Detroit council rejects plan to auction houses, vacant land near Herman Kiefer complex

Detroit News staff

Detroit — The City Council on Tuesday rejected a proposal that would have allowed dozens of blighted houses and more than 100 lots in the footprint of the Herman Kiefer complex to be sold to residents at a discounted rate.

The council turned down the amendment to the $143 million master development agreement by a 5-2 vote over concerns about a lack of adequate engagement of all impacted residents and guarantees that the residents would even be able to buy the houses. The request sought to keep 39 houses and 102 lots in the Detroit Land Bank Authority's inventory for public sale. 

Ron Castellano, of Herman Kiefer Development, is heading up a $143 million effort to redevelop the former medical complex and adjacent neighborhood. Detroit City Council turned down a proposal Tuesday that would have amended the agreement and allowed for dozens of homes and over 100 lots to instead go up for public sale.

The proposal sought to satisfy complaints from some neighbors who have long lobbied for the chance to purchase the houses and land and rehab them on their own rather than put them in the hands of the project developer. 

Ron Castellano, managing member of Herman Kiefer Development LLC, signed a deal with the city in 2015 to redevelop the former hospital complex and adjacent neighborhood. 

"To date, there still seems to be some hesitancy around this issue of not getting guarantees of ownership of the properties," Council President Pro Tem Mary Sheffield said ahead of Tuesday's vote. "For me, I can't support it ... There still just seems to be some outstanding issues that could be resolved."

Sheffield voted no Tuesday along with President Brenda Jones and council members Scott Benson, Raquel Castaneda-Lopez and Roy McCalister Jr. Members James Tate and Janee Ayers supported the measure. 

Detroit Mayor Mike Duggan's administration noted during Tuesday's formal session that the amendment was the product of 13 meetings over a nearly one-year span to identify the homes and parcels to go up for public sale. 

“We listened to the community and spent months working with them and the developer to deliver a compromise that would give residents a significant ownership stake in their neighborhood and help the developer move this massive redevelopment forward," Donald Rencher, the city's group executive of Housing, Planning and Development, said in a statement. "We are disappointed these residents will not have the opportunity to purchase these properties, at an 80% discount, and build generational wealth like they wanted.”

Castellano could not be immediately reached Wednesday for comment.

Alyssa Strickland, a spokeswoman for the land bank, told The Detroit News in a Tuesday email that the council's no vote means the properties "will stay in the developer’s portfolio." The land bank and city's housing department will now work with Castellano on a new timeline to redevelop the parcels. 

"The updated timeline will account for the imminent closings and rehabs of all 88 remaining houses in the option agreement," she added. 

Katrina Chaves, deputy group executive of Planning, Housing and Development for the city, said that the administration has worked with community members throughout the discussions.

"I can assure you that we have taken many steps over the last several months to engage all of the different stakeholders that are involved in this deal," she said. "The developer's urgency in coming to a resolution in part is because the quality of these houses deteriorate the longer that we wait and have this question open."

Longtime Virginia Park neighborhood resident Venita Thompkins told council members during public comment Tuesday that she'd been waiting to purchase land there since June 2017. But, she claimed, residents have been "overlooked" while Castellano has been given a "sweetheart deal."

Thompkins noted she was undecided on whether to support the proposal and that she was leaving it in the council's hands. 

Castellano purchased 29 of 117 houses near the hospital site so far, Luke Polcyn, a member of the city's Jobs and Economy Team told the council Tuesday.

This summer, Castellano missed a deadline to rehabilitate the first 15 of the blighted properties he'd purchased from the land bank under the complex development deal.

The former Herman Kiefer Hospital at 1151 Taylor Street in Detroit on March 16, 2021. The City Council on Tuesday, Nov. 9, 2021 rejected a proposal that would have allowed dozens of blighted houses and more than 100 lots in the footprint of the Herman Kiefer complex to be sold to residents at a discounted rate

Polcyn said the homes had been "substantially complete" by the initial June 30 deadline. He also noted Tuesday Castellano's investments in the overall project and said Castellano has "proven himself."

Despite the prospect of steeply discounted rates for the homes proposed for public sale, Jones and other council members on Tuesday maintained fears that investors would have bid against neighborhood residents for the sites and as a result, forced auction prices up "so that the community still can't afford to purchase them."

"We know that investors have much more money than the community," Jones said before casting her no vote. 

In response to his critics, Castellano, who inked a $925,000 deal for the complex in 2015 and closed on it in 2018, told The News this spring he's invested more than $8 million overall — $1.4 million in the neighborhood alone — and isn't going anywhere.

Castellano has noted that his team made it clear from the start that they want to partner with neighbors on rebuilding the community. 

As for the medical complex, Castellano brought in Colliers International, which has an office in Southfield, to market the property in January 2020. 

Over time, there have been varying plans for the site including a boutique hotel and skate park. Last fall, Castellano's team was marketing the grounds as a potential innovation hub, garment manufacturing facility or medical technology complex.