The Policy Path of Detroit’s Destruction

As published in Riverwise magazine

How state policy legalized the destruction of Detroit.

Detroit is a city with so much to lose and so little to spare. Popular narratives which attempt to describe Detroit’s struggles resort to abstract reasoning, such as the ‘invisible hand of market forces’. Other times, corporate submission to global market trends is blamed for the exodus of a once-thriving auto industry. However, when we trace the path of exploitative policy decisions at the state level in recent decades, we see that our own state laws have aided, if not forced, the hand of destruction. Detroit has suffered an inverted urban renewal process, through which homes are turned to blight, homeowners to renters, and neighborhoods to fields. This is the story of a predatory scheme that Michigan lawmakers, developers and special interests have devised during Detroit’s recent history.

In 1999, the State of Michigan implemented House Bill 4489, which said that any land owing property taxes for 3 years should transfer to government ownership through a process known as Tax Foreclosure. Michigan’s law was unique in its harshness: a mandatory interest rate of 18% on delinquent taxes was set, the law stipulated that the real property, not just the debt was to be foreclosed and, even further, that the foreclosure would eliminate any and all equity that the former owner had on the property. The law was intended to prevent property owners from shirking their civic duty, and also to ensure that abandoned properties did not linger indefinitely.

Shortly thereafter, in 2003, the state passed Act 258, which enabled the creation of a new type of entity called a land bank that would “fast track” the clearance of title and economic growth, and to work in concert with tax foreclosure. Land banks were a new type of organization—a quasi-governmental organization, which meant they had many of the powers of government with the protections of a corporation. The byline was that land banks were to be considered the “owner of last resort,” but no such strong language appears in the law itself.

Just over a decade after the passing of House Bill 4489, the State of Michigan continued its undemocratic practices by implementing Act 436. According to this law, elected officials could be stripped, entirely, of their authority to govern. Instead, their power would transfer to an appointee of the governor. The law implied that the new authority would prioritize public health, safety, and welfare but, in practice, it prioritized bondholders. We were told this law was intended to bypass cumbersome procedures and government corruption and to uphold a standard of fiscal responsibility.

In 2013, Act 436 was leveraged against the citizens of Detroit when it was used to push the City into emergency management and ultimately municipal bankruptcy. This law provided the State-imposed emergency managers legal grounds to override existing government officials, policies, contracts, and, ultimately assail our basic democratic rights.

Under the combined forces of emergency management and bankruptcy, Detroit inverted itself.

In 2014 alone, 25,000 properties lost private ownership and were sold to the highest bidder in auction. Over 8,000 properties were transferred to the growing Detroit Land Bank Authority. This same year, 33,000 households had their water service terminated. Loss of water service led to people turning their water back on “illegally,” which often prompted removal of infrastructure by DWSD. In other cases, loss of water led to the “passive eviction” of untold scores who abandoned their unlivable homes.

Of the 8,000 tax-foreclosed properties acquired by the Detroit Land Bank Authority that year, 3,000 of them were “fast tracked” to land bank ownership through an aggressive acquisition technique known as “bundling,” which prevented them from being purchased individually at auction. The land banks also began to make use of the term “nuisance abatement” to acquire privately held property that was not in tax foreclosure, on the basis of their designation that it was a public nuisance.

Even as thousands of homes passed through tax foreclosure, relief funds held by the Michigan State Housing Development Authority (MSHDA) sat idly in government coffers. Stringent qualification measures meant that many homeowners were denied access to those federal funds. A lack of outreach assured that many qualified homeowners never applied in the first place. Those funds were redirected to the land banks to facilitate property demolition, instead of rehabilitating homes and protecting homeowners, as the funds were originally intended. Two hundred and fifty million dollars was allocated to demolish at least 10,000 buildings.

This well-orchestrated system of policies facilitated the exodus of thousands of Black homeowners and residents turning many into renters. In 2017, we saw legislation introduced which cleared the path for large developers to move in. For example, the state legislature passed into law Senate Bill 0111, a series of policies meant to promote the redevelopment of “brownfields.” This term refers to land deemed “blighted” or a “nuisance,” usually due to environmental contamination. In defining a brownfield, this law specifically included tax-foreclosed properties and those that have had their utilities permanently disconnected. To give a leg up to developers seeking these troubled properties, the legislative package offered tax breaks for those undertaking transformation of brownfield-designated land.

The impact of this succession of laws cannot be underestimated.

One in four properties in Detroit has been foreclosed and auctioned off by local government since 2010. For the first time in decades, Detroit has more renters than owners. The city’s population is still declining overall, despite large growth and investment downtown. Nearly one-eighth of the city—90,000 properties—is owned by the Detroit Land Bank Authority. At this time, 20,000 residents face water shutoff and 17,000 face tax foreclosure for debts as low as $3,000. Meanwhile, exclusive downtown properties are receiving tax breaks under brownfield designation. Developer Dan Gilbert was instrumental in lobbying for the passage of brownfield redevelopment laws that have resulted, most recently, in designations of $618 million in tax breaks for upcoming projects.

The overall result of these policies is a legislative maneuver around the requirements of compensating someone for their displacement (as with eminent domain) or considering their equity (as with bank foreclosure). Instead, policymakers have made it the fault of the residents. It also secured money on the basis of a crisis, which it redirected like a black market of humanitarian aid stolen in broad daylight. Disaster capitalism at its finest. A similar process has been used to decimate the public school system.

Was this process the result of a strategic multi-decade plan that has been implemented to perfection? Probably not. But incremental exploitation looks like a lot like long-term conspiracy, and what is indisputable is that these policies have facilitated the exploitation of Detroit’s land and housing resources.

We don’t yet know the end of this story—the story of Detroit is still being told. If a city is a geographic location, Detroit will be fine. But if a city is its people, then it continues to face a very existential threat.

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