The Land Bank in Detroit is, in effect, an organization by which the City oversees the takeover and subsequent resale, demolition or repurposing of previously privately and publicly owned properties. On a topical level this process is strongly opposed. Why and how can a City rationalize that taking someone’s property and selling it is an idea that meets good governance standards? It can almost seem like and example of a government overreaching its power. In this article we will briefly outline the basic legal framework, economic reasoning and processes that the Detroit Land Bank goes through to make sure it follows good governance practices.
Margaret Dewar offers an excellent and concise overview of what happened to major cities in what has become known as the nation’s “rustbelt”.
In many northeastern and midwestern U.S. cities, population and job losses after World War II reduced the demand for housing and commercial property, leading to the eventual abandonment of homes, retail districts, and industrial areas. By the 1990s many of these cities were plagued with tens of thousands of abandoned buildings, vacant lots, and tax-reverted properties, though their experiences varied based on population and job losses, durability of buildings, and laws governing foreclosure for property tax delinquency and liability for environmental contamination.
In the case of Detroit there has been a widespread migration of people to suburban municipalities due to social, racial and economic differences in the population and that is further compounded with lower and lower employment opportunities in a previously homogenous market for labor. Here this means manufacturing for the auto industry.
The people that remain in these city centers tend to be the poorest and least able to shoulder the cost of leaving, as well as those with the most attachment to ideals the city used to espouse. With less employment the desire to move is further punctuated to the point that some people have flat out abandoned their properties. The remaining properties then begin to become devalued as less and less of the people who have decided to migrate away are able to sell their homes. We then see out first issue: large amounts of empty properties. As these properties are left to rot, they begin to accrue housing code violations.
As Thomas Gunton outlines vacant properties can, in a larger sense, be identified as any building, commercial or residential properties, that bears significant housing code violations as well as environmentally contaminated industrial properties. As these have become “legion” in rustbelt cities and especially in Detroit, we then witness what has become known as the “spiral of blight”.
The issue concerning large amounts of blight in a neighborhood is simple. As more and more properties are not maintained in a neighborhood, all properties in the neighborhood lose their value. This does two things: first it further punctuates the need for people to leave and second is that it decreases the City’s ability to enforce housing code as well as provide for other services.
This second issue is more complex as there are diverse and far-reaching effects concerning property devaluation. The majority of Detroit’s tax revenue comes from property taxes, which are levied as a percentage of the total property value. As people abandon properties the property tax revenue, which is a main source for the city is directly and indirectly reduced from devalued homes that are not abandoned. This means that fewer services, such as firefighter control and streetlight maintenance, can be provided by the city. As less services are provided for, less care and ultimately dangerous behavior becomes more and more normal. This is where the downward circle has come completely around.
These vacant properties become extraordinarily expensive to a city. They are a source of cost rather than (tax reverted rather than tax-generating) revenue and they allow for the number of truly “nuisance properties” to grow. By 2006 the city owned between 38,000 and 40,000 parcels of land through tax delinquency and there was an estimated 90,000 vacant properties, which makes up 18% of the cities land area and 23% of the cities land parcels. This trend makes a tough situation nearly untenable to a city which is attempting to bring in more diverse employment opportunities and revitalize the struggling system.
The solution to this issue is to find a way to transform these tax reverted properties into tax-generating, prosperous, properties. In other examples such as Dewar’s outline of the efficacious Cleveland Land Bank there have been many hurdles Detroit has faced. We will now outline the legal, as well as more structural organizational blocks that need to be cleared in order to spark redevelopment in the cities suburban neighborhoods.
As should be evident this solution, where a city would takeover blighted properties to resale demolish or in other ways make decisions regarding the future of the property, has many legal hurdles. In 2006 Thomas Gunton outlined four major sources of legal concern. The Issues included clouded titles, property tax delinquency laws, handling and disposition of foreclosed properties, and finally the transfer of public properties to private hands.
The first and most prevalent concern were the many cases of “clouded titles”. This means that the legal right to control and dispose of properties. This can be caused in multiple ways were the current owner has property tax liens or other forms of secured debt, such as mortgages, that are propped up by the value of the property. This really boils down to the question of who really owns the property. As can be imagined, this is a huge issue after the 2008 collapse of the housing market due to predatory lending practices. Solving this problem had to be undertaken with coordination and data collection.
The next three, while sizeable in nature required systemic legal fixes and precedent set forth in order to complete the transfer of property from vacant or delinquent status to the hands of someone who is able to redevelop the parcel and recreate prosperity and economic activity.
A large rustbelt city with similar issues to Detroit’s Land Bank is Cleveland. Cleveland’s Land Bank has historically been noted to be an efficient performer in transforming vacant property to prosperous status once again. We can use this comparison to infer the more structural hurdles that the Detroit Land Bank needed to clear before it could be more effective.
How did Cleveland do better than Detroit? The easy answer is that Detroit’s problem was larger. Detroit had a larger scale of vacant land 23% vs 11% of empty parcels in Cleveland. Cleveland also acted more transparently and there was a strategic plan laid out for each property to follow. This meant that people who wished to purchase this vacant land could know what policies they had to follow, knew the policies would not change and developers literally had to document a trial and error period in an attempt to effect changes in the 1990’s. This ineffective cooperation precluded a regimented or efficient redevelopment of properties in Detroit.
What does the Land Bank do now?
As is important to creating a strategic plan to move forward in a cohesive manner, the Detroit Land Bank has made real efforts to bring the transformation process up to speed and truly effective. Since 2006 they have straightened out the legal troubles associated with the associated transfer of ownership as well as the structural issues that were outlined in the previous section.
Both Gunton and Dewar make it clear that what makes a land bank successful is the clarity by which it outlines its goals and the ways that the organization molds itself to fit the communities that it services. For example in previous years this Land Bank was known to be opaque and did not have clear goals and policies outlined. This change has also been made and although the scale of the issue for Detroit is still quite large, their legal roadblocks have been cleared and from reviewing their materials so it seems the coordination with developers.
Identifying the problem: Strategy
The first step in creating transparency in government is to actually have a cohesive plan in place that you can disclose. As the author suspects, it is unlikely that there was one plan in any books prior to 2008 as there were inconsistent estimates for the sheer number of vacant properties, especially that the city itself owned. So to create a cohesive plan, you need to identify the problem entirely. This is where the Motor City Mapping program comes into play.
Source: Motor City Mapping, Product of LovelandTechnologies, Special thanks to Matt Klovski
This program has continually surveyed 375,142 properties, 83,023 are publicly owned and 288,739 are privately owned. Below you can see the websites output concerning whether or not the building is occupied, whether it has a building on it, and if so what that buildings condition is. They also track illegal dumping, fire damaged structures, and structures that need to be boarded up. As this is a huge task for any agency to do, they have a quite cool method for collecting this data: the Blexting app. They have utilized the merits of modern technology to text pictures of blighted buildings so the Land Bank can keep track of deterioration and determine whether or not the building is vacant, needs to be boarded up etc.
Having access to this level of information has allowed the city to create structured plans as well as visualize vacancy throughout the city. As the below map illustrates, this is a pervasive problem for the city, but now with the help of GIS mapping a plan can be made and outlined for public involvement.
What does the Land Bank do and what are its resources?
Source: Motor City Mapping, Product of LovelandTechnologies, Special thanks to Matt Klovski
As is evident in the handy graphic above, the l Land Bank serves as a bridge between land use that is costly to a municipal government to land usage that actually generates revenue, therefore allowing that government to be efficacious. Now we can outline the revenues and processes that the Land Bank makes.
What the Land Bank Does Now
As has been identified by both Gunton and Dewar, in previous years the largest concern for the Detroit Land Bank has been issues in transparency and the general lack of structured or cohesive plans to allow people to help the revitalization process. That has been changed for the better with the use of modern technology and the internet.
We can discern that one of the main goals of the Detroit Land Bank is to resell properties to people within the city, in effect to keep a more localized ownership to ease “outsider” control that many Detroiters dislike. There is a series of programs that are now posted in efforts to help revitalize the area. These processes are checked by what the return on investment is. The overarching goal is to recreate tax revenue for the city, so it makes sense to have that as a good, quantifiable, check to progress. Although this marker seems cold, it should be noted that with more revenue comes more police, streetlights, firefighters and other services that the City needs to provide more of.
The list of programs in the Land Bank is not the longest, but on their website each has a tab, with bullet points concerning the main points of operation. We have already gone over the Motor City Mapping, and planning stage and we will outline the newest program in the next paragraph. The main program is the Auction Program, where the city sells properties that have been foreclosed on or transferred to the city for various other reasons. That is the main tenement of the Land Bank. There are side lot sales, where current owners can buy lots that are next to their homes. There is also the Hardest Hit Fund/Demolition program where, using Federal Grant funds, the city identifies buildings that are too far gone to be reasonably brought back up to living standards and demolishes the building on the property. Lastly there is the Community Partnership Program, where the city reaches out to various communities throughout the city and even contracts work out to interested building contractors and other service providers located in the city.
One of the newest programs, which was implemented in January of 2015, is the Nuisance Abatement program, where the Land Bank uses structured contact methods to get in touch with vacant building owners. The house must fall into certain categories such as boarded up and or open to trespass. This program has come to agreements with 200 nuisance property owners to either demolish or to bring the home up to code. According to the Quarterly report to City council on July 11, this program has been able to come to agreements where 101 owners will bring their homes back up to living standards.
All of these programs and activities are funded through government grants, auction revenues and private grants. These total $44.1 million for the fiscal year 2014-2015. The Land Bank employs 35 people and contract out other services, such as demolition. That brings their projected budget for the same year to just over $56 million. They expect to continue to take in more properties through tax foreclosure and the nuisance properties program. They do expect to run a deficit of almost $12 million in the 2015 fiscal year, which is an increase from surpluses in 2013 and a deficit of about $500,000 in 2014.
As this process is legitimized as an investment that will allow the city to transform assets that were previously costly into revenue generating. This process, if efficacious, will return the city to equilibrium. The goal here is to stabilize away from the spiral of blight and build a strong foundation to legitimately competitive performance. On heavy equipment, you can knock off the rust, grease up the gears and get the engine running smoothly once again.
Maps were given special permissions to use from Loveland Technologies
Detroit Law Review
July 11 2015 Quarterly report to the City Council
Land Bank Website
Image of Land Bank Processes
Margaret Dewars Comparison to Cleveland
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