This is NOT A HOAX -

On a quiet, tree-lined road near Detroit’s city airport, sits a house that was briefly the most famous in America. When the three-bedroom home at 8111 Traverse Street found a buyer last summer, the purchase price made headlines around the world — the house sold for one dollar, then worth about 50p.

The unnamed buyer was a local woman who bought the house as an investment. Yet two months later, America’s spiralling financial crisis is wreaking so much new havoc in decaying property markets like Detroit’s that even a $1 house cannot be resold for a profit.

As the home of America’s once-omnipotent automobile industry, Detroit is scarcely a stranger to adversity. “Blight is creeping like a fungus through many of Detroit’s proud neighbourhoods,” an article in Time magazine noted in 1961. It has since become America’s poorest city, the Motown that lost its mojo. Last week the city’s big-three motoring manufacturers, Ford, General Motors and Chrysler, announced their worst monthly results for car sales since 1993.

The house on Traverse Street tells part of the story of a decline so dizzying that other cities around America have begun to talk fearfully of “Detroitification”, a seemingly irreversible condition of urban despair that slowly takes grip of once-flourishing communities and strips them of value and life.

For much of the world it might seem unthinkable that a house in a large American city could be sold for a single dollar, but the shocking reality of Detroit’s urban implosion is that there are tens of thousands such homes in varying states of calamitous disrepair, with no hope of finding buyers.

Officials still debate the varying causes of the city’s ruin, but race riots in the 1960s, competition from foreign carmakers, a galloping murder rate and a flourishing drug culture all took a heavy toll.

In the past 40 years, Detroit has lost half its population, which is now estimated at 850,000 — more than 80% of them African-American.

It continues to lose residents to the suburbs at a rate of 1,000 a week. Spirited attempts to revive the city centre with new skyscrapers, waterfront developments and brand-new sports stadiums have failed to halt a long-term decline symbolised by a single building — the Michigan Central railway station, a beaux-arts masterpiece built in 1913 with a waiting room that is modelled on a Roman bathhouse. Closed in 1988, it is now a vandalised ruin, with every single one of its thousands of windows smashed.

The credit crisis of the past year has exacerbated the city’s woes. Downtown developments have been frozen for lack of funding.

Last week the city tore up a project to build new blocks of upmarket flats along the Detroit river. An attempt to preserve part of Tiger Stadium, the city’s former baseball mecca, is also on the verge of collapse. It scarcely helped that the city’s energetic and popular black mayor, Kwame Kilpatrick, became embroiled in a sex scandal and was jailed for perjury.

Many of Detroit’s empty houses are now owned by banks trapped in a vice of their own making. Having once handed out mortgages irrespective of buyers’ ability to repay them, the banks are no longer handing out mortgages at all.

Vast swathes of Detroit have become effective no-go areas for lenders; even a derelict church is for sale with a sign that reads “Best cash offer”.

The Traverse Street house sold for $65,000 (£36,450) in 2006 but within a year its owner had stopped making mortgage payments and the bank stepped in to repossess it.

As neighbourhoods wilted in a blitz of foreclosures, prices sank like stones. The house was put on the market for $1,100 last January, but still found no takers. A would-be purchaser was also liable for a $4,000 bill in back property taxes and a large unpaid water bill. Desperate to get rid of a home that by then had been comprehensively looted of anything of value — including its front door — the bank lowered the price to $1, and eventually found a buyer willing to take a gamble that one day the market might recover.

There have since been several other reports of American homes selling for a dollar or little more, but the latest turns in the credit crisis have offered little hope that bargain hunters can turn a quick profit. The kind of decay that was primarily restricted to poor black neighbourhoods is spreading to much grander homes.

A short drive west from the barren wastes of Traverse Street lies the historic Detroit neighbourhood of Boston-Edison, named for two of the streets that form its boundaries.

It was here in 1904 that Henry Ford, then a budding automotive tycoon, built his first Detroit home, a sprawling mansion in Italian Renaissance Revival style, surrounded by elaborate gardens.

Today it is home to Jerald Mitchell, a retired anatomy professor from nearby Wayne State university, and his wife, Marilyn, who runs a local group that is attempting to save the Boston-Edison district from collapse. “We’re accustomed to adversity,” Mitchell admitted, “but the current situation is unprecedented.”

To a British visitor it seems utterly unthinkable that such a graceful, family-friendly neighbourhood, just a few minutes’ drive from the city centre, should not have buyers queuing up. Yet in some ways the plight of Boston-Edison seems even more shocking than the $1 home on Traverse Street — you wouldn’t expect to pay much for a derelict ruin in a largely abandoned black neighbourhood; but who could have thought that a six-bedroomed mansion in good condition on a beautiful boulevard lined with oak trees and handsome front lawns could be bought for only $30,000?

Mitchell and his wife belong to a neighbourhood association that is fighting to save Boston-Edison from the curse of “Detroitification”.

At a time when many of the affluent whites were fleeing the city to the suburbs, the Mitchells moved in at the Ford mansion determined to preserve a valuable element of the city’s history.

“We were urban pioneers who made a commitment,” said Mitchell. “And we weren’t alone.”

Over the years the district acquired a rare residential mix, with Jewish professors living next door to black professionals in a green and elegant enclave that bears comparison with Hampstead in London.

Yet the same financial forces that produced a $1 home on Traverse Street have emptied dozens of homes in the Boston-Edison neighbourhood.

From their elegant, wood-panelled living room on Longfellow Street, Victoria Koski and her English husband, Trevor, watched in dismay as foreclosure notices began to appear and homes around them were boarded up.

“When we bought this place, we thought it was an investment before moving on to somewhere else,” said Koski. “But we couldn’t sell it now, even if we wanted to go.”

The collapse of the mortgage market has reduced house purchases in the area to “cash only” property transactions, Koski added.

Prices have plummeted. The association’s website lists four and five-bedroom homes for as little as $12,500 each.

Out of the 900 houses in the officially denominated historic district, at least 100 of them are now believed to be vacant.

The empty properties have, in turn, attracted squatters and thieves who strip architectural features of merit and ransack the structures to strip away lead or copper and other valuable scrap metals.

To fight blight, the neighbourhood association has hired a security patrol and organised efforts to protect empty homes.

“We put battery-operated motion detectors in empty houses, and a neighbour keeps the monitor,” said Koski. “If there’s an intruder, we all rush out and surround the house while the police are called.”

Neighbours mow the lawns of empty houses and try to preserve the area’s appeal in the hope of attracting a new generation of buyers.

Convinced that one day the economy might pick up again, Koski persuaded her husband and a business partner to snap up an empty house across the road as a speculative investment. At $30,000, it seemed just too big a bargain to ignore, especially as the six-bedroom home still had many appealing 1920s features.

Yet Trevor Koski, a computer programmer who left Britain 25 years ago, confessed that he remains unsure that the family has made a wise move.

“She’s the optimist, I’m the pessimist,” he says.

“This area’s perfect, except that we are surrounded by poverty. You go two blocks out of Boston-Edison, and everywhere it’s a nightmare.”

Businessman sues Detroit officials for alleged pay-to-play scheme: Unprofessional requests led to his firm’s bankruptcy

Oct 03, 2008 (Detroit Free Press - McClatchy-Tribune Information Services via COMTEX) — An Alabama business executive is alleging his refusal to participate in a “pay-to-play” atmosphere in Detroit led to the demise of city pension funds invested with his airline company.

Donald V. Watkins claims in a legal filing that his refusal to hire a pension board trustee’s relative, donate to former Mayor Kwame Kilpatrick’s legal defense fund and “a multitude of improper and unsavory requests” led the board to declare his company in default on a $30.1-million pension fund loan.

The allegations came to light in a motion filed Thursday in U.S. District Court in Detroit.

Watkins, who also claims trustees asked him for cash “contributions,” was “disgusted” when approached in May, his Detroit-area lawyer, Keefe A. Brooks, told the Free Press today.

“I’ve lived in and around this city for 54 years and, frankly, nothing surprises me anymore,” Brooks said.

Watkins, an Alabama businessman well-known for successful urban bank start-ups and inner-city investments, came to Detroit at the urging of Kilpatrick, Brooks said. Ronald Zajac, the retirement funds’ staff attorney, said today he’s surprised by the allegations of a “pay-to-play” scheme. “Clearly that would have been something that would have come to people’s attention,” Zajac said.

According to the lawsuit, first filed in June, Detroit’s Police and Fire Retirement System and the city’s General Retirement System together in February invested $30.9 million in TradeWinds Airlines, Inc. through Watkins’ firm, Watkins Aviation. The pension boards’ trustees approved additional investments into TradeWinds in April and May, according to the suit.

But the trustees’ “attitude toward this investment took a sudden turn for the worse after defendant Watkins, a well-known and highly respected businessman and banker, refused to participate in a ‘pay-to-play’ scheme,” according to the court documents.

Watkins alleges the scheme included “a request to use Defendant Watkins’ corporate jet aircraft for inappropriate purposes” and “a request by a Trustee that Defendant Watkins meet and confer with a representative of hers who was the subject of an active City Hall-related federal bribery investigation.”

Brooks declined today to identify the trustee or elaborate on the allegations in the court filing.

Monica Conyers - President Pro Tem Detroit Common Council

The women who were pension board trustees in May include Detroit City Council President Monica Conyers, Councilwoman Barbara-Rose Collins, Susan Glaser, Kathleen Leavey, Sheila Kneeshaw and Shereece Fleming.

Barbara Rose Collins, Detroit Common Council - in her Birthday Tiara

The pension funds now claim the legal proceedings began because Watkins missed making a capital contribution in March, according to the suit.

On May 30, TradeWinds’ board authorized the company to file for Chapter 11 bankruptcy protection. The pension funds filed a claim to get their investment money back on June 13, the filing states.