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The Detroit Land Bank and its many controversies, explained

Since its creation in 2010, the quasi-public authority has continually faced criticism

The North End apartment building once owned by Michigan Lt. Gov. Garlin Gilchrist II.
| AP

In the run up to Michigan’s 2018 gubernatorial election, the revelation that now–Lt. Gov. Garlan Gilchrist owned a blighted Detroit apartment building marked one of the campaign’s biggest scandals.

Gilchrist’s North End property sat vacant with a few boarded windows, no back door, and debris littering the unmowed yard. In addition, he was behind on taxes. All of which raised a central question: Why did the city allow Gilchrist to keep a blighted home?

The answer: The Detroit Land Bank Authority, a quasi-public agency that’s largely self-governed and makes decisions with little public input, wasn’t holding Gilchrist’s feet to the fire.

Gilchrist had purchased the fourplex from the Land Bank for $13,500 in 2016. The agency can repossess homes that aren’t renovated within six months, but that didn’t happen, nor did Gilchrist receive a blight ticket for the property’s litany of code violations. Ultimately, the Land Bank allowed Gilchrist to sell the property for $190,000, and questions over how the authority handled the property went unanswered.

The situation is one in an ongoing series of controversies around the Land Bank, which owns about 25 percent, or 88,000, of Detroit’s residential properties. The organization has been accused of bid-rigging, neglecting the blighted properties it owns, showing favoritism to city officials, and threatening to seize homes it doesn’t own. While it manages a stock of publicly-owned properties, Detroiters regularly say the Land Bank won’t sell them homes. That’s led to accusations that the agency is speculating and “hoarding” parcels for developers.

Detroit Ombudsman Bruce Simpson, whose office is a city government independent oversight agency, said he hears about the latter issues “over and over and over again,” and suspects a lot of them also have to do with “a lack of communication” over properties’ availability.

In an interview with Curbed Detroit, Land Bank director Saskia Thompson pushed back against some of the accusations, but also said the agency was effectively a “startup with no models to follow” and is “evolving.” She called for patience, saying that Detroit’s blight problem was “decades in the making” and that it left the Land Bank with an enormous volume of properties to manage.

But that’s left many wondering if the Land Bank is up to the task or needs to be reformed entirely.

What is the Land Bank?

Prior to the Land Bank’s creation, Wayne County, the city of Detroit, and departments within the city all owned properties that were managed with little coordination.

In 2010, the city and state created the Detroit Land Bank Authority to streamline management and sale of local governments’ vast stock of vacant structures and lots. Its mission, according to its website, is to “return the city’s blighted and vacant properties to productive use.”

While the Land Bank acquires properties through a variety of channels, buildings and lots most frequently arrive via the Wayne County tax foreclosure auction. The Land Bank takes control of properties that aren’t bid on and is charged with maintaining, selling, or demolishing them. An inventory team considers a number of factors, including the home’s condition and sale potential, when determining its fate.

It then unloads these properties through a variety of channels. For example, property owners can buy adjacent vacant lots from the Land Bank for $100. Homes through online auctions or the Own It Now program can be bought “as is” for as little as $1,000. It rehabs and sells homes for $50,000 and up, and works with Quicken Loans to pre-approve buyers for mortgages with low down-payments.

People congregate around a table with flyers outside a house.
People register to tour homes being auctioned through the Detroit Land Bank.
Getty Images

Sometimes it bundles properties for sale, either to a developer with specific terms or as a package that people can bid on.

The Land Bank is also designed to combat the rampant real estate speculation that plagues Detroit. Its “compliance program” requires those who purchase a home to occupy the property within six months, though it grants extensions. In recent years, the Land Bank also started acting as a code enforcement agency by threatening to seize blighted and vacant homes with the goal of forcing owners to bring them up to code.

The mayor appoints all but one of the Land Bank board members who guide its decision-making process. In that way, it’s effectively an administration apparatus that ultimately answers to the mayor. With few exceptions, Detroit City Council has no say in how the agency is managed and which properties are sold, demolished, or rehabbed.

The city and state’s decision to create an authority that’s at a distance from voters is partly behind the general sense that the agency isn’t accountable, Simpson said.

“Any time a function that’s providing a city service is placed in an authority ... there’s a distance between municipal government and the authority, and that distance does not lend itself to oversight,” he added.

A series of controversies

While the Land Bank protects the public’s property from real estate speculators, critics also contend it effectively functions as a speculator. There’s nothing in the Land Bank’s policies and procedures that requires it to make a property available to everyone, and Detroiters regularly complain that the Land Bank won’t sell a house or side lot that they want to purchase.

That seems to be one of the chief issues: Detroiters can’t access some of the best property, and there’s little explanation as to why. That’s especially the case in high-demand neighborhoods, which has led to accusations that the Land Bank is holding onto properties to sell at a higher price to developers. In other words, speculating. The Land Bank says that 59 percent of its sales are to homeowners purchasing the property for personal use.

“People see a home and it’s not available to them, and that’s off putting,” Simpson said.

Land Bank director Thompson, however, “strongly rejects the notion” that it favors developers. Two issues may delay a home from being put on the market, she said. The Land Bank makes sure the title is clear, which takes time. The city’s planning and development department is also conducting planning processes in some neighborhoods, and has asked the Land Bank to freeze sales on property in those areas.

“We’ve pushed back on that,” Thompson said, adding that the agency is put in a difficult position when it can’t sell homes that are in demand because of a city planning process.

But the lack of clarity on that basic function and issues like the Gilchrist controversy are why some view the Land Bank as opaque. While it can repossess the property within six months if the rehab isn’t complete and the home isn’t occupied, it frequently gives extensions to those who are making progress. Thompson said everyone who’s working on a property and remains in communication with the Land Bank receives one—not just Gilchrist.

“Occupancy is the goal—we don’t want to take those houses back at all,” she added.

However, Thompson acknowledged that the terms around the compliance program haven’t been spelled out, and she said the Land Bank is in the process of redoing its marketing material to make it clearer.

It’s also trying to “put staff in a buyer advocate role to make moving through compliance program a little easier, and make it easier to communicate with us about renovation progress,” she added.

Meanwhile, a Deadline Detroit sampling of 70 homes sold in a program that offers city employees a discount on Land Bank properties found 40 percent “are today either on the brink of foreclosure, still blighted, or have been sold to new owners, some of them speculators.” Many of the homes aren’t occupied, others being used by city employees as investment properties and 17 percent have been sold to out-of-state entities. Those numbers are slightly better than those of standard buyers, which doesn’t speak to the Land Bank’s success rate.

The Land Bank’s portfolio may be proving too unwieldy for its 145 employees. Since 2014, it has sold 8,000 houses, demolished over 14,000 structures, and sold over 14,500 side lots—a pace that the city applauds, but others question.

Compounding the problem is inadequate funding for upkeep of its 88,000 properties. The Detroit News recently noted that some blocks throughout the city are filled with multiple decaying Land Bank homes. In 2019, the agency shifted its resources to focus on high-demand neighborhoods, but that means fewer resources are spent addressing its blighted properties in the city’s poorest areas.

The agency is also facing criticism for using its nuisance abatement program to target homes that weren’t purchased from the Land Bank, even as it didn’t go after Gilchrist. Others have pointed to the irony of the Land Bank spending money to force others to bring their properties up to code as tens of thousands of Land Bank properties sit rotting.

Thompson said the program is essential to the agency’s success and is supported by case law, and the agency is only targeting homes that it says are vacant and blighted.

“We can only be successful by tackling it from multiple platforms and that’s what we’re doing,” she said.

“We’re not hitting the mark”

Is more council oversight the answer? Mayor Pro Tem Mary Sheffield declined an interview request from Curbed Detroit, but recently told the News that she hears “a lot of complaints, a lot of outcry about the lack of transparency, the lack of accountability with the Detroit Land Bank Authority.”

“So really, it’s how do we make the Detroit Land Bank more accountable?” Sheffield asked. “Or, how do we dismantle that current structure, because currently it’s not working for the average citizen?”

Ombudsman Simpson said the best solution is to create a city department for the Land Bank, or bring it under the control of an existing department.

“Let’s put it this way: If the objective is to be as transparent as possible and have as much oversight as possible, then you put the function in a department,” he said. “If you’re trying to circumvent those things you may want to have that distance.”

The Land Bank argues that it would lose “unique statutory powers” that help it run more efficiently if it were rolled into a city department. But Simpson stressed that the need for change is clear.

“For me, the goal is to always make sure the citizen is satisfied with the service. And there are a lot of people who are not satisfied with the Land Bank—we’re not hitting that mark.”

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