Can Free Financial Counseling Help Address Detroit’s Eviction Crisis?
Mindful of the two-way relationship between housing and economic security, the City of Detroit focuses on ramping up targeted wraparound services to affordable housing residents
By Jeremy Gantz
**Even before COVID-19 exposed and exacerbated so many symptoms of the United States’ crisis of economic inequality, local governments were working on better ways forward. Through the What Works Cities (WWC) Economic Mobility initiative, launched in June 2019, nine cities chose to develop critical projects to increase the financial security and economic mobility of their most vulnerable residents — often in low-income communities of color.
The story below is a snapshot: a record of a persistent obstacle to economic mobility, of a city creatively engaged with the problem, of an emerging solution. Written before the pandemic began, it shows the commitment and leadership of city leaders, staff, and local community partners who recognized the need for change. Although COVID-19 is reshaping economic mobility challenges and solutions around the country, the stories of these pre-crisis actions and insights remain instructive and valuable.
As the hard tasks of response and recovery continue, WWC will be publishing stories about how cities have evolved their economic mobility projects to meet the moment.**
DETROIT, MI — Detroit is probably not the first city most Americans think of when it comes to the affordable housing crisis. But the Motor City was grappling with a major housing crunch in the years leading up to 2020. “A lot of housing units were falling out of the bottom of the market,” says Keegan Mahoney, a program director in the City’s Housing and Revitalization Department (HRD).
What that means: Affordable buildings became unrentable after entering foreclosure or falling into disrepair, because landlords were unwilling or unable to pay to maintain them. By 2018, there were more than 102,000 vacant housing units in the city, accounting for 28 percent of its housing stock, according to a Center for Community Progress report. Meanwhile, many Detroiters were housing insecure. In 2014, 64 percent of extremely low-income renter households in Detroit — making up about one-third of city residents — were paying more than 50 percent of household income on housing. Between 2005 and 2016, average rents across the city increased by 26 percent.
In 2018, Detroit’s leaders decided to address the growing crisis head-on. They released the City’s first-ever affordable housing strategy, announcing goals to both aggressively preserve and create affordable multifamily housing in the following five years. But there was a recognition that the City needed to go further, and deeper. A big part of the affordable housing crisis was a supply problem. But another part of it stemmed from tenants’ financial instability. Between 2014 and 2018, nearly one in four rental households in the city faced eviction every year.
“An apartment may be affordable on paper, but that doesn’t mean that the goal of affordable housing — to provide stability for residents — is always being realized,” says Julie Schneider, acting director of HRD. “When residents are not in a stable financial situation, that will often translate into housing instability, even when rents are subsidized.”
An emerging body of research pointed city officials to possible solutions. It showed that affordable housing residents who receive wraparound financial services experience greater economic stability and mobility, which simultaneously can serve to prevent affordable housing stock from falling into foreclosure or disrepair. The prospect of this win-win for residents and property owners “really excited us,” Mahoney says.
So the City decided to add another prong to its affordable housing strategy: HRD would offer free one-on-one financial counseling services to all Detroit residents. It would do so through Financial Empowerment Centers (FECs) launched across the city, in partnership with businesses and nonprofits.
The core idea here is simple: improve residents’ financial stability to reduce evictions, thereby boosting housing stability. Stable housing, in turn, boosts economic prospects in a virtuous cycle. The first FECs opened in August 2019 to any resident of Wayne County (which contains Detroit).
In 2019, Detroit’s efforts around economic and housing stability were boosted when the City was selected as one of nine cities to participate in the What Works Cities (WWC) Economic Mobility initiative. The program aims to support cities’ efforts to increase residents’ economic prospects and share how local communities can reverse the national trend of declining mobility.
Through the initiative, Detroit is working with the Behavioral Insights Team, a WWC partner, to develop a pilot project to target City-sponsored financial counseling services to residents showing early warning signs of housing instability. The City does this by partnering with property management companies to get the word out to tenants living in 18 privately-owned multi-unit affordable buildings. To gauge the pilot’s impact, the City plans to track housing stability levels of residents who received FEC counseling.
‘Building Trust Is Critical’
Financial counseling is no housing crisis panacea, of course — Chelsea Neblett knows this. “We want to provide high-quality, free public service that helps individuals with the fundamentals and also refers residents to other assistance programs and supportive services when extra assistance is needed,” says Neblett, financial empowerment manager in the City’s Department of Neighborhoods.
Here’s what the counseling process typically looks like. At an initial session, the counselor assesses a resident’s household financial situation (expenses and income). Together with the resident, she then creates a plan focused on four areas: banking access, credit improvement, debt reduction and savings.
Specific goals vary: one person may want to improve credit scores, while another may want to build up emergency or down payment savings. Follow-up sessions to track progress are scheduled with the same counselor, because “finances are personal,” Neblett says. “So building trust between that resident and counselor is critical.”
The City is tracking various metrics to help evaluate the impact of FECs, including the number of referrals to public assistance programs and the number of residents receiving income tax preparation help. Major goals the City aims to achieve with residents include reducing debt by 10% and increasing credit scores by 35 points.
Along with the pilot effort to provide targeted counseling to residents in multi-unit developments, a parallel City project aims to support residents living in single-family homes, which comprise the majority of the City’s housing stock. These older homes are increasingly part of the rental market, but owners often struggle to keep up with mortgage, tax or utility payments. So Detroit is working with another one of WWC partners, the Harvard Kennedy School’s Government Performance Lab (GPL), to develop a network of Housing Resource Centers (HRCs) in partnership with local nonprofits.
“We wanted to put in place a network of trusted neighborhood counseling agencies to holistically address the various dynamics of housing instability that residents of single-family housing face,” Mahoney says.
Partnering With Property Owners
A central challenge in the City’s pilot project is connecting with residents at risk of financial instability in the multi-unit housing developments selected for the intervention. These 18 properties, which together comprise 1,200 housing units, are overseen by two private property management companies. Engaging them as trusted partners in the pilot project is crucial to the short-term and long-term goals of the project.
The City ultimately aims to provide a model for private housing owners to partner with service providers and build support among them to help tenants through periods of job loss or other financial emergencies. The argument is that “this is a better, and possibly cheaper way of addressing that challenge than eviction or other disruptive approaches,” Mahoney says. Part of the reason older, affordable buildings fall into disrepair and out of the market is because of high rates of tenant turnover caused by delinquent rents and evictions, he notes.
Cinnaire, a nonprofit community developer with a deep presence in Detroit and financial stakes in the properties chosen for the pilot, believes residents can thrive when housing operators provide access to critical support services including financial counseling. “As we seek out relationships with operator partners, we seek first to understand the unique needs of the community residents,” says Lucius Vassar, corporate counsel and executive vice president of equitable engagement at Cinnaire. “Then we partner with organizations with track records demonstrating they can meet those needs and foster an environment for residents to thrive.”
In the short-term, the support of property management companies is critical for promoting the pilot’s financial counseling services. Part of it involves mailing FEC-related fliers and other printed materials to residents. The outreach strategy involves more than mail, though. In partnership with the property management companies, the City has made materials available to residents in building lobbies, attached fliers to rent statements, and promoted counseling services at tenant meetings.
“You can’t access these buildings without property managers’ partnership and cooperation,” Mahoney notes.
But it’s about more than access: Housing staff can act as the city’s eyes and ears, helping to reach residents at risk of housing instability. When a management company’s on-site staff see someone falling behind on rent or experiencing other financial challenges, they can make referrals to FECs rather than simply deliver an eviction notice.
Staff in buildings have been “tremendously helpful,” Neblett says. “It was critical that we opened those lines of communication.”
Ultimately, the City envisions an additional dimension to its strategy to address the affordable housing crisis, one that dovetails with more traditional efforts to directly create and preserve units. Working hand-in-hand with housing operators, the City’s pilot is building a new integrated service provision model that could prove the value of new partnerships. The hope is that the new model serves as a safety net for residents displaying early warning signs of housing stability.
In Detroit, a city where the impact of the long, painful foreclosure crisis over the last decade still lingers, innovative government efforts to stabilize the housing landscape are sorely needed. By thinking creatively about what services the City offers and how, Detroit seeks to build new ways to close the housing affordability gap. If new approaches are successful, Detroit’s model can inform other cities challenged by high poverty rates and a low-quality affordable housing stock.
A crucial aspect of this model is the idea that housing operators can and should do more than just manage buildings, Schneider says.
“The City of Detroit looks to our affordable housing partners not just to deliver units, but to deliver on housing that demonstrates meaningful contributions to the stability and economic mobility of residents,” she says. “Coordinating services that are tailored to the needs of residents is one way housing operators can achieve this.”
Jeremy Gantz, a writer and editor, is a communications consultant for Results for America.
The What Works Cities Economic Mobility initiative is a program that aims to help nine participating cities identify, pilot, and measure the success of local strategies designed to accelerate economic mobility for their residents. Through the expertise of the What Works Cities’ network of partners and the support of Bloomberg Philanthropies, the Bill & Melinda Gates Foundation, and Ballmer Group, this initiative puts data and evidence at the center of local government decision-making.
Launched in 2015, What Work Cities helps local governments use data and evidence to tackle their most pressing challenges and improve residents’ lives. Learn more about What Works Cities at whatworkscities.org
