$300 Billion War Beneath the Street: Fighting to Replace America’s Water PipesBy HIROKO TABUCHINOV. 10, 2017

CreditDerek Brahney

Bursting pipes. Leaks. Public health scares.

America is facing a crisis over its crumbling water infrastructure, and fixing it will be a monumental and expensive task.

Two powerful industries, plastic and iron, are locked in a lobbying war over the estimated $300 billion that local governments will spend on water and sewer pipes over the next decade.

It is a battle of titans, raging just inches beneath our feet.

“Things are moving so fast,” said Reese Tisdale, president of the water advisory firm Bluefield Research. And it’s a good thing, he says: “There are some pipes in the ground that are 150 years old.”

How the pipe wars play out — in city and town councils, in state capitals, in Washington — will determine how drinking water is delivered to homes across America for generations to come.

Traditional materials like iron or steel currently make up almost two-thirds of existing municipal water pipe infrastructure. But over the next decade, as much as 80 percent of new municipal investment in water pipes could be spent on plastic pipes, Bluefield predicts.

The outcome of the rivalry will also determine the country’s response to an infrastructure challenge of epic proportions.

By 2020, the average age of the 1.6 million miles of water and sewer pipes in the United States will hit 45 years. Cast iron pipes in at least 600 towns and counties are more than a century old, according to industry estimates. And though Congress banned lead water pipes three decades ago, more than 10 million older ones remain, ready to leach lead and other contaminants into drinking water from something as simple as a change in water source.

As many as 8,000 children were exposed to unsafe levels of lead in Flint , Mich. , after the city switched to a new water supply but failed to properly treat the water with chemicals to prevent its lead pipes from disintegrating. Corroding iron pipes, meanwhile, have been linked to two outbreaks of Legionnaires’ disease in Flint that added to the public health emergency.

The plastics industry has seized on the post-Flint fears.

The American Chemistry Council, a deep-pocketed trade association that lobbies for the plastics industry, has backed bills in at least five states — Michigan, Ohio, South Carolina, Indiana and Arkansas — that would require local governments to open up bids for municipal water projects to all suitable materials, including plastic. A council spokesman, Scott Openshaw, criticized the current bidding process in many localities as “virtual monopolies which waste taxpayer money, drive up costs and ultimately make it harder for states and municipalities to complete critical water infrastructure upgrades.”

Opponents of the industry-backed bills, including many municipal engineers, say they are a thinly veiled effort by the plastics industry to muscle aside traditional pipe suppliers.

“It’s simply catering to an industry that is trying to use legislation to gain market share,” Stephen Pangori of the American Council of Engineering Companies testified this year before a Michigan Senate committee.

To more directly reach towns and counties across the country, the plastics industry is also leaning on the American City County Exchange, a new group that gives corporations extraordinary capacity to influence public policy at the city and county levels. The group operates under the auspices of the American Legislative Exchange Council, a wider effort funded by the petrochemicals billionaires Charles G. and David H. Koch that has drawn scrutiny for helping corporations and local politicians write legislation behind closed doors.

Left, PVC pipes in Nevada. Right, the remains of a lead water pipe removed from the ground in Lansing, Mich. CreditLeft, Scott Sady/Associated Press; Right, Laura McDermott for The New York Times

Corporations pay membership fees as high as $25,000 to gain access to some 1,500 mayors and local council members who have signed up for the initiative. At a July convention in Denver that brought together about three dozen local legislators, Bruce Hollands, executive director of the plastic pipe industry group Uni-Bell PVC Pipe Association, discussed what had gone wrong in Flint, and explained what needed to be done to open up local bidding for plastic water pipes. To spur local decision-making, the A.C.C.E. has also adopted model legislation pushing for more open bidding for water pipes.

“We’re just trying to take up policies that limit the size of government, that keep it from growing exponentially,” said Jon Russell, national director of the A.C.C.E. and a councilman from the town of Culpeper, Va.

Plastics are an obvious replacement for the country’s aging pipes. Lightweight, easy to install, corrosion-free and up to 50 percent cheaper than iron, plastic pipes have already taken the place of copper as the preferred material for service lines that

connect homes to municipal mains, as well as water pipes inside the home.

Still, some scientists warn that the rapid replacement of America’s water infrastructure with plastic could bring its own health concerns.

Scientists are just starting to understand the effect of plastic on the quality and safety of drinking water, including what sort of chemicals can leach into the water from the pipes themselves, or from surrounding groundwater contamination. Studies have shown that toxic pollutants like benzene and toluene from spills and contaminated soil can permeate certain types of plastic pipes as they age. A 2013 review of research on leaching from plastic pipe identified more than 150 contaminants migrating from plastic pipes into drinking water.

“Plastics are being installed without any real understanding of what they’re doing to our drinking water,” said Andrew J. Whelton, assistant professor of civil engineering at Purdue University, and an author of the 2013 study. “We don’t know what chemicals we’re being exposed to.”

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Sensing an opening, the iron pipe industry has started a public relations push of its own, voicing concerns over plastic, wooing President Trumpwith accolades for his infrastructure drive and setting up a war between the two industries.

“Iron is just more durable. It’s a more proven material,” said Patrick Hogan, president of the Ductile Iron Pipe Research Association, the industry’s main lobby group. “Iron’s been in the ground for 100 years.”

Plastic groups have criticized the studies, saying they focus on older generations of plastic piping and conflate different types of plastics. They also stress that their pipes are independently tested by the third-party organization.

“It’s not a new material. It’s a safe material. It’s independently tested,” said Mr. Hollands, executive director of the Uni-Bell plastic pipes group.

The industry outreach, at times, has been more overt.

At the height of Flint’s water crisis, the chief executive of one of the nation’s largest manufacturers of plastic pipes, JM Eagle, traveled to the beleaguered city and offered to replace the city’s lead pipes at no cost.

Pipes from JM Eagle would last 100 years and are a long-lasting and safe solution, the company’s chief executive, Walter Wang, told the City Council last February. “This water crisis, this contamination issue,” he said, “it’s hurting children and making them sick.”

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Installing new copper water pipe at a home in Lansing, Mich., last year. CreditLaura McDermott for The New York Times

JM Eagle, however, has faced recent legal problems. In 2013, a federal jury in California found that the Los Angeles-based company had defrauded states and municipalities for more than a decade by knowingly selling defective water pipes. In some places, PVC pipes that were supposed to last 50 years exploded in their first year, causing injuries and flooding.

JM Eagle declined to comment but has previously said the litigation was based on “scurrilous allegations” by a disgruntled former employee. Formosa Plastics, a Taiwanese industrial conglomerate that was its parent company at the time, agreed to pay $22.5 million in a settlement with municipalities and other government agencies in California.

The uncertainty over potable water pipes of all kinds is exacerbated by a lack of regulation over their safety. There is no federal oversight of the materials or processes used to manufacture plastic water pipes; instead, water pipes are certified and tested by an organization paid for by industry.

That organization, NSF International, displays a picture of the Capitol building on its regulatory resources web page and runs a hotline for questions on regulations and product safety. Yet it has never received regulatory authority from the federal government. Nor does it disclose test results for the pipes it certifies.

NSF International called its testing robust. “If a product does not meet the requirements of a standard, it will not pass,” said Dave Purkiss, the organization’s general manager of water systems.

For now, Flint is fitting the city with service lines made with another material: copper, at an expected cost of more than $140 million. Officials discussed creating a pilot area using plastic to replace the service lines to houses on several city blocks, according to Plastics News, though a Flint spokeswoman, Kristin Moore, said plastic pipes were not currently under consideration.

“When you take that inherent issue that we needed to rebuild trust of the citizens in the water system, we felt that copper was the way to go,” Michael McDaniel, a retired Michigan National Guard brigadier general put in charge of replacing Flint’s water pipes, said at a conference this year.

In Burton, just next door to Flint, budget realities have made plastics the realistic choice.

The small city of 29,000 saved $2.2 million by using plastic to replace its own 1930s-era water system after state regulators alerted the city to critically needed fixes. For a municipality struggling with a dwindling tax base, those savings were huge.

“We needed safe water, and we needed it fast. We needed to replace the system, and PVC was a good choice for us,” said Burton’s mayor, Paula Zelenko. “I’ve got to get the best bang for the buck, because bucks are hard to come by these days.”

Detroit: From Motor Cityto Housing IncubatorThe 2008 financial crisis and 2013 city bankruptcy gutted Detroit’s housing market. Now,Detroit is experimenting with unorthodox ways to get people to buy homes and

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houses.

DETROIT — Bank of America and JPMorgan Chase, the country’s two largest banks, trace their roots in Detroit back decades, when they helped finance the city’s once-booming auto industry.

These days, Detroit is still struggling to recover from the 2008 financial crisis, and the two banks have pledged to help resuscitate the city and its crippled housing market. So, guess how many home mortgage loans these two enormous banks made last year in this city of 637,000 people.

Bank of America made 18. JPMorgan did just six.

Detroit’s hometown lender, Quicken Loans, made the most — 170 mortgages.

An abandoned home on the city’s east side. Major banks have made just a handful of mortgages in Detroit over the past year. CreditErin Kirkland for The New York Times

Midwestern cities like Detroit have long embodied the American can-do spirit. Over the course of a century, Motor City melded assembly-line prowess with freedom-of-the-road ideals to help define a nation. In the postwar years, Detroit became the epitome of the American dream, a place where factory workers without college degrees could make enough money to buy a house of their own.

Yet as home prices soar across the United States — particularly on the coasts — Detroit remains a poster child for the economic crisis and housing collapse of a decade ago. Boarded up homes and rubble-strewn fields litter the landscape.

Today, a house can be bought here for the price of a used Chevy Caprice.

What is truly surprising about that, though, is how difficult it still is for buyers to actually buy. Basically, prices are too low for lenders (who see the deals as too small or risky) but too high for buyers (who may be cash-poor). There aren’t enough houses in move-in-ready condition — and not enough money to fix them up.

This strange situation has turned Detroit into an unlikely petri dish for experiments into how to kick-start a housing market that is, depending on your perspective, either slumbering or comatose.

Will a neighborhood of “tiny houses” for the poor help fix things? Or how about rehabbing city-owned homes, and selling them at a loss, to jump-start the action? Other more conventional — if risky — ideas involve providing no-interest financing to fix up tumbledown properties. Or offering mortgages for homes that normally would be too small to be worth a banker’s trouble.

One local financier is even trying to beautify bulldozed neighborhoods by planting thousands of trees on 160 acres of vacant land his firm has gobbled up.

And while Detroit is worse off than most big cities, housing-policy makers nationwide are keeping a close eye to see what lessons can be learned.

To understand how far Detroit has fallen, consider the statistics. In the mid-2000s, banks were writing some 7,000 mortgages a year. Then, the financial crisis nearly destroyed the American automotive industry, Detroit’s economic heart. Jobs disappeared; citizens fled. Last year, there were more than 700 mortgages made in Detroit, up from 200 at the depth of the crisis but barely 10 percent of the level a decade earlier.

Mortgages Are Slowly Coming Back, In PocketsThe housing market in Detroit crumbled after the financial crisis nearly a decade ago, and mortgage lending ground to a halt. Recent efforts have spurred a slight uptick in lending, but only a handful of neighborhoods have benefited from the increase in mortgage lending.

PEMBROKE

SHBy Karl Russell | Sources: RealtyTrac; Urban Institute

Those bleak numbers, however, do not tell the whole story. Behind the scenes, nonprofit groups, foundations, local officials and a dozen banks including JPMorgan, Bank of America and Quicken are trying to varying degrees to reanimate the mortgage market in Michigan’s largest city.

Success, however, often comes achingly slow.

At 15455 Winthrop Street, on one of Detroit’s better manicured blocks, there is a freshly rehabbed three-bedroom home. The bungalow-style house was fixed up by the city itself, through its land bank, which acquired the house a year ago after the county foreclosed on the owner for failing to pay taxes. The land bank did a gut renovation with money provided by a grant from Quicken.

Since August, the land bank has been trying to sell the house, with a price tag of at least $79,900. More than 80 people have come to check it out. But so far there have been no takers.

“We have never not sold one,” said Craig Fahle, a former radio host who today is the communications director for the Detroit Land Bank Authority. “Detroit likes to do everything kicking and screaming,” he said. “But we get there eventually.”

Erica Wyatt was able to buy this home through a downpayment-assistance program designed to jump-start the housing market. CreditErin Kirkland for The New York Times

Even happy stories are the product of a slog. Erica Wyatt struggled to pay down her debts and then searched for two years before she managed to get a mortgage from Fifth Third Bank to buy a four-bedroom home for $92,000. The transaction happened only because Ms. Wyatt, a single mother with four children, received $15,000 in down payment assistance.

Ms. Wyatt, who grew up in Detroit, said she was determined to move back into the city after renting a home in a suburb. “I wanted to make sure my children saw that not all of Detroit is bad and there are some beautiful neighborhoods,” said Ms. Wyatt, 39, who works for an insurance company.

Some of the ideas seem like stopgap measures. A social services group’s community of  “tiny homes”  — 400-square-foot structures with nothing more than a bedroom, a bathroom and small kitchen — is being erected to provide housing to homeless and handicapped people. The project, led by Reverend Faith Fowler, executive director of Cass Community Social Services, is taking place on a plot of vacant land the charitable organization bought from the city.

The dollhouse-like structures — seven so far — are near the organization’s main social services facility, in a rather desolate area of Detroit off Rosa Parks Boulevard. In all, Ms. Fowler hopes to build two dozen small homes, which will be rented for as little as $250 a month and eventually deeded over after seven years to a select group of homeless or poor individuals.

Tiny-house living can take adjustment, even for people with no roof over their heads at all. Ms. Fowler said that one homeless veteran told her the homes were too small to compete with a traditional homeless shelter.

Still, for some, the homes are perfect. One of the first tenants to move in this past summer is a former Methodist minister, David Leenhouts, who was forced to give up his ministry near Cleveland because of health issues that make it difficult for him to walk and talk.

Mr. Leenhouts, who grew up in the Detroit area, said his college-age son told him the small home, with a steepled ceiling, was all he needed because everything is within just a few steps. Mr. Leenhouts, 59, said, “I have no idea where I would be living if I was not chosen for a tiny house.”

That said, a cluster of tiny homes hardly seems scalable in a city as big as Detroit. And almost by definition, a tiny home isn’t a viable option for a family with children.

It’s also an example of why the long-term prognosis for Detroit’s housing market remains uncertain at best. Much of the work underway is taking place block-by-block — much like the tiny-home homeless experiment — and there are a lot of blocks in this 139-square-mile city.

“The pilot programs help some people, but they are on the margin,” said Gregory Markus, a professor emeritus of political science at the University of Michigan and executive director of Detroit Action Commonwealth, an advocacy group for low-income residents. “‘The root problem is that Detroit is the poorest big city in America.”’

The national poverty rate is 14 percent, and Detroit’s is 36 percent. Mr. Markus said that, without more jobs, home buying will remain a largely unattainable goal.

Detroit’s population peaked in the 1950s at nearly 2 million and has been falling ever since. The financial crisis and the city’s bankruptcy filing in 2013 hollowed out what was left of its once large, middle-class African-American community. Over the past decade there have been more than 150,000 home foreclosures here.

The city of Detroit lacks “a functioning housing market,” one report last year declared. Abandoned, dilapidated houses can be found across the cityscape. CreditErin Kirkland for The New York Times

Detroit lacks “a functioning housing market,” a report last year bluntly declared.

Things are so difficult that simply finding a contractor to rehab a home can be an ordeal. “We had several contractors who didn’t want to do work in the city,” said Heather McKeon, 35, who along with her husband, Matthew, recently moved into a fixer-upper in Detroit’s up-and-coming Corktown neighborhood. “They would say, ‘I don’t trust that I can keep my tools here.’”

She added: “It is still sort of flabbergasting to be laughed at.”

Ms. McKeon, an interior designer, said many insurers wouldn’t sell them a homeowner’s policy on an unoccupied home under renovation. Ultimately, they got a policy from a subsidiary of Munich Re Group of Germany.

Detroit’s Largest Property Owner

Many of the efforts to resuscitate the housing market begin with the Detroit Land Bank Authority, a government agency that is the city’s single largest property owner. The land bank owns some 25,000 vacant homes in various stages of disrepair, another 4,200 occupied homes and 65,000 grass-covered lots where homes once stood before the city tore them down in an effort to fight blight.

Mr. Fahle, the land bank’s communications director, likes to drive around and point out once-abandoned houses that his employer sold to people who then fixed them up.

But on a rainy September day, he was particularly interested in showing off the refurbished three-bedroom house at 15455 Winthrop, which the land bank spent $98,000 to renovate. The asking price for the home — with its restored hardwood floors and a new granite kitchen countertop — was reduced by a few thousand dollars in early September from $83,000 to spur more interest.

Craig Fahle, a former radio host who now represents the city’s land bank, in one of the homes that the land bank has fixed up and is trying to sell — at a loss — to help reinvigorate the real estate market.CreditErin Kirkland for The New York Times

Throughout Detroit, the land bank has sold 44 homes under its “Rehabbed & Ready” pilot program. The program is funded with a $5 million grant from Quicken. At the closing, the buyers get a $1,500 gift card from Home Depot to buy appliances.

The program, though, is losing money — an average of $21,000 for every home sold.

Mr. Fahle said the goal wasn’t to turn a profit, but to get more move-in-ready homes into the marketplace and to boost property values in the process. In all, the land bank has sold more than 2,700 houses, many in online auctions.

The land bank’s operations are not without controversy. Housing advocates have complained it has focused too much attention on rehabbing homes in just a few neighborhoods, and on tearing down dilapidated homes elsewhere. A federal grand jury has

been investigating the awarding of contracts to tear down more than 12,000 dilapidated homes as part of a war on blight led by Detroit’s first-term mayor, Mike Duggan. The investigation is looking into why costs soared under the demolition program, with almost $140 million in mostly federal money being spent.

Overgrown homes in the Brightmoor neighborhood. About half the mortgages written last year were for properties in just six of 25 Detroit ZIP codes. CreditErin Kirkland for The New York Times

Mr. Fahle said the land bank is cooperating with the investigation. He said criticism that the rehabbed and ready program has focused on a just a small part of the city is misguided. Mr. Fahle said a decision was made to select homes for renovation in four neighborhoods early on, but over time it is expanding to other parts of the city.

Homes are certainly worth more in Detroit now than they were a few years ago. Citywide, the median value for a house here is $47,700, a 40 percent gain over the past two years, according to Zillow. Stately homes in the Villages, a group of neighborhoods with tree-lined streets, located not far from the posh suburb of Grosse Pointe, Mich., have sold for more than $400,000.

But progress is largely limited to a small cluster of neighborhoods. About half of the mortgages written in Detroit last year were for homes purchased in just six ZIP codes, according to data from the real estate information firm RealtyTrac, part of Attom Data Solutions. There are 25 ZIP codes in Detroit.

One question is whether the money that banks are providing — a combination of grants and loans — signifies a long-term commitment or an effort to score points with federal regulators. Banks are expected under the federal Community Reinvestment Act to make loans in communities with large numbers of poor- or moderate-income residents in order to spur economic activity.

The downpayment-assistance program that helped Ms. Wyatt buy her home, for instance, was financed by a settlement Wells Fargo reached a few years ago in a housing class-action lawsuit. The settlement money is drying up, though, and the bank said it was not sure if it will renew the program. So far, it has provided assistance to 180 home buyers in the city.

Bank of America said it was committed to working in Detroit and is providing up to $4 million to fund no-interest loans that have enabled 400 homeowners to fix up properties. The bank, working with two nonprofit groups, also has said it was willing to finance $55 million worth of mortgages in Detroit. So far this year, the bank has issued 23 mortgages in Detroit — up from 18 in 2016 — and has increased the number of loan officers in the city.

JPMorgan said it, too, was here for the long haul. Jamie Dimon, the bank’s chairman and chief executive, regularly promotes its Invested in Detroit program, which includes up to $150 million for housing and commercial development and funds for research by the Urban Institute in Washington, D.C., to study ways to revive Detroit’s economy and housing market.

Quicken, which moved most of its operations in 2010 to downtown Detroit from nearby Livonia, Mich., recently committed $300,000 to a new government program that will give 80 tenants living in homes that face tax foreclosure a chance to buy the houses for as little as $2,500.

Downtown areas have been revitalized with investments from Dan Gilbert, the founder of Quicken. The Townhouse restaurant is in a building renovated as part of his work. CreditAndrew Spear for The New York Times

Still, the money shelled out by the banks pales in comparison to the estimated $2.5 billion that Dan Gilbert, Quicken’s founder, has spent buying and renovating over 95 largely vacant properties, including old department stores, in Detroit’s downtown. Now most of those buildings are filled with new businesses. A company backed by Mr. Gilbert brought high-speed internet to downtown and Quicken paid $5 million for the naming rights for a recently opened streetcar system called the QLine that makes 12 stops along its 3.3-mile path.

The mayoral election on Nov. 7 is to some degree a referendum on Mr. Duggan’s efforts at reviving both downtown and the city’s housing market. Mr. Duggan is seeking a second term and is opposed by Senator Coleman Young II. Mr. Duggan said one of his top priorities as mayor was getting home prices up in Detroit.

“Home-sale prices have climbed far faster than anyone could have predicted,” Mr. Duggan said.

Perhaps the most vexing issue is the reluctance of banks to give loans to people to buy cheap homes. It’s simple business: The costs of underwriting a $50,000 mortgage — doing all the paperwork, the credit checks and the inspections — are the same as for much larger mortgages that can generate more

bank revenue. Plus, when homes are in such disrepair, often they are appraised for much less than the amount the borrower needs to fix it up.

That means the collateral on the loan — the house itself — is worth less than the amount the bank is owed. In today’s risk-averse banking culture, that’s a big no-no.

The winners in this environment are speculators with lots of cash. Many local residents, by contrast, are turning to risky seller-financed transactions such as contracts for deed. Evictions are common after just a few missed payments. Over the past five years, at least 5,400 homes in Detroit were sold through a contract for deed and 34,500 in all-cash deals, according to RealtyTrac.

One alternative is the Detroit Home Mortgage project. Launched in early 2016, the program works with a handful of banks to get an appraisal for a house that’s based on the “true value” of the home after it’s been renovated, not in its current dilapidated state. The process effectively involves two loans — one to cover the purchase of a home, and a second mortgage that effectively covers the renovation work. The second loan is backed by a bank and various foundations involved with the program.

“DHM wants to be an ambassador for lending in the city,” said Alex DeCamp, the mortgage community development manager for Chemical Bank, a local lender that has funded 15 loans through the program. The program can take months to complete. Applicants go through a careful screening and most also complete three mortgage workshops to be eligible for a loan.

So far, 54 home buyers have bought homes through the program, among them Ms. McKeon and her husband. So did Ashley and Damon Dickerson, who are about to move into a renovated two-family home.

The Dickersons, both of whom are architectural designers, closed in March. But their search began months earlier when they submitted a $45,000 bid during one of the land bank’s daily online property auctions.

Winning the bidding for the 107-year-old home was just the start. The couple found it would cost at least $180,000 to fully renovate the six-bedroom, three-story brick structure with a large porch. They were attracted to the home’s hardwood floors, bay windows and potential to reshape it by knocking down some walls.

In all, they got two mortgages from Chemical Bank, according to property records: one for $37,692 to cover the purchase from the land bank and another for $207,000 to cover the rehab costs. The Dickersons, who both graduated from the University of Michigan, said they never would have been able to pull the deal off without the mortgage program. But the process was a bit of an eye-opener because it took longer then anticipated to close on the home. As with any new program, the couple said, there were “growing pains.”

The Detroit Home Mortgage project is now looking to get banks to provide low-interest loans directly to local contractors, so they can renovate more homes and get them into move-in-ready condition.

One local investor has snapped up acres of former residential land and is now planting rows of trees.CreditErin Kirkland for The New York Times

But for now, the lack of move-in ready homes means home buyers like the Dickersons and the McKeons need to be something of urban pioneers — fixing everything from broken water lines to antiquated electrical wiring.

The prospect of people moving into Detroit from the suburbs or city residents getting mortgages is of course sweet music to local real estate agents. Until now, much of the business for them has been handling all-cash deals. But several said they are looking forward to getting local residents into homes with traditional financing.

Dorian Harvey, a Detroit native and the incoming president of the Detroit Association of Realtors, said he would like for the city and land bank to move quicker to get vacant homes into the hands of local residents. Mr. Harvey, a Morehouse College graduate, said he came from the camp that the rebirth of Detroit is going to have to happen from the ground up with everyone taking part — contractors, real estate agents and local investors.

But he isn’t necessarily waiting on government largess. “There are untapped resources in the city and we need to tap them and the city needs to tap them,” said Mr. Harvey, who added there’s money to made in Detroit. “My heart is liberal but my money is conservative.”