Unlike Pittsburgh, Detroit is Waging an All-Out War Against Blight – AND WINNING

Her city was in trouble when Tammy Daniels joined the Detroit Land Bank Authority in 2015. Detroit’s population had cratered 65 percent from its peak in the 1950s. Well-paying jobs had melted away when the auto industry that defined the city contracted. Foreclosures reached a crisis following the Great Recession. Vacant properties claimed as much as 40 square miles of the city by some estimates — about 28 percent of its land. Some neighborhoods were left with ghost streets lacking a single occupied structure.

Lenders shied away from neighborhoods where they struggled to determine the value of viable houses because there were too few comparable properties. “We had areas in the city where you couldn’t get a mortgage,” said Daniels, the land bank’s executive director. “People couldn’t refinance their home or even sell it.” 

Few cities in the United States have been hit harder by blight than Detroit. None has been more aggressive in addressing it. 

Ridding Detroit of blight has been a top priority of the city’s three-term mayor. The city spent hundreds of millions of federal dollars on demolishing more than 15,000 abandoned houses to eliminate eyesores and open up land for redevelopment. It has begun rehabbing or razing 16,000 other vacant houses after city voters approved borrowing more money to finish the job.

Michigan law allows for a streamlined process of moving tax-foreclosed properties to local land banks, which have taken the lead in getting vacant and blighted properties into the hands of new owners and helping turn them into community assets. The Detroit Land Bank Authority has flexed that muscle to become a major player in the city’s anti-blight campaign. It boasts an inventory of more than 75,000 lots and houses. It holds all of the city’s tax-foreclosed homes. It has sold more than 41,600 abandoned properties in eight years, including nearly 13,000 houses.

Those numbers are staggering compared to other places in the country, including those with land banks. The comparison to Pittsburgh is particularly stark. The Pittsburgh Land Bank has failed to live up to its potential as a tool to combat blight and has done so in spectacular fashion. It sold only one vacant lot during its first seven years in business. 

“If you’re going to operate on a large scale, you need political and financial investment from your city partners,” Daniels said. “It’s not for the faint of heart and it is not an easy task. But it’s doable when you have commitment from your mayor and city.”

Big problem, Bold Approach

The Detroit Blight Removal Task Force was able to quantify what was apparent to the naked eye in 2014, when it dispatched 150 volunteer surveyors, each armed with a mobile app, to go door-to-door photographing and detailing the conditions of more than 380,000 properties in the city.

Nearly 85,000 buildings and lots had devolved to blight, the task force determined. And more troubled properties were being added every month.

Detroit Mayor Mike Duggan, who inherited a bankrupt city when he took office in 2014, set out to eliminate residential blight on every street as part of a strategy to right the beleaguered city. 

From the start, Detroit had millions of federal dollars to invest in its war against blight that most U.S. cities — Pittsburgh included — did not. Unlike Pennsylvania, Michigan was among the states that experienced the steepest declines in home prices and highest numbers of underwater homeowners during the housing crisis that fueled the 2007-2009 Great Recession. The state received more than $760 million in federal Hardest Hit Funds to soften the blow. Detroit spent nearly $260 million of its share on demolishing some 15,000 abandoned houses as part of a plan to stabilize property values, add green space and make way for future development. 

At the same time, the inventory of tax-foreclosed properties that the Detroit Land Bank Authority acquired soared, rising from 766 in 2013 to nearly 97,000 four years later, according to land bank records. Strategies for recycling them expanded with programs ranging from “as-is” sales at auction to “Rehabbed and Ready,” which sells vacant houses that the land bank rehabs in target neighborhoods.
 
And when the city exhausted its federal Hardest Hit Funds in 2020, voters approved Proposal N, which authorized borrowing $250 million to spend on razing an additional 8,000 vacant houses and rehabbing another 8,000.

Coordination among city departments and other organizations, including the land bank, became necessary to address legal, zoning, maintenance and other challenges that repurposing so many abandoned properties posed. “It’s clear that if blight remediation is a thing throughout the city, everybody has to be on board with it,” said city Demolition Department director LaJuan Counts. A large database tracks the condition of every parcel in the city. Most vacant properties are sold through online platforms that allow buyers to research and bid on them.

Vacant housing rates in Detroit fell from nearly 23 percent of the city’s housing stock to 18 percent between 2010 and 2020, according to U.S. Census data, which counts houses and tenantless apartments. At the same time, the city’s population fell by more than 12 percent. 

But some of the most fragile neighborhood real estate markets have shown signs of revival. Median home sale prices, for example, grew 11.5 percent more per year in neighborhoods where the land bank sold rehabbed houses compared to other city neighborhoods that its Rehabbed and Ready program didn’t reach, according to a University of Michigan study. And the number of mortgages rose more than 5 percent a year in Rehabbed and Ready neighborhoods to the point where 42 percent of residents were able to secure one, which is double the citywide rate. The land bank takes a loss on the sale of houses it pays to have rehabbed, Daniels said. “But the goal is not to make money. It’s to create a comp in the neighborhood and activate the natural market so people can access the market themselves.”

Some 23,000 vacant houses have been demolished during his administration, Duggan said in his March State of the City address. “We are two-thirds of the way through the abandoned houses in the city. I expect that in the next four years, we are going to demolish or renovate every abandoned house so no child in the city ever grows up on a block where they have to walk past blight.” 

Detroit’s anti-blight campaign hasn’t been free of controversy. The city’s use of demolition funding was the subject of local, state and federal investigations. Two men involved in the demolition program pleaded guilty to accepting bribes and rigging bids. And an investigation by The Detroit News found that about 100,000 Detroit homeowners were overtaxed when the city failed to adjust assessments to reflect plunging home values in the wake of the Great Recession, as was required by law. Studies suggest overtaxing contributed to several thousand homeowners having faced tax-foreclosure before assessments were corrected.

Despite such missteps, more than 70 percent of Detroit voters approved Proposal N in 2020, allowing the city to sell $250 million in bonds to finish the anti-blight campaign. “Revitalization can’t happen until we remove the blight,” Daniels said. “Citizens saw the investment that had been made was bearing fruit and they wanted to keep going down that path.”

Time and Money

Abandoned and blighted properties are found in most communities, to some degree, racking up maintenance, police and fire costs, depriving municipalities of tax revenue and dragging down property values. In Pittsburgh, nearly 24,000 vacant properties cost the city more than $9 million a year in services, tax delinquency and lost revenue, and this is to blame for $266 million in lost property value, a citywide study estimated.

Most U.S. cities and counties have been unable to overcome the political, legal, financial and other challenges that winning a large-scale war on blight demands.
 
Laws in 17 states enable land banks to be created, usually as quasi-public organizations that are given legal advantages to acquire vacant, tax-delinquent properties and repurpose them. “Land banks have been one of the more successful tools in taking properties that have been stuck underwater in value, that nobody in their right mind would even touch because it doesn’t make financial sense,” said Kim Graziani, senior advisor at the Center for Community Progress, a national land recycling consulting firm based in Flint, Mich.

But not all land banks are created equal when it comes to their legal powers and level of resources they have to work with.

The Detroit Land Bank Authority’s $24 million annual budget is perhaps the largest among the more than 250 land banks across the country. It includes $11 million in operating funds from the city, which allows for a staff of 147 employees across departments ranging from legal to maintenance, marketing and sales. It clears roughly 2,000 property titles each year.

The Pittsburgh Land Bank, created by city ordinance in 2014, has not approached that level of organization capacity. It doesn’t get annual operating funds from the city. It has been slow to execute agreements with various taxing bodies with a stake in delinquent taxes, which are necessary to transfer abandoned properties to new owners. It has struggled to acquire even city-owned tax-delinquent properties, let alone sell them to responsible owners. It only recently began hiring full-time staff after getting $10 million from the city’s share of federal American Rescue Plan funds.

Like Detroit, the land bank that covers Cleveland is taking a significant bite out of blight. It, too, has the benefit of a healthy operating budget, due in large part to Ohio law, which allows land banks a share of the penalties and interest collected in delinquent property tax settlements. For the Cuyahoga Land Bank, that means about $8 million a year and support for the work of 30 staffers. In 10 years, it has razed 7,000 vacant properties, rehabbed 2,100 vacant houses and returned 11,500 distressed properties to the tax rolls, according to an independent economic impact analysis.

In Pennsylvania, time and money are major hurdles to such large-scale land recycling. The state adopted land bank-enabling legislation in 2012, but it did not include a mechanism for funding them — a common shortfall of legislation across the country.

“Most land banks will operate at the pace and scale their resources allow,” Graziani said. “That usually doesn’t allow for a significant level of activity. Most land banks are not getting a direct allocation from their local government, although I would argue land banks are taking properties that are costing local governments a heck of a lot of money.”

In addition to paying staff, land banks need to have money to acquire, clean out and maintain properties before they sell them. In Allegheny County, it costs the Tri-COG land bank $5,235 on average to get a clean, insurable title on a property; $1,200 a year to maintain it; $4,296 for repairs and inspection; and $1,369 in legal fees to sell it.

Land banking legislation and changes to Pennsylvania’s property laws enacted over the past 10 years offer more options for getting control of vacant property. But the legal processes involved in acquiring it remain tedious and risky.
The Tri-COG land bank acquires vacant tax-delinquent properties through sheriff’s sale, a process that can take around 18 months to complete. In Pittsburgh, the Pittsburgh Land Bank by law moves properties through treasurer’s sale, which can take at least that long, if not much longer. And the longer it takes to get control of a vacant house, the more it deteriorates, driving up rehab costs and slowing the process of repurposing it. 

While the Pittsburgh Land Bank has struggled to navigate such challenges, the Tri-COG land bank has leveraged limited resources to meet them and widen its reach in the 26 eastern Allegheny County municipalities that are members. In four years, it has sold some three dozen vacant properties, owns some 50 others and is in the process of acquiring dozens more. 

It has done so with a staff it shares with the Steel Rivers and Turtle Creek Valley councils of government that amounts to less than five full-time positions. Its budget is tight. Member fees brought in less than $200,000 last year; sales, another $440,000. Small grants and the value of property in its inventory rounded out its revenues.

“Is it transformational for the region yet? No, but that’s a good amount of work with four full-time people,” said Executive Director An Lewis. “We wanted to be sure we knew how to handle it so we didn’t become a land bank with a lot of blighted inventory and part of the problem we were set up to solve. No matter how much money you have to start with, you have to get the process down. Once you do that, more money will allow you to scale up.”

But eliminating blight is more complicated than recycling large numbers of vacant properties. Unless steps are taken to prevent it, it will return. 

The pipeline to blight includes a multitude of issues, ranging from population loss to lax code enforcement that allows houses to degrade and little help for struggling homeowners to keep them up to code. It has proven to be a job too big for any land bank alone — even in Detroit, where underemployment and a tax foreclosure system that wrongly claimed thousands of properties are among the concerns. 

“A land bank is a very transactional entity,” Graziani said. “It takes properties, cleans out the financial barriers and puts them into responsible ownership. That’s great. But if you want to transform a community, a land bank is not going to be the only player.”