collapse of mid-sized and large American cities across a whole swath of the country depopulate at the same time.

The essay authors despair at efforts to downsize cities by bulldozing development and ending services to whole neighborhoods, but it is hard to see a responsible alternative.

Detroit Abandoned

The story of Detroit's decline is told in pictures.

Detroit has immense excess supplies of buildings and furnishings. But, the owners of these assets have abandoned them, because they no longer have economic value even as great as their maintenance costs. The land isn't even worth enough to scrape clean of abandoned buildings on it either (and while toxic waste cleanup risks are present in a small minority of buildings, it is minimal economic value and not environmental laws that explain why the other now useless buildings aren't at least scraped).

There are limits to the value of land and physical capital. Economic prosperity ultimately comes down to what people do in a place. Abundant natural resources and supplies of physical capital are far down the list of things important to economic development and prosperity. Many places awash with natural resources are poor. Many places with almost no natural resources are rich.