Where politics and faith dance in the shadow of the windmill.

Standing up for free enterprise and slums

It can be challenging standing up for free enterprise today, especially when it involves real estate. But somehow, Kent County commissioners Shana Shroll, Dan Koorndyk, Harold Voorhees, and Mike Wawee found that courage. As Jim Harger reports, theirs were the only votes against the purchase of property by the Kent County Land Bank.

On one hand the complaints are understandable: if the Land Bank steps to the head of the line for certain properties, doesn’t that create disincentives for other speculators? Notwithstanding that more than 300 properties are being offered up at the County auction.

One can understand the Voorhees vote, and even that of Wawee — both come from the far west side, and reflect that sort of economic conservative (aka Tea Party) sensibilities. Fine. But Koorndyk and Shroll? They both live close enough to see the impact of abandoned properties in neighborhoods, or the impact of absent land lord. Their support for the flippers and slumlords is hardly appetizing, and  certainly not the mark of civic leadership.

As David Allen explained earlier on Urban Planet, it is not even clear how many of these speculators now crying foul, will actually perform any renovations let alone pay taxes. To date, that has not been the dominant strategy from the playbook.

While the properties are not in their district, their vote places them on the side with the economic radicals — a position broadly out of favor in both districts (and certainly in East Grand Rapids, one third of Shroll’s new seat.  With redrawn districts, the commissioners have gone and handed their opposition a prime issue, one that Democrats will gladly say, “thank you.”

Is the support for slum lords overblown? Below the fold, Allen explains how the Kent County Land Bank purchases work, and more importantly how the speculative flipping damages neighborhoods and city revenue. Writing in thread at Urban Planet, Allen explains:

Those that make this argument often say, “let the market take care of these tax foreclosed properties.”  The general public has no idea what happens at the tax auction.  If they did, there would be a loud cry to change the law and shut it down.  There are two auctions.  All that want to participate in the auction must pre-register and it is cash only.  At the first auction the minimum bid is the price of taxes owed and then it goes up from there.  Whatever does not sell at the first auction goes to the second auction which is called the “Distressed Auction” where the minimum bid is $1.  Typically about 1/3rd to 1/2 of the properties sell at the first auction the rest go to the second auction.  I am currently working on a report that correlates the properties purchased at the past 4 years’ distressed auction in Grand Rapids and nuisance/code violations with the City.  For example there is an investor that happens to live in Caledonia that has purchased properties at the distressed auction every year for the past 4 years.  Last year he bought 12 properties and paid about $90K.  Collectively this individual owns about 30 properties in Grand Rapids.  He currently collectively owes Grand Rapids over $20K in fines and fees for nuisances on his properties.  I had a rep at the last Distressed Auction to scope things out.  He was sitting in front of 4 guys each with a breif case.  My guy told these men that it was his first auction and asked if they had a strategy.  They shared it with them.  These guys told us that they have been going to this second auction for years.  They usually quadruple their money and sometimes get a ten fold return.  They study the properties available and only bid on homes that have families living in them and paying rent.  They usually pay between $800 to $1500 per property.  What they are buying is VERY blighted properties that are rented to folks that have no other place to live.   They win their properties, go to the treasurers office and pay.  They go to the Register of Deeds and file their deeds.  Then they go to the home and sign a new lease with the renter.  In each case these 4 guys do no improvements to the properties, and more important do not pay the taxes…allowing them to revert back to the County in three years.  You do the math.  They pay an average of $1,000.  They collect $500 a month for 36 months or $18,000.  Right now according to my calculations about 15% of the properties in the tax auction are repeat offenders like this.  Sending tax foreclosed properties to the auction for cash to the highest bidder is not good for our neighborhoods, it is not good for the County, and it is not good for our real estate market.  We need to find a way to get as many properties as possible into the hands of responsible investors that will do the right thing with the properties they purchase.  Right now it is a free for all and the wrong buyers are dictating the terms.


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