A Boston-based institutional investment firm aims to deploy around $11 million in the coming years to increase the supply of Detroit’s affordable housing stock.

Acrtaris Impact Investors LLC, which manages a variety of real estate funds, working in concert with Detroit-based real estate firm Circuit Ave., will buy 100-200 homes in Detroit over the next few years, largely from “absentee” owners who bought the properties around the time of Detroit’s bankruptcy a decade ago. 

The goal, according to Arctaris Principal of Real Estate Andrew Gibbs, is to spend around $100,000 per home — including repairs — and rent the homes to Detroiters receiving government assistance, who would then have opportunities to eventually purchase the homes themselves.

Target homes will be “vacant, distressed properties that have often been owned by absentee (owners) and are in need of significant capital improvements,” Gibbs said. “And so the main focus is to acquire single-family homes that are for sale at a significant discount to (the) replacement cost and are in need of much repair (and) bring them up to code. And so we’re looking to acquire 100-200 single-family homes, make capital improvements and lease them out to tenants that typically have Section 8 vouchers.”

Gibbs said the budget for the homes the firm is looking to acquire would be about one-third of what it would cost to replace and build new.

Homes will be rented to those earning 50% or below the area median income, which in Wayne County would be $33,150 a year or less. Additionally, Gibbs said the Arctaris fund is working out details of a program to allow for Detroiters to eventually purchase the homes.

Locally, Arctaris is working with Detroit real estate investment firm Circuit Ave, which will manage operations in the city, such as acquisitions and property management.

“We founded Circuit Ave to address a disturbing contradiction across cities nationally — neighborhoods share both a severe affordable housing shortage and a vacant home on nearly every block,” Circuit Ave CEO Ian Batts said in a news release. “Partners like Arctaris make it possible to create inclusive housing options while restoring neighborhoods and contributing to local economic resurgence.”

The partners have so far purchased two houses, both on the city’s west side.

Arctaris has also worked closely with the Troy-based Kresge Foundation, which, according to reports back in 2019, wrote a $15 million first loss position for the overall fund, essentially a form of risk mitigation for Arctaris investors.

The news of an institutional investor such as Arctaris coming into the city comes as the business model has changed for longtime investors in Detroit’s housing market, largely a result of Detroit homes increasing in value.

Gibbs, who declined to share anticipated return on the Detroit investment fund, said the current market with elevated interest rates and Detroit’s tax structure make ground-up development challenging to underwrite.

“And so our thesis is really to go into markets like Detroit — where there’s still a significant need for affordable housing — and there’s this significant amount of inventory that’s available at a fraction of replacement costs,” Gibbs said. “And these homes that appreciated quite significantly from the bankruptcy (around) 2010 (and) 2011, but they’re still trading at levels that we think even with the capital improvements budget, will be sufficient to achieve the return targets we set.”