Detroit $1,000 Home Program Fails to Make Progess

Douglas A. McIntyre

Building Detroit represents a laudable effort by Detroit to remove or sell some of the huge inventory of blighted homes created by years of brutal urban financial problems and a shrinking population. As part of the effort, the organization has begun to auction off homes that can probably still be repaired. Auction prices begin at as little as $1,000. The trouble with the plan is that so few homes are up for auction, and so few homes have been sold.

Ironically, the Detroit Land Bank Authority, which handles the auctions, has another function, which is to demolish houses across the city. In a way, the Authority competes against itself as it races to both sell homes within the city limits at the same time it destroys others.

On the destruction side of the ledger:

In February 2010 the U.S. Department of Treasury created the Hardest Hit Fund to provide assistance to homeowners in 18 states that were most affected by the mortgage foreclosure crisis.

The Detroit Land Bank was awarded $52.3 million in demolition funds. This funding will allow us to demolish at least 3,300 vacant structures within the City. This is a one-time opportunity to make a major dent in Detroit’s blight problem.

Once again, given the thousand of properties that are part of the problem the Land Bank needs to address, the plan can only address a tiny fraction.

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On the auction side, the number of homes that can be bid upon now is in the dozens, and not the hundreds or the thousands. The Building Detroit program claims to sell two homes a day. At that rate it would take years, or perhaps decades, to go through the inventory of blighted homes that the city, for the time being, does not plan to destroy.

One factor about the auction rate problem is that the process to make bids is so easy, which should have the effect of drawing more bidders:

•    Each property will be open for sale for only one day. Bidding will be open from 9:00 a.m. until 5:00 p.m.
•    If any bid is made within the last 5 minutes that bidding is open, the closing time will be extended by 5 minutes.
•    The bidding will open at $1,000.00. All bids must go up in increments of $100.
•    To bid, click on the property that you want and then click on “Bid Now”.
•    If this is your first bid you will be prompted to provide your credit card information.
•    The amount of each bid submitted will be posted immediately on the screen, so that the public knows the current bid at all times, together with the Bidder Name of the current bidder.

Even the requirements for a winning bidder are very reasonable:

•    Within 30 days after closing, you must provide the Land Bank an executed copy of a contract to rehab the home. If you can demonstrate to the Land Bank you have the skills to rehab the house yourself, within 30 days after closing you must provide the Land Bank receipts showing you have purchased the materials necessary.
•    Within 6 months after closing, you must provide the Land Bank with a Certificate of Occupancy for the house and demonstrate that the house has an occupant.
•    If the property is in an historic district or has historic designation, you must provide the Land Bank with a Certificate of Occupancy within 9 months after closing.
•    If you fail to meet these deadlines, you forfeit both your purchase price and the property and are forbidden to bid in all future auctions.

According to The New York Times, Detroit officials have taken a measure of the problem, which is that 30% of structures, or 78,506 buildings within the city, are dilapidated or headed in that direction. So, the immensity of the task needed to address the issue makes it too difficult for current programs to overcome.

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