In October 2009
, I wrote this blog about the housing crisis in Detroit. I am reposting it as written. -----------------------------------------------------------------------------
Amid the chaos of our crappy economy it might be easy to forget that there are still thousands, if not hundreds of thousands of homes that are still empty due to the mortgage crisis. Reuters
reported that Detroit tried to auction off "9,000 homes and lots in various states of abandonment and decay from the tidy owner-occupied to the burned-out shell claimed by squatters."
Only 1/5 of them sold. The starting bid was $500.
Location, they say, is everything, and a town like Detroit, devastated by Auto industry layoffs, is no exception. Even one house left empty in a neighborhood drives down prices, but 9000 in a city? That would fill up Central Park. Detroit - like other cities - has chosen to look at these empty homes and lots as a potential source of revenue.
The biggest problem with this situation, is that there are people expecting to make money off this total disaster area. The housing crash in this nation is a disaster of Katrina-like proportions. Instead of nature, it was caused by greed and unregulated capitalism. City and state governments trying to solve the problem with the same thing that caused the disaster seems not only counterproductive, but insane.
I have long wondered why, when a home is foreclosed, the bank that reclaims the mortgage is not held responsible for it's upkeep. Aren't they the ones taking it back? Doesn't that make it their investment as well? At what point do the people who helped create this crisis become responsible for it? Cities like Detroit are trying to replenish the tax revenue they lost from the housing crash -- shouldn't banks bear some of that responsibility? They are making money, and they still own these houses; they are not paying taxes on those houses, and they are not maintaining those houses -- driving the values down.
Maybe that is what the banks and investors wanted all along.
Many potential homeowners that Detroit desperately needs said they felt penalized by the auction process.
They mostly found themselves outbid by deeper-pocketed investors from California and New York who were in a race to claim the auction book's relatively few livable properties.
Dozens of potential bidders, mostly local residents, were turned away on the first day of the auction by deputies after they failed to meet the morning deadline for registration.
Ross Wallace, a lieutenant in the U.S. Army, turned in his check for $500 and waited on the auction floor in full dress uniform for a chance to buy a Detroit house on the cheap.
Wallace, 27, said he did not want to leave his fiancée and two children with a mortgage before shipping out to Iraq later this year.
"I still have student loans and I'm trying to be responsible. I don't want to leave debt," he said.
Wallace waited for the auction to roll around to Detroit's Boston-Edison district, a once stately area that was home to boxing legend Joe Louis and Motown founder Berry Gordy.
But he was quickly outbid. An unidentified investor at the front of the room who had scooped up several dozen properties took the home Wallace wanted for about $15,000.
"Why am I competing against a bank?" he said later. "It would be common sense to have a separate process for people who want to move back to the city or it's going to stay empty."
A soldier can't even get a home for his family and yet investors can blind bid from California. Detroit and other cities need to start taking care of their own communities by allowing locals to buy these properties. Capitalism is not going to save this city and others like it. To expect the very people who caused this problem to come in, purchase these properties and pay off the $300 million budget deficit is irresponsible and foolish. Those houses are being bought to sit there empty and in the same state if disrepair, until the very people who drove the market down decide that Detroit is worthy again of their money. In the meantime, the city is still paying for the cost of 'cutting the weeds and responding to fire calls for thousands more abandoned lots.'
It's a scam -- and Detroit has fallen for it.
I don't have a lot of experience with rebuilding a community or economics, but there seems to be a few smart things the city could do here. Perhaps by cutting red tape and letting local residents have priority to these home may make for an easier transition -- the properties would be occupied. Let that be a requirement. Allow non-profits to buy these houses,and resell them to low income families. How about partnering with a land trust group? Then tear down the houses that are lost, and make a park. In the meantime, the families that do move in can keep what little money they have in their own communities. There is great potential here, and it isn't going to happen overnight, but it is better to include actual residents into the process, instead of bending to a million dollar investor in a state thousands of miles away.
There are no easy answers, but allowing real estate speculation seems to me to be the wrong one. You simply don't solve a problem with what caused the problem in the first place. -----------------------------------------------------------------------------