Deadline Detroit | Held hostage: Two Detroit neighborhoods fight to break developers’ grip
For years, residents in Virginia Park have been eyeing the vacant tan brick duplex where Byron Street ends.
Shandrekia Lawrence, a long time renter who lives 10 doors down, sees it as a potential escape from a slumlord — a home she could fix up and pass down to her sons. George Adams wants to turn it into an art house with his non-profit, 360 Detroit, which plans a park across the street.
But the boarded-up house, though publicly owned, is not for sale. It’s one of more than 100 here that have been unavailable to residents since at least 2017, when a New York developer tapped to restore the nearby vacant Herman Kiefer health complex was given the option to buy every Land Bank-owned house and lot in its shadow — a proposed mass residential property transfer unlike almost any the city has seen in modern times.
The houses, residents were initially told, would be rehabbed by 2020 and occupied thereafter, helping to renew a once-thriving neighborhood. But following a series of delays and an extension granted by the city, today the hundred-plus houses are either untouched or works in progress, shutting out interested buyers like Adams and Lawrence, and fueling distrust among long-time residents who feel the community was cheated out of property it should have had first claim to.
“We looked up one day and suddenly somebody else owned everything,” said Renee Gunn, a longtime Virginia Park resident and member of the Neighborhood Advisory Council keeping tabs on the development. “People have been trying to get these houses and lots for years. We took care of these lots … they did us horribly wrong.”
The plan to entrust one developer with revitalizing all the publicly owned, blighted properties in a neighborhood was replicated in northwest Detroit’s Fitzgerald neighborhood in 2017, when the city announced a landmark turnround project never before tried in the U.S. That plan has since been scrapped in favor of a more inclusive and decentralized alternative, Deadline Detroit has learned, with the city pulling back hundreds of properties from the developer after it rehabbed just 13 houses in three years.
The deals were essentially eggs-in-one-basket gambles struck at a time of greater desperation, when few with financial means were jumping to help stabilize neighborhoods and the city had no blueprint for doing so. At first, residents in these areas appreciated the attention after years of disinvestment, but as time wore on without significant improvements and property values rose, they began to question the fairness and feasibility of the plans.
The experiences of all involved — developers, public officials, and residents — illustrate how difficult and complicated such turnaround projects can be, and will serve as what the city calls a lesson as it begins the second phase of a $130 million campaign to strengthen and repopulate 10 areas through its Strategic Neighborhood Fund. But although it says it will in the future abandon the approach that failed in Fitzgerald, the city remains tied to the slow-going deal in Virginia Park. There, a group of vocal residents is fighting to claw its way out of “property purgatory,” even as a developer insists he can still deliver the change they want.
Gaston Nash was one of the first to predict the implosion of the deal they said would save his neighborhood.
Announced during a city election cycle in 2017, Fitzgerald was a banner project that epitomized Mayor Mike Duggan’s newfound commitment to bringing back areas beyond downtown — a prototype that would inform Detroit’s approach to a number of neighborhood revitalization efforts to come.
The vision for the blighted area at Six Mile and Livernois was ambitious. Over two years and with $12 – $15 million from public, private and philanthropic sources, development group Fitz Forward LLC was supposed to rehab more than 100 vacant houses and landscape more than 200 lots as the city built a park and greenway and funnelled additional investments into the neighborhood’s commercial boundaries. It was a blitz needed “for maximum impact and effectiveness,” a cached version of the now-defunct project website said.
Century Partners, the group’s lead developer, was chosen as a Black-led firm that had rehabbed and sold more than 50 houses throughout Detroit’s neighborhoods in the preceding two years, while giving long-term residents an opportunity to invest in them. The Platform, a high-profile development firm that owns the Fisher Building, played a supporting role as co-investor.
Fitzgerald was targeted because city leaders believed it could be saved. Though rife with abandonment, the neighborhood is bordered by Marygrove College and the University of Detroit Mercy, and boasts solid housing stock, plus a fair number of homeowners who’ve stuck it out through the decline.
Nash, a block club president who was lured there in 2009 by two houses he bought for cheap at public auctions, was excited by the prospect of change. But from the immaculate bungalow he’d converted into his “dream home,” he watched as the handful of developer-owned houses within view sat untouched, their windows shattered, roofs crumbling, and weedy yards covered in unraked leaves and litter.
A year went by and Fitz Forward did not renovate a single house. Two more years passed and it completed just 13. At some point, Nash discovered the developer hadn’t paid the 2019 taxes on the homes it owned on his street. This was followed by a run-in with a worker on the project, who informed him he’d be quitting because there was “nothing going on,” and oh, by the way, did you see that news story that said the developer now has until 2024?
While improvements had trickled into the neighborhood, like the clearing of illegal dump sites and the new Ella Fitzgerald park, Nash felt more urgency was needed to address the torn up houses still standing.
“It’s just not right for people to live like this,” he said from his home early this month. “The (Detroit) neighborhood I grew up in didn’t look like this and, for most of the people here, back in the day, their neighborhood didn’t look like this … This neighborhood is a microcosm of the city, and it’s important we figure out how to fix this so people want to live here and move here.”
But from the perspective of the two-man team behind Century Partners, the project was moving as quickly as it could.
Work didn’t begin in earnest until 2018 due to delays in gaining title to the properties, they said. Additional slowdowns were attributed to financing issues associated with operating in an economically distressed neighborhood and compounded by an effort not to disrupt its character. So not only could the homes in some cases fetch only slightly more than their rehab costs, but because the developers were prioritizing low-income or first-time homebuyers from Detroit, they also had to rely on subsidies and skittish lenders.
Nearly $2 million of the city’s limited allotment from the federal Housing and Urban Development department was put toward the affordable housing component (20% of the houses were to be set aside for households earning 80% of area median income — or $44,000 for an individual), and an additional $400,000 was eventually secured for the market-rate homes. Almost all of the HUD money was spent with just six affordable homes developed and sold.
“We’re proud of what we were able to accomplish in a relatively short time with the investment and given (the state of) the housing market prior to us starting,” said David Alade, co-founder of Century Partners. He added that their efforts helped prime the neighborhood for investment, noting home values have tripled since 2017 to an average of about $110,000 in 2020.
In interviews with the Free Press last year, Alade and Century Partners co-founder Andrew Colom said they ultimately preferred an incremental approach that would let them focus on the neighborhood over 10-15 years, while the city conceded its early, 2-year timeline — which did not include progress milestones — was unrealistic and informed by no data.
The ideal timeline for such an undertaking is three years, said John Mogk, a Wayne State University professor and planning expert. Blight begets blight, and abandoned houses must be eliminated “as soon as possible” in order to stabilize a neighborhood and encourage residents to stay. Tapping one developer to achieve that makes sense, but only if they can deliver quickly. Otherwise, Mogk said the work should be divided amongst people who can actually do it.
“The question is who is most capable of putting the abandoned housing back to use,” he said. “If some residents are capable, they should be given priority, but only if they’re capable.”
In its effort to tackle the neighborhood in one sweeping program, the city scuttled at least one seemingly viable development proposal that could have helped restore at least part of it. In 2014, Tadd Heidgerken, a University of Detroit Mercy architecture professor who’s worked on small-scale neighborhood redevelopment projects elsewhere in the city, said officials rejected his proposal to buy and rehab eight houses on Stoepel Street for affordable or student housing. That was even though he said he’d secured about $200,000 in financing. Two of the houses have since been demolished.
Nash, who has restored his own home and another in the neighborhood, said he was prevented from buying a Wayne County-owned house next to his in 2013 because it was transferred to the Land Bank and eventually sold to Fitz Forward.
The deal was “severely unfair,” said Lauren Hood, an equitable development strategist and former director of development nonprofit Live6 Alliance, because it locked out small-scale rehabbers and residents looking to build equity or establish new income streams.
“I mean, I understand the logic behind it,” said Hood. “You think a smaller developer doesn’t have the resources, might not have the experience, and when you’re the mayor, you want results that you can see super fast so you can maintain your position in office … but there are other ways to do this so that it’s accessible to more people.”
In mid-2020, the city began to heed that wisdom. With Fitz Forward’s deadline extended to 2024 and other groups recruited to take off some of the load, Nash and a cohort of neighborhood leaders managed to convince the city to hammer out a new, more inclusive plan that involved pulling back a remaining 67 houses and 277 lots for which the developer was at that point responsible, and freeing up a large portion for purchase by residents.
Under the new plan, residents and community groups are expected to get first crack at as many as 40 houses, with the city’s Bridging Neighborhoods program and Land Bank’s Rehabbed and Ready partnership with the Rocket Community Fund to take care of a portion of the remainder. Any houses community members don’t want or can’t provide a satisfactory development plan for are expected to be sold in the Land Bank’s public auction, which involves a compliance program to ensure buyers redevelop homes within a target of two years. The majority of remaining vacant lots, meanwhile, will be beautified under a grant-funded city workforce program or sold as side lots to residents.
“It really was us listening to the neighborhood about how we can … include them in having access to rehabbing stuff because that’s a sentiment that’s rising up in a lot of neighborhoods,” said Jermaine Ruffin of the Planning and Development Department.
This multi-pronged approach that prioritizes community input will be the preferred neighborhood redevelopment strategy moving forward, Housing, Planning and Development group executive Donald Rencher said, noting that way, if one developer fails “the impact is not as hard.”
Nash says he believes the change in course will mean a better ending than the one his neighborhood was heading toward. However, he concedes it remains somewhat of an experiment.
“Will it completely change the neighborhood — we’ll have to see,” he said. “But if it’s (going to take until 2024), why not give the properties to the people who are closest to them and can do something with them? We can live and die with our suggestions being taken.”
Despite efforts by the city to downplay Fitz Forward’s performance issues, it ultimately pulled back the properties due to a number of contract violations, a strongly-worded September 2020 letter from the Land Bank indicates. Those included a failure to pay 2019 and 2020 property taxes and revamp vacant lots in accordance with a newly set timeline.
“At your repeated requests, we have tried to work with you since early last year, despite (multiple defaults),” the notice said. “However … that flagrant disregard for your responsibilities in the City of Detroit cannot be tolerated … We have a responsibility to the neighbors in Fitzgerald to find a new path to the long-promised restoration of their neighborhood.”
The city took a different tack five miles to the south in Virginia Park, where more than 400 vacant parcels remain tied up in a deal with Ron Castellano, who agreed to tackle the neighborhood after announcing in 2015 that he’d redevelop the sprawling Herman Kiefer complex at its border. So far, he’s formally purchased a little more than 30 of the parcels he’s entitled to.
Here, tensions have reached a boiling point as vocal residents once grateful for the proposed intervention demand the city turn the residential properties over to community members, citing project delays, rising property values, and interest among small-scale developers and residents. Castellano’s presence bears the hallmarks of “modern-day apartheid” said Dr. Althea Armstrong, a member of the Neighborhood Advisory Council responsible for negotiating community benefits with him. Joyce Moore, president of the Virginia Park Community Coalition, has equated residents having to lease land from the developer to a “slave-master relationship.” Even things some might consider improvements — like Castellano’s conversion of a swath of vacant lots into a temporary tree farm — have become lightning rods for controversy.
Publicly owned property here has for the most part been unavailable since at least 2016, when the Land Bank entered into an initial agreement with his development firm. Castellano formally signed off on an option to buy 119 blighted houses and 300 vacant lots in 2017.
Like in Fitzgerald, much of the frustration stems from the fact the project was oversold and afforded leeway when it fell short of its goals. Some residents were under the impression the houses would be done by 2020, based on the terms of the project’s Community Benefits Agreement. But contract language in fact only held Castellano to completing 15 rehabs by then. And even though he hadn’t started any in earnest as last year’s deadline approached, the city granted him a one-year extension, citing delays out of his control.
As of last week, Castellano said just one rehab was nearing completion with a new, June 30 deadline looming.
“It’s another example of the city not supporting its people and Black people being excluded from opportunity,” said Monique Becker, a Virginia Park resident and partner with Mona Lisa Development, a “socially responsible” real estate development firm. “This is the country’s Blackest, poorest city. The rate of homeownership is dwindling and that’s the number one way Americans can build generational wealth. Given that context, that fact that (Castellano) is still clinging on to ownership is a problem.”
Becker helps lead a resident group making a bid for the properties Castellano has yet to close on. The group, Black Detroiters Rebuild, would aim to enlist small-scale developers for the work and sell the majority of houses to Black city residents. Funding options are being explored, but for now the proposal ultimately relies on residents and community groups taking on what they can afford.
The blighted houses, which would each cost Castellano $500, are seen as valuable assets in a neighborhood where many could use a financial boost.
Of four longtime residents we spoke with who were unaware of the battle between Castellano and their more engaged neighbors, each said they felt they or the community deserved a crack at the properties — certain they could slowly invest $30,000 or so to make them livable or sellable for windfall profits. The Black Detroiters Rebuild proposal is meanwhile backed by more than 100 residents, Becker said.
But from Castellano’s vantage point, he’s been “working and working,” sinking $1.5 million into clearing and maintaining the properties with help from a grounds crew, and stripping them down so they’re ready for swift renovation. Title issues prevented him from beginning to close on the houses until 2019 — he so far technically owns just 28 — and additional time was needed to obtain a Neighborhood Enterprise Zone tax break to make the rehabs financially feasible. Then the pandemic hit, shutting down construction activity for three months.
Castellano further sees his and residents’ goals as in sync. If successful, he would certainly help repopulate the neighborhood and boost property values — all while providing employment opportunities to local developers, who are to complete at least 20 percent of the rehabs. And he’s shown some willingness to adjust to resident demands, recently freeing up 42 of the land parcels reserved for him as side lots for residents.
“We showed up in 2014 to community meetings and people were like, ‘please help us stop demolishing houses and improve the neighborhood,’” he said, adding that dozens of the houses would have likely been torn down had he not agreed. “We’ve invested enormous amounts of time (since then), and … to come in and say, ‘OK after you did this, we want all these things back’? We’ve already started, we’re well on our way now.”
After the first batch of properties come due June 30, Castellano has only a year to rehab an additional 92 houses — a timeline akin to the one that was unfeasible in Fitzgerald.
Though he’s required to also redevelop the Herman Kiefer complex by 2029, Castellano insists he’ll complete the residential portion of the project on time and avoid the financing issues that hampered Fitz Forward. The first phase of developments was covered with equity, he said, and he’s confident he can secure funding for the rest as lending in the area improves. Homes where the sales price might not cover the cost of repairs may be rented for a period to make the numbers work. Castellano also benefits from tax breaks the other project did not.
But despite those differences, the plan remains a longshot, said Colom of Century Partners.
“I think it will be very difficult for him to (meet) the overall deadline,” he said. “But I want him to be successful because (the city needs) investment dollars. I just hope he works with the community to do it in a way where everyone feels like they win.”
For now, the city and Land Bank say they remain committed to the existing deal because Castellano has complied with its terms. But another out may emerge in the next several months if the developer comes up short on the first batch of rehabs. At that point, the city could pull back the properties, but the contract leaves enough wiggle room that it could let him keep them too.
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