Duggan: ‘You can’t build a new house in Detroit’ due to high taxes

Taxation is a big part of Detroit’s problem, Mayor Mike Duggan said last week. During a talk with The Detroit News at the Mackinac Policy Conference (no affiliation to the Mackinac Center), Duggan shed light on why Detroit struggles to attract new residents or keep the ones it has.

Here are four takeaways from Duggan’s interview:

1. New home construction is an extreme rarity due to high taxes. Duggan said that only eight new single-family homes were built in Detroit in 2022. Eight.

“The cost of the taxes on a single family home makes it impossible,” Duggan told The News.

Duggan continued: “You cut those taxes 25%, and all of a sudden Detroit versus Ferndale, Detroit versus Ann Arbor, for home building, becomes almost even. And we have other reasons to be in one city or another.

“But today you are taxed so high you can’t build a new house in Detroit.”

2. Detroit’s real competition is with its regional neighbors, not cities like Chicago. For all the talk about Detroit being a world-class city, in the scenario Duggan mentioned above, the prospective homebuilder was choosing between Detroit and Ferndale or Detroit and Ann Arbor.

That’s the healthiest way for Detroit to look at itself. If Detroit will grow, it’s because it’s attractive to people looking to relocate within Southeast Michigan. People leave Detroit for the same reason they leave Michigan: They can find a better life elsewhere. Detroit must win the battle for regional homebuyers. For 70 years it’s been losing this battle to the suburbs.

3. Schools are essential. As Michigan Capitol Confidential has reported, only 5% of Detroit’s eighth graders scored proficient in reading. As parents feel the need to pay for private school in addition to spending more for the city’s high insurance costs and high property taxes, Detroit becomes too expensive for most families.

Detroit schools are not under mayoral control, and Duggan has not tried to change that. Regardless of who controls Detroit schools, the city will lose regional battles if it cannot educate children. Duggan did not speak the word “schools” in the interview, and that silence was deafening. There is no viable Detroit without strong schools.

4. Detroit land is a “cheap lottery ticket” for speculators, but unattractive to investors. Detroit has 30,000 vacant lots, Duggan told The News.

Those cheap lots fall into the hands of speculators hoping someone will buy them out at an inflated cost, Duggan said. Ideally they’d be bought by homeowners looking to build or businesses looking to grow.

“You can have it for 30 bucks, and if the Illitches or somebody comes to build on it, you ask for a million dollars,” Duggan said. “So, it’s a cheap lottery ticket.”

Duggan has floated a taxation scheme that would lower rates for occupied properties and raise rates for vacant land and parking lots.