CITY OF SOUTHFIELD Neighborhood Investment Initiatives Southfield Community Coalition March 14, 2018 Kenson J. Siver, Mayor
Introduction Challenges facing Southfield neighborhoods & initiatives to bolster our housing stock
Issues Facing Southfield Neighborhoods Aging Housing Stock Aging Population Mortgage Crisis 2007-2010 Bank Foreclosures Decline in Property Values following 2008-10 Recession Oakland County Property Tax Foreclosures Significant Increase in Rental Homes Increase in Group Homes Second Wave Homebuyers Infrastructure Issues Streets, Sewers, Septic Systems
CONCERN: Dramatic Rise in Rental Homes Due to the mortgage crisis & recession, houses were devalued; speculators, flippers, real estate investors and home rental companies bought up a large number of foreclosed homes in Southfield. Banks and mortgage companies left homes vacant for years. Resulting in little or no maintenance of properties
CONCERN: Aging Homes/Aging Population We want our older residents to Age in Place, but home maintenance becomes more of a challenge for many in their senior years.
Goals of Support Programs for Southfield Neighborhoods Maintain attractive, safe neighborhoods Improve public infrastructure Increase property values Assist older residents with home/yard care so that they may remain in their homes longer Reduce or contain the number of rental homes
Part I Programs & Resources to Strengthen Neighborhoods & to Assist Homeowners particularly older residents, lower income & the handicapped Help for Southfield Neighborhoods
Help for Southfield Neighborhoods Rental Home Registration & Inspection Programs City Council Strengthened Ordinances on Rental Homes Every rental home must be registered Every rental home must be inspected every 3 years Landlord pays the registration & inspection fees Staff added to the Building Department
Help for Southfield Neighborhoods Home Repair Programs (income restrictions) SHIP No interest loan for major repairs CHORE $500 per client for yard work, minor repairs Oakland County Home Program Major repairs In the past two years $1.5 million has been spent in these programs
Help for Southfield Neighborhoods The City of Southfield now has two loan programs for residents with failing septic systems or failing wells who want to connect to city sewer or city water. 1) 3% loan paid over 17 years Sewer tap-in fee reduced to $5,000. 2) 0% loan for income qualified to be paid upon sale of the property.
Help for Southfield Neighborhoods Replacement of water & gas lines and storm & sanitary sewers Repair/replacement of neighborhood streets; additional sidewalks
Help for Southfield Neighborhoods Reconstruction of Southfield streets & infrastructure are top priorities 2015 ~ $34.7 million 2016 ~ $40.0 million 2017 ~ $22.3 million 2018 ~ $30.3 million
Help for Southfield Neighborhoods Home & Yard Assistance Oakland Rebuilding Together connects with corporations and volunteers to make home repairs and yard cleanup annually in Southfield.
Help for Southfield Neighborhoods Home & Yard Assistance Habitat for Humanity Rock the Block program connects with corporations and volunteers to make home repairs and yard cleanup annually in Southfield.
Help for Southfield Neighborhoods It s a Hand Up, Not a Hand Out Homeowners have to provide some sweat equity in return for assistance.
Help for Southfield Neighborhoods THE BIG RAKE 250 volunteers turned out for THE BIG RAKE in 2016 with 75 yards raked 350 volunteers turned out for THE BIG RAKE in 2017 with 120 yards raked Most of the volunteers are students from Lawrence Tech & Southfield Public Schools.
Help for Southfield Neighborhoods THE BIG RAKE Southfield Public Schools students, staff & parents joined the BIG RAKE.
Help for Southfield Neighborhoods Southfield Parks & Garden Club Yard makeovers for CHORE houses Litter patrols Annual Garden Walk showcases a different neighborhood each year
Help for Southfield Neighborhoods Corporations & organizations spruce up neighborhood parks Comcast, Eaton, Federal Mogul, Kappa Foundation & others
Help for Southfield Neighborhoods Historic Designations Southfield was awarded a $45,000 grant from the Michigan State Historic Preservation Office to prepare two Mid-Century Modern neighborhoods for possible historic designation. Historic neighborhoods have stronger property values & in times of real estate turn-downs, historic homes retain more value and rebound sooner.
Help for Southfield Neighborhoods NEIGHBORHOOD ENTERPRISE ZONES Two areas of the city will be designated Southfield Neighborhood Enterprise Zones City of Southfield NE corner of the city from Catalpa to 13 Mile Road and Sections 34 & 35 These areas have the largest concentrations of pre 1960 homes with modest assessed values.
Help for Southfield Neighborhoods NEIGHBORHOOD ENTERPRISE ZONES Credits only include material costs, NOT labor. City and county taxes will be reduced by 17.2 mills for 12 years for homeowners who opt into the program. In turn, property owners must make major home improvements by licensed contractors. Improvements must meet building code requirements. Improvements may include new roofs, rewiring, replumbing, new windows, foundation repairs, insulation, additions, etc.
Part II Southfield Neighborhood Revitalization Initiative But first a look back as the Mortgage Crisis was unfolding in 2007 which then brought on the Recession of 2008 ~ 2010
REPORT TO SOUTHFIELD CITY COUNCIL ~ JUNE 2007 National Crisis of Sub-Prime Loans & Predatory Lending Sub-Prime Loans are being widely promoted as a means for people with credit problems or weak credit to become homeowners. For many, the opposite is becoming the reality. They are deeper in debt and have a worse credit history. Credit experts say it takes about ten years for a working person to recover from a foreclosure
REPORT TO SOUTHFIELD CITY COUNCIL ~ JUNE 2007 National Crisis of Sub-Prime Loans & Predatory Lending From 2000 to 2005 the number of sub-prime loans more than tripled in the US Marketed to people with blemished credit & high debt-to-income ratios African American, Latino & low wealth families have disproportionate share of sub-prime loans Sub-prime lenders breed foreclosures thru bad underwriting, balloons, ARMs, prepayment penalties, teaser rates, etc.
REPORT TO SOUTHFIELD CITY COUNCIL ~ JUNE 2007 National Crisis of Sub-Prime Loans & Predatory Lending 2.2 million sub-prime loans made between 1998 & 2006 will end in foreclosure 19% of sub-primes made in last 2 years failed Will cost homeowners $164 billion in losses As housing appreciation slows, sub-prime foreclosures rise Data from National League of Cities & Center for Responsible Lending
REPORT TO SOUTHFIELD CITY COUNCIL ~ JUNE 2007 Foreclosures In 2006 more than 1.2 million foreclosure actions were filed an increase of 42% from 2005! Metro Detroit had the highest number of foreclosures among the 100 largest metro areas during January - March 2007 That is one foreclosure for every 51 households Southfield has 110 homes in pre-foreclosure, 26 in auction & 678 bank-owned Data from RealtyTrac & Detroit Free Press May 7, 2007 April 26, 2007
REPORT TO SOUTHFIELD CITY COUNCIL ~ JUNE 2007 Foreclosures Banks & mortgage companies (criminally) promoted easy home ownership with deceptive, junk mortgages. Large homes are being sold without down payments
REPORT TO SOUTHFIELD CITY COUNCIL ~ JUNE 2007 Foreclosures This Southfield home was listed at $290,000 in 2003. After 2 foreclosures, years of no maintenance and being stripped of fixtures, it is now listed at $165,000 (bank will take $140,000). SOLD IN 2008 for $83,000
REPORT TO SOUTHFIELD CITY COUNCIL ~ JUNE 2007 Foreclosures The foreclosure of a single family home may, in some cases, generate direct municipal costs on cash-strapped public agencies in excess of $30,000 per property. In addition, area homeowners, business owners and landlords stand to lose if a rash of foreclosures brings down property values, accelerating the decline of an entire neighborhood. Left unchecked, the nationwide municipal cost of foreclosures could easily top the $1 Billion mark. From: Collateral Damage: The Municipal Impact of Mortgage Foreclosure Boom a study conducted by the Center for Housing Studies, Harvard University
THE AFTERMATH ~ 2007-2015 Foreclosures The city spent $1,000s on boarding up properties, turning off utilities, going after banks & mortgage companies some of which went out of business or never responded. Southfield was the hardest hit community in Oakland County by mortgage fraud. At the height of the crisis the city had 1,600 vacant homes. Banks, mortgage companies and HUD dumped houses at ridiculously low prices, causing more duress and the Second Wave. Property values plummeted; tax revenues the same. To save Police & Fire, residents supported a five-mill property tax increase in 2011.
CONCERN: Property Tax & Bank Foreclosures / Annual Oakland County Auction Following the mortgage crisis and the severe devaluation of homes, speculators, flippers, real estate companies and individuals snapped up hundreds of properties at greatly reduced prices in Southfield. Many of the tax foreclosed homes became rental properties. Numerous owners who bought at low prices appear unable to afford to maintain their home, pay the water bill & their property taxes and/or condo association fees. These properties are the SECOND WAVE of fallout from the home mortgage crisis.
County Tax Foreclosure a 3-year Process Year 1 On March 1 st unpaid taxes become delinquent; an administration fee & 1% interest charged Year 2 On March 1 st new fees added & interest rate increases On May 1 st foreclosure petition filed in Circuit Court Owners & lienholders are notified Year 3 In January show cause hearings are held, giving taxpayers a chance to appeal foreclosure In February, a Circuit Court hearing is held; Foreclosure order signed by judge On March 31, owner loses all interest in property if tax arrears have not been paid. Around June 1 st, cities are notified of foreclosures & have first right of refusal to take property by paying all taxes & fees. Mid August foreclosed properties go on the auction block At minimum, six warnings are issued to property owners Foreclosures can be avoided by arranging a tax payment plan, but property owners must keep up on payments
CONCERN: Property Tax Foreclosures Second Wave Case Studies #1 Prior to mortgage crisis this home sold in 2007 for $132,000; Sold again in 2012 for $21,450. The owner bought this house in 2012 while delinquent on taxes on another home he owned in Southfield 2 nd Wave owner failed to pay $9,754 in taxes & $2,337 water bill on this house & $14,027 in taxes & water on his principal residence Both were foreclosed by Oakland County in 2016
CONCERN: Property Tax Foreclosures Second Wave Case Studies #2 Purchased in 2007 for $104,000; Sold in 2009 for $20,000 2 nd Wave owner failed to pay $27,689 in taxes & $8,010 water bill; Foreclosed by Oakland County in 2016 #3 Purchased in 2006 for $350,000; Sold in 2009 for $74,900 2 nd Wave owner failed to pay $24,733 in taxes & $1,243 water bill; Foreclosed by Oakland County in 2017 #4 Condo valued at $144,000; Purchased in 2012 for $41,000; Owner failed to pay $8,246 in taxes; Foreclosed by Oakland County in 2017
CONCERN: Property Tax Foreclosures Case Studies #5 Purchased in 2014 at County Tax Auction for $21,000; New owner failed to pay $11,982 in taxes; Instead, used property for an illegal marijuana grow operation; Foreclosed again by Oakland County in 2017. Now in very poor shape and will be demolished by the Southfield NRI. #6 Owner of four unregistered rental homes fell into tax arrears between 2006 and 2013; Collected rent but failed to pay $48,795 in taxes on these properties, plus water bills totaling $4,560. All four homes were foreclosed by Oakland County in 2017.
CONCERN: Property Tax Foreclosures Case Study #7 Purchased in 2011 from US Bank for $10,000, this Cranbrook neighborhood home had sold in 2002 for $167,000; Out-of-town landlord rented the home & didn t pay taxes. The landlord also failed to maintain the home. When the sewer line collapsed he rigged up a pump and dumped raw sewage in the yard. Foreclosed again by Oakland County in 2016.
CONCERN: Property Tax Foreclosures Case Study #8 This home sold for $80,000 in 2002. Has changed hands 10 times since 2000. Purchased at the Oakland County Tax Auction in 2014 for $2,036. Rented. New owner never paid taxes. Tax foreclosed again in 2017. Now beyond repair, it will be demolished. This is one of 13 houses the SNRI will demolish. Back taxes, fees, water bills & demo costs equal a loss of approximately $350,000 for the SNRI.
Help for Southfield Neighborhoods THE QUESTIONS BECOME: What to do about hundreds of homes & condos that were sold at the Oakland County property auctions resulting in a dramatic rise in rental and group homes? (Many to out-of-town landlords.) How do we improve home values? Doing nothing is NOT an option!
Anyone may buy a SNRI home once they obtain mortgage approval; purchaser must live in the home. SNRI homes cannot be rented. Neighborhood Investment Initiatives Help for Southfield Neighborhoods Formation of Southfield Neighborhood Revitalization Initiative (SNRI) Partnership formed between Southfield City Council, Southfield Non-Profit Housing Board and Habitat for Humanity Oakland County. City Council exercises First Right of Refusal on Oakland County tax foreclosed properties; Transfers title to the Southfield NRI, LLC. Southfield Non-Profit Housing Board pays back taxes, water bills & fees and finances renovation costs. Southfield NRI contracts with Habitat for Humanity to renovate homes, perform environmental studies, bring houses up to current building codes and sell the homes at market value, thus raising property values. Property sale proceeds go back to the Southfield Non-Profit Housing Board.
Help for Southfield Neighborhoods Southfield Neighborhood Revitalization Initiative (SNRI) has 96 properties including vacant lots. It will demolish 13 homes that were beyond repair. Neither the City of Southfield, Non-Profit Housing Board nor the SNRI foreclose on property owners. The Oakland County Treasurer s office forecloses when taxes go unpaid for three years or more or payment plans are not met. In 2016, the SNRI paid $959,444 in back taxes and $62,171 in overdue water bills. In 2017, it has paid $1.1 million in back taxes. To date, the Southfield Non-Profit Housing Board has invested over $4 million in home renewal. The vast majority of NRI properties were formerly owned by people who purchased homes at greatly reduced prices and immediately fell behind in their property taxes & water bills. Almost all of these homes need significant repairs/upgrades. Some houses are SOLD to Habitat clients. There are NO free houses.
Help for Southfield Neighborhoods SNRI properties are spread throughout the city and vary in size from 900 sq. ft. to 5,400 sq. ft.
IN SUMMARY: The Oakland County Treasurer s Office makes the determination to foreclose on properties. The City of Southfield does NOT foreclose or evict homeowners. The City of Southfield takes First Right of Refusal on foreclosed properties per state law and transfers properties to the Southfield Neighborhood Revitalization Initiative (SNRI). Otherwise these properties would be auctioned off at the annual county property sale. The City of Southfield provides redevelopment assistance to the SNRI via Brownfield Tax Credits. The SNRI, in partnership with Habitat for Humanity Oakland County, rehabilitates and upgrades homes OR demolishes them. The goal of the SNRI is not to profit but to breakeven on home rehabilitation. In some cases the SNRI puts more money into home restoration than the selling price. Demolished homes are a total loss.
Southfield NRI Success Story BEFORE $84,750 owed in back taxes & $2,681 in water bills when foreclosed in 2016. AFTER Rehabilitation cost $121,233, including new driveway, landscaping. Sold for $250,000.
Southfield NRI Success Story Totally rehabbed interior, including new electrical, plumbing and HVAC. New kitchen cupboards and granite counter tops. New flooring and doors, as well.
Southfield NRI Loss SNRI took possession of this mold filled and damaged home in 2016, after paying back taxes, fees and a water bill, totaling $8,475. Insurance, demolition, management fees, etc. came to an additional $23,401, for a total loss for the SNRI of $31,876. The goal of the SNRI is to break even on its investments. Some properties will generate a profit while others are a loss.
Help for Southfield Neighborhoods SNRI homes are placed on the real estate multi-list. Homes sold to date have had multiple bidders. SNRI hosts occasional open houses. Persons interested in buying an SNRI home should contact a realtor.
CITY OF SOUTHFIELD Neighborhood Investment Initiatives ReVitalizing Neighborhoods House by House Kenson J. Siver, Mayor