Why is the Detroit Land Bank selling bundles of occupied homes?

The Detroit Land Bank Authority (DLBA) recently put out a request for proposals for developers, builders, or people with real estate experience to bid on home bundles. That kind of program isn’t new for the Land Bank. What is new is that these homes have occupants.

The new RFP is through the Occupied Sales Bundle (OSB) program, which allows entities to bid on one of 10 bundles, each containing three homes in close proximity to one another. In this pilot phase of the OSB program, no entity can purchase more than three bundles.

The Land Bank is constantly auctioning or selling properties through a variety of avenues. That’s its job—to find the most effective way to get properties out of public ownership and back on the tax rolls. (Though it’s faced plenty of criticism for not doing this effectively.)

Because of the city’s tax foreclosure crisis, the public authority came into more properties than it knew what to do with. Of the more than 100,000 tax foreclosures in Detroit since 2012, tens of thousands of those homes had people living in them, either as tenants or owners who fell behind on their taxes.

In the last few years, the Land Bank has developed programs to deal with this problem and which try to turn occupants into homeowners. The Occupied Buy-Back program, for example, allows eligible home occupants to buy a tax foreclosed property for $1,000 if they can commit to caring for it for a year.

Alysse Miller, a program manager with the DLBA, says the Occupied Sales Bundle program is the next step in getting these homes back on the tax rolls. “We still continue to have occupied inventory, so this is the next approach to selling that inventory,” she says.

But the OSB program concerns some housing advocates, who say that the best way to encourage stable homeownership is by turning these occupants into owners. Many of them would like to own the home, but either didn’t qualify or didn’t know about the buy-back program.

“The person who lives in the home is likely to be the one who cares about it,” says Michele Oberholtzer, director of the Tax Foreclosure Prevention Project at United Community Housing Coalition. “And if they have homeownership interest, then the interest of the occupant can align with the interest of the home.”

The OSB program does have some measures to encourage occupancy. Property bundles are sold on a promissory note, which is due at 90 days. If the occupant is still in the home at that point, then the buyer gets a 50 percent reduction in their bid amount.

“We do want to encourage entities to keep occupant if possible,” Miller says. “We can work with them to determine what’s the best method, whether that’s cash sale, land contract, or renting.”

But there’s no requirement that the new landlord keep the occupant in the home after 90 days, even if it’s received the 50 percent discount. They also have six months to renovate the property.

Oberholtzer recognizes that these homes are the trickiest to deal with. They went unsold at the Wayne Count Tax Auction and maybe have occupants who don’t have the means to fix it up. But she also thinks this program will lead to more evictions and that the Land Bank must do whatever it can to prevent displacement, even if it means setting aside funds for relocation.

“I think it’s possibly a deferment of responsibility by the Land Bank,” Oberholtzer says. “It’s them saying, ‘Will someone else evict these people for us? Will someone else deal with it?’”