A recent convening hosted by The Kresge Foundation included a report by Bernadette Atuahene, a University of Illinois Chicago-Kent law professor, sharing her findings after studying the property tax foreclosure crisis in Detroit.
A recent convening hosted by The Kresge Foundation included a report by Bernadette Atuahene, a University of Illinois Chicago-Kent law professor, sharing her findings after studying the property tax foreclosure crisis in Detroit.
Two years ago the Detroit Free Press published an op-ed by Atuahene in which she said Detroit was experiencing a Hurricane Katrina without water by way of a property tax foreclosure crisis.
According to her research with Christopher Berry at the University of Chicago, 10 percent of all tax foreclosed homes in the area were caused by unconstitutionally inflated property assessments.
The Michigan Constitution states that property assessment ratios should not exceed 50 percent of the true cash value. However, Atuahene said they found a “gross illegality” of homes assessed at 60 percent and above.
Her presentation was given at a Detroit Neighborhood Forum hosted by The Kresge Foundation at the Detroit Athletic Club in early July. The Forum includes meetings of leaders from the philanthropic, banking, nonprofit and public sectors focused on discussing community priorities and collaborating together.
Why should grantmakers be concerned about housing and tax policies?
Atuahene says the issue will persist with the current policies in place and spark other socio-economic ills.
The rate of property tax foreclosures is expected to continue rising over the next three years, even after the Mayor’s Office did a parcel-by-parcel reappraisal of the city’s 255,000 residential properties in 2017.
According to the law professor’s report, 25 percent of the tax foreclosed homes in Detroit within the lowest sales price were over-assessed at a greater frequency and unjustly displaced thousands of homeowners.
That’s an increase to homelessness and blight, an increase to social services needed and a trail of aging families with distressed or defunct credit and zero cash flow.
Laura Grannemann, vice president of strategic investments, Quicken Loans, knows the issue is growing. Grannemann knocked on doors across the city to address blight. She met, and eventually hired, a woman whose home had been foreclosed due to exaggerated property taxes. At the time, the woman’s only other option was to sleep in her van, which she parked across the street from her once home while someone else took over the property.
Homeowners who can’t afford the inflated prices pay a late property tax payment with an interest rate of 18 percent. Homeowners with a good track record may receive a six percent reduction to 12 percent after one year. Even more, since 2006, unpaid water bills have been rolled into tax foreclosure bills, unbeknownst to many homeowners.
Grannemann said property tax foreclosure has become the “blight removal pipeline” citing that 50,000 of the 58,000 homes within Quicken’s blight project had been touched by foreclosure.
To confront this problem, grantmakers are encouraged to stay up to date on millage rate reform, the Property Tax Exemption program and the Right of First Refusal program. Detroit has also started a paralegal program to help homeowners protest their assessments and several funders have agreed to a loan fund for delinquent taxpayers.
Read a July 2018 article on the Right of First Refusal housing program.
