In 1896, Henry Ford built his first car. In 1903, he would go on to establish Ford Motor Company. Followed by Packard, Dodge and Chrysler, Detroit would soon become known as Motor City or the automotive capital of the world. Throughout the beginning of the 20th century, Detroit became a capital for industry and culture. It was a vibrant city full of music and art, opportunity and optimism.
After World War II, Detroit became a destination for many returning soldiers and immigrants. The booming industries meant an abundance of jobs. The population grew rapidly up until 1950, when it hit its peak of 1.8 million residents. According to the 2010 census, the population has since fallen by over 60%. There are now just over 700,000 residents remaining in Detroit. What used to be a city full of American dreams has now become the foremost example of urban decline.
Living the American Dream
Many Europeans immigrated to the city from Ireland in the 1940s to find their American dream. A young girl called Jane Murphy decided to follow her American dream and got on a boat to the US. Jane is the youngest of 11 siblings and she was the first of her family to make the journey by boat to America. Soon her sister and brother would follow her to Detroit in search of opportunity. There Jane met a returning war veteran who worked for General Electric. They moved to the Redford Township, a suburban neighborhood not far from downtown. With money from the Service Man Readjustment Act passed in 1944, they were able to buy a home and start a family in the vibrant city.
Redford is a perfect example of the changes seen in Detroit. However, the house they lived in for 60 years had become dangerous. A neighborhood that was once a community of families had declined since then. Most families had left and eventually Jane, one of the few remaining, finally moved to a safer area farther from downtown. It’s hard not to get emotional seeing such rapid decline in the city.
What caused the massive decline in Detroit? The once vibrant city is now all but empty. Tens of thousands of buildings remain empty and nearly half of the residents fail to pay their taxes. This economic disparity has caused the city to file for bankruptcy stating 18.5 billion USD in debt. Detroit’s decline can’t be attributed to just one factor. Many factors drew the population away from the city.
The automotive industry, initially the heart of the city became decentralized. Plants were built away from the center of the city, which decentralized the population. From 1945 to 1957, the big three automotive companies built 25 factories near Detroit, but not one of them was in the city itself. In the 1950s, Detroit lost nearly 150,000 jobs to the suburbs. The amount of available jobs continued to decrease due to automation. The Ford River Rouge plant, which once employed 90,000 workers in 1930, only required 6,000 workers to operate by the year 1990.
Two riots also attributed to the decline of Detroit. Firstly the riot (occurred in 1943) sparked over racial tension. Detroit, like most cities in pre-civil rights America, struggled with racial discrimination. The riots lasted for 3 days and resulted in 34 deaths. The summer of 1967 saw the largest riots in Detroit’s history. Lasting five days, 33 people died and another 467 were injured. The property damage is estimated to be over $40 million. Thousands of stores were ruined and hundreds of buildings were burnt so badly that there was no alternative but to demolish them. Many businesses either closed or relocated. Over the next few decades, hundreds of thousands would leave Detroit for safer neighborhoods. The area became increasingly destitute and unemployment rocketed.
Detroit is unlike any other major city in the USA, as it has reached a new low. Detroit was hit harder than most cities during the 2008 economic crisis. Home prices in Detroit plummeted and unemployment (which was already high) continued to grow. In some areas of Detroit, the price per square foot is only $16. Homes can be purchased for next to nothing. Some investors speculate that the city will recover and are buying up large areas of the downtown and surrounding areas. Since the purchase price is so low, they are willing to take the high risk of buying homes in Detroit. For landlords that are able to find tenants, there is a large profit potential.
The rental yield in Detroit is 30% on average, which is the highest in the USA. Dan Gilbert (owner of Quicken Loans) is a perfect example of making good investments in Detroit. He has purchased over 15 buildings in downtown Detroit and now holds over 2.6 million square feet of commercial space. The future of Detroit is not certain, but most agree that things can only get better from here.
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