For years, the constant threat of tax foreclosure for tens of thousands of Detroit homeowners left little time to deal with other critical issues like home repair: How can you afford to replace a roof if you’re about to lose your home altogether?
Thanks to an expanded property tax exemption and tax debt relief programs, tremendous progress has been made in reducing tax foreclosure and delinquency. In 2015, 6,408 homeowners went into tax foreclosure in Detroit. This year, there were 265.
This progress means there is finally the time and opportunity to move on to other urgent issues facing the city’s homeowners. It’s also certain that new threats will emerge even as tax foreclosure, hopefully, continues to recede.
Below are a few of the major threats and opportunities Detroit’s homeowners are facing, and some that may arise in the years ahead. All levels of government, community organizations and philanthropy should take the opportunity created by the declining threat of tax foreclosure to aggressively pursue this next wave of housing issues.
These issues and opportunities are far from comprehensive. But they are important topics to confront, and they make the point that the easing rates of property tax delinquency is not a reason to rest and wait for the next homeownership crisis to erupt.
Second in line to the threat of tax foreclosure is the need for home repairs in Detroit. During the 2020 Neighbor to Neighbor door-to-door survey, which I worked on when I was at the Rocket Community Fund, 38% of tax delinquent homeowners interviewed said their home was in need of major repairs. Another survey conducted by the University of Michigan estimated that 38,000 Detroit households live in inadequate housing with some kind of plumbing, pest or structural problem. When a home repair fund for Detroiters opened earlier this year, it received 244,000 phone calls within the first month after launch.
A spate of new home repair programs have launched in the last year or received additional cash infusions. Still, with the need for home repair funds estimated at at least $2 billion in metro Detroit, the need far outstrips the resources available so far.
Since the start of the pandemic, the average sale price of a single family home in Detroit has nearly doubled.
Per 2020 American Community Survey data, about 50% of Detroit homeowners are at least 60 years old. A 2018 report from Detroit Future City put life expectancy at birth for Detroit residents at 73. Many homeowners likely need wills or trusts to keep their homes — and the wealth represented by those homes — in the family for future generations.
It would be yet another economic tragedy for the city’s homeowners to see this family wealth evaporate when current owners die and legal preparations are not in place to pass the property on to living family members.
Though I’m not aware of any data on the topic, it is very common in the work of tax foreclosure prevention to find families who inherited (in a practical, not legal, sense) their home from parents, grandparents or other family members but have no legal documentation to that effect.
In these cases, the home is often facing tax foreclosure because the new family members did not take on the property tax bill payments. Without their name on the deed, these families cannot make use of resources like the Homeowners Property Tax Exemption or the Michigan Homeowner Assistance Fund (MIHAF) to address property tax debt because they are not legally the homeowners. So they face a lengthy and complicated probate process, often requiring the assistance of time-constrained nonprofits. If tax foreclosure comes first, the home is lost.
It is likely that the frequency of these cases will only increase in the years to come.
Continued expansion of HOPE
The Homeowners Property Tax Exemption (HOPE) from the City of Detroit is the cornerstone of both debt elimination and keeping homeowners out of debt in the future. HOPE can eliminate the current year’s property tax bill for Detroit homeowners and simultaneously enroll them in the Pay As You Stay and Detroit Tax Relief Fund debt elimination programs.
For Detroit homeowners with low incomes to remain out of property tax debt, there must be continued focus on making it easier for homeowners to apply for HOPE exemptions and for the City of Detroit’s Board of Review to process the tens of thousands of applications that continued expansion of HOPE will produce.
The more friction within the HOPE program can be reduced — both for applicants and the Board of Review which approves or denies them — the more likely homeowners who have dug their way out of property tax debt will stay out. We cannot afford to see the annual increases in HOPE applications roll back.
High pressure sales tactics
With home prices soaring during the pandemic, it’s likely that the tactics used in predatory real estate practices will change. During the peak tax foreclosure years, speculators would buy owner-occupied homes in the tax foreclosure auction and either kick former residents out or turn them into their tenants.
That predatory behavior will not dissipate simply because there are only 100 to 200 owner-occupied homes in tax auctions these days. Instead, it is likely that Detroit will start to see what other cities have seen as their real estate markets recovered: High pressure sales tactics where homeowners are presented with well-below market value cash offers for homes that would sell for tens or hundreds of thousands of dollars more on the open market. Many use even more underhanded tactics, pretending to own property and selling them to unsuspecting buyers.
The city needs to work with nonprofits to expand resources available to people in the real estate market by offering classes, consultation and readily available information online so Detroiters can avoid losing money to unscrupulous actors.
There may be good news in the near-future for the city’s homeowners and their property taxes with the prospect of a transition to a split-rate property tax regime. A split-rate tax would both lower property taxes for Detroit homeowners and make speculation on vacant land and property far less attractive for the thousands of speculators who hoard cheap land in the city, primarily purchased through tax foreclosure auctions.
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