Federal Cash to Help Homeowners Will Raze Properties Instead

In a move hailed by political leaders but condemned by anti-foreclosure activists, a federal program designed to help struggling homeowners stay in their houses will now funnel some $100 million to instead raze abandoned homes in Michigan, some $52 million of it in Detroit alone.

“We’re outraged by it,” says Michael Shane, an organizer with the Moratorium Now Coalition and the Detroit Eviction Defense, both of which are fighting foreclosures in economically battered southeast Michigan. “The money was supposed to keep families in their homes. … But the money just sat there.”

The cash comes from the U.S. Treasury Department’s “Hardest Hit Fund,” which aimed to use $7.6 billion in TARP funds to help homeowners in 18 states that bore the brunt of the housing crisis during the Great Recession. Michigan’s slice was nearly $500 million, money that activists like Shane say has been hung up at the state level and helped relatively few families.

In June, Michigan and federal officials announced the deal to siphon $100 million from the fund to fight blight instead of tackling foreclosures in Detroit and four other distressed Michigan cities. They announced Tuesday that $52 million will go to Detroit, $20.1 million to Flint, $11.2 million to Saginaw, $3.7 million to Pontiac and $2.5 million to Grand Rapids. An additional $10.2 million is being reserved for other unspecified demolitions.

The announcement was framed as a positive step in The Detroit News:

Advocates have praised the influx of money as a chance for the financially bankrupt city to clear out eyesores, rid neighborhoods of crime havens and to free up open space for new uses. Sen. Carl Levin, D-Detroit, also has said this redirecting of mortgage aid money for Michigan is an example of how the Obama administration can help aid the city that filed the largest municipal bankruptcy in U.S. history.

“With these federal funds, we’ll be able to launch large-scale demolition programs that strike at the blight that is weakening too many neighborhoods in these cities,” Snyder said in a statement.

Although clearing abandoned lots is a high-priority problem for the bankrupt city of Detroit, which has lost more than 1 million residents since 1950, Shane noted the irony of cash that was supposed to help keep homes occupied will now be used to level abandoned properties.

“People should be allowed to apply for this money, which is being misdirected to take down homes,” Shane says.

—Posted by Scott Martelle.