Policy Group Urges Support for Proposed Michigan Law to Halt Predatory Land Scavenger Sales (Press Release)

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Legislation is part of broad policy initiative that empowers local communities to tackle blight and encourage productive land reuse.

FLINT, MI (AUGUST 4, 2011): Policy experts are joining residents in some of Michigan’s hardest hit communities to cheer the introduction today at the State Capital of legislation that would help undercut predatory speculation in delinquent property tax sales that often serves as a wedge for abandonment and growing blight.

Earlier this year, fifty-eight Flint houses, bought for a total of $25,350 at a “scavenger sale” auction last November, found their way onto eBay, where they sold for $92,800 – with no guarantees that the unknown buyer would develop or even maintain the property. The new legislation – HB 4819, introduced by State Representative Jim Ananich with the support of Genesee County Treasurer Deb Cherry – would help end these types of scavenger sales. Flint is in Genesee County.

“Investors typically make a sizeable profit in these scavenger sales,” says Dan Kildee, President of the Center for Community Progress, one of the nation’s leading policy groups tackling the issue of land reuse and foreclosures – and a strong proponent of the new legislation. Kildee was formerly the treasurer of Genesee County and the chairman and chief executive officer of its land bank.

“The problem is that there’s nothing to ensure that the speculators who buy these properties will keep them from falling into the same kind of disrepair that gave us landmark eyesores like Genesee Towers and the old Durant Hotel, which sat unused for nearly 40 years before it was finally redeveloped by the Genesee County Land Bank and its partners,” says Kildee “This legislation gives local governments one more powerful tool to undercut speculation that drives decline.”

Michigan law currently requires no-minimum-bid “scavenger sale” auctions, as part of the process for dealing with tax-foreclosed properties. If a property does not sell at a first, standard auction, with guidelines for minimum bids and other safeguards, it is dealt with in a second auction, one where the county has to accept the highest bid – no matter what. Tax-foreclosed properties only come under the control of land banks when the second auction fails to produce a bidder.

The approach made sense when first enacted decades ago, ensuring that properties brought in at least some small amount of revenue. But in today’s market, the practice produces profits for outside speculators and does little to ensure that the properties will be used productively – or even minimally maintained. And property that is allowed to deteriorate can have a cascading – and devastating – impact on nearby homes, businesses and whole neighborhoods.

“By removing the second auction requirement from the books and empowering land banks to take control of properties that cannot be sold in a standard auction, the State legislature will provide communities with a potent mechanism to reduce blight,” says Kildee, who worked through the Center for Community Progress to develop and advocate for the proposed legislation as part of a year-long legislative agenda to help local and state governments craft new legislative strategies to deal with foreclosures and blight. “I urge State legislators to enact this law, because it gives communities the chance to make decisions that are in the long-term, best interests of local residents.”

The State Legislature will have the opportunity to consider the proposed law when it returns to work this fall.