It is unwise to give government money to people to demolish or "fix up" property they don't own just because they don't like the way it looks. Doing so practically invites projects that are hastily conceived and ill informed.
And yet, that is exactly what the state of Michigan did with some of the $97 million it received in a foreclosure lawsuit settlement. Approximately $25 million was given out to local government agencies and nonprofits for "blight elimination" activities, with $10 million of this going to Detroit and $15 million to agencies throughout the state.
In Grand Rapids, the money created controversy when the owner of a popular taco stand was surprised to learn that his property was on a list of properties a local nonprofit, LINC Community Revitalization, Inc., planned to demolish with these funds.
Leo Schlesinger, the owner of Tacos El Cuñado, told MLive he has no plans to sell the property, and was actually looking to expand.
LINC Director Jeremy DeRoo acknowledged to MLive that the nonprofit scrambled to submit an application for demolition money, because "we were looking to make sure that Grand Rapids had access to some of these dollars."
Thankfully, DeRoo said he'll make sure to approach property owners before undertaking blight elimination projects.
Though nonprofits received some of the state blight elimination money, the bulk of it will go to Michigan land banking activities. Of the $15 million awarded outside of Detroit, more than half will be given to government land banks.
Ironically, this will actually result in more property being declared blighted. Under a definition added to state law in 2006, any property acquired by a land bank is deemed to be blighted. Moreover, the property keeps the blight tag even if is sold to another owner.
So thanks to state law, land banks cannot eradicate blight, they can only perpetuate it. For those considering purchasing land bank property, this could mean that their property has a greater risk of being taken under government eminent domain powers.
There are easier ways to reduce the number of vacant structures. For example, instead of petitioning for more state funding, local governments could ease up on regulations that make development (and demolition) difficult for private property owners.
National Review recently profiled private efforts in Detroit to deal with the city's gigantic vacancy problem. Demolishing a property in Detroit is a difficult, bureaucratic process. According to the National Review, property owners seeking to demolish a structure must fill out a four-page application in person, get signatures from five different city departments, and prove ownership.
On top of that, the publication reports:
Each demolition permit costs $254.00. Additionally, anyone seeking to demolish a building must show documentation confirming that gas, water, and electricity are disconnected. Historically, labor contracts have often mandated that unionized utility workers are the only ones authorized to disconnect these utilities. It costs $660 to turn off water and an additional $720 to turn off electric and gas.
Such inefficiency should not be rewarded with additional state funding. Instead, the state should encourage cities to reduce the costs of development and demolition incurred by private property owners. Doing so would likely have a much greater impact than just giving more tax dollars to land banks, cities and nonprofits.
After all, Michigan land banks and other agencies have already been awarded plenty to alleviate blight and vacancy, including $224 million from the federal government in 2010. The primary result appears to be increased land bank property holdings.
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