Property speculation creates chaos in Detroit housing market
DETROIT (AP) — Property speculation is causing dysfunction in Detroit’s housing market and leading to blight and instability in neighborhoods, according to a newspaper investigation .
University of Michigan-Dearborn Assistant Professor Joshua Akers documents Detroit property speculation on his website Property Praxis. Akers told the Detroit Free Press that the annual Wayne County tax foreclosure auction “is one of the greatest destabilizing forces” in the city.
“The auction is the perfect way to gamble. If a bet doesn’t pay off in three years, all you lost is the initial purchase price,” he said. “At least that’s the speculative perspective. There is a much higher cost for the neighborhoods.”
Nearly 144,000 properties landed in the tax auction between 2002 and 2016. Speculative investors accounted for 90 percent of all auction purchases between 2005 and 2015, according to Akers. Speculative investors engage in steady and continuous swapping of capital and titles.
Akers said the practice leads to vacant properties or predatory rent-to-own land contracts in which the prospective buyer has a high likelihood of eventual eviction.
“These land contracts are predatory because they are set up to fail,” said Lorray Brown, co-director of the Michigan Law Poverty Program.
The contracts require consumers to take on the obligations of a homeowner, like fixing up the property, with none of the rights, she said.
The contracts usually include a provision that allows the seller to terminate the agreement if the consumer fails to comply with the requirements, Brown said.
“The seller then takes back the property through eviction and the consumer loses all of the money invested in repairing the property,” she said.
Land contracts also give bulk buyers and speculative investors a loophole in a 2015 state law that prohibits individuals with a foreclosed property or delinquent taxes from bidding in the auction. The contracts put the taxes on the tenant.
Wayne County Treasurer spokesman Mario Morrow said the office “doesn’t have the resources, financial or human, to police thousands of properties that are sold in the auction.”
Information from: Detroit Free Press, http://www.freep.com