Speaker
Description
Pockets of residential and commercial development have sprouted in Detroit since the bankruptcy of 2013. Some of these are visible and sizeable developments and they have been completed by established, large well-capitalized, White developers. However, there has always been and still is a smaller constituent of Black developers. Not much is known about these Black developers.
The paper aims to establish a primarily qualitative, understanding of African American developers in Detroit. While we expect to learn enough from this exploratory work to support tentative policy suggestions, the primary objective of this paper is to understand the factors that hinder the ability of African American developers to succeed and how they approach development differently from White developers.
Our approach to obtaining data is interviews with developers. A reporter from Crains Detroit helped in making initial connections with developers. We also reached out to industry groups and a recommendation from a community group that has been engaging with developers. From these contacts, we used snowball referrals to speak to other developers. We interviewed 14 developers, nine Black and five White. We stopped our interviews when further interviews yielded no new information relevant to our research. After completing our analysis of the interviews, we interviewed an additional Black and White developer to confirm that our findings from the initial 14 interviews remained the same.
We present three major findings:
- Black developers gain expertise from public service or private sector experience, whereas White developers enter through legacy connections to entrepreneurship, or direct connections to legacy real estate developers, or happenstance indirect real estate connections.
None of the Black developers we spoke with came with family connections to real estate, wealth, or upper middle-class parentage. In every instance, the nine Black developers we spoke with took a circuitous route to the business, building experience working for local elected officials, as public servants, as employees of other developers, in the banking sector, or some combination of these experiences, and leveraged these experiences to launch their businesses. On the other hand, White developers entered the industry through a traditional route of social capital. Four of the white developers came from upper-class backgrounds of either business or professional lineage. One entered the business through happenstance interaction with wealthy investors.
- Bias in financing and incentives remains a challenge for Black developers.
Based on previous research about Black entrepreneurship, we expected that Black developers would face more constraints with respect to obtaining financing. Our research bore this out. Eight of the nine expressed frustration obtaining financing from banks, and never being sure whether it was because of the color of their skin. On the other hand, the White developers had access to financing whether through banks or investors.
- All developers seek profits, but Black developers are more likely to link their work to community.
All developers we spoke to seek profits, but for all the Black developers this was accompanied by an interest in the betterment of communities in Detroit. This interest in communities was not shared by White developers. A representative quote from a Black developer is: “Many of us are Detroiters … we are active in our neighborhoods”. While White developers spoke about the potential to have a positive impact on the city or a neighborhood, their responses also focused on individual accomplishments of themselves.
In summary, our findings are part of a larger academic literature about the challenges that Black entrepreneurs face. Our findings point to the need to provide a more level playing field for Black developers in Detroit.
References
Bates, Tim, 2006. “The Urban Development Potential of Black-Owned Businesses.” Journal of the American Planning Association 72 (2): 227–37.
Coiacetto, Eddo John, 2000. "Places shape place shapers? Real estate developers' outlooks concerning community, planning and development differ between places." Planning Practice and Research 15 (4): 353-374.
Fairlie, Robert W., and Alicia M. Robb, 2007. "Why are black-owned businesses less successful than white-owned businesses? The role of families, inheritances, and business human capital." Journal of Labor Economics 25 (2): 289-323.
| Keywords | Developers; Blacks; Detroit; Real Estate |
|---|---|
| Best Congress Paper Award | No |
