Side lot sales: a success story

**BankruptcyGuy** · August-17-15, 07:21 AM

If this program were to reach full velocity, it would be great for the city. You'd have some of these well-built homes with wide lots for play, rather than spaces overrun by dumping, etc.

http://www.detroitnews.com/story/new...lots/31833677/

**emu steve** · August-17-15, 08:27 AM

Originally Posted by BankruptcyGuy

If this program were to reach full velocity, it would be great for the city. You'd have some of these well-built homes with wide lots for play, rather than spaces overrun by dumping, etc.

http://www.detroitnews.com/story/new...lots/31833677/

Great program. Indeed, the persons best able to care for vacant land are neighbors who can care for it just like their own with the same care and love.

Most single family homeowners would love to have more land and sometimes separation from their neighbors.

Sounds like a way of doing the best possible as the number of housing units in Detroit have shrunken to a level more commensurate with the reduced population.

Wide lots and fences make good neighbors...

**BankruptcyGuy** · August-17-15, 09:21 AM

And you can see the cycle. Today, some buys up a whole block in Detroit. Later, as demand pressure grows, that person sells to a developer who builds multiple houses. Wouldn't that be something?

**emu steve** · August-17-15, 10:30 AM

Originally Posted by BankruptcyGuy

And you can see the cycle. Today, some buys up a whole block in Detroit. Later, as demand pressure grows, that person sells to a developer who builds multiple houses. Wouldn't that be something?

Those neighborhoods don't have to disintegrate...

Or just wait 20 years, and some of those empty lots might be part of a neighborhood full of McMansion houses on them.

I'm reminded of some sayings: "cup half empty or half full" or "Making a silk purse out of a sow's ear." [[is the saying: "make a sow's ear out of a silk purse?").

**DetroiterOnTheWestCoast** · August-17-15, 11:45 AM

Another example of the Duggan administration actually getting things to work efficiently. And in the process, getting these lots of the city's hands and into those of neighborhood residents who will maintain them.

**royce** · August-18-15, 12:34 AM

I was able to purchase a side lot at the last fair on my mother's behalf. For years the lot was vacant and we cut the grass. Feels good to have it officially ours now. The hold up in the past was that as much as the city talked about side-lots being $300, they actually cost more if there were back taxes. My father wanted to purchase the side lot but declined when the city said he had to pay the back taxes of the previous owner. I never could understand that. Why couldn't the city sell the land to my father and go after the previous owner for the back taxes through the court system? What changed to make the purchase possible this year? I doubt the previous owner ever paid the back taxes. Well, anyway, trying to decide what kind of fence to put up to close in the lot.

**rex** · August-18-15, 10:09 AM

anyone know offhand if its possible to pick up a house from the Detroit Land Bank and demo it? Seems like if you did this, bought a house for 1K, Spent the 10K or thereabouts to clear it away and bought a sidelot for $100 you would have something going. Another probably stupid question is are you allowed to build between 2 lots if you own them both?

**Lowell** · August-18-15, 07:18 PM

Wouldn't this be a hindrance to future development. Ideally those gap-toothed areas would be infilled in the future. It hurts the city to have to maintain infrastructure for sparsely populated areas.

Wouldn't there be difficulty assembly contiguous property essential to housing development. As many of you know use of eminent domain is very difficult in Michigan. With many different owners the potential for hold-outs would seem likely.

DetroitBoy · August-18-15, 07:51 PM

Originally Posted by Lowell

Wouldn't this be a hindrance to future development. Ideally those gap-toothed areas would be infilled in the future. It hurts the city to have to maintain infrastructure for sparsely populated areas.

Wouldn't there be difficulty assembly contiguous property essential to housing development. As many of you know use of eminent domain is very difficult in Michigan. With many different owners the potential for hold-outs would seem likely.

At one of his neighborhood meetings, a person on a block with few houses asked if his neighborhood was up for redevelopment. The mayor mentioned something about a home trade program and he could be the first participant. Has anyone heard anything more about this program?

**ABetterDetroit** · August-18-15, 09:30 PM

Originally Posted by Lowell

Wouldn't this be a hindrance to future development. Ideally those gap-toothed areas would be infilled in the future. It hurts the city to have to maintain infrastructure for sparsely populated areas.

Wouldn't there be difficulty assembly contiguous property essential to housing development. As many of you know use of eminent domain is very difficult in Michigan. With many different owners the potential for hold-outs would seem likely.

I see it as a positive and here's why: on your first question, you have to assume that the people who buy the lots and commit to paying the taxes on them genuinely want them so that they can improve the land and use it to beautify their own property. It is a benefit to the property values in the neighborhood anytime somebody improves property.

On your second question, there are so many vacant residential lots that any builder or developer would have a pretty wide choice of where he wanted to build. Suburban style development of clearing a farm field and having one developer build out all the home sites are way too cookie cutter. The best new developers enter into agreement with municipalities that they are going to bring other builders on board so that there will be 3 or more builders on the development. That offers you some variety in home styles. If builders were going to infill in some of Detroit's vacant lots in residential areas, ideally you would want to piece them out six or a dozen at a time to three or four builders. Well taken care of houses even with these side lots would be a great place to start on small scale new residential single family home construction on the remaining vacant land.

It is my belief that more of this should already be occurring considering the amount of new office workers in the downtown area, the growth in the midtown area, the rise in entrepreneurs and the rapidly expanding arts in the city. Apartments are coming online, office space is getting filled, both of these faster than for decades. Owner occupied new housing is flat at best which doesn't make a whole lot of sense considering that we're near record lows in interest rates. It would be a shame to miss a growth period in owner occupied homes because some solution could not be found to the high residential property tax rates in the city. It would be a game changer if something was done about that fast.

**emu steve** · August-19-15, 02:35 AM

I wonder about this in-fill development.

Does it make sense in Detroit to build a house from scratch?

A house has two components: land and the cost of building the house.

The big cost in Detroit would be the cost of building the house, not the land. If so, would someone build a house in the city which would cost much, much more than it could sell on re-sale?

This is why I assume almost all new housing in Detroit would be multi-unit housing [[e.g., apartments like in Brush Park) or rehabs.

**BankruptcyGuy** · August-19-15, 02:07 PM

Originally Posted by royce

I was able to purchase a side lot at the last fair on my mother's behalf. For years the lot was vacant and we cut the grass. Feels good to have it officially ours now. The hold up in the past was that as much as the city talked about side-lots being $300, they actually cost more if there were back taxes. My father wanted to purchase the side lot but declined when the city said he had to pay the back taxes of the previous owner. I never could understand that. Why couldn't the city sell the land to my father and go after the previous owner for the back taxes through the court system? What changed to make the purchase possible this year? I doubt the previous owner ever paid the back taxes. Well, anyway, trying to decide what kind of fence to put up to close in the lot.

Great question. This is a common point of confusion.

Property taxes result in what's called "in rem" liability--that is, liability to the thing. Your income taxes, in contrast, have what's called "in personam" liability--they follow you to whatever you have and wherever you are.

As a result, the state/county/city can't sue property owners for unpaid property taxes. All they can do is take the properties back. Since, most of the time, property taxes are 3% at most of the property's value, there's generally a pretty good incentive to pay the taxes. If you don't, you'll lose the property, and lose the other 97% of the value.

Two factors make this a more challenging problem. First, if there is a mortgage holder, their interest is at risk, too. If someone had a 97% HUD mortgage, and the property value falls, they won't have much incentive to pay the taxes.

Second, it was very prevalent that properties in Detroit were wildly overassessed. [[Why bother appealing your taxes when you're underwater on the property?) So what happened is that the taxes were actually more than the property's value.

On of the other factors [[did I write two? I meant three.) is that the tax recipients of your bill are several different groups. There's the state [[school taxes), the county ISD, the parks system, water bonds, and the City itself. While one group might agree to take a discount, some of the other groups often held out for higher values. Stupid, in my opinion, but they were operating under the premise that the City of Detroit would just pay them back in full.

I am hoping I cleared that up. If not, fire away.

**mwilbert** · August-20-15, 12:09 AM

Originally Posted by ABetterDetroit

It is my belief that more of this should already be occurring considering the amount of new office workers in the downtown area, the growth in the midtown area, the rise in entrepreneurs and the rapidly expanding arts in the city. Apartments are coming online, office space is getting filled, both of these faster than for decades. Owner occupied new housing is flat at best which doesn't make a whole lot of sense considering that we're near record lows in interest rates. It would be a shame to miss a growth period in owner occupied homes because some solution could not be found to the high residential property tax rates in the city. It would be a game changer if something was done about that fast.

It seems to me that this is simply because single-family prices in Detroit aren't high enough to cover building costs, so the only single families that get built are subsidized ones. This doesn't bother me a lot because there is plenty of existing supply of single families. As far as I can see, there is a real problem with the supply of apartments, and there I think the prices are getting close to the point that it may be possible to build them without subsidy, although as far as I can tell that still isn't happening. I'm not sure if that is because it is still uneconomic, or because lenders think it is uneconomic, or because developers have simply gotten used to Detroit projects being subsidized.