New home construction is pricy, but still a priority
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New homes pictured last year in East Village. Photo: Annalise Frank/Axios
It costs about $150,000 more to build a new home in Detroit than it does to build a new multifamily unit, per a recent analysis from the city's housing department.
Why it matters: New home construction is rare but increasingly desirable as Detroit navigates complex housing challenges around needs for affordability, as well as amenities for residents outside downtown.
Driving the news: City council requested the analysis as leaders seek housing solutions. The Housing and Revitalization Department's report seeks to help the city determine where and how to invest its resources to further those affordability goals.
- Though the department says it should continue prioritizing financing multifamily affordable housing for low-income residents, it also says it's worthwhile to work to lower the cost of new single-family housing in a city with a lot of vacant land and historically high homeownership.
Stunning stat: A new home in Detroit with three bedrooms, two baths and a garage would cost nearly $450,000 to construct, based on the data the department collected. Of that price tag, the direct construction costs are estimated at $336,000.
- For comparison, the March report found the average multifamily cost per unit is $304,000.
- The report acknowledges costs vary greatly depending on land, infrastructure and environmental issues.
Yes, but: In 2024, Detroit's homes sold for an average of $87,500, per Realcomp — roughly $360,000 less than the price of the example of a new home.
Between the lines: The department used data from local developments as examples, as well as plans from projects in the pipeline, estimates and housing finance tools.
Flashback: Detroit allocated a lot of federal affordable housing funding to single-family homes from 2000 to 2008 developed by local community development groups. The mortgage crisis put an end to those efforts.
- Economic challenges from the recession remained, with low home values and high vacancy. The focus since the bankruptcy has been on multi-unit affordable housing, with more publicly funded financial tools available for those types of homes.
By the numbers: Detroit issued 34 permits for new single-family home construction last year, according to the city. It's a small figure, but up from 18 in 2023, seven in 2022 and nine in 2021.
What they're saying: Sami Abdallah, a Detroit real estate investor and owner of Re/Max City Centre in Southfield, tells Axios the city is seeing individual successes in higher-end new home building, like Greatwater Homes in East Village.
- "But we're not seeing any mass movement toward increasing supply. ... We're not seeing any affordable [new homes]. A starter home, the numbers would never make sense for that," he says.
The bottom line: The city needs to make public resources available for both multifamily and single-family houses to satisfy the city's diverse needs around affordability, mobility, yard access, amenities and wealth creation, the report says.