From the front page of today's Free Press:

Posted: Sept. 29, 2009

Detroit's fight against vacant land gets tougher

Tax foreclosures skyrocket

BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER


In case anyone doubted it, Detroit's vacant land problem, already bad, is getting worse in a hurry.


The number of tax-delinquent properties listed for sale in Wayne County's annual auction beginning Oct. 19 has swelled to almost 9,000 this year, from about 2,000 properties in 2007, said Terrance Keith, Wayne County's deputy treasurer.


The vast majority of those parcels are vacant lots in Detroit, he said, and most are unlikely to find buyers at the annual tax auction.


Detroit already suffers more vacancy than any city in the nation, except perhaps post-Katrina New Orleans, urban planners and academic researchers said. An estimated 40 square miles of the city's 139 square miles of land are now vacant, an amount of land roughly the size of San Francisco or Boston.


The extent of the tax foreclosures underscores the efforts by Mayor Dave Bing, planners and activists in and out of city government to find new purposes for the land, including urban agriculture and greenways.
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The foreclosure crisis has added significantly to the problem. Detroit's Office of Foreclosure Prevention said last week that 17.3% of Detroit's residences had gone through foreclosure through the end of 2008, with many more added this year.

Some fear tax auctions only add to problem of abandoned property


At the corner of Freud and Dickerson on Detroit's east side, a parcel of vacant land stretches seemingly for blocks without a single house or other structure on it.

Five lots on that stretch will go up for auction in mid-October as part of Wayne County's annual sale of properties seized because of unpaid property taxes. The lots are small, 30 to 40 feet wide by 100 feet deep, and in a better real estate market, they might fetch a buyer.

But there's a good chance they won't sell at all, because most properties offered at the county's annual land sale don't, said Terrance Keith, Wayne County's deputy treasurer. And that means those lots might stay in the county's inventory or revert to the City of Detroit, which already owns tens of thousands of unwanted parcels.
Huge problem is growing


The county's annual auction, which is to be held this year beginning Oct. 19, provides a look at Detroit's vacant-land problem. That problem is huge, and it's growing.

The latest U.S. Postal Service data show that as of June, about 17% of Detroit's addresses appeared to be vacant. That didn't count thousands of other vacant lots to which the postal service no longer tries to deliver mail.

Two years ago, during the 2007 auction, the county listed about 2,000 tax-delinquent properties for sale, Keith said. This year, following the collapse of the real estate market and the nation's economy, almost 9,000 properties are to go on the block during the auction, which can last up to three days.

The vast majority of those parcels are vacant lots in Detroit, Keith said, and if history is a guide, most of those won't sell.

The problem of what to do with tax-foreclosed property is a question contained within the larger debate about Detroit's growing vacancy. Planners and activists have suggested many solutions, from turning the land into urban farms to somehow repopulating it with the help of billions of dollars in federal aid, if such aid ever becomes available.

In the meantime, many critics said that using a tax-foreclosure auction to dispose of the land probably makes the vacancy problem worse, not better.

Speculators take advantage


Margaret Dewar, a professor of urban planning at the University of Michigan, said last week that the most common buyers at tax auctions are speculators, based either locally or around the country. They hope to buy cheap land and flip the properties for a quick profit.

She contended that more deserving groups that should get control of the land, like neighborhood community nonprofits or homeowners who want to buy the lot next to them, often lose out to the speculators.

"Tax auctions are a very bad mechanism for taking any control of what your city becomes," Dewar said.

Dan Kildee, the treasurer of Genesee County, where Flint is located, also dislikes the auction process. Kildee chairs the Genesee County Land Bank and arranges for sales of tax-delinquent land on a negotiated, parcel-by-parcel basis, cutting out speculators.
"It's pretty unusual that the auction produces a responsible investor," Kildee said.

In a notable example of what can happen, two local speculators bought a parking lot belonging to the Perfecting Church on Detroit's east side at the county's 2003 tax auction without the knowledge of the church, which didn't realize its lot was being auctioned off in error.

The buyers offered to sell the lot back to Perfecting Church. The church sued instead, but it had to go all the way to the Michigan Supreme Court before getting its property back.

How the process works


Keith agreed that that the auction method of disposing of surplus property isn't the best. It just happens to be the one outlined under state law, and one that almost all counties in Michigan use.

Keith said he would like to see changes in state law making it easier for property owners to avoid foreclosure and hang on to their properties, so the parcels don't wind up in the annual auction.

In the meantime, the county will carry on with the annual sale. There are actually two auction sales each year. The first, in mid-September, requires buyers to bid at least the amount of delinquent taxes due on a property, which can run into many thousands of dollars.

Few people buy at that sale, waiting for the follow-up auction in mid-October, when the minimum bid drops to $500 per parcel.

Keith used the example of a vacant building with $15,000 in delinquent taxes due on it. "In a hot economy, the $15,000 would be a bargain," he said. "In the economy that we have now, that's an outrageous price, a significantly overstated value, given the market conditions."

Other counties also auction properties seized for delinquent property taxes, but no county has the volume that Wayne County does because of the Detroit parcels.

Oakland County, for example, will auction tax-delinquent property beginning Oct. 13, but the county treasurer's Web site lists only a few hundred parcels for sale.


Contact JOHN GALLAGHER: 313-222-5173 or gallagher@freepress.com


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