Having filed the largest municipal bankruptcy in US history in 2013, Detroit is on a road to recovery with a community-based investment scheme. The Community Capital initiative is hoping to rebuild the city’s community spirit, by empowering residents to invest and vote where their money goes. We explore the insights behind the innovation, and understand how Cooperative Capital plans to involve Detroit’s residents in the restoration of their city and the building of communities.
A city like Detroit – which has 70,000 abandoned buildings, 31,000 empty houses, 90,000 vacant lots, and the second highest rent-to-value ratio in the country – can seem ripe for investment, especially to those Gen Yers who see house-flipping as a good way to make a buck. Yet the know-how and initial capital needed to do so has many locals reluctant to buy into the housing market, despite potential gains. Cooperative Capital, founded by Kwaku Osei, is a community-based fund that requires a minimum of $1,000 for a first investment. Collaborative investors can vote on how the pooled money will be spent, giving communities a chance to contribute to the rehabilitation of their city, rather than leaving it in the hands of outsiders.
According to Osei, many people from Detroit wish to invest in the future of their city, but don’t have the financial means to do so. With this collaborative fund, new investors are given the opportunity to create and fund collaborative urban projects, from buying to restoring to reselling properties. After a plan is drawn up, it is then reviewed by a financial committee. When it passes a due diligence stage, guaranteeing that participants are likely to get at least a 6% annual return, the project is moved forward. Osei tells Canvas8 that the project’s “real desire was to create a situation where residents were able to come together to collectively invest and build up our community in a way that everyone benefits.”
By offering residents a way to contribute towards their community without breaking the bank, Cooperative Capital is tapping into people's innate desire to belong, while simultaneously providing 86% of Gen Y renters who plan on owning a home someday with a product that delivers tangible financial returns. And in a city where the poverty rate is 40%, Osei recognises that $1,000 is a barrier to entry for some, noting that he’s “talking to a couple of foundations where individuals go through a financial education program and save around $1,000 over a six month period. So they would get that matched through a grant with the foundation – and then they would be able to invest in Cooperative Capital.”
Marjory Drevet is a trend forecaster and editor and a freelance writer at Canvas8, which specialises in behavioural insights and consumer research. She created research and development site The Trend Eye, where she features insights and news about upcoming trends.