Making Markets: Think Tank Legislation and Private Property in Detroit

Abstract

The growing literature on shrinking and declining cities portrays the problems of vacancy and abandonment as symptoms of the absence of capital, while the policy transfer literature views declining cities as unlikely sites for the incubation of neoliberal urban policy. This study examines how declining cities have become key sites for tailored market intervention, focusing on the collapse of Detroit's land market. Long-term decline has been exacerbated by legislative changes orchestrated by think tanks seeking to reinvigorate the market for private property while using homeownership for neighborhood stabilization. Analysis of legislative proceedings, tax foreclosure auction data, and interviews with developers, officials, and activists document the trajectory of these policies of market fundamentalism and indicate that the primary “stabilization” has involved a revitalization of the conditions for predatory capital accumulation in a declining city.

Key words:

• property
• urban policy
• think tanks
• market fundamentalism
• neoliberalism
• Detroit

Acknowledgments

Acknowledgment: The author acknowledges Dan Cohen, Jason Hackworth, Jamie Peck, and Chris Muellerleile for their comments and encouragement on earlier drafts of this work. The author also thanks Richard Shearmur and the four anonymous referees for their critique and insights.

Notes

1 ²The type of homesteading under discussion here is a government program in which settlement is induced by offering publicly held land at minimal cost, in this case one dollar, in exchange for living on and improving a property for a period of time, in this case 5 years. The act of homesteading has a long history in settler colonial societies. The Michigan program explicitly references the Federal Homesteading Act of 1862, authorized by President Abraham Lincoln, which opened large expanses of western territory for settlement. Urban homesteading, the idea of inducing settlement in vacant and abandoned properties in cities, gained traction in the mid-1960s.

2 ³The city of Detroit cannot account for all of the properties it owns, has few resources to maintain properties that are in use, and even fewer resources for the abandoned properties it continues to accumulate. The worst structures end up on a demolition list. Current Mayor Dave Bing pledged to knock down 10,000 houses by the end of his term in 2014. Over 3,000 structures were demolished in the first 2 years. The average cost per demolition is $10,000. The city is using funds from the federal Neighborhood Stabilization Program to demolish these structures.

3 ⁴In Cities Destroyed For Cash, Boyer reports approximately 40,000 vacant properties in Detroit were held by HUD in 1973. This total is just under half the total number of vacant and abandoned properties in the city in 2012. Detroit's population fell by half between 1970 and 2010.

4 ⁵Not all properties that go up for auction are vacant. In 2011, 934 of the final 12,000 properties that went to auction were occupied. The city of Detroit refused to accept the deed to any occupied property. In an attempt to avoid evictions, Wayne County went door-to-door in the winter of 2012 offering occupants title to the property for $500. As of June 2012, 500 people accepted the offer (Sabree, 2012).

5 ⁶During his tenure, Engler pressured the city of Detroit to lower its income tax or face massive state disinvestment. Despite the city's acquiescence, the state failed to make over $220 million in transfer payments over the past 15 years.

6 ⁷Largely ineffective in putting people into houses, this program was successful in transferring responsibility for much of HUD's property inventory to state and local governments. The fallout of the HUD-FHA mortgage scandal in the late 1960s and early 1970s left the department responsible for nearly 350,000 houses nationwide by the early 1970s (Boyer, 1973).

7 ⁸Birkholz was one of 39 Michigan Legislators who paid their ALEC dues from their legislative budget.

8 ⁹Increasingly, speculators are using the tax auction to avoid paying the full taxes owed. Owners allow properties to be tax foreclosed by the county and then repurchase the same property for $500 in the second auction. This accounts for nearly 20% of all auction purchases between 2002 and 2010 (Wojtowicz, 2011).

9 ¹⁰In Cleveland, Ohio, the use of public inventory or land bank for tax-reverted property allows the city and county to exercise some control in its use and development. This property disposition program utilizes a variety of planning and development tools, vetting potential projects for both feasibility and community benefit. The Cleveland model adopts the dual purpose of returning property to the private market while maintaining checks on speculative investment (Alexander, 2011; Dewar, 2006.)

10 ¹¹This transfer process is not always smooth. The city can refuse the transfer, which it does when the property appears to be occupied. This creates issues for the county as it must evict those living in the structure to transfer the property. In February 2012, the county began going door-to-door to offer nearly 1,500 houses to occupants for $500. County officials argued that keeping people in houses was better than leaving them vacant or abandoned. The city estimated it lost nearly $17.6 million in revenues on unpaid property taxes in 2011 (MacDonald, 2012).

11 ¹²Government claims to property supersede all other claims, including mortgage claims. Generally, properties with a mortgage do not enter tax foreclosure as property tax is included in most monthly mortgage payments. Since 2010, financial institutions’ have written off losses and allowed a growing number of properties to enter the tax auction, increasing the number of Real Estate Owned (REO) properties. Most of these properties go unsold and become the responsibility of the city or county (Wojtowicz, 2011).

12 ¹³The Wayne County Treasurer's unilateral decision to cap tax foreclosures over the past 2 years has drawn the attention of Michigan Attorney General Bill Schuette, who questions the legality of the action. Schuette was one of the primary proponents of the bill setting up the auction process.

13 ¹⁴The Wayne County Treasurer did not provide data on purchasers for 2011 and 2012. The office is working with a private company, Bid4Assets.com, and the data provided lists only the online username of the buyer, rather than the actual name the buyer used to register for the auction.

14 ¹⁵The Ambassador Bridge is the only privately owned public border crossing in North America. Moroun has owned the bridge for three decades.