February 4, 2011 at 1:00 am

Detroit's Real Estate Bazaar

Reforms urged to deter land speculators

Stop selling parcels at auction, set up land banks, expert says

Detroit —Mayor Dave Bing must make it more expensive for land speculators to do business if his redesign of Detroit has any chance of working, experts say.

And he's got to move fast. In October, the Wayne County Treasurer auction of tax-foreclosed properties set a record, selling more than 4,300 properties with opening bids of $500. Most were in Detroit and the tally was 21/2 times more than 2009.

Most buyers — an increasing number from out-of-state — won't need to open their wallets again for at least three years, the soonest the county can foreclose again on parcels for unpaid taxes.

"(We've) got to make it so onerous to speculate, and we have to do it now," said Maggie DeSantis, president of the nonprofit Warren Conner Development Corp.

Among the ideas: Change the tax sale Wayne County has two annual auctions of tax-foreclosed property. One is in September, where buyers have to pay back taxes and liens to acquire parcels. If those properties don't sell, they are auctioned in October, where bidding starts at $500 and buyers don't have to pay back debts.

The first thing Bing should do is cut off the supply of cheap land and end the October auction, said Dan Kildee, head of the nonprofit Center for Community Progress that focuses on the reuse of vacant urban land, and a leading expert in urban revitalization.

Kildee wants communities to put all unsold property in a land bank, which would own and maintain the land. The land bank would then market the land to developers with the community's goals in mind, he said.

Without the land bank, many of the parcels will be stuck in a cycle of going from speculator to foreclosure every three years, said Kildee, a national land-use expert who monitors Detroit.

Wayne County treasury officials said they are seeking reforms to change the low pricing of the October sale, including allowing the city more chances to buy properties for $500.

Boost use of land banks Detroit's land bank was formed in 2008 and is in the midst of acquiring about 250 bank-owned homes with about $2 million in grant funding.

It hasn't begun a process to acquire tax-reverted properties or city-owned land yet, but local community groups see those as future goals. The land bank would hold on to properties until a larger development could be proposed with the community in mind, not a speculator's "short-term" profits, said Kildee, the former Genesee County treasurer.

"It would set some parameters so that we can, as a community, have more of a say of how those properties are used rather than those individual speculators who don't have a local interest make those decisions," said Heidi Mucherie, CEO of the nonprofit Community Legal Resources.

Hold owners responsible The city Department of Administrative Hearings issues tickets to owners for vacant and dangerous buildings, trash and other violations. But city officials haven't found a way to force landowners to pay. As of last year, the so-called blight court was owed nearly $41 million in fines.

Kildee said the city could make changes to add unpaid blight fines to property taxes, much like water bills are added now. That would allow the county to foreclose on the property for the unpaid tickets.

The city also can legally make a case to a judge that a property is so dangerous and blighted that it can seize the property under state law.

Reform city first Others say reforms should start with the city, which owns nearly 40,000 parcels.

Nicholas LeFevre, attorney for land owner Michael G. Kelly, said private investors do a better job of maintaining property than the city. Officials for years have failed to aggressively pursue scrappers who strip vacant buildings of materials and contribute to blight, LeFevre said. Russ Harding, director of the Mackinac Center's Property Rights Network and a former Gov. John Engler appointee, agreed.

"You are in some ways better off with the speculators," he said. "It's not very efficient for government to own a lot of land. It becomes more of a burden for the taxpayer."