Thousands of poor Detroit homeowners could get tax relief under plan

Detroit — City and Wayne County officials want to wipe away portions of property tax debt for thousands of poor homeowners as part of a new proposal announced Wednesday.

Those who qualify for the program "Pay as You Stay" would get interest and fees eliminated. And the remainder of their debt would be capped at 10 percent of their home's taxable value. The owners who qualify would have to pay the bill within three years with no interest charges.   

The changes need to be approved in Lansing, and legislation could be introduced as early as this week by state Rep. Wendell Byrd, D-Detroit. It is designed particularly to help Detroiters stay in their homes, but it's anticipated that any homeowner in the county who qualifies for a property tax exemption could see the debt relief. 

About 31,000 Detroit owners living in their homes are behind on tax debt and Mayor Mike Duggan estimated that more than 60 percent could meet the income requirements to qualify.

“You will never eliminate the blight if people keep moving out of their houses,” said Mayor Mike Duggan at a press conference Wednesday. “I think we can agree that people below the poverty level have a right to be treated differently than the others. So what the county executive, the treasurer and our staff have come up with I think is a fair solution.”

Critics have argued that while foreclosures are down dramatically in Detroit, thousands are stuck in repayment plans with unmanageable debt created in part by the city's admitted inflated assessments and inaccessible tax breaks.   

Low-income Detroiters who qualify don't have to pay property taxes, but housing advocates have argued the yearly application process for the property tax exemption is cumbersome and many don't realize it's available. This year, more than 5,800 have been granted the break, according to the city's Board of Review. 

To qualify, a single person would have to make less than $19,303 per year and a family of four less than $28,671. If approved, the program would be available for three years. 

Currently, cities can't wipe away taxes retroactively even if a person can prove he or she would have qualified for the break in the past.

The proposal announced Wednesday is less than some advocates wanted: A retroactive exemption that would wipe away all debt for up to three years. 

Byrd introduced similar legislation in 2015, but it didn't get enough support. Experts say they aren't aware of another municipality that has retroactively forgiven property taxes.  

Duggan and Wayne County Treasurer Eric Sabree said they could face opposition in Lansing from other county treasurers. The legislation would allow counties to opt into the program if they want, officials said. 

Occupied foreclosures have dropped from 9,111 in 2015 to 514 this year, a 94 percent decrease, according to a county and city press release. 

“Since 2015, we’ve been able to reduce the number of occupied foreclosures by 94 percent, but far too many Detroiters still are at risk of foreclosure,” said Mayor Mike Duggan in a press release.

More than 24,700 properties currently are on payment plans, according to county data as of Sept. 23. Of those, about 11,000 are believed to be owners living in their homes and are paying 6 percent interest on an average debt of $4,000.

Some housing advocates worry that thousands in payment plans will never be able to get out of debt in Detroit, the nation's poorest big city. 

Sabree had been cool to the idea of retroactively giving the tax break, saying last year "it would go down an inequitable road" for other low-income homeowners who paid their bills.

Sabree said Wednesday he supports the plan, saying it "would help the most vulnerable homeowners" stay in their homes.

"There are still homeowners who are struggling with their tax payments and this plan will help those who can least afford to pay," Sabree said. 

It's not clear yet how much waiving interest, fees and capping the tax debt could cost Wayne County, said James Martinez, a spokesman for Wayne County Executive Warren Evans.

He also said it's not clear how many properties outside of Detroit could qualify.

"It's an improvement," said Ted Phillips, executive director of the United Community Housing Coalition, a Detroit nonprofit that works with people facing foreclosure. "It seems like it's in the ballpark (of the relief needed.)" 

The ACLU of Michigan settled a lawsuit with the city of Detroit over the tax break application in 2018, arguing it was also overtaxing owners with inflated assessments.

Michael Steinberg, a professor at the University of Michigan Law School and former legal director at the ACLU of Michigan, said he welcomes officials' push to help struggling homeowners but said he's disappointed "the legislation does not discharge all wrongfully assessed taxes — which would have been a more fair approach."

"And this proposal, of course, does nothing for individuals who already lost their homes due to wrongfully inflated tax bills," he said. 

The Quicken Loans Community Fund, which has done tax foreclosure prevention door-to-door outreach with local nonprofits, estimates nearly 90 percent of homeowners behind on taxes will qualify for the debt relief. 

"The city’s announcement today shows a clear commitment to increasing access to exemptions and dramatically simplifying payment plans," said Laura Grannemann, the fund's vice president of strategic investments. "Once enacted by the state, this legislation will change the landscape for low-income Detroit homeowners.”  

A yearlong investigation by The Detroit News in 2013 concluded Detroit was over-assessing homes by an average of 65 percent, according to a review of state tax appeals. The series prompted state regulators to overhaul Detroit's Assessment Division and ordered the first reappraisal done in the city in decades.

cmacdonald@detroitnews.com

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Twitter: @cmacdetnews