It has long been one of the Detroit’s most intractable problems: dealing with properties acquired when taxes aren’t paid.
With 10,000 people a year moving out, there’s little demand for the homes and land the city acquires through tax foreclosures. At last count, there were some 38,000 such parcels in the city’s inventory. And that’s just the number of tax-reverted properties owned by the city. Both the state and Wayne County own tax-reverted properties in Detroit. Those properties add significantly to the blight of neighborhoods throughout town.
The good news is that an effective way of addressing the problem may soon be established. It’s called a land bank. Think of it as a real estate broker crossed with a city planning department crossed with a selective fire sale.
As envisioned, the land bank would be an independent authority run by an appointed board. Tax-reverted property would be transferred to the land bank, which, unlike the city, can sell it below market value to spur development. The land bank would also facilitate the bundling of parcels, making land more attractive to commercial and residential developers. Once established, the land bank could also target property to acquire for specific projects.
In 2002 the state Legislature considered a measure that would have led to the creation of a land bank concentrating control of the authority in the hands of Detroit’s mayor. Concerned about having such an important development tool wielded by just one person, City Council members and nonprofit leaders successfully lobbied against the bill, and the proposal died. The issue then gained new life last year when another land bank bill fast-tracked its way through the Legislature. The new legislation allows local governments to shape the structure of any land bank authority created.
Among other things, the legislation allows local governments to create land banks capable of acquiring and dispatching land, clearing titles and gaining grant money for land rehabilitation.
Now the mayor’s office and City Council are negotiating the details of how the new authority will be structured. A key point will be how many board members each will appoint. The minimum number of Detroit residents that must be on the board, as well as basic guidelines determining how the authority will operate during its first two years are also being negotiated. Most of the details of the authority’s operations will be determined by the appointed board.
If agreement is reached, the council will then be required to pass a resolution calling for creation of the authority. An intergovernmental agreement allowing Detroit’s land bank to operate in conjunction with the state and Wayne County must be produced, with the state attorney general’s approval required.
City Council will then have final word on whether the authority is established.
City Council President Pro Tem Ken Cockrel Jr. says he expects the council to consider the issue this summer, and if things progress on schedule, the land bank could be in operation by year’s end.
Detroit Local Initiatives Support Corporation (LISC), an umbrella nonprofit organization that supports resident-led community development groups, has promised to finance start-up of the land bank by providing $250,000 annually for the first three years. LISC has also pledged to solicit donations above the initial seed money, though ideally, the land bank will be self-supporting within five years.
Land banks such as the one being considered by Detroit are a relatively new concept.
“The only established land bank that’s more than four or five years old is in Cleveland,” says Anika Goss-Foster, LISC’s program director. “They were trying to use it for a different purpose, and now they’re going back and trying to modernize it.”
That land bank, nonetheless, is credited with revitalizing Cleveland’s blighted communities. The land bank started selling abandoned residential lots for $100 and adjacent lots for $1 in 1990. Buyers were required to present plans for the parcel, and buyers with housing violations or unpaid back taxes weren’t eligible to purchase from the land bank.
Creating a land bank and appointing a board to run it is just the first step for Detroit.
“Once the board is in place, they’ll need to determine policies and procedures and bylaws,” Goss-Foster says.
Detroit’s charter requires the city to charge fair market value for properties it sells. Because the land bank would be free of that hindrance, the board, Goss-Foster says, must determine how and when reductions in sale price will be allowed. That leeway is crucial to a land bank’s success, experts say.
“I would say that a lot of the parcels in the city’s inventory are vacant parcels which no one sees any value in,” says Alan Levy, director of the city’s Department of Neighborhood Commercial. “The land is just in the neighborhood by itself, and the market may or may not be there for that.”
The legislation lets the land bank bundle together noncontiguous parcels, Goss-Foster says. Under the current system, development hinges on the acquisition of separate parcels, a process that’s prone to bogging down, allowing developers’ financing and plans to fall through before all the necessary property can be acquired.
Deposits into the land bank over the first two years will be small — only about 5,000 to 10,000 properties, according to Levy.
“We want to make sure the system’s working,” he says.
Only city-owned tax-foreclosed properties are eligible for transfer to the land bank by the City Council. The state and the county, both of which own tax-reverted properties in Detroit, are working on their own land banks, Goss-Foster says.
Foreclosed lots are traditionally available for sale through the city’s Planning and Development Department. The number of properties in the city’s inventory offers a stark testament to the current system’s ineffectiveness. Residents and officials alike complain of inadequate information about properties for sale, clouded titles, property liens and long delays that make commercial development impractical.
Part of the problem, Goss-Foster says, is that when the system now in place was established 35 years ago, it wasn’t designed to deal with the volume of property now overwhelming the city.
“They didn’t really have the strong business practices needed to deal with a property inventory that was that high,” Goss-Foster says.
An additional benefit of the most recent state legislation is a provision that automatically makes land-banked property eligible for brownfield credits — a state program that provides financial incentives for redevelopment of functionally obsolete or blighted property — without having to go through the application and approval process.
Though efficiency is a large part of a well-run land bank — and that’s what Levy and Goss-Foster are aiming for — it’s more than just a mechanism for selling properties quickly. The authority will work closely with the city’s Planning and Development Department and citizen groups to redevelop properties in ways that are good for the community.
Eventually, the land bank will be able to acquire derelict properties before foreclosure, allowing it to more easily package parcels in a way that’s attractive to developers. It won’t, however, be able to use eminent domain to acquire property.
Land bank property can be earmarked for specific purposes, though some proponents say preference should be given to residents and nonprofit organizations.
“That’s really the exciting part,” Goss-Foster says. “The land bank can acquire and bank property so you can hold the property to the highest and best use, which is so much of the problem in Detroit. There’s so much in the inventory that’s a hotbed for speculators. People come in and buy up parcels when they think there’s a new development coming, and that drives up the prices so you can’t assemble property for a development proposal. The land bank can deter a lot of that speculation.”
Councilmember Sheila Cockrel says the land bank is something Detroit has needed for a long time.
“It makes it easier for people to invest in older communities,” Cockrel says.
Though it’s not a cure-all, Goss-Foster says the land bank could literally transform the city’s landscape. With a land bank, she says, blighted and useless properties become prospects for redevelopment and the foundation for healthy neighborhoods.
“We all live with this every day. If you live in Detroit, you understand what this tool is and what you could do with vacant and abandoned property.”
Nancy Kaffer is a Metro Times staff writer. Contact her at [email protected]
