Modular-home manufacturer Champion Homes has nearly completed construction on 37 rental homes in the Penrose neighborhood on the northern edge of Detroit’s blighted urban landscape.

These 1,400- to 1,500-square-foot two-story homes, in 13 single-family and 12 duplex buildings, represent the second phase of a 73-unit project that Champion, based in Troy, Mich., started supplying in 2006. The project’s developer, Benton Harbor, Mich.-based Star Development Co., is one of the few private-sector companies that are actively buying land in Detroit for redevelopment and residential construction.

Sam Thomas, Star Development’s president, would like to build up to 300 houses in Penrose. But that could take a while, as his projects are funded primarily by HUD’s low-income tax credit program, whose allocation-per-round to any one developer, says Thomas, typically maxes out at 50 houses. (That explains the time gap between Penrose’s first and second phases, he says.)

Reviving a Community
Thomas, now 71, started planning his redevelopment strategy for Detroit in 2003, and received his first tax-credit allocation two years later. In 2006, Thomas worked with Champion to build 64 low-income rental homes in Benton Harbor.

Champion also was the module supplier and builder of 38 rental homes in Detroit’s Kendall neighborhood, across town from Penrose. The firm currently is completing a townhouse project for Star Development in Milwaukee, Wis.

(Click here to see a video about the Milwaukee project, and here to see the building design that Champion is using at Penrose, where its homes emulate this historic neighborhood’s turn-of-the-century look.)

“They make a very good product,” says Thomas about Champion. And once Champion delivers modules to a jobsite, it takes between 45 to 60 days, on average, to complete the houses for occupancy.

Star Development’s revenue comes from development fees and from managing property managers it hires for its buildings. “The quicker Sam can start generating a revenue stream, the more viable his business model is,” says Kevin Flaherty, Champion’s vice president of marketing.

Flaherty says Star Development likes its neighborhoods to include some kind of anchor. At Kendall, for example, it was a historic schoolhouse that's now being used for children with  disabilities. At Penrose, Champion built an Art House and a farmhouse that supports the neighborhood’s urban farming movement.

“A community based around art and agriculture—we’re seeing that it works,” said Sally Wenczel, program director at the Art House and its adjacent community garden, in an interview with Detroit Metro Times in May. Thomas calls urban farming “a community-building tool.”

Champion’s involvement with Star Development has extended beyond simply supplying modules. For the Benton Harbor project, Champion trained local neighborhood residents in light carpentry at its factory in Indiana. Flaherty notes that nearly all of the employees at that plant are Amish, and the trainees were mostly African-American women, which he says created some interesting cross-cultural dynamics. The women built porches and garages onto the houses once they were placed at the jobsite.

Affordable Housing Demand
Having declared bankruptcy with more than $18 billion of debt, Detroit’s future is uncertain, to say the least. It has been widely reported that the city has lost more than 1 million people since its heyday in the late 1950s, and is now down to under 800,000 residents spread over 140 square miles (roughly the size of Philadelphia with 1.5 million people).

Politically, it is highly unlikely that Detroit’s urban boundary will be redrawn. Nevertheless, Thomas observes that Detroit “is a shrinking city.”

Most of the redevelopment and building going on in Detroit right now are being done by nonprofit and faith-based organizations. Thomas doesn’t think most of Detroit’s abandoned real estate will be redeveloped for housing. Still, he’s convinced that Detroit’s residential market can be revitalized, and that there’s both a need and demand for the homes his company offers.

“The people are still there, and the people we serve need housing that matches their incomes,” says Thomas. He thinks that at least some of Detroit’s population flight can be attributed to its lack of affordable housing. “People were paying rent to live in 100-year-old hovels, and even that type of housing has worn out.” At Penrose and Kendall, he says, renters are living in well-built, attractive new housing for around $600 per month.

And as more housing gets built in Detroit, the prostitution and drug dealing that infected many of its downtrodden neighborhoods are slowly being pushed out. Recently, a Meijer supermarket opened about a mile from the Penrose neighborhood. “That’s a good sign,” says Thomas.

Flaherty says neighborhoods in Detroit, even at northern fringes like Penrose, have “pockets of neglect” where “you’ll see a good house next to a boarded-up house.” He says that Champion is encouraged by the demand it’s been seeing for modular in urban settings, and Champion has been supplying modules for everything from rental units in Detroit to $1 million townhouses in Bethesda, Md.

At Penrose, Flaherty points out that a large portion of renters’ costs is for utilities, which modular, with its “tighter” energy-efficient design and construction, can help keep down. Thomas concedes that modular construction is more expensive than stick-built, but he still prefers modular for the speed at which he can complete projects.

As he looks ahead, Thomas would like to continue building at Penrose and Benton Harbor, but he acknowledges that competition for low-income tax credits is stiff. And Congress has been talking about reforms that would reduce or eliminate corporate tax expenditures, which might include the low-income tax credit program.

So, says Thomas, “you have to be patient.”

John Caulfield is senior editor for Builder .