Approximately 28,000 of the overtaxed properties have been foreclosed on since 2013.
The city of Detroit pushed tens of thousands of homeowners into debt and foreclosure after it overtaxed them by at least $600 million in the years following the Great Recession, an investigation by the Detroit News found.
Detroit homeowners knew they were overtaxed and the city acknowledged the issue as early as 2013, but the scale of the error was not clear until now. Of the 173,000 homes reviewed by the Detroit News and Reveal from The Center for Investigative Reporting, more than 92% were over-assessed between 2010 and 2016. Homeowners were overtaxed by an average total of $3,800.
Michigan law mandates that assessments reflect a home’s market value, and the city completed a state-ordered reappraisal of every residential property in 2017. But consequences of the city’s errors linger: More than 63,000 Detroit homes have delinquent debt as of fall 2019.
That debt, which accrues interest, might never have existed had the city taxed its homeowners accurately. The debt owed on roughly 40,000 of those properties is less than how much the homes were overtaxed by during those years.
Breck Stevenson is one of the homeowners who was overassessed; his property was overtaxed by at least $5,300, more than the $4,200 he now owes in back taxes.
“It’s (the city’s) responsibility,” Stevenson told the News. “It was their mistake. It’s their responsibility to take care of it and make things whole with the citizens.”
The state and city have tried to address the problem with a variety of programs.
In 2015, Michigan enacted a state law allowing Detroit to implement low-interest repayment plans to help homeowners. These plans have not worked as expected and have instead kept thousands of homeowners in an endless cycle of debt that has caused nearly 40 percent of those participating in the plans to lose their homes to foreclosure, or face the risk of foreclosure this year.
The city has also tried to address the problem with its Homeowners Property Tax Assistance Program (HPTAP), which it recently expanded to include more residents. Under the expansion, a family of two earning less than $25,703 is eligible for a 25% tax exemption, a family of two earning under $23,336 is eligible for a 50% exemption, and a family of two earning under $20,799 is eligible for a 100% tax exemption, meaning they will not have to pay any property taxes.
More than 63,000 Detroit homes have delinquent debt as of fall 2019.
But many homeowners are unaware they can even apply for such exemptions. Only about 7,600 Detroit homeowners were granted the exemption in 2019, even though nearly 40,000 are eligible every year, according to researchers at the University of Michigan.
The expansion of HPTAP could also allow more residents to access the newly proposed state-level Pay as You Stay (PAYS) Program, which would eliminate penalties, interest, and fees on back taxes. It would also cap the remainder of a homeowner’s debt at 10 percent of their home’s taxable value. Owners would have three years to pay off the remaining debt.
PAYS, championed by Detroit Mayor Mike Duggan and other officials, was introduced in the state house by Rep. Wendell Byrd (D-Detroit) in October. The House passed the measure in December and sent the bill to the Senate, where it’s currently under consideration in the Senate finance committee.
While these new efforts will certainly be welcomed by struggling homeowners, many others won’t be able to take advantage of these programs. Approximately 28,000 of the overtaxed properties have been foreclosed on since 2013, the News reported.
The long-term consequences of the Great Recession and Detroit’s ensuing overtaxation are also finally starting to crystallize. In 2000, 51 percent of black Michiganders owned their homes. By 2016, that number had dropped 11 points to only 40 percent, according to a 2018 report from the Urban Institute.
That was the largest decrease of any state in the country.