Whether To Rent Or Buy Your Home Can Be An Expensive Debate. Detroit Has A Solution

Despite Detroit having the lowest home values of any metro in the country, Detroit renters still struggle with affordability. In fact, it costs 24% more to rent the typical home in the Detroit area than it does to buy it. That’s the biggest rent premium among the 50 most populous metro areas studied by Redfin
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. The high cost of rent is symptomatic of Detroit’s larger economic challenges. However, a new land value tax plan from Detroit’s mayor offers a promising solution that may provide a model for the nation.

More Renters Than Potential Homeowners

One reason renting is more expensive than buying a home in Detroit is that a high share of Detroit residents has no option but to rent. Although the price of a typical Detroit home is the lowest of any metro in the U.S., the criteria for a mortgage, such as a good credit score and a stable income, limits the pool of potential buyers. Detroit has witnessed a significant decline in its population, primarily among wealthier residents who could have qualified to own a home. As a consequence, the homeownership rate in Detroit is only 51% compared to the national homeownership rate of 66%. The low share of homeowners and high share of renters has put upward pressure on rental prices.