Detroit spends $9 million on 30 homes.

[mwilbert]

I think it would have made sense to do more modest updates on a larger number of houses.

Also true, but the point here is that if you have a program that requires that houses be sold to people with incomes that are likely to be inadequate to maintain larger homes, it doesn't make much sense to renovate larger homes if your goal is to stabilize the neighborhood. Making modest updates to large houses in B-E wouldn't really have been much better if you end up with homeowners who can't maintain the houses.

[Scottathew]

Also true, but the point here is that if you have a program that requires that houses be sold to people with incomes that are likely to be inadequate to maintain larger homes, it doesn't make much sense to renovate larger homes if your goal is to stabilize the neighborhood. Making modest updates to large houses in B-E wouldn't really have been much better if you end up with homeowners who can't maintain the houses.

Excellent point. In that case you're even worse off because you now have a house that costs more money to maintain.

[old guy]

In the article where they list the cost of expenses to rehab the house, a quick ballpark addition comes to somewhere around $160,000 - $170,000 in expenses for materials and some work. If the house cost $483.000 to rehab, doesn't that leave somewhere in the area of $300,000 in labor costs. I'd like to get a few of those job contracts. I wonder who did?

[Hermod]

In the article where they list the cost of expenses to rehab the house, a quick ballpark addition comes to somewhere around $160,000 - $170,000 in expenses for materials and some work. If the house cost $483.000 to rehab, doesn't that leave somewhere in the area of $300,000 in labor costs. I'd like to get a few of those job contracts. I wonder who did?

Friends and family. It is a Detroit tradition.

[rex]

I dont relish taking advantage but had I known about this I might have looked into Boston Edison for one of them. Even if that # is exaggerated to be able to pay 80K for a special house in a special neighborhood that has had several hundred thousand invested seems like a good deal. Its several hundred thousand that i wouldnt have to spend and a house that would need next to nothing but basic upkeep for 15-20 years. It will take a little time before that area becomes family friendly but for a single man with sought after tech skills that could find employment downtown it could work. Buy a good security system and a dog.

[Wesley Mouch]

Also true, but the point here is that if you have a program that requires that houses be sold to people with incomes that are likely to be inadequate to maintain larger homes, it doesn't make much sense to renovate larger homes if your goal is to stabilize the neighborhood. Making modest updates to large houses in B-E wouldn't really have been much better if you end up with homeowners who can't maintain the houses.

Most government programs deal with unanticipated results. Its why central planning is to be avoided. Like schools -- the best thing about charters is that they can try something -- experience results -- change approach. Government programs often can't adjust. The enabling law usually has specific rules. Its easy to imagine that the law here wanted disadvantaged residents to get bigger houses. So the program may have done what it was intended to do.

[rex]

I like to think this is about more than making a profit flipping houses. There is a desired outcome that moves middle income families in to strengthen the neighborhood. They're improving the housing stock, adding value to nearby homes, and turning liabilities into assets.

[Motor City Sam]

They're basically using federal urban renewal funds to enrich connected contractors. The homebuyers are besides the point. No one puts 10x into a home worth x.

Exactly. You and I don't agree on everything [[although I do respect your opinions), but we are 100% on the same page with this situation.

There is no way to defend this.

[GUSHI]

Some one made a lot of money on these homes,

[Hermod]

Most government programs deal with unanticipated results. Its why central planning is to be avoided. Like schools -- the best thing about charters is that they can try something -- experience results -- change approach. Government programs often can't adjust. The enabling law usually has specific rules. Its easy to imagine that the law here wanted disadvantaged residents to get bigger houses. So the program may have done what it was intended to do.

Government programs tend to work to the metric. A disillusioned Soviet economist once pointed out about central planning and incentives for production that "if we measure by quantity of nails produced the hardware stores will have nothing but carpet tacks, if we measure by weight of nails produced the hardware stores will have nothing but railroad spikes, and if we measure by value of nails produced we will see the first solid gold nails".

[ABetterDetroit]

Federal funds when piped back to the states, cities, towns, whatever come with guidelines. Uncle sugar sets his own rules on how they can be used, auditing practices, purpose of funds, etc.

Now I am getting some sort of vibe from some folks that because these funds came from the Feds that must mean that "whoever" sent this money knew what they were doing when they set up the guidelines. Nothing could be further from the truth. [[ totally different discussion tho ) In the wake of the finacial crisis of 2008 the Feds couldn't pump the money out fast enough, in incredible staggering amounts [[ again another diff debate ) and as they started chucking it around the rules, reasons, and purposes actually became pretty crazy. [[ I know, but remember the Feds are gov. also. Not all that smart. With their 6 trillion $ annual income they fucked up the books completely, if they didn't print the money then lend it to themselves and set the rate, they would be bankrupt as well )

This part is the most ironic in my eyes. Remember the days when Detroit left literally hundreds of millions of Fed $ on the table because they really just flat out could not meet the guidelines required and the money would go completely unused because the city lacked the expertise to jump through the stupid hoops the Feds would set up for it? Well here we are. Is Detroit getting better at grabbing uncle sugars handouts and doing something with it or was uncle sugar just pouring money out the window? My guess is the truth lies somewhere in the middle.

[rex]

Hey. Im just glad they used some federal funds. Hasn't the city returned a bunch of money to the feds? Mismanaged, failed to take advantage

[Honky Tonk]

Hey. Im just glad they used some federal funds. Hasn't the city returned a bunch of money to the feds? Mismanaged, failed to take advantage

Detroit returned $11 mil because they failed to tear down blighted homes with it. There was another large amount returned because they failed to dress for success low income residents.

[mwilbert]

Most government programs deal with unanticipated results. Its why central planning is to be avoided.

This is not really relevant here. There aren't any unanticipated consequences here--we are busy anticipating possible consequences that haven't occurred. As far as I can tell the program did what it was supposed to do. The problem is that what it was supposed to do wasn't very sensible, which is also a problem with some government programs, but it is a different problem.

Nor are unanticipated results a major reason why central planning is bad. Unanticipated results are a natural result of all human activity. People like to talk about them in the context of governmental action, but there isn't anything special about government in that regard. The main problem with central planning is an inability to adequately understand and address the variety of human needs because central planners don't have a good substitute for the information provided by market prices.

[royce]

This is a non-story. Just a headline grabber. Not Detroit money.

[royce]

One other thing. Getting a home owner in the house, paying taxes for 10, 20, or 30 years, clearly helps recoup most of the costs put into the home to bring it up to code and make it marketable.

[BillyBBrew]

We have 5 homes being renovated/rehabbed in West Village currently. The money for these came from one of the phases of the Neighborhood Stabilization program. It is my understanding that while this money is adminstered and controlled by the federal government, the money actually comes from fines assessed to financial institutions being reinvested back into the neighborhoods they helped destroy. 3 of the rehabs are single family houses which will be sold and 2 of them are 2 family units which will be owned and rented by the Villages CDC.

While on the face of it, a $300,000 renovation of a house that will sell for $75,000 seems ludicrous, the reality is that it serves a purpose. In West Village they picked 5 of the very worst houses that no one would want or could ever begin to justify renovating, yet were still structurally sound. By renovating these houses, they keep the neighborhood density, and it does spur the economy, at least in our neighborhood. If the worst houses are fixed, then developers and investors feel confidence in buying and renovating the more viable houses, even if they aren't cheap easy fixes, but involve some investment. The houses they are doing are being completely rehabbed, new guts, new walls, flooring, kitchens, bathrooms, etc. It makes no sense at all to do something half assed if you want it to stay. The people moving into these houses likely won't stay forever and if you don't do it right the first time, you end up with another ghetto piece of crap that's falling apart.

There was a fair and just bidding process for the West Village houses. Bids were solicited and reviewed, both for the planning and the construction. There was no "friends and family", while some preference was probably given to Detroit based businesses. Not sure about that but assume so. I am very happy with what's happening in West Village and I have watched and am impressed with the crews working daily on the houses, doing quality work with quality materials. I just wish we could do a few more houses.

Meanwhile my block, which 1 year ago had 4 occupied housing units out of 12 available, now has 8 properties occupied out of the 12 available and one more under renovation/gut rehab by private owners and one for sale with a lot of interest in it. Only 3 of the occupied units are rentals [[one of the 3 being an owner occupied 2 family flat, 1 owner, 1 renter) To me this is a significant improvement and the stabilization will only make it better.

Thank you to the Villages CDC for making this happen. A dedicated group of people who work really hard for our neighborhoods.

[old guy]

But once again, although this might have been a good project with good intentions and possibly a good outcome, weren't there some contractors which weren't mentioned that made outrageous profits. Why doesn't the news coverage mention who these contractors are and what their profit margin is? I worked in the contracting business for a number of years and the profit margin here seems to be somewhat suspect. I also lived in Detroit for a number of years and it doesn't surprise me that this would be the case.
It just doesn't seem to add up to be a logical situation. It seems that a larger number of homes could have been brought back to life with that amount of money producing a greater impact.

I'm reasonably knowledgeable about the building trade and these numbers just don't seem to make sense unless someone is well connected with the financial sector of the project. Who were the contractors or the people issuing the contracts? Why isn't that part of the reporting? Seems somewhat pertinent.

Escalating costs

The Detroit Land Bank spent nearly $483,000 on a 3,800 square-foot, five-bedroom home on Chicago. The house sold for $100,000 to a buyer who got $25,000 in forgivable down payment assistance.
Here are some of the expenses:
$26,642 purchase price and holding costs
$38,800 wood windows
$15,000 repair and finish wood floors
$14,192 paint
$14,000 kitchen cabinets and countertops
$10,500 ceramic tile
$10,000 waterproofing
$10,000 lead abatement
$9,400 insulation
$5,000 appliances
$4,000 exterior doors
Source: Detroit Land Bank

The cost of the home and the materials seem reasonable. The cost of the labor sounds extremely extravagant. Somebody knows somebody that has a friend that knows somebody.

[emu steve]

We have 5 homes being renovated/rehabbed in West Village currently. The money for these came from one of the phases of the Neighborhood Stabilization program. It is my understanding that while this money is adminstered and controlled by the federal government, the money actually comes from fines assessed to financial institutions being reinvested back into the neighborhoods they helped destroy. 3 of the rehabs are single family houses which will be sold and 2 of them are 2 family units which will be owned and rented by the Villages CDC.

While on the face of it, a $300,000 renovation of a house that will sell for $75,000 seems ludicrous, the reality is that it serves a purpose. In West Village they picked 5 of the very worst houses that no one would want or could ever begin to justify renovating, yet were still structurally sound. By renovating these houses, they keep the neighborhood density, and it does spur the economy, at least in our neighborhood. If the worst houses are fixed, then developers and investors feel confidence in buying and renovating the more viable houses, even if they aren't cheap easy fixes, but involve some investment. The houses they are doing are being completely rehabbed, new guts, new walls, flooring, kitchens, bathrooms, etc. It makes no sense at all to do something half assed if you want it to stay. The people moving into these houses likely won't stay forever and if you don't do it right the first time, you end up with another ghetto piece of crap that's falling apart.

There was a fair and just bidding process for the West Village houses. Bids were solicited and reviewed, both for the planning and the construction. There was no "friends and family", while some preference was probably given to Detroit based businesses. Not sure about that but assume so. I am very happy with what's happening in West Village and I have watched and am impressed with the crews working daily on the houses, doing quality work with quality materials. I just wish we could do a few more houses.

Meanwhile my block, which 1 year ago had 4 occupied housing units out of 12 available, now has 8 properties occupied out of the 12 available and one more under renovation/gut rehab by private owners and one for sale with a lot of interest in it. Only 3 of the occupied units are rentals [[one of the 3 being an owner occupied 2 family flat, 1 owner, 1 renter) To me this is a significant improvement and the stabilization will only make it better.

Thank you to the Villages CDC for making this happen. A dedicated group of people who work really hard for our neighborhoods.

Good information.

[emu steve]

We have 5 homes being renovated/rehabbed in West Village currently. The money for these came from one of the phases of the Neighborhood Stabilization program. It is my understanding that while this money is adminstered and controlled by the federal government, the money actually comes from fines assessed to financial institutions being reinvested back into the neighborhoods they helped destroy. 3 of the rehabs are single family houses which will be sold and 2 of them are 2 family units which will be owned and rented by the Villages CDC.

While on the face of it, a $300,000 renovation of a house that will sell for $75,000 seems ludicrous, the reality is that it serves a purpose. In West Village they picked 5 of the very worst houses that no one would want or could ever begin to justify renovating, yet were still structurally sound. By renovating these houses, they keep the neighborhood density, and it does spur the economy, at least in our neighborhood. If the worst houses are fixed, then developers and investors feel confidence in buying and renovating the more viable houses, even if they aren't cheap easy fixes, but involve some investment. The houses they are doing are being completely rehabbed, new guts, new walls, flooring, kitchens, bathrooms, etc. It makes no sense at all to do something half assed if you want it to stay. The people moving into these houses likely won't stay forever and if you don't do it right the first time, you end up with another ghetto piece of crap that's falling apart.

There was a fair and just bidding process for the West Village houses. Bids were solicited and reviewed, both for the planning and the construction. There was no "friends and family", while some preference was probably given to Detroit based businesses. Not sure about that but assume so. I am very happy with what's happening in West Village and I have watched and am impressed with the crews working daily on the houses, doing quality work with quality materials. I just wish we could do a few more houses.

Meanwhile my block, which 1 year ago had 4 occupied housing units out of 12 available, now has 8 properties occupied out of the 12 available and one more under renovation/gut rehab by private owners and one for sale with a lot of interest in it. Only 3 of the occupied units are rentals [[one of the 3 being an owner occupied 2 family flat, 1 owner, 1 renter) To me this is a significant improvement and the stabilization will only make it better.

Thank you to the Villages CDC for making this happen. A dedicated group of people who work really hard for our neighborhoods.

One of the problems with 'new construction' [[really not the case here, but close enough) is that in a city like Detroit with depressed housing values, it costs more to build a house than the house would sell.

The only difference between building a new house in Detroit and say B'ham is the price of the land.

No one sells kitchen cabinets and countertops at a 25% discount because it will be in a house south of Eight Mile.

[Zacha341]

I agree. The heating bills in the winter even for a flat or apartment can be high. Double, triple that for those older big foot houses.

...Even at twice that income level, I would be very worried given the huge costs in these big old homes. They could have 4-figure heating bills.

[Zacha341]

That would be the Detroit way of doing things......

...The cost of the home and the materials seem reasonable. The cost of the labor sounds extremely extravagant. Somebody knows somebody that has a friend that knows somebody.

[Zacha341]

Uhh, yeah.

Friends and family. It is a Detroit tradition.

[Wesley Mouch]

One of the problems with 'new construction' [[really not the case here, but close enough) is that in a city like Detroit with depressed housing values, it costs more to build a house than the house would sell.

The only difference between building a new house in Detroit and say B'ham is the price of the land.

No one sells kitchen cabinets and countertops at a 25% discount because it will be in a house south of Eight Mile.

So in other words, the cost of Detroit land is actually negative. So your $180,000 house [[1,200 s.f. @ $150/ft.) becomes worth $75,000 in Detroit, but $260,000 in Lathrup Village.

Lathrup:
$180,000 house value
$50,000 land value
$230,000 total value in place

Detroit
$180,000 house value
$105,000 NEGATIVE land value
$75,000 total value in place

Thus, to get people to live in Detroit, you really do need to pay them.

[emu steve]

So in other words, the cost of Detroit land is actually negative. So your $180,000 house [[1,200 s.f. @ $150/ft.) becomes worth $75,000 in Detroit, but $260,000 in Lathrup Village.

Lathrup:
$180,000 house value
$50,000 land value
$230,000 total value in place

Detroit
$180,000 house value
$105,000 NEGATIVE land value
$75,000 total value in place

Thus, to get people to live in Detroit, you really do need to pay them.

Actually, land values for say Georgetown [[D.C.), B'ham, Detroit, etc can all over the map.

The land might be worth 1M in Georgetown, 250K+ in B'ham, and very negative in Detroit.

The idea, of course, now is to stabilize neighborhoods so that housing values increase. Good for homeowners and good for the city.

And, guys, for those who have been living under a rock in recent years, ONE reason Detroit has so much problem with the budget is REVENUE [[or lack there of). To counter John Boehner, the problem in Detroit is more of a revenue problem than a spending problem.

Detroit has a terrible residential real estate tax base which has declined sharply. Isn't real estate taxes what pays for schools, police, etc... [[yes, it is).

Detroit needs to collect more tax revenues from both commercial and residential real estate.

The best way for Detroit to get back on its feet is for more commercial development, esp. in downtown and for the revitalization of housing.

In Detroit with its blight, too many houses are an expense instead of a revenue source.