The landscape of foreclosed and municipally owned Detroit real estate kind of resembles a volcano. Most of the year, everything is rock solid and unmoving; the city seems to behave as though its land isn't worth much -- unless you'd like to buy some, in which case it's quite valuable.
Twice a year though, we see violent eruptions of cheap land in the form of the Wayne County Tax Foreclosure Auction. Every year the state mandated foreclosure auctions force Detroit to offer a pound of flesh to the highest bidder in a mostly futile effort to recoup unpaid property taxes. I watched this play out last year with Loveland Technologies, where we map Wayne County's foreclosure properties.
In 2012, 21,000 tax foreclosed properties went on the block in the two rounds of the auction, nearly all of them in Detroit. Of those 21,000, about 9,000 didn't sell even for the discount bin price of $500 per property.
Around the same time the auction wrapped up, John Hantz purchased 1,500 properties on Detroit's east side for $500,000, plus $3.2 million in maintenance commitments. That's a sizable chunk of land, and his purchase caused quite a bit of consternation throughout the city.
Shockingly absent from the conversation surrounding the Hantz Woodlands deal was any mention of the Wayne County Foreclosure Auction. During a public hearing in December, a Detroit councilman asked whether the city has ever had a land sale as large the Hantz deal. Why the 12,000 properties sold in the 2012 foreclosure auction were not included in this equation -- several thousand to a handful of individuals and private companies -- I'm not sure.
The opportunity existed at the end of the 2012 foreclosure auction for someone to purchase the 9,000 leftover properties, most of them in Detroit, at $500 a pop, for a total of $4.3 million. That's half a million more than Hantz paid, and he only got one-sixth as many properties.
Had this happened, there would have been no opportunity for citizens to attend a hearing on the sale, or for city council to decide whether or not the purchase should be approved; two percent of the City of Detroit would simply transfer into the hands of the buyer.
In 2013, 43,000 properties are eligible for foreclosure and entry into the auctions. So far, we've not been confronted with a scenario where a single investor, or group of investors, buys a chunk of this city, for pennies on the dollar, without asking anyone if they mind, but every year we risk it. Already Macomb County has seen it happen, albeit on a much smaller scale.
We lack a repeatable process by which the people of Detroit and investors like John Hantz can pursue the purchase of city-owned land. The path Hantz followed was long and bruising, and the homeowner who wants to buy a city-owned property across the street should not be stonewalled and stymied by an unnavigable path to purchase, with their only recourse the untamed foreclosure auctions.