Researching Public Law and Public Policy in the Public Interest

Detroit’s Housing Disaster Is Its Leaders’ Fault

Associated Press

From the Huffington Post:

DETROIT ― On Sept. 7, officials in Wayne County, Michigan, began selling off roughly 14,000 homes in what has become the nation’s largest foreclosure auction.

But the foreclosures in Wayne County, which includes Detroit, aren’t because homeowners owe money to banks. People here are losing their homes because of unpaid property taxes ― taxes that, in many cases, are based on outrageously high assessments that have not been updated for more than two decades.

Each municipality is responsible for conducting its own property assessments, but Detroit is several decades behind. Most of these houses were last assessed in the mid-1990s, and the region’s housing market has cratered in the years since. The median home here is worth $40,600 less than it was in 2007, and less than half what it was worth in the 1990s, according to estimates from the real estate website Zillow. Residents are being charged far more than they should rightfully owe. 

“You’re getting taxes assessed on a $30,000 or $40,000 property value for a house that probably couldn’t sell for more than $5,000,” explained Ted Phillips, executive director of the advocacy group United Community Housing Coalition. 

Many of the homes on the auction block this year are still occupied. After the auction ends in November, those residents will be evicted. New families will move into some of the homes. But speculators will scoop up most of the them, and the houses will sit empty. Unoccupied houses fare badly in Michigan winters. Foragers break in, shredding walls in search of copper plumbing. Within a year or two, many of these homes will turn into more examples of Detroit’s famous ruins. This is what Victoria Kovari, general manager of Detroit’s Department of Neighborhoods, has called the city’s “blight pipeline.”

The purpose of the auction is to collect tax revenue. But there’s not a lot of evidence that lays the groundwork for a sustainable property tax collection. Speculators who participate in the auction have little incentive to pay taxes, and many never do, said Joshua Akers, an economic geographer at the University of Michigan at Dearborn. “Worst case for the speculators is the property gets foreclosed and goes back into auction, where they can sometimes just buy it back at $500 a pop,” Akers said. “What we have is a cycle where Detroiters lose their houses, the city loses residents, the county loses property taxes and speculators profit.”

There’s no indication the process will end anytime soon. Some 100,000 Detroiters, or 1 in 7 city residents, were on the verge of eviction due to tax foreclosures in 2015, The Nation reported.

Read this article in its entirety at the Huffington Post