Detroit has maintained a small, and largely unsuccessful program called “Building Detroit” that allows people to buy homes for as little as $1,000 at auction, just as the City of Detroit bulldozes thousands of homes. The low-priced home purchases come with a long list of provisions, which likely plays a role in why the plan has been so unsuccessful. The demolition program has, on the other hand, been successful.
The city even keeps a website to track Detroit demolitions. As a sign of how dire Detroit’s situation is, the city has lost half its population since the 1960s, and it has less than 700,000 residents today.
According to the site called Detroit Demolition Program, the city as taken down 10,268 houses. One of the stated purposes of the site is to:
Search the new Detroit Demolition Tracker to find the status of upcoming demolitions around your house.
It also trumpets the program’s benefits:
More than $90 million in demolition contracts have been awarded to Detroit-based and Detroit-headquartered businesses, more than $25 million of which has been awarded to minority-owned businesses. And more federal funding is on the way.
The U.S. EPA has recognized the high environmental standards used by the City of Detroit, saying, “Having completed a major overhaul of the demolition process, Detroit’s new demolition practices balance speed, cost and environmental performance.” (September 8, 2014)
In the past two years, Detroit has taken down 10,268 vacant buildings in neighborhoods across the city. If we keep this pace, we can remove 40,000 blighted structures in about eight years, instead of the 30 years it would have taken us at our previous rate.
A recent study shows that Detroit’s approach of strategically clustering demolitions in target areas has resulted in an increase in property values in those areas.
Building Detroit keeps a running list of Daily Auctions. This allows potential buyers the opportunity to look at houses for sale at $1,000. Then a bidding process begins. A large number of the homes have square footage of just above 1,000, or less. Many have two or three bedrooms and a single bath. Many of these homes are in sections south of 7 Mile Road and and not far from the South Field Freeway.
One of the reasons Building Detroit has not done better is likely the very long list of requirements to participate. Among them:
You must be a Michigan resident, a non-Michigan resident who will live in the property after rehab, or a company or organization authorized to do business in Michigan.You, or any legal entity in which you have an ownership interest, cannot have unpaid delinquent property taxes on properties located in Wayne County, or have lost property to back taxes in Wayne County in the last three years.
You, or any legal entity in which you have an ownership interest, cannot have material unresolved blight or code violations in the City of Detroit.
You cannot have won a previous auction and then failed to make the down payment, close on the purchase, or satisfy the conditions of bringing the property up to code and having it occupied within 6 months 9 months for homes located in a historic district).
You are limited to the purchase of one auction property until you have brought the first property up to code and have had it occupied within 6 months (9 months for homes located in a historic district). Once you have demonstrated the ability to meet the terms of the purchase agreement by successfully bringing the property up to code and having the property occupied, you can purchase one property per month. However, you will not be able to purchase any further properties if any property that was previously purchased is not in compliance with all requirements outlined in the purchase agreement. Please note, that this rule limiting the amount of properties that can be purchased may come into effect before the 6 month (9 month) deadline for any property that is purchased and not in compliance as determined by the DLBA. This rule shall also apply to all bidders that have won previous auction bids and have not completed the rehabilitation of at least one property and have it occupied within the required time period.
If you use a legal entity to purchase the property, you must have an ownership interest in it. This legal entity, and all other legal entities in which you have an ownership interest, is limited to the purchase of one auction property until the legal entity has brought the first property up to code and has it occupied within 6 months (9 months for homes located in a historic district).
Once the legal entity has demonstrated the ability to meet the terms of the purchase agreement by successfully bringing the property up to code and having the property occupied, it can purchase one property per month.
However, the legal entity will not be able to purchase any further properties if any property that was previously purchased is not in compliance with all requirements outlined in the purchase agreement. Please note, that this rule limiting the amount of properties that can be purchased may come into effect before the 6 month (9 month) deadline for any property that is purchased and not in compliance as determined by the DLBA. This rule shall also apply to all legal entities that have won previous auction bids and have not completed the rehabilitation of at least one property and have it occupied within the required time period.
A Purchaser is ineligible to purchase a property from the Detroit Land Bank Authority if they or the entity that they are purchasing under are currently involved in a Bankruptcy Proceeding.
A Purchaser is ineligible to purchase a property from the Detroit Land Bank Authority if they have an IRS lien filed against them or the entity that they are purchasing under.
Any bidder who misrepresents themselves regarding these qualifications is subject to loss of payments and/or the property.
In addition, the Detroit Land Bank reserves the right to exclude bidders with a history of delinquent taxes or code violations.
Between May 5, 2014, and June 30, 2016, 754 houses were sold at auction and the had completed the closing process.
That is as big a failure as can be imagined.
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