Federal funds breath new life into Lansing neighborhoods

Federal funds breathe new life into Lansing neighborhoods

Lansing State Journal - January, 27, 2012

Matthew Miller

http://www.lansingstatejournal.com/article/20120127/NEWS01/201270318/Federal-funds-breathe-new-life-into-Lansing-neighborhoods

LANSING - A house was built on Allegan Street this past fall, a trim yellow-and-white two-story that looks out on the Riddle Elementary School playground.

Unexceptional, but for the fact that a new house hadn't been built on that block in 88 years and the fact that federal money was used to build it.

The city of Lansing and the Ingham County Land Bank are working their way through a second round of Neighborhood Stabilization Program funding from the federal government - more than $17 million.

The greater part of the money is being spent on homes that have come into the hands of the land bank through the tax foreclosure process or outright purchase, to demolish those that are beyond repair and renovate a smaller number deemed salvageable.

But a portion of the grant is being used to build homes in Lansing's older neighborhoods, often those where private developers haven't built for decades.

Ten of the 15 permits for new construction issued by the city in the latter half of 2011 are for houses being built by the land bank or the city itself. At least 10 more are in the planning stages.

"What we're trying to do is be the catalyst for new investment in the neighborhoods," said Bob Johnson, the city's director of planning and neighborhood development.

"It's about hope, really."

New optimism

The house that once occupied the lot at 1216 W. Allegan St. was an orange-and-green behemoth built at the tail end of the 19th century. It was torn down to make room for its smaller and more energy-efficient replacement.

Chad Rogers, who lives next door with his wife, Rebecca, and their 1-year-old daughter, wasn't sorry to see it go.

The house was broken into a number of times during the months it sat empty. The Rogerses were the ones who called the police.

"It was going to be a fire eventually," Chad Rogers said.

The couple, both in their early 30s, bought their house in 2004, not least because the location made for a convenient walk to their jobs downtown.

Like many other home-owners in the city, they watched its assessed value dwindle as the economic crisis hit and foreclosure claimed other houses on the street.

But the work begun on their block last year by the county - not just the new house next door, but a renovation two doors down and the planned demolition of another house that has sat empty for years - has inspired cautious optimism.

"In the end, our block is going to be a lot nicer than it was five years ago," Rebecca Rogers said.

"At least they're putting something in that should hold its value," her husband added, "and stop ours from sliding more."

Generating revenue

In 2011, the Ingham County Land Bank closed on 36 new or fully renovated houses

"We had the nicest homes in the neighborhood often, and we were selling them for some of the strongest values in town, beginning to reset the comparable sales data," said Eric Schertzing, the county treasurer and chairman of the land bank.

Take, for example, the renovated house at 520 Christiancy St. in the Baker-Donora neighborhood.

No other house on the block has fetched a price of more than $50,000 in the last decade, maybe ever. It sold for $80,000.

Just as assessors overvalued properties during the bubble years, "now we're getting torn apart by them undervaluing properties," Schertzing said.

The Neighborhood Stabilization Program and the work it's paying for are meant to push the city's neighborhoods back toward a healthier equilibrium.

There's a cost to that, though. In this instance, it's a cost paid with federal money that can't be used for any other purpose.

The house at 1216 W. Allegan cost just over $200,000 to build. It has hardwood floors on the first floor, a high-efficiency furnace, Energy Star qualified appliances, including a washer and dryer. It will go on the market for $105,000.

"Contractors don't charge us less when they drive from East Lansing to Lansing to build a home," Schertzing said, and homes in Lansing simply don't sell for as much.

But he said the financial logic looks somewhat better when you factor in the property tax revenue the new and renovated homes will generate once they're sold, their beneficial effect on the values of the homes around them and on the stability of neighborhoods as a whole.

"Just as blight pulls a neighborhood down, renovation and new construction pull it up," Schertzing said.

And there are provisions attached to the sale of the homes that are meant to amplify those beneficial effects.

They must be owner occupied for at least 20 years after the first sale, though they can change hands.

Some of the homes have been sold to One Church/One Family Nonprofit Housing Corp. It works with local churches to bring in homeless families, to provide them with rental subsidies and other social services.

The remaining houses can be sold only to those who earn 120 percent of the area median income or less, about $58,000 for an individual, $82,000 for a family of four.

"It's allowing people who do not have the means to get into houses and neighborhoods like this to purchase these homes and raise their families to a standard that they couldn't have otherwise," said Bill MacLeod, president of Coldwell Banker Hubbell BriarWood Real Estate Co. in Delta Township.

He is not involved in the city and land bank's work, but called it "a benefit to the entire area."

But Eric David called it "lucky," for him and his wife, Virginia.

The couple, both graduate students at Michigan State University, bought a renovated single-story home on Ronald Street last summer with new appliances, a new roof, new siding, newly refinished floors.

"The quality was move-in ready," he said, "and for the same price as other houses that needed work."

'Wind-down phase'

The spending deadline for the Neighborhood Stabilization money is February of next year.

"Right now, we've got 27 houses under renovation. That's kind of a high point," Schertzing said. "We'll do that for a little while longer, but we're getting into the wind-down phase."

And what will happen to any money left over, any money cycled back into the program through the home sales, isn't clear. It might be recaptured by the U.S. Department of Housing and Urban Development or by the state Housing Development Authority, Schertzing said. He doesn't know.

The program always was meant as a stopgap, an infusion of government money to rebuild neighborhoods at a time when market forces wouldn't have.

"The market five years ago could try to do it, but not today," Schertzing said. "We're trying to get things back to that, but the market's got to take over. The government is the catalyst, but ultimately it's got to be the private sector."