City of Saginaw (Michigan) flipping houses with Stimulus Money

[TheTusch]

The light beige, 1,011-square-foot abode has worried neighbors for eight years now — ever since its previous owners fell short on payments and moved out of the otherwise fully-occupied West Side block.

But things have changed these past few weeks. The city of Saginaw has fixed up the home as part of an urban renewal program and it’s back on the market. Some call it the next great American housing experiment.

mLive.com: Home for the holidays: Saginaw house renovated with federal stimulus goes on market

[hudkina]

One idea that I've had for revitalizing neighborhoods is to create limited-equity housing co-ops (preferably with public loans, but also with private loans) that buy up entire neighborhoods, fix them up and sell a share of the corporation for each unit in the neighborhood. In that sense, the residents will have a stake in the entire neighborhood and will have a certain degree of determination in who can live in the neighborhood. (i.e. a slumlord can't buy a house on the block and rent it out to a drug dealer.) A co-op can maintain lawns, hire private security (if needed), and even own commercial properties within the neighborhood, whose rents could help offset the costs of the co-op.

Buying into a co-op is much easier than buying into a condo association, as the cost per share is generally lower. For example, under a condo association, someone might pay $200,000 just for the condo (with all of the profit going to the builder), while under a co-op that same unit may be had with the purchase of a $10,000 share. The difference is that the monthly fees are generally higher under a co-op as a portion of the fee goes toward paying down loans, taxes, and any overhead. The upside is that because a co-op is basically a nonprofit, the fees aren't that much higher, especially after the loan is paid off.

Another interesting aspect of a co-op is that it can legally obtain a charter for and operate a charter school (at least in Michigan). Assuming a charter school is able to perform better academically, it would help attract families.

[Crawford]

The problem with using scarce federal dollars to flip homes in Saginaw (and similar cities) is that you might actually be making the problem worse. At best, you are probably doing a bureaucratic version of "musical chairs" or "wack a mole".

The problem in Sagniaw is the demand side, not the supply side. By concentrating investment on the supply side, they're just adding unwanted housing, thus driving down the value of stable housing in the neighborhood.

If the population is going down by the day, it doesn't really help anyone (well maybe some contractors are happy) to renovate and resell homes.

You see this in the Detroit area, where they built subsidized brand-new homes in Highland Park (a decayed inner suburb) and in Brightmoor (a poor West Side neighborhood). Most of these new homes were eventually abandoned anyways.

[hudkina]

Technically those houses in Highland Park were never abandoned. They just never sold and I'm sure that had a lot to do with the size, quality and price.

As far as the houses in Brightmoor, I don't think a single one of the infill houses is empty, or at least none are visibly vacant. In fact, I would say the vast majority of the infill housing built in Detroit is occupied. And while I'll agree that building houses in Brightmoor probably wasn't the smartest idea, I think it does have its merits. I could see Brightmoor become more like the exurbs with larger cheap housing on large lots with limited services.

For example, this house takes up the space that once held four houses:


And while that may seem like a lot, that is still only 2/5 of an acre, as the lots were originally 1/10th of an acre. If they replace four to six houses with a larger house on a larger lot, then I don't necessarily see a problem as you're still removing 3/4 of the housing in the neighborhood.

[LMich]

But, you still have to plow and light the same length of street, trash pick-up still has to drive the same number of miles, etc...if you're going to do this stuff, it better be actual infill, and in stable or stablized neighborhoods or stable or stablizing sections of neighborhoods. The very worst thing that could be done reducing density from the perspective of a local government. They need to be cramming as many folks on an acre as they can get, and cutting off the surplus, contiguous land either for development or for things like gardens if or until the land becomes desirable again for development.

You know, I don't mind rebuilding in a place like Brightmoor, so long as they build around something, actual neighborhood cores. Simply spreading out the housing defeats the purpose. City planners need to be smarter about this; I'm glad to see that at least in Detroit they are finally in the first stages of being smarter about land use.

I know we're kind of getting slightly off subject about what Saginaw's doing in particular, but it was important to comment on "right-sizing" in general. I actually think what Saginaw's doing is worth a try, something similar is being doine here in Lansing and other communities around the state through land banks.

BTW, anyone interested into going deeper into this can read the Michigan State Housing Development Authority's plans on this across the state:

Neighborhood Stabilization Program 2

[Raining Inside]

Here are a couple abandoned new infill homes in Brightmoor. I think it's great that new homes get built in dead neighborhoods. But the same underlying conditions that caused the old neighborhood to vanish still exist.

[hudkina]

Those houses aren't abandoned. Those coverings are put over the windows while they're under construction to deter vandalism and theft. For all we know they've been sold in the year or two since those pics were taken.

[Crawford]

^
IMO, in this case, the difference between "abandoned" and "vacant" is inconsequential. The issue is that real estate in Brightmoor is virtually worthless.

I question whether it makes sense to plow redevelopment dollars in areas with little or no real estate value, especially when the redevelopment dollars are targeting middle class homeownership.

Why would a working or middle class person choose Brightmoor? Most of the city and suburbs are already very affordable for working class folks. As for the poor, I don't thnk the government should be subsidizing their homeownership.

[hudkina]

But those houses are mostly occupied, so your point is inconsequential. Keep in mind that not everyone is a 27 year old suburban-bred white male... There are plenty of people who find value in an affordable brand new house on a relatively large lot in Brightmoor.

[Crawford]

Originally Posted by hudkina

There are plenty of people who find value in an affordable brand new house on a relatively large lot in Brightmoor.

The Detroit real estate market contradicts this assertion.

Median home values in non-prime Detroit neighborhoods are below $10,000.

[Raining Inside]

I found a couple of those newer homes in the Brightmoor area on the market. The terms seem unusual. They require a 15 year lease with an option to buy at the termination of the lease. I like how the developer covered the windows and doors on the empty homes with plywood that matches the exterior color. Now if they would only mow the yard...

[hudkina]

Originally Posted by Crawford

The Detroit real estate market contradicts this assertion.

Median home values in non-prime Detroit neighborhoods are below $10,000.

Of course they are, but that has nothing to do with the new homes for sale in those neighborhoods. The relevent question would be what is the median value for homes built in the last twenty years? Or even what is the median value for homes when excluding stripped and dilapidated structures?

[Rizzo]

Ahh my hometown.

At least Saginaw has clearly prioritized which blocks they intend to invest in. We are talking about the west side....an area with high potential. There are very few retail vacancies in their business districts and hardly any vacant lots. I'd say keep flipping houses on this side of town and tearing down the old abandoned burnt out hulks on the East side. Everyone wins. East side residents see a removal of blight, west side residents gain confidence in knowing their neighborhood is being reinforced with renovated housing stock....and positivity is contagious in Saginaw... I know this...

I'd say Crawford's first post in this thread is only partially correct. What you are seeing here is indeed an overall decline in population, but also a shift in residents from east to west side, or else new residents moving to the west side, but failing to make up for the dramatic declines on the east side.

I suppose analyzing census tracts may be more revealing and specific, but what I can say from personal experience, the west side remains dense, vibrant, and healthy.....so why not continue to renovate houses in this area...what's the problem. I'd say I'd be in full agreement with crawford if we were talking about renovating houses in on the east side or south village...but we aren't.

[Crawford]

Originally Posted by hudkina

Of course they are, but that has nothing to do with the new homes for sale in those neighborhoods.

I totally disagree. New homes aren't going to be valued more than old homes. If a neighborhood is essentially worthless, new homes will be essentially worthless.

Originally Posted by hudkina

The relevent question would be what is the median value for homes built in the last twenty years? Or even what is the median value for homes when excluding stripped and dilapidated structures?

This is dodging reality, IMO.

Low property values in Detroit have nothing to do with the relative age of homes. If anything, very old homes in Detroit are worth more then newer homes.

I would guess than homes built in the last 20 years in Detroit ghettohoods are essentially worth the same as homes older than 20 years.

[hudkina]

Originally Posted by Crawford

I totally disagree. New homes aren't going to be valued more than old homes. If a neighborhood is essentially worthless, new homes will be essentially worthless.

You are looking at it from an upper-middle-income, suburban-raised, white male hipster's perspective. To you anything about a neighborhood like Brightmoor is worthless, and that's why you won't find any upper-middle-income, suburban-raised, white male hipsters living in that neighborhood. To you a "crappy low-quality" house in a shitty neighborhood is a step down, but to many a "decent affordable" house in a shitty neighborhood is a step up...

Originally Posted by Crawford

This is dodging reality, IMO.

Low property values in Detroit have nothing to do with the relative age of homes. If anything, very old homes in Detroit are worth more then newer homes.

As long as the quality and characteristics of a house are relatively even, I would say a newer home is more valuable than an older home. That's especially true when comparing working-class housing from the 30's and 40's to low-income housing of today. Of course a brick mansion in Rosedale Park or an historic 19th century worker's cottage in Corktown are going to be worth more than low-income housing in Brightmoor. However, I can guarantee the most valuable homes in Brightmoor have been built in the last decade...

Originally Posted by Crawford

I would guess than homes built in the last 20 years in Detroit ghettohoods are essentially worth the same as homes older than 20 years.

So to be clear, you think these:


are worth the same as these:


When you talk about the "median value", all that means is that half the homes in the neighborhood are valued below that number and half are valued above that number. Just because those homes are in a neighborhood where the median value may be $10,000, doesn't mean those homes themselves are worth $10,000. They are clearly in the upper half...

[Raining Inside]

Originally Posted by hudkina

So to be clear, you think these:


are worth the same as these:


When you talk about the "median value", all that means is that half the homes in the neighborhood are valued below that number and half are valued above that number. Just because those homes are in a neighborhood where the median value may be $10,000, doesn't mean those homes themselves are worth $10,000. They are clearly in the upper half...

The problem is that the new homes are nothing more than small islands surrounded by abandoned/collapsing/burned out homes and rubbish piles that many of the empty lots have become. With no improvement in the crime and unemployment rates in the area, those new homes won't look nice and hold their value as long as they would elsewhere. In the not so long run it will be just a waste of money and effort.
There a plenty of viable neighborhoods in Detroit that have empty lots that could be built on. Building new homes in those places would have longer lasting benefits to the home owners and neighborhoods. I suspect areas like Brightmoor get a smattering of new homes because the land is cheaper.

[Raining Inside]

Another "Lost Cause" neighborhood in Detroit where I think money for new homes is being wasted is Chaldean Town. These two pictures are of three new homes on the same street. With the neighborhood like it is the value of the new homes doesn't stand a chance of going any place but down:

[Crawford]

Hudkina, you're taking the most wildly extreme samples from two subsets in order to make a point.

Yes, a brand new tract house in Detroit will be worth more than a firebombed shell. That doesn't mean the tract home is worth much, or that there's any economic reason for its existence.

And I could just as easily show pics of beautiful (and very valuable, for Detroit standards) prewar homes in Northwest Detroit contrasted with nearby worthless, gutted brand new homes off West 6 Mile.

If the real estate values in a given neighborhood are approaching zero, there is absolutely no reason taxpayer dollars should be spent on subsidized construction. It's as if the current property values aren't quite low enough, and they really want to punish the existing homeowners with even more unneeded supply.

Detroiters aren't moving away because they want newer homes. They're moving away because of crime, schools, taxes, etc.

And the potential folks you could attract to the city aren't looking for a crappier version of Shelby Township. They want something different from the suburbs.

[BG918]

That is crazy, but I guess you have to start somewhere..

[Raining Inside]

Originally Posted by BG918

That is crazy, but I guess you have to start somewhere..

There are a lot of examples of new homes like this being built all across Detroit in derilict neighborhoods. Those new home owners are true urban pioneers.