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Neighorhood revitalization gone bad as nearly new homes are demolished and sent to the landfill
10:45 PM, Jul 17, 2013
1:08 PM, Jul 18, 2013
HIGHLAND PARK (WXYZ) - The 7 Action News Investigators are exposing a scandal; a neighborhood revitalization project that turned into a disaster. What was supposed to be a brand new subdivision was abandoned in mid-stream.
Now your tax dollars are being used to tear down homes that are only a few years old.
There are a lot of players involved, including at least two convicted criminals, and nobody has an answer on why things fell apart.
The project was supposed to transform a derelict section of Highland Park into a model neighborhood. But a lot of the homes were never built, many that were built are now abandoned, stripped or burned and many are already being demolished just eight years after they were built. So what went wrong, and where did the money go in this housing fiasco?
On a recent morning, the 7 Action News cameras were rolling as a huge piece of demolition equipment rolled up to an eight-year old home on Ferris Street in Highland Park. Giant metal jaws chewed into the top of the house tearing a gaping hole in the roof and shattering perfectly good windows. It was a scene that would leave you asking; what in the world is going on here? In less than an hour the house was reduced to a pile of rubble.
The demolition contractor usually tears down houses that are fifty or sixty years old, but something this new?
"Brand new dry wall, brand new doors, brand new windows, brand new everything, brand new insulation, everything. It's all in a landfill, gone," lamented Bill Koresky, the owner of Able Demolition.
It's not just one house. The Investigators counted 19 vacant, nearly-new homes, many marked for demolition, and heading for a landfill. What a waste.
"It's just to me, habitat for humanity could have come in and at least strip it before I rip it down," Koresky said.
The 7 Action News Investigators have been looking into this colossal failure for weeks, asking how it could have happened. Nobody seems to have the answers.
When it was conceived, planned and started, Highland Park was near bankruptcy and being run by the state. Then Governor Jennifer Granholm appointed a CPA, Ramona Henderson Pearson, to be the Emergency Financial Manager, and Fred Durhal, current state representative and Detroit mayoral candidate.
"It was a housing project that if it had not failed it would have changed the entire face of Highland Park," said Durhal.
The project started out small. A church in the neighborhood owned some property, both dilapidated homes and vacant lots, and they wanted to build about a dozen new homes on the land.
"We decided that, gee, it made more sense to build a new subdivision rather than just pluck a few houses down here in the middle of a bad looking area," said Durhal.
North Pointe Village was an ambitious plan; put in 153 factory built homes. Durhal assembled the land, a builder and developer were hired and and a man named Aryeh Schottenstein would bring in private financing.
But shortly after dignitaries gathered for a ground breaking in 2005, there was a shake-up in Highland Park. Ramona Pearson was ousted as Emergency Financial Manager and replaced by Art Blackwell. Then Blackwell gave Durhal the boot.
, who is currently on probation after pleading guilty to mismanaging funds while serving as the emergency manager, says the project was doomed from the start.
"When I went over there, I knew it couldn't work. Who would pay a hundred and twenty or thirty thousand dollars for that kind of home?" Blackwell asked.
Some homes had price tags as high as $155,000. That much money for an eleven hundred square foot house in an economically distressed area like Highland Park? On top of the high prices there were problems with the houses."They had no back door, they had no steps off the back door wall, and no garages," Blackwell said.
On top of that, the basements were flooding, and sub pumps were dumping water right along the foundations. Some homeowners had to run plastic pipes all the way to their back alleys to keep their yards from turning into swamps.
The homes weren't selling and before long, the project stopped in its tracks. Squatters, metal thieves and arsonists moved in. Now, many of the homes are being demolished and there are vacant lots throughout the neighborhood where the eight-year-old-homes have been torn down.
Fred Durhal has taken a lot of heat over this deal but he insists it could have worked if he was allowed to see it through.
"I think it was a good housing project. I just think that things happened somewhere along in the financing and what have you and it fell apart," said Durhal.
The project was privately financed. A man named Aryeh Schottenstein was the financier. Our investigation revealed that Schottenstein and several cohorts were running a house flipping scheme in Columbus, Ohio at the same time he was promising to bankroll the Highland Park project. According to press reports and a news release from the U-S Attorney's office, Shottenstein and the others stole 30 million dollars from investors telling them they were rehabbing houses. No homes were rehabbed and the investor's money went into their pockets.
Shottenstein served three-and-a-half years in federal prison and was ordered to pay nearly four million dollars in restitution.
7 Action News Investigator Scott Lewis caught up with Schottenstein outside of his home in suburban Detroit and asked him if he knows where the money went for the aborted project in Highland Park.
"You showed Fred Durhal a check for two million dollars so there must have been some money there," Lewis told Schottenstein.
"I can't speak about it right now," Schottenstein replied.
"You can't even tell me generally why the thing fell apart? I mean they're tearing down these new houses," Lewis retorted.
As Schottenstein walked away from the camera he replied, "I'm sorry".
And so are residents of Highland Park who saw a promise of a beautiful thriving neighborhood turn into a fiasco.
"Something went wrong in that process, either someone walked off with the money or someone got paid under the table. Several of them shouldn't have had certificates of occupancy," said Shauwn Smith who bought one of the North Pointe Village homes for just $5,000 after the project collapsed.
Art Blackwell, and Highland Park's current mayor both blame the State of Michigan for this disaster. After all, they were running Highland Park when this happened and both say these homes should never have passed inspection.
"Even though from the outside you know if you ride by it looked like it's a nice house, but the quality of the homes that were built over in North Pointe was not up to standard," said Highland Park Mayor DeAndre Windom.
"The state has to approve every design and permit because the City of Highland Park didn't have its own building department. The city of Highland Park relied on the state," Blackwell said.
Quite a few of these new homes are occupied. Some of the owners aren't able to get a clear title and have huge assessments for back taxes and water bills.
The State of Michigan says they had no involvement in the project other than to loan Fred Durhal to the city.
The project's developer puts some blame on Art Blackwell, saying he didn't follow through on promises that were made such as providing security for the homes that got looted.
Highland Park's Mayor says something was rotten with this deal and he would welcome an outside investigation to get to the bottom of it.