Reviving a mortgage market through financial inclusion? Experimental housing governance and alternative home loan programmes in Detroit, Michigan

Abstract

Since the 2008 financial crisis, the City of Detroit has faced significant housing challenges: the conventional mortgage market in the city has collapsed; numerous residents are precariously housed; and urban ‘blight’ and property abandonment are widespread. This paper offers an empirical focus on one experimental approach to governing these problems: the roll-out of new forms of housing-related loans to low- and moderate-income (LMI) Detroit residents. Under the rubric of financial inclusion, private and public actors have promoted these loan programmes as a way to both improve the housing outcomes of financially excluded residents and reboot the city’s mortgage market. The paper critically analyses these claims through a political economy lens, asking how, why and with what impacts housing-related financial inclusion programmes have been developed in post-crisis Detroit. The paper argues: (1) that these financial inclusion efforts are the products of an existing orientation toward market-based governance mechanisms and have grown out of a broader political project of property market revival; and (2) that in spite of their rhetorical commitments to improving the housing outcomes of LMI residents, many of the new loan programmes are ill-equipped to deliver on these promises in practice, prioritising market revitalisation over the needs of borrowers.

Keywords:

• Financial inclusion
• alternative housing finance
• mortgage markets
• experimental housing governance

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 In the United States, low- and moderate-income refers to a household whose income does not exceed 115% of the median income for their area (Loomis, 2018). In the more specific arena of housing finance, low-income is generally defined as a household whose income is 80% of the median income for the area (US Department of Housing & Urban Development, 2016).

2 It is also important to note that at the same time that this wave of racialised mortgage foreclosures was sweeping through Detroit, a secondary tax foreclosure crisis was also developing in the city (Dewar et al., 2015). Between 2008 and 2016, Wayne County repossessed close to 100,000 homes due to tax delinquency (Akers & Seymour, 2018).

3 The Opportunity Resource Fund is a non-profit, Michigan-based CFDI that operates as a revolving loan fund and impact investor. The Neighborhood Assistance Corporation of American is a non-profit community advocacy housing organisation.

4 While it is too early to make definitive judgements on the way these loan programmes are affecting property values, mortgage market activity, or housing insecurity, there are some preliminary indicators that they have contributed to a rise in mortgage issuances. In early 2019, the Detroit News reported that approximately 1,300 mortgages were issued in Detroit in 2018, up from 490 in 2014 (Noble, 2019).