To analyze the strategies used by the Detroit land bank, I will utilize metrics that Dewar et al. put together in describing a successful transfer of tax foreclosed properties. Those authors put together a very simple three part analysis to measure how well the transfer process of the Wayne County Treasurers Office employed in the early 2000’s until approximately 2012. In short that organization failed spectacularly. We will use the itemized failures to look more deeply into the Detroit Land Bank to see whether or not they are operating to revitalize and stop the spread of blight more effectively than the County Treasurers Office (to the best of our knowledge).
The three metrics to measure are simple in the logic that they contain. First preserve homeownership; it is imperative to keep the property occupied, even if it is by the individuals being foreclosed upon. The turnaround had been over 6 years in 1999, shortening it to 2-3 years meant the property had much less time to degrade and involved simple streamlining and advertising. Second, prevent blights in stronger (higher occupied) neighborhoods; maintaining better neighborhoods is possible. As cited by Dewar et al, Innergluck and Smith found that for each foreclosure within 1/8 mile resulted in a reduction of all surrounding properties by an average of .9%. Third, avoid sale to purchasers likely to cause more blight. This is mainly described by practices such as bulk purchases of over 80 properties, home “flipping” (immediate resale for a profit), and fundamentally contained by those who allow their properties to fall back into tax foreclosure, creating a repeat loop.
The reasoning behind these three goals to maintain return to the very first: all practices involved should be checked to ensure that homes are occupied. This prevents the spread of blight and therefore contains the number of properties that cost the city negative revenue. Blight reduces tax revenue on their own and also through surrounding properties through value reduction. It behooves any municipality to keep homeowners property values from tanking with a spiral of blight.
Considering that 63,000 properties were foreclosed on between 2000 and 2009 and that property values were severely reduced, any organization attempting to maintain property value through occupancy should have a solid plan and goals to achieve. The actual decrease in value is contested; it ranges from the Detroit Office of Foreclosure Prevention Office, which claims that property values decreased 33% and 78% with the Detroit Board of Realtors. The number of houses that went through foreclosure in 2009 accounted for 25% of all habitable structures in the city. Most alarmingly, of homes that were still occupied, 45% of homes were underwater. That meant that people had to pay off mortgages that cost more than the house was currently worth.
So how does the Detroit land Bank compare? We will now look into the practices by which they transfer foreclosed properties to new owners: the auction process. There are other processes by which the city cuts down at blight such as the nuisance abatement program, where they work with current owners and the police to minimize illegal activity through negotiations to demolish or forfeit and also notably the side lot sales program, which aims to increase property ownership by selling vacant land that is next to current homeowners.
The auction process is first and foremost well-advertised. There are community engagement events as well as links to the land bank website at the bottom of the City of Detroit’s homepage. Next in this field are their programs to facilitate community outreach. They have a program where interested non-profits and faith-based groups can partner up with the Detroit Land Bank. The community partnership program is further augmented by a dedicated community relations team, headed by Craig Fahle. This in itself allows the Detroit Land Bank to tie its operations into wider stakeholder groups. It is noted by Dewar et al. that the revenue geared Wayne County Treasurer’s office did not have methods or strategies in place to capitalize on coordination.
Next in importance is the nuisance abatement program. This functions by having lawsuits leveled on owners of blighted or otherwise dangerous properties. This then leads to negotiations that must end in either forfeiture or renovation of the property. This specifically targets the bulk buyers who bought and abandoned the properties and buildings to rot. We can look at this program as a last-ditch effort to preserve habitable structures and therefor preserve more taxable land.
The end of the line is the Land Bank’s hardest hit fund. In this program the most terribly blighted buildings are town down. The recently awarded grant totals $52.3 million to work on 3,300 properties. Before we get into the meat and potatoes of how auction requirements assist in a cohesive plan to help redevelop the housing crisis in Detroit, we have to ask how the Land Bank tracks the immense area and numerous properties.
Here we find Motor City Mapping, a product of Loveland Technologies and interdepartmental work to synthesize data into an easily trackable format. They have also added the cutting edge of mobile technologies through their use of apps within smartphones. This “Blexting” app allows further coordination between the residents and Land Bank employees.
So finally how do the requirements laid out reduce repeat foreclosures and spur properties to be inhabited by people by Dewar et al’s three metrics? First, you cannot bid on any of the properties if you have been foreclosed upon. This prevents certain landlords from buying complexes at low cost, not paying property tax and repurchasing new or the same properties at auction after it had been foreclosed. This fortifies the third metric. Allowing for financing and purchasing, as well as coordinating with local non-profits and faith based operations, serves to stop the spread of blight in more inhabited neighborhoods (second metric). This is all tied together by having a bottom line, or control, that serves as a barrier as to whether or not a building is worth selling. This is all tracked by the mapping system and blight is removed by the hardest hit and nuisance abatement programs. These two programs tie the others back to the first and most prominent metric to preserve and boost homeownership.
This Land Bank has laid out guidelines to lead purchasers to return to the final goal of maximizing how much land is inhabited. Specifically, as most properties have degraded to the point where they are not legally habitable, the buyer must provide a plan to bring up to code in 5 months. This either consists of a contract with specialists or receipts proving purchase of necessary materials. This process is streamlined by inspections that are available before purchase of what is needed to be done. These checklists significantly reduce the risks involved, and therefore fear that prospective buyers might have to evict squatters or be surprised by worse-than-foreseen conditions.
Next the buyer must provide proof that the property is occupied six months after the close of the auction. Extensions can be granted, but in reading materials on the website, not very often. For young families and others on the verge of income necessary to take on this process, there is financing available through the Land Bank. Having financing available, as well as payment structures and plans, significantly reduces the amount of necessary capital one may need to purchase a property and bring it up to livability. This also overcomes a failure by the Wayne County Treasurers office, which necessitated full payment in 24 hours.
All these separate programs and practices combined brings an outside observer to realize that more than auction revenue must be taken into account for a project of this type and of this magnitude. In essence it is an investment that will see returns far in the future if carried out responsibly. It is through this brief outline that we can see the Detroit Land Bank has observed other attempts to deal with blight and massive foreclosures, and build a better strategy that will keep the city functioning.
In looking at this Land Banks revenue and cost streams, we can see a punctuated increase of activity. Although previous years netted a profit, the most recent numbers coming in for 2014 and 2015 are in the red. Not only are they in the red but all numbers in question are much larger than previous years. From this we can see that the Land Bank is finally becoming fully implemented. If theory and logic hold out this will be a worthy investment for the city to continue its attempts to redefine itself and hopefully bring in a young crowd of interested and prosperous people.
Dewar et al.
Land Bank Quarterly report