Cityscape

2019 recap: Detroit Land Bank discount for city employees harms some neighborhoods


December 01, 2019, 7:41 AM by  Violet Ikonomova

We revisit 2019 news highlights each weekend this month, concluding with a Top 10 countdown starting Dec. 22. This originally was published May 21.

The partially boarded two-story house on Mettetal Street is largely unremarkable for Detroit. With bushes that extend up to its roof, a crumbling porch and loose bricks, it’s the standard image of blight in a city still rife with abandonment.

But on this densely populated stretch in Grandmont Rosedale, a solidly middle class neighborhood of well-kept A-frames with tidy landscaped lawns, the house is an anomaly — an unwelcome drag on an otherwise vibrant neighborhood.

More peculiar than the house itself, however, is why it’s idling in this blighted state: The home’s most recent owner was a city employee who purchased it from the Detroit Land Bank Authority at a deep discount — a benefit that should have ensured its restoration.

The 2015 sale was supposed to mark a turning point for the house and block. The employee, a Detroit firefighter, had taken advantage of a 50-percent discount extended then only to city employees, retirees, and their family members, with the idea that they’d be responsible owners who could get Land Bank houses rehabbed, occupied, and back on the tax rolls.


The lone blighted house on the 14000 block of Mettetal. (Photo: Violet Ikonomova)

But none of that happened at the house on Mettetal. Instead, it has sat vacant since at least 2015 — its taxes unpaid, its blight presenting a threat to neighbors. At some point, a tree fell on it, causing a brick column in front to topple. After two years in which the owner failed to make the necessary repairs, the Land Bank took it back. It now sits in its inventory, along with about 30,000 other vacant structures.

While the house represents a worst-possible outcome for the discount program, a Deadline Detroit review of the 70 homes sold to city employees and their family members in its first year finds the program has in many cases fallen short of its goal to stabilize communities.

Nearly 40 percent of those homes sold in 2015 are today either on the brink of foreclosure, still blighted, or have been sold to new owners, some of them speculators. And instead of luring city employees or their family members to Detroit, the program has primarily attracted people seeking an investment opportunity, as the overwhelming majority of buyers appear to be renting out the properties.

Our review found:

  • Just 24 percent of houses still owned by their original buyer have a tax exemption that indicates owner-occupancy.

  • 22 percent were, as of last month, facing foreclosure over unpaid 2016 taxes and an additional 7 percent of properties had not paid taxes for 2017. Most of those facing foreclosure have made minimal payments to avoid it, but the average tax bill on the properties remains $2,200.

  • 9 percent were sold or transferred to new owners within three years.

  • 7 percent remain blighted and/or had to be taken back by the Land Bank because their owners failed to bring them up to code, while another 3 percent still have not made necessary repairs to achieve “compliance.”

  • 17 percent are currently owned by people or entities based outside Detroit.

In an interview, a Land Bank spokeswoman defended the program and rejected the idea that it could be improved through more stringent requirements. According to the Land Bank's own data, discount buyers tend to fare slightly better than standard buyers, and third-party data suggests more than 90 percent of the houses sold in the first 12 months are currently occupied.

“The goal is to get houses renovated and to get people living in them,” said Alyssa Strickland. “Of course, maybe there are some challenges for certain buyers, but I don't think any program would ever be perfect and have a perfect outcome for every single participant.”

The Land Bank is in early conversations to extend the discount to skilled-trades workers and possibly other groups.

But residents and housing advocates charge the program is an unfair, inadequate way to grow homeownership in a city of great need. Detroit was decimated by a foreclosure crisis that in the last decade flipped the historically majority-owner city to majority-renter, thrusting tens of thousands of residents into a precarious rental landscape.

The primary beneficiaries of a program like this should be people who need housing, said Michele Oberholtzer, a counselor with the United Community Housing Coalition in Detroit.

“The most frustrating thing about this is the same thing that is most frustrating about the Land Bank in general: That in a city with so many homeless, foreclosed upon, and unstably housed people that simultaneously holds tens of thousands of homes in government ownership — they can't find a way to make a fit at a large scale,” Oberholtzer said. “Why do we have to devise schemes that provide incentives to investors?”

Three doors down from the dilapidated house on Mettetal, Gloria Hunter, a 61-year-old renter, recalls fixing up a long-vacant house in Boston Edison some years ago. Her eyes widen when told the city worker who let the house on her block languish bought it for just $1,500.

“I’m telling you if I got a house for that much there’s no way I wouldn’t have moved in it,” said Hunter. “When I moved in my [Boston Edison] house — and it was vacant for 13 years so you know what it looked like — I moved in one room, fixed that room up, I moved in another room, and I took it one room at a time. And that’s what they should have done down there.”

Asked whether she felt someone should receive a discounted house because they work for or are family to someone who works for the city, she replied, “I’m just as responsible — give me a discount.”

Looking for a home or for profit?


Nearly 500 Land Bank-owned houses have been sold at a discount to city employees and their family members over the last 3.5 years. (Photo: Violet Ikonomova)

Created by the Land Bank in 2015 at the request of Mayor Mike Duggan, the 50-percent discount was billed as a way to increase residency and limit abandonment while at the same time giving a leg up to city workers and pensioners who’d taken cuts during and before bankruptcy. The discount is applied after a buyer wins a house in the Land Bank auction, which traditionally sells vacant houses in the city’s more viable neighborhoods to the general public. Discount recipients must only adhere to the standard auction rules — they face no additional requirements.

As of February, the Land Bank had awarded more than $4 million in discounts for 470 houses purchased by current or former city employees, their family members, or city school teachers. Renovations are complete at 40 percent of those houses, with work in progress on many others. In the program's first year, it appears the discount was utilized primarily by family members of city employees, and not the workers themselves.

When the program was established, there was little indication that participants would primarily use it to make money. Instead, the emphasis was on owner-occupancy: buyers would fix up the houses and live in them, helping stabilize neighborhoods.

“Whether they are renters looking to buy, homeowners who want to restore and move into a bigger house, or employees living in the suburbs who might like to return to the city, we wanted to make it easier,” Duggan said at the time.

A resolution passed unanimously by city council also stressed owner-occupancy: “We must provide incentives to encourage the city’s employees and retirees and their families to reside within the city,” it read. “City employees are dedicated public servants committed to the city’s future and crucial partners in all revitalization efforts.”

But the program does not require that buyers actually inhabit the property, and it seems that very few do. Instead, the overwhelming majority of the houses appear to be rentals, based on property records and conversations with owners, occupants, and neighbors. A small fraction have been sold, in some cases to speculators or for considerable profit.

And that’s not ideal for neighborhoods, says Peter Hammer, director of the Damon J. Keith Center for Civil Rights at Wayne State University.

“Owner-occupancy matters because occupancy prevents blight,” he says. “If the people who are buying [the house] don't live there, there’s a much better chance of it not being occupied full-time."

“If it’s owner-occupied there’s also a nice alignment of incentives: People have more incentive to invest, take care of and maintain the home, whereas renters have a very different incentive structure.”

That profit appears to be the motive on many of these sales can also lead to negative outcomes, he said.

“Many of the problems in the property market have been caused by speculation, and letting these back onto the market in an unstable manner can further destabilize the market.”

Indeed, property records suggest instability and an uncertain future for some of the houses.

One buyer transferred a house for which she received a $4,000 discount to someone for no money within two years. That person then sold it for $30,000 a year later to a couple listed as living in New York, who also own property in New Jersey. It’s unclear what repairs were done to the home before the mark up, as no rehab permits were ever taken out and exterior images show the property was in good shape around the time of sale. A renter lives there now.

Another participant received a $14,000 discount on a house in Detroit’s Bagley neighborhood, and three years later, sold it for $45,000 to John Whitby Forsyth Properties, a Georgia-based speculator that owns dozens of houses in Detroit. The property appeared to also be in good condition and the buyer took out no permits for rehabilitation work. A family is currently renting it.

Ennis McGee, a building engineer at the city, received $62,000 off a house in Boston Edison in 2015 and sold it two years later to Possibility 7 LLC, another speculator, for only a small return. He too never took out a permit for rehabilitation work. Records show he also didn’t pay taxes on the property.

A handful of additional properties transferred with no record of money exchanged. It’s unclear if the new owners have any connection to city government; the Land Bank does not keep track of what happens to properties once the necessary improvements are made.

Many buyers also had more than one home in Detroit, further indication of a possible rental. Deidric and Natasha Tupper, city of Detroit retirees listed as living in Southfield, each bought a home through the program and now rent them out. Natasha said they were grateful for the opportunity to make some extra money, “because you should see my husband’s retirement check after two decades, it is seriously laughable.”

The Land Bank disputed that less than a quarter of the houses were owner-occupied, as the homestead exemptions suggest. Instead, it believes about half of the houses to be occupied by the people who bought them, based on its own, more lax measure of owner-occupancy. The Land Bank considers a house likely owner-occupied when the owner lists it as their mailing address. But a closer look at 10 randomly selected properties that fit that criteria revealed the measure is flawed. Just three of the houses were owner-occupied; the other seven were rentals or vacant.

Still, Strickland framed the unintended rental outcome as a positive.

“If some city employees are using [this] as a way to make extra income, then you know, I think that that's a benefit to city employees that they have a new way to make some additional money renting out homes,” said Strickland.

The Duggan administration echoed that sentiment, going on to reframe the initial stated goal of the program.

“The employee discount program was created to provide an incentive for more vacant land bank homes in our neighborhoods to be renovated, and the program has succeeded in that goal,” said Chief of Staff Alexis Wiley. “This program has been a success and we continue to fully support it.”

It's not known how many properties needed renovation. The lion's share were plucked from a batch slated for the 2014 Wayne County tax foreclosure auction, suggesting they hadn't been vacant for long. And less than a quarter of owners took out rehab permits. The program requires at least one permit when renovations are necessary.

Lax vetting process

Whether city employees and their family members tend to make good homeowners is unclear. 

In northwest Detroit, on Indiana Street, Deputy District 5 Manager Karla Williamson is among the more than 20 percent of 2015 discount recipients barely hanging onto their properties. She hasn’t paid her 2016 taxes in full, but has been making monthly payments of about $100 as part of a payment plan to avoid losing the house.

Further west, at a house near Rouge Park, Martisa Hairston, the sister of Kenyetta Hairston-Bridges, vice president of real estate and financial services at the Detroit Economic Growth Corporation, owes more than $5,200 in taxes and has not made any payments to keep from losing the house in the fall foreclosure auction. What’s more, she was able to buy with the Land Bank discount, despite owing taxes on another Detroit house that is now subject to foreclosure. The auction rules are supposed to prevent that.

Williamson and Hairston did not respond to requests for comment.

Part of the reason the discount program can attract sub-par buyers is because it doesn’t require they show proof they can afford not only taxes, but often costly repairs on a property. After a property is sold, the Land Bank checks only to see if work is being done to bring it up to code within a target 6-9 months. It has to be occupied for one year, and, if it’s sold before three years, the Land Bank takes a portion.

The requirements are far more lax than those of another DLBA program to increase access to home ownership. The "buyback" program — typically geared toward renters whose landlords lost their homes due to unpaid taxes — requires purchasers escrow a month’s worth of taxes, keep current on tax payments and water bills for a year, and attend homeownership workshops. They receive a deed only after the program requirements are met.

Land Bank board chair Erica Ward Gerson has hailed that program as a great success.

“Of all the programs we run, buyback is the one I'm the proudest of," Gerson said last year in an interview with the Free Press. "To me, the most remarkable thing is we've only taken back three properties from people who signed agreements, started putting money aside."

To date, the buyback program has awarded 324 deeds and nine houses have been taken back.

Strickland, the agency’s spokeswoman, said the buyback program requirements help ensure positive outcomes.

“There are additional requirements, because the goal is that we want them to be successful rather than just saying, give us $1,000 and here is the deed,” she said. “We want to make sure that they're armed with the tools to hold onto those properties and be successful owners once they complete the program.”

But when asked whether the Land Bank has considered incorporating some of the buyback program’s provisions to improve the success rate of the auction discount program, Strickland said no, that it wouldn’t be in the authority’s best interest to “add additional barriers.”

Too quick to seize?


Armando Clinton says "it would be nice" if the Land Bank "actually did something" with the blighted house next door. (Photo: Violet Ikonomova)

Where the Land Bank does impose stringent requirements is on the timeline for repairs. Buyers must provide monthly updates on their progress, and are expected to wrap up within 9 months, though additional time is allowed if progress is being made.

Some who lost homes for a lack of repairs complained they were blindsided by the rehab requirements, and didn’t have the money or time to complete the work.

Maurice Funchess — the firefighter who owned the dilapidated house on Mettetal — says he spent thousands of dollars scraping, painting, and redoing floors in the first year he owned the house. But a couple of burglaries set him back, and he hadn’t budgeted for the porch and brick work. Unsatisfied with his progress, the Land Bank took back the house a year later.

“It’s not for poor folks, you can’t do it if you’re poor,” said Funchess, who was earning $70,000 a year between his job as a firefighter and other gigs at the time. “You need some help, some programs, a little bit of money to go in, like a grant or loan. There’s some that are out there, but they’re so hard to get.”

Things went even worse for Jeffery Marshall, the son of a Detroit Water and Sewerage Department employee. Marshall sunk $10,000 into his property between 2015 and last year, foregoing paying taxes in order to cover the repairs. But, like Funchess, he wasn’t working quickly enough and things kept getting stolen. This year, with the house facing foreclosure, he paid off his 2016 tax bill in hopes of holding onto it. Shortly after, the Land Bank took it back.

Marshall places some blame on the Land Bank for not fully communicating the requirements of the program or condition of the house.

“There were some shockers at the closing like you have to do this, this, and this, and the house had a lot more problems than what the listing said … there were issues with the foundation and the plumbing was nowhere up to code.”

“The whole thing was really, really stressful, to the point where my friends who were helping me were just telling me to give the house back.” Still, he says, “Even to this day I would fix the house up, I just needed more time.”

The Land Bank does today explain the program requirements on its website.

In some cases, such repossessions wind up benefiting the Land Bank, which, due to an improving housing market, is able to sell them for more to new buyers. However, those people ultimately stand the same chance of success as Marshall.

In other cases, they remain a burden to neighbors, like the mother and son who live next to the house Marshall lost. Roots from a large tree stretch all the way to their property, where they’ve broken the driveway, compromised the home’s foundation and burst a pipe. The son, Armando Clinton, says the foundation fix alone cost $3,000.

But the now-Land Bank owned house isn’t Clinton’s only concern: across the street sits a burned out house he says was set ablaze by squatters. Its owner, who lives elsewhere in the city, had told him he would fix it up.

The charred house, and Clinton’s foundation bill, are powerful reminders of what can happen when homes sit too long.

Of the house next door, Clinton says simply, “It would be nice if they actually did something with it.”



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Potd_img_8262_379 Abstract painted door on Saint Aubin Street and Gratiot Avenue, near Eastern Market.

By: Michael Lucido