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Federal government spends $13.8 million destroying houses in bankrupt Detroit

Posted: July 25, 2013 |   Comments

( The Detroit area remains one of the top 10 metros for foreclosed and vacated homes. Its abandoned residences often become hideouts for drug users and prostitutes, and occasionally scenes of murder. So it's no wonder that government officials want to simply tear down many of these homes. But in the community of Highland Park, Mich., several of the homes recently demolished were nearly new and never owned after a neighborhood revitalization project turned disastrous. And even the wreckers hired to do the job expressed shock at the waste.

"The project was supposed to transform a derelict section of Highland Park into a model neighborhood," reported Detroit TV station WXYZ. But a lot of the homes built just eight years ago are now abandoned, stripped, burned and now being demolished by the state as a part of its "Michigan Blight Elimination Program."

Just recently, several homes built this decade were marked for demolition alongside some 60-year-old homes. (See the demolition slideshow below.) "Four houses over, there were abandoned homes more than 30 years old, but they had me come take out a new one," Bill Koresky, the owner of Able Demolition hired to raze the homes, told AOL Real Estate. "I called the inspector. I said 'There is no way I can rip these down. There are new doors, new windows. The interior has not even been painted yet.' "

But Koresky says the inspector confirmed that the homes had to come down by order of the state. Not because of mold. Not because of bad soil. Not because of chemical contamination. But, according to news reports, because of alleged mismanagement of funds and poor planning. It turned out that not many people wanted to spend $150,000 on a 1,100-square-foot home in a distressed community. Then at least one of the financiers behind the project in Highland Park -- an incorporated city essentially surrounded by Detroit -- was charged with conspiracy and money laundering in connection with real estate deals in Ohio. And the state official running Highland Park's financial affairs also ran into legal trouble.

After the 2005 ground-breaking for the new properties in Highland Park -- a city that was forced to follow the financial supervision of the state since 1990 -- its emergency financial manager was replaced by Art Blackwell, who's now on probation after pleading guilty to mismanaging funds while serving as the emergency manager. In addition, the construction of the new units was being privately financed by Aryeh Schottenstein of Oak Park, Mich., who was accused of running a house-flipping and money-laundering scheme in Columbus, Ohio, at the same time that he was supposed to be financing the Highland Park project. He pleaded guilty, and in 2009 Schottenstein was sentenced to 42 months in prison and ordered to pay $3,740,173 in restitution to the victim financial institutions.

As if all that wasn't enough, WXYZ reported that the properties in the project that were bought and occupied were found by owners to be poorly constructed and subject to flooding. And the recent recession probably didn't help either.

The demolition of 24 homes in Highland Park was being paid for by a $13.8-million grant through the federal Neighborhood Stabilization Program. Despite the massive amount of resources wasted on aimlessly building and destroying new houses, 34,643 homeless people live in the Detroit Metro area and 36.2% of families in Detroit are living in poverty.

"Essentially, you and I are paying for the demolition with taxes," said Koresky in his phone interview with AOL Real Estate. "Parts of the homes at least could have been donated. Given to Habitat for Humanity. Big money was just being thrown away."

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