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AGabor

May 22 2024

How a Detroit Neighborhood Is Transforming Its Blighted Land

Bailey Park was built on former vacant lots purchased from the Detroit Land Bank. (Photo by Melani Bonilla)

By Alexandra Adelina Nita

When Katrina Watkins thinks back to the start of her community organizing in Detroit’s McDougall-Hunt neighborhood, she remembers a pivotal conversation she had with two college students.

James Scott Douglas and Joe Gruber came from the University of Detroit Mercy in 2014 to interview Willie Watkins, Katrina’s father. A grandchild of the Great Migration, the elder Watkins had “lived in Black Bottom, partied in Paradise Valley,” two historically Black neighborhoods in southeast Detroit. The city demolished them and displaced their residents in the late 1950s and early 1960s to build the I-375 freeway.

Detroit had changed in other ways that would also come to influence Watkins’s evolution as a community organizer. Automobile manufacturers, which had dominated Detroit’s economy for close to a century, were devastated by foreign competition, and came near to declaring bankruptcy; beginning in 2000, Detroit lost jobs every year for 10 years straight. As a result, automakers began shifting their operations to the less-unionized South, slashing worker pay and benefits. (Last year’s United Auto Workers strike was staged, in part, to undo the most recent large-scale concessions by the union during the Great Recession of 2008.) Finally, financial mismanagement led the city to declare the largest-ever municipal bankruptcy in U.S. history in 2013. 

By the time the students arrived on Watkins’s doorstep, Detroit’s population was in free fall and would reach about 600,000 in 2023, down from its historic height of over 1.8 million in 1950. As residents abandoned the city, neighborhoods like McDougall-Hunt suffered the consequences. During the decade ending in 2010, the neighborhood lost 43 percent of its population, nearly three-times the city’s average population decline during that period.

Abandoned houses and vacant lots encircled the properties where Watkins and her sister live, some becoming spaces for drug use and prostitution. Watkins and her neighbors wanted to restore the quiet and the sense of safety they felt living in the neighborhood, but realized they couldn’t rely on the city.

Katrina Watkins is the founder of the nonprofit Bailey Park Neighborhood Development Corporation. (Photo by Melani Bonilla)

When Douglas and Gruber finished talking to Watkins’ father, they asked Katrina Watkins what she wanted to see for her neighborhood. “I told them, ‘I just want to clean up my community and if I could do anything, it would be to clear the lots across the street from my home,’” which she said had become overgrown and unsightly.

The students helped Watkins and her neighbors do just that. As part of their master’s project in community development, Douglas and Gruber collaborated with Watkins to help her connect with city agencies like the Detroit Land Bank and state agencies like the Michigan Department of Transportation to clear 16 lots of vacant land.

But Watkins, accustomed to wearing many hats — she is a former social worker and current part-time accountant for home-based businesses — had bigger plans. As the founder of the nonprofit Bailey Park Neighborhood Development Corporation, she would oversee projects that included the reopening of the Calcara Park’s baseball diamond in 2017; the construction of Bailey Park (with the later addition of playground equipment and a grounds crew); and the creation of a mural by artist Ivan Montoya through Detroit’s City Wall Project. The refurbished Franklin Wright Settlements house serves as a community center where, among other things, children attend after-school programs.

In the meantime, Detroit changed yet again. A decade after filing bankruptcy, the city achieved an investment-grade credit rating, and is now working with private real estate developers to build luxury condominiums downtown and with Ford to build campuses for its tech workers.

McDougall-Hunt has the benefit of being located on the periphery of downtown. But the neighborhood, which is 93 percent Black, is also poor, with about 36 percent of its residents making $25,000 to $34,999 a year. The city average income is about $37,761. So far, Detroit’s self-described revitalization has attracted wealthier, largely white transplants to the majority Black city without closing a racial wealth gap formed through decades of previous white flight. 

The city has collaborated with Watkins by allowing her to purchase lots from the land bank, which controls vacant and foreclosed properties and sells them either to developers or directly to residents. Residents can purchase up to ten lots a year from the Land Bank without having to receive authorization from the Detroit City Council. Watkins called the city’s asking price of $1,800 per lot, “very, very reasonable”; Bailey Park has relied, in part, on crowdfunding to purchase lots.

Watkins was clear on what her long-term goal for McDougall-Hunt is: “We would like some commercial [development] and maybe some market rate, but we want mostly affordable.” Watkins said, adding that she is in talks with a nonprofit to buy land.

Katrina Watkins’s house in McDougall-Hunt (Photo by Melani Bonilla)

Building affordable housing in Detroit, however, is a challenge. “Development is expensive, and it either has to charge a lot for rent for purchase or it needs subsidies,” said Tom Goddeeris, the chief operating officer of Detroit Future City, an urban planning think tank that has partnered with the Bailey Park community.

Goddeeris estimates that building a single-family home in Detroit — the city’s most prevalent form of housing — would cost $400,000 for 1,000 square feet. The city’s median home selling price was under $100,000 in 2022 and many of those were in poor condition.

The U.S. Department of Housing and Urban Development determines the affordability of rents by calculating an area’s average median income (AMI), but it lumps together Detroit and its wealthier suburbs, where average incomes run as high as double the city’s average.

“The rents that you can charge in Detroit aren’t exorbitantly high if you looked at it region-wide or even nationwide, but they’re not serving the majority of our population,” said Goddeeris.

Kevin James, a long time resident of McDougall-Hunt, is concerned about gentrification in Detroit. (Photo by Emma Delahanty)

Watkins’s neighbors agree.

“What’s happening in Detroit now is gentrification,” said Kevin Jones, a youth mentor and basketball coach, who is known in the neighborhood by his nickname — Coach Kellog. “They got this new building they just built off the riverfront, probably about five or six thousand dollars a month. So eventually, that’s a form of pushing out the old and welcoming the new,” he said.

While Detroit lacks the jurisdiction to create its own AMI guidelines, its law department proposed possible incentives for affordable development like fee reductions and waivers in 2021. To keep housing affordable for the long-term, it also suggested that the city lobby for Michigan to legalize rent-control laws.

Subsidies for affordable housing are limited, according to Oren Brandvain, a director at the nonprofit Develop Detroit. The organization funds its projects, in part, through federal low-income tax housing credits. But these are scarce. Brandvain said that in Detroit only two-to-three developers a year receive them, which he estimates is enough to build 300 housing units, a fraction of the more than 46,000 needed last year.

“Every year all the developers are forced to compete for the same small pot” of money, he said.

Bailey Park is only one of the many community groups in Detroit attempting to navigate that reality. Detroit Future City’s Goddeeris estimates there are 30 to 40 community based development organizations in Detroit with some paid staff, and many other voluntary community groups. Despite Watkins’s success at transforming vacant land into community spaces, the obstacles her group faces in building affordable housing highlight the scale of the challenges that lie ahead for the rest of Detroit’s far-flung neighborhoods.

Written by AGabor · Categorized: Detroit

May 22 2024

Activist Uses Guerrilla Farming and a Co-Op to Bring Fresh Produce Back

Malik Yakini is the executive director of Detroit Black Community Food Sovereignty Network, a nonprofit organization founded in 2008 to combat food insecurity. (Photo by Melani Bonilla)

By Regina Martinez

In the summer of 2007, Farmer Jack, a Detroit-based supermarket chain, closed its last store in the city. The departure followed decades of de-industrialization, outsourcing and population decline that already had seen other grocery chains abandon the metro area.

That left mainly convenience stores and small grocers, which found it uneconomical to carry a variety of fresh fruits and vegetables. Detroit, 80 percent Black, saw itself with little access to fresh produce and other vital provisions.

In 2006, lifelong Detroiter Malik Yakini began guerrilla farming — the gardening equivalent of squatting — on a small plot of land in Detroit’s Rouge Park. “Instead of us just complaining that there’s not good access to food in Detroit,” said Yakini, he was determined to see if a guerrilla garden could be used “to transform ourselves and transform our conditions.”

Yakini’s garden grew into Detroit’s largest urban farm, D-Town Farm, occupying more than seven acres. Using regenerative methods like large-scale composting, rainwater retention, solar energy and beekeeping, the farm grows more than 30 varieties of fruits, vegetables and herbs each year. D-Town focuses on growing relationships as well. By working with volunteer groups, college students and community members, the farm maintains its hoop houses, which extend the growing season in a city where freezing temperatures can last from November to March, as well as a children’s area and a public event space.

Now, at 68, Yakini is the executive director of Detroit Black Community Food Sovereignty Network (DBCFSN). A nonprofit organization he founded in 2008 to combat food insecurity, DBCFSN is a wide-ranging Black-owned food enterprise aimed at building “self-reliance in Detroit’s Black community.”

DBCFSN opened The Detroit Food Commons, a two-story, 14,000-square-foot project, in May. (Photo by Emma Delahanty)

In May, DBCFSN opened The Detroit Food Commons, a two-story, 31,000-square-foot project in partnership with Develop Detroit Inc., a full-service, non-profit real estate development company. On the first floor, The Detroit People’s Food Co-op is a community owned grocery store that sells fresh produce from D-Town Farms, local vendors and commercial distributors. The second floor includes DBCFSN’s offices, four culinary grade kitchens and a banquet hall.

To finance the co-op, Yakini had to reevaluate his core beliefs. Yakini’s first exposure to gardening was in his grandfather Austin W. Burton Sr.’s backyard garden; Burton had moved from Georgia to Detroit like many other African Americans during the Great Migration. Yakini learned to value the earth and, conversely, to hate capitalism, which he saw as exploitative of the Black community.

However, as the Food Commons start-up costs rose to $22 million, Yakini began to adapt his thinking. “I realize that we live in the United States of America in 2024, and if you want to do some things, you have to have money,” he said. 

Partnering with the non-profit Develop Detroit in 2017 “brought additional contacts and credibility,” Yakini said, which, in turn, attracted investors, donations, grants and loans. That partnership gave Yakini the legitimacy that a “crazy dude with dreadlocks always talking about how much he hates capitalism,” might not otherwise have had, he said.

Still, financing the project took over a decade. 

Indeed, the biggest challenge facing Black entrepreneurs is acquiring capital. “Detroit was one of the most red-lined cities in the country,” said Brandon Reed, director of external affairs at the Michigan Black Business Alliance, an organization devoted to creating profitable Black-owned businesses and closing the racial wealth gap. According to a 2020 report by the Brookings Institution, Black entrepreneurs are denied or given lower bank loans at more than twice the rate of their white peers, and when they do get loans, people of color pay higher interest rates on average than their white counterparts. 

Nadia Nijimbere, owner of Baobab Fare, said one of the reasons she and her husband opened a restaurant was so people could eat healthy food. (Photo by Emma Delahanty)

Racial uprising and white flight

To hear Yakini tell it, the seeds of DBCFSN grew out of turmoil in the 1960s, as he witnessed Detroit beset by police brutality and racial uprisings. “You had many white people fleeing Detroit,” said Yakini. Supermarket chains fled with them to the suburbs. Today, all local Sam’s Clubs are outside of the city. 

For Yakini, establishing DBCFSN was about promoting self-reliance in the metro area. “We shouldn’t put a lot of energy into trying to convince the government to change, but we should put more energy into galvanizing and mobilizing our own energies,” he said. 

In 2009, DBCFSN helped create the Detroit Food Policy Council, an organization committed to advocating for, and educating people about, food sovereignty. Yakini defined food sovereignty as a model that consumers control and benefit from, instead of large corporations. Along with community members like Kami Pothukuchi, an urban planner at Wayne State University, and Ashley Atkinson, co-director of Keep Growing Detroit, Yakini held public listening sessions where community members could voice their concerns and suggest additions to the policy. Today the council produces Food System Reports; its most recent data shows that nearly 70 percent of Detroit are food insecure – meaning they don’t know where their next meal will come from. 

In 2007, a statistic like this might have been attributed to the lack of supermarkets, but today residents are being priced out. “Groceries are expensive,” said Nadia Nijimbere, a Detroit resident and co-owner of the East African restaurant Baobab Fare. “One of the reasons we opened a restaurant is so people can come and eat real food.” 

As gentrification raises property values and attracts new businesses, residents travel outside the metro area to shop. “When Farmer Jack closed, that’s when we all started grocery shopping in the suburbs,” said Jonathan Jenkins, a lifelong Detroiter and executive assistant at Detroit Future City. “And I still do today. It’s cheaper than going downtown.” 

Challenging this reality, the new co-op is located in Metro Detroit’s North End, a majority Black, low-income neighborhood. “We want to ensure that longtime Detroiters have access to everything that we’re doing,” said Yakini.

For the 43 percent of Detroiters who don’t own a car, the Food Commons will be accessible via the Woodward and East Euclid bus station across the street, which extends ten miles down the center of Detroit. For the 33 percent of Detroiters who are using SNAP, the store will accept EBT cards. For local organizations that might not be able to afford an event space, the communal banquet hall will be priced at four different levels. The Food Commons aims to be a hub for all community members.

According to the co-op’s website, any resident of Michigan over 21 can become a “member/owner.” It already boasts 2,300 members. A lifetime membership costs $200, which can be paid in one lump sum or spread out over ten monthly installments and comes with multiple benefits. Members vote in elections for the co-op board of directors, have a say in co-op activities and future projects, approve paying a share of profits to member/owners and receive discounts on select products. By contrast, a membership in Sam’s Club Plus, which is owned by Walmart, costs $110 per year and confers no decision-making power. 

D-Town is Detroit’s largest urban farm, occupying more than seven acres. (Photo by Melani Bonilla)

Located near the city’s rapidly gentrifying downtown, the Food Commons’ challenge is to serve a broad customer base. “There are going to be people looking for five-dollar local kale,” while others will want “a two-dollar loaf of bread,” explained Chris Dilly, the interim general manager. “We’re trying to find a happy medium that gives people an option.” 

Yakini brought Dilly to the operation because of his nearly 30 years of experience in co-op management, chiefly at the highly successful People’s Food Co-op of Kalamazoo. 

“We’re trying to create a sense of place here, tying the grocery store to the community directly,” said Dilly, echoing Yakini’s vision. In addition to produce from D-Town Farms, the co-op will sell fruits and vegetables from mainly local black-owned farms, including Oakland Avenue Farm, Project Green, Nurturing Our Seeds, and Black Farmer Land Fund. By sourcing from local farms, the co-op is aiming to establish a circular economy — for the people and the product. The co-op will also compost and recycle waste products and try to avoid over-purchasing. 

The co-op will take three-to-four years to generate about $6 million in sales — the level it needs to turn a profit, according to Dilly. While inflation has set back the co-op’s profitability projections, Dilly noted that Yakini has created a financial cushion that will allow time for the store to reach profitability. “You have to be a genius like Malik and build in the room for losses,” he said. 

But, by then, Yakini will be long gone. 

On June 1, Yakini will step down as executive director and begin a year-long sabbatical to work on a memoir of his life. 

A year later, he will retire — presenting the ultimate challenge for his food enterprise. “We’re in a baton-passing process here,” said Yakini. Recognizing that succession planning is one of the biggest challenges for any business, DBCFSN hired a consultant to walk the organization through the process. In keeping with Yakini’s penchant for innovation, he is changing DBCFSN’s leadership model from an executive directorship to a co-directorship — one that is only now beginning to catch on among a number of organizations. Yakini will be replaced by Shakara Tyler, DBCFSNs’ fund development director, and Gi’anna Chears, the chief financial officer.

This is a “less patriarchal, more cooperative form,” Yakini said. 

That said, Tyler and Chears will have big shoes to fill if they are to realize Yakini’s vision for food sovereignty.

Written by AGabor · Categorized: Detroit

May 22 2024

Land-Value Taxes Helped Build the Motor City. Can They Revive It Once More?

Detroit’s land bank aims “to return the city’s blighted and vacant properties to productive use,” according to its website. It has sold over 25,000 lots, rehabbed 99 properties and demolished over 15,000 properties that were previously deemed uninhabitable. (Photo by Emma Delahanty)

By Irza Waraich

Eighteen-nineties Detroit had an abundance of land and a shortage of municipal revenue and city services. To wrest control of the land from speculators, who either profited from rent or left land undeveloped, waiting for it to increase in value, then-Mayor Hazen S. Pingree introduced a property tax as the sole funding mechanism for the city’s essential public services.

By adopting a single tax on land, Pingree was following the precepts of the progressive economist Henry George, whose book Progress and Poverty was hailed at the time as “a cure for poverty and inequality,” said Polly M. Cleveland, former adjunct professor of environmental economics at Columbia University.

Pingree’s single tax targeted only land, and neither buildings nor property improvements. At a property tax rate of 2.5 percent, the city was able to fund public services, such as education, health, water, sanitation, parks, welfare and more. Before Pingree’s land taxes, all revenues came from state and local property taxes on both land and structures; there were no income, sales or business taxes.

The tax also helped lower fares on mass transit — in the form of trolley cars — making it more affordable for working-class families.

Pingree’s strategy worked. In response to the land tax, Detroit’s private sector soon teemed with small machine shops, and even lured Henry Ford and the Dodge Brothers to the city.

More than a century later, Detroit is once again flirting with Georgism as a way to spur development and revitalize 19 square miles of vacant land, which comprises close to 14 percent of the city’s 139 square miles. 

Detroit Mayor Mike Duggan has proposed a new form of land-value taxation and is working on a ballot measure he hopes to put before voters in November. The Land-Value Tax Plan aims to increase taxes on vacant land and spur development, while offering tax relief for Detroit homeowners.

Tom Goddeeris (right), chief operating officer of local think tank Detroit Future City, said that the pressure to develop properties in Detroit “isn’t everywhere,” and is only in areas that have “become desirable.” (Photo by Valerie J L Conklin)

Under the proposal, 97 percent of homeowners would receive a 17 percent cut in taxes, according to the City of Detroit, which will be paid for by increasing taxes on abandoned buildings, parking lots, scrap yards and other similar properties.

The idea is to end a system in which, “blight is rewarded, and building is punished,” according to the city.

“Economists in general like land-value taxation based on the theory that you’re encouraging development and you’re discouraging speculative holding of vacant land,” said Rick Mattoon, vice president of regional analysis and engagement and Detroit regional executive for the Federal Reserve Bank of Chicago. “So that part of it makes a lot of sense. The problem is that whether it’s going to be effective really depends on a lot of local conditions.”

Today, there are few examples of land-value taxation in the U.S.  and, among the cities that have tried it, not all have been successful.

The only successful example of a modern land-value tax is in Pittsburgh, which used the system to solve a very different problem. Like many Pennsylvania municipalities, the city has played with multiple versions of land-value tax since 1913. Toward the end of the 20th century, Pittsburgh used the land tax to help meet high downtown commercial and residential-housing demand — the mirror opposite of Detroit; taxes on structures were about twice as high as on land. The land tax was credited with spurring a higher level of construction in Pittsburgh than similar-sized cities in the Midwest that also had low-vacancy rates, but didn’t have a land tax, according to an analysis by the Federal Reserve Bank of Chicago.

The land-value tax is also credited with helping to raise the funds needed for a redevelopment initiative known as Renaissance 2, and the creation of the Pittsburgh Light Rail System, also known as the “T.”

Additionally, Mattoon said the reason why the tax may not prove effective in Detroit is because it’s unclear how much demand there is for land, making it difficult to draw expectations from other experiments.

“It was successful in Pittsburgh, because it was only applied in the downtown area where there was a high demand for property,” Mattoon said. Apply the system across a large city where land values vary significantly, and you could see all kinds of “distortionary effects.”

Mattoon explained that the real idea behind the land-value tax is to get the land to be used for its highest and best purpose, and “that could be a parking lot,” he said, noting that not all locations are suited to the development of large commercial buildings.

Indeed, one of the most controversial aspects of the Detroit land-value tax plan is that it would double taxes on scrap yards and other land the city deems to be under-utilized. In the process, it raises concerns about how the city defines efficient land use.

“In the context of a city that’s been losing population, the development pressure isn’t everywhere,” said Tom Goddeeris, chief operating officer of Detroit Future City, a local think tank. “It’s only certain places that have become desirable.”

The high amount of empty acreage is a byproduct of Detroit’s years-long economic decline, which saw the city’s population shrink to around 630,000, down nearly two-thirds from the peak in the 1950s. Locals question the development potential of scrap yards and other underutilized properties far from downtown.

Across Detroit’s 139 square miles, there is an estimated 19 square miles of vacant land. A new proposal aims to increase taxes on vacant land and offer tax relief for the city’s homeowners, with a primary goal of spurring development. (Photo credit: Valerie JL Conklin).

Indeed, much of Detroit’s vacant and blighted land is owned by the city — land that was abandoned or declared bankrupt — and not by private individuals, and thus would not be subject to any tax. The Detroit Land Bank Authority (DLBA) owns over 70,000 properties, which account for 18 percent of all city property. Of the Land Bank holdings, 62,000 are vacant lots.

The land bank’s mission is “to return the city’s blighted and vacant properties to productive use,” according to its website. It has sold over 25,000 lots, rehabbed 99 properties and demolished over 15,000 properties that are deemed uninhabitable. The “Side Lot Program” also allows homeowners to purchase vacant lots that surround their homes for just $100.

However, the land bank has faced criticism on how it operates, including complex requirements for land rehabilitation and land acquisition.

“There are a lot of good people at the land bank if you deal with them on an individual basis, but institutionally, it’s still a challenging organization to work with,” said Goddeeris.

Critics note that while Detroit publishes a mowing schedule for the vacant land it owns, city-owned properties sometimes contribute to neighborhood blight. Nor is the city always amenable to planting trees on property it hopes to sell, according to Goddeeris.

“If you go down the street, there’s seven or eight burned-down houses and a bunch of junk,” said Ross Winston, the fourth-generation owner of Winston Brothers Inc., a local scrapyard. The property neighboring his business is mostly owned by the city. “The street is so rough you can’t drive your car down it. And then the one lot that we own, we maintain it, we cut the grass, we trim the tree back.”

The city has made progress in revitalizing a few areas, especially downtown and the riverfront — a three-and-a-half-mile walkway overlooking the Detroit River — and several walkways leading to it, within and around the downtown area. Several downtown development projects are currently underway or set to commence soon, including the $1.5 billion District Detroit development project, expected to introduce numerous high-end residential buildings and luxury hotels.

However, it’s unclear that the land tax can resolve the problems of far-flung neighborhoods in a diverse landscape.

For now, the land-tax strategy faces more immediate hurdles. It will need to pass the Michigan state legislature to get on the November ballot. Three earlier attempts to pass the plan failed last October. To put the ballot measure in front of Detroiters in November, it must be passed by the legislature in the summer.

The city says that international economists are hopeful for the land-value tax, with some participating in a poll expressing hope for substantial economic growth within the next 10 years.

If the ballot measure passes, Detroit homeowners could see a big tax cut in 2025. But measuring the land-value tax’s success could take years — the time it takes to redevelop vast swaths of empty land.


Written by AGabor · Categorized: Detroit

May 22 2024

Entrepreneurship Is Risky: For Black Businesses, Especially, It’s No Panacea

Chelsea Ray (center), decided to quit her job as an engineer and join the family’s start-up chocolate business, Insatiable Turtles. (Photo by Valerie JL Conklin)

By Judah Duke

When layoffs began to threaten her family’s financial prospects during the throes of the Covid-19 pandemic, Chelsea Ray of Detroit decided to quit her job as an engineer and join the family’s start-up chocolate business.

Ray’s aunt was let go from her job at an auto manufacturing plant and her mother was fired from her job as a financial-aid counselor at Mary Grove College in Detroit; the women were, respectively, three and five years from retirement. Her father, who is also a chaplain with a master’s degree, was laid off from his job as a violence-prevention counselor at a Detroit public school and now works a second job driving for Uber, while Ray’s mother works behind the deli counter at a Kroger supermarket, in addition to creating the chocolates for the family’s Insatiable Turtles brand.

Ray noted that her elders had imagined working the same job until retirement, even if they didn’t care for it. By contrast, Ray said: “I want to do something that I’m really passionate about.”

That passion, coupled with the unpredictable employment landscape around her, prompted Ray to leave her job as a manager at an Amazon facility. Today, she co-owns Insatiable Turtles with her mother and sister, selling pecans wrapped in a layer of caramel and chocolate.

Ray did not want to disclose specific profit and sales figures, beyond noting that her profits were up substantially this year. However, her last year’s earnings from Insatiable Turtles, which sells chocolates in bags of five for $20, totaled a fraction of Ray’s former salary.  

“I wanted to do something that can build legacy, so we can kind of write our own narrative,” she said.

Entrepreneurship has long held the allure of a golden ticket to prosperity for many Americans. As the aftershocks of Detroit’s bankruptcy and the challenges from the pandemic persisted, entrepreneurship has increasingly been held up as a way to narrow the racial wealth gap. Three years ago, the Michigan Black Business Alliance (MBBA) was established, initially, to support Detroit entrepreneurs like Ray and to build a network of 1,000 Black million-dollar businesses in the next decade, according to its 2023 annual report. The organization has since expanded beyond Detroit. In addition, Michigan’s Lieutenant Governor Garlin Gilchrist’s team recently called for the creation of 1,000 Black millionaires, according to Brandon Reed, the director of external affairs for the MBBA.

But entrepreneurship is a risky business, especially for Black entrepreneurs, creating an especially precarious path for aspiring business people like Ray. According to the U.S. Bureau of Labor Statistics, 20 percent of small businesses fail within the first two years, and 65 percent within the first 10.

The uphill struggle is even steeper for Black Americans. Eight of 10 Black-owned businesses fail within the first 18 months, according to a Bloomberg report.

For Black entrepreneurs and minority business owners in general, who are also twice as likely as their white counterparts to report access to capital as a limiting factor to growth, financing is a major problem. Black-owned firms, including ones owned by women, are relatively prevalent in Detroit — a Black-majority city — compared to the national average. And while Black-led startups made up close to one-quarter of all new Wayne County companies, in 2021, they garnered only 1.5 percent of all venture capital that year. In Michigan, organizations are stepping up to provide funding through grants and loans, but many systemic hurdles remain.

 “Detroit was the most red-lined city in the country for a while, and so, there’s just a lot of systemic barriers, even geographic barriers that just make it more difficult,” Reed said.

Ray credits the MBBA with providing the resources she needed to take her business from a private affair, selling chocolates to friends and family at church, to a budding operation with a website and a presence at Detroit food markets. She noted that MBBA workshops helped with her business plan and, in particular, persuaded her to put her family members on the company payroll — rather than pouring all profits back into the business.

The MBBA also partners with other organizations to provide its members with access to capital. One such group is the Michigan Women Forward, which issues microloans, ranging from $2,500 to $50,000, to women-owned businesses.

Michigan Women Forward stands out for its unconventional approach to disbursing loans based on a variety of factors, not just credit scores. (Indeed, poor credit scores are often a barrier to obtaining financing for Black-owned businesses.) The organization holds bi-monthly meetings with a loan committee that plays a significant role in making credit decisions. “Our underwriters are able to tell the entrepreneur’s story about how their credit was affected,” said Tanesia Greer, Michigan Women Forward business development manager. “Just think how much you would lend someone if you really understood their story, and you looked at their financials,” she said.

The vast majority of the businesses the MBBA supports are small, Black-owned firms. Most of its over 1,300 members usually have less than ten employees.

The historic barriers that kept Black Michiganders, many of whom migrated to Detroit from the Jim Crow South, from building generational wealth, is another major hurdle.

State Representative Joey Andrews, whose District 38 includes St. Joseph and Benton Harbor, uses his own family’s experience to illustrate how unequal the playing field is for Black and white entrepreneurs. Andrews’s great grandfather, an autoworker and union man, used his pension and savings to build a business–the Andrews family is white. Each subsequent Andrews generation has had successful business owners.

“What those union jobs enabled them to do was it allowed their families to enter the middle class, and then set them up so that their kids could do non-manual labor work,” said Andrews, who champions the trades, which can garner six-figure wages, as well as pensions and healthcare; he challenges what he refers to as the “myth” that starting a business is the only path to financial security.

“The message we’re trying to bring is that the trades are the way up and out — that enables you to set your kids up for success,” he added. “You’ll have the resources then so that your children can be the business owners and entrepreneurs. You can send your kids to college at that point, because you will have the money and the resources.”

Indeed, Ray also comes from a long line of Detroit auto workers. Her grandparents, aunts and uncles on both sides of her family worked for the Ford Motor Company.

Hampered, perhaps, by red-lining and a lack of credit, only recently has her family begun to think about becoming entrepreneurs.

Today Ray is determined to make a success of Insatiable Turtles. A $5,000 grant she won from an event at MBBA’s Wealth Summit, last year, gave her company a boost. Now she is applying for a $15,000-loan package in the hope of renting a commercial kitchen, improving marketing and rebranding her website.

In the meantime, Ray is looking for a part-time job in business consulting to help support her household so her husband doesn’t have to “take care of all the bills.” Eventually, she said, “I would like to work on the business full time.”

Written by AGabor · Categorized: Wheels

May 22 2024

Gen-Z Is Hungry for Cheap EVs. Is Detroit Ignoring the Market at Its Own Peril?

The average cost of an American-made EV is $50,798. That is greater than the national average income of $41,804 per capita, according to the U.S. Census Bureau’s 2022 American Community Survey. (Photo by Jack Van Hecke)

By Jack Van Hecke

The Chevrolet Bolt electric vehicle starts at $27,495. Ford’s electric F-150 is priced at $49,995. The Rivian R1S costs upwards of $78,000. The list of American-made EVs goes on and on, and the prices go up and up.

Meanwhile, foreign automakers are prioritizing building vehicles at a lower price point. The Chinese company BYD, which stands for Build Your Dreams, currently has five models marked lower than $15,000. The Seagull is an astonishing $11,400 — less than electric bicycles by Trek, the high-end American bike manufacturer. BYD’s e2 compact SUV model is priced at around $12,507. The Dolphin costs $14,500.

These vehicles are not yet available in America, primarily because of U.S.-imposed trade barriers. On May 14, President Joe Biden announced that he is quadrupling the tariff on Chinese-made EVs from about 25 percent to 100 percent to protect American-made companies from foreign competition. The U.S. argues that the Chinese government is subsidizing EV production, allowing its manufacturers to dump products in both the U.S. and Europe at prices below what it costs to build them. Between 2009 and 2022, the Chinese government provided an estimated $173 billion in tax breaks and subsidies to companies like BYD, NIO and Wuling. Between 2018 and 2022 alone, BYD received $3.5 billion from the Chinese government.

U.S. tariffs and incentive policies — including a $7,500 tax break for car buyers who purchase U.S.-made EVs — are intended to support American manufacturers. However, the high prices of American-made EVs suggest that automakers could be missing out on what might be, potentially, their largest market: Gen Z car buyers.

The target market for electric vehicles is consumers aged 18 to 29, according to consumer surveys, a generation that is particularly concerned about climate change. Over half of the people in this age range say they are somewhat-to-very likely to go electric, according to Statista. But the current price point of EVs is the greatest factor standing in the way of these wannabe EV buyers. The average income of individuals 20 to 34 hovers around $45,994, according to a Forbes study. The national average estimated by the U.S. Census Bureau’s 2022 American Community Survey puts the number at $41,804 per capita.

That is less than the $50,798 average cost of an American-made EV.

“The rule of thumb in the auto industry is that your annual income should be two times the price of the car,” said Micheline Maynard, author of multiple auto-industry books and a Boston Globe columnist covering the car industry. “So, if you look at two times the price, it means you probably have to earn $125,000 a year” to afford the average price of an American-made EV, she explained.

Take Dody Gonzalez, an 18-year-old factory worker at Amazon. Gonzalez, who makes $18 per hour, or about $20,000 annually after taxes, has been shopping for an EV for months. Gonzalez said he is “searching for any brand that’s just cheap,” but said he can’t afford the cars currently on the market.

The price of BYD EVs would be perfect for Gonzalez, he said. If they were available in the U.S. market he would “jump” at the chance to buy one, said Gonzalez, adding that the car’s design is “actually pretty gorgeous.”

Professor Jerry Davis, a professor of business and sociology at the University of Michigan, said that he could see Chinese vehicles becoming a feasible option for Americans if they are able to enter the market. (Photo by Judah Duke)

The Chevy Bolt is the cheapest American-made EV. And while other foreign-made cars by companies like Volvo, Mini Cooper, Volkswagen and Kia offer cheaper EVs than U.S. manufacturers, their prices begin in the mid-$20,000 to upper-$30,000 range. The Volkswagen ID.4, which is priced at $39,735, qualifies for the $7,500 tax incentive because it is produced in Tennessee. Similarly, the Nissan Leaf qualifies for a $3,750 partial tax incentive because 60 percent of the battery’s components are manufactured or assembled within the U.S. and it has a seven-kilowatt hour capacity. These are requirements under the new Inflation Reduction Act.

Despite high prices, Americans are hungry for EVs. In 2023, Americans — most of them middle-aged white men — bought a record 1.2 million EVs.

But with the number of EVs on U.S. roads expected to surge to 145 million by 2030 — a nearly 15-fold increase over the number of electric vehicles on the road today — U.S. automakers risk losing out on their potentially biggest market: 18-to-29-year-olds, who number 58 million, according to the census.

For one thing, U.S. automakers may not be able to count on trade policies keeping the Chinese cars out for long. BYD already is looking to expand manufacturing into Mexico. “They are hoping that if they can build vehicles there — they’re built in North America — then they can be sold in America” under the United States-Mexico-Canada-Agreement (formerly NAFTA), said Jeff Gilbert, a long-time automotive reporter for Detroit’s news radio station WWJ. Because of USMCA, Chinese companies manufacturing in Mexico could find a loophole around high tariffs.

If Chinese cars enter the U.S. market, American car manufacturers might have to relearn the painful lessons of the 1970s and 1980s. Following the oil shock of the 1973 Yom Kippur War and the 1979 Iranian Revolution, Japanese car makers flooded the U.S. market with inexpensive small cars, even as American automakers stuck to making bigger, more expensive — and less fuel-efficient — models. As the quality of Japanese cars increased, U.S. automakers faced record losses and Chrysler (now Stellantis) came close to bankruptcy — and was bailed out by the federal government. Before long, Toyota had surpassed General Motors with the highest market share in the U.S. (Today Toyota’s market share is a close second to General Motors.)

“I imagine there will be a similar trajectory with Chinese vehicles,” said Jerry Davis, professor of business and sociology at the University of Michigan and author of The Vanishing American Corporation. “They might start just being the low-cost option because you can’t afford other vehicles.”

While Davis is not making any predictions about the long-term prowess of Chinese car manufacturers, he said that American companies should be worried. “If they’re not worried, they’re not paying attention,” he said.


Written by AGabor · Categorized: Wheels

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