DETROIT — Tens of thousands of Detroit homeowners are facing possible foreclosure in the next year as the county cracks down on back taxes owed, which activists say are often extremely inflated because the county assesses property taxes on the basis of their value before the city fell into financial crisis.
When Wayne County officials opened the Cobo Center convention hall in early February to property owners hoping to work out payment plans to save their homes from tax foreclosure, more than 6,000 people streamed through the doors.
There was Krystal Malone, who finished up coursework to become a teacher just as the recession hit and is now underemployed as a substitute teacher and $9,000 behind on her taxes, even though her house is worth only about $10,000. There was Gabriel McNeil, who bought his house for $1,500 in 2013 without realizing it had nearly 10 times that owed in back taxes and is now trying to work out a plan with the city to pay that off. There was Brenda Johnson, whose aunt recently died, leaving her a house full of furniture and several thousand in taxes owed to the county.
“I just don’t want to get padlocks on my door and I can’t get my personal property out,” Johnson said. “I’m just trying to buy some time.”
Even though Cobo’s largest room was packed every day it was open to people people waiting to meet with county officials, the residents there represented only a fraction of the tens of thousands of occupied properties facing foreclosure by the county this year.
Each individual sitting in Cobo had a story as complex as the crisis that brought Detroit into the largest municipal bankruptcy in U.S. history.
In November, when the city emerged from that bankruptcy and control was handed back to the city government from state-appointed emergency manager Kevyn Orr, things were looking up: the city’s debts were mostly settled, the population, after dropping precipitously for decades from a high of almost 2 million to fewer than 700,000, seemed to have leveled off — even increase a bit in the city’s core — and new businesses were moving downtown.
But the celebration was short-lived, as the county announced it would start cracking down on back taxes, going after some 76,000 properties, about 35,000 of which are occupied, according to Dave Szymanski, the deputy treasurer for Wayne County. There were 70,500 tax foreclosures from 2009 to 2013, according to a Detroit Blight Removal Task Force Plan.
“That’s probably a higher rate than anywhere in the world,” said Szymanski.
According to an analysis from Detroit-based Loveland Technologies, which collects data on every parcel of land in Detroit for an app and online maps, the crackdown could affect 97,733 people, about one-seventh of the population.
Activists point out several state and county policies that have put homeowners at a disadvantage in Detroit. For one, the state charges 18 percent interest on all past-due taxes (in contrast, New York charges 9 percent on any home worth less than $250,000). Properties in Detroit are often assessed by the city at values several dozen times their actual worth, reflecting what they might have sold for decades ago, before the city was in financial crisis. That means some residents pay thousands in taxes on properties worth only thousands of dollars. The state decided to use hundreds of millions of dollars in federal funds meant to help homeowners stay in their homes to knock down abandoned, blighted properties instead — a move that triggered an audit from the U.S. inspector general’s office.
And the county for years chose not to pursue back taxes on tens of thousands of homes, according to Szymanski, which allowed those taxes and penalties to pile up to levels that are unaffordable for many.
“We deferred, and waiting clearly made it more difficult,” Szymanski said. “Is that fair? It’s the reality of the situation. There were just too many properties.”
Officials said the county needs to begin going after foreclosures and putting them up for auction in order to remain financially stable. But many of the properties it goes after aren’t worth much, and activists contend it would be better for the city’s economy to keep people in their homes and work out a way to pay down their taxes over time.
“What the county is doing with these foreclosures is not only inhumane and unjust but stupid,” said Joe McGuire, an activist with nonprofit Detroit Eviction Defense. “If it’s about revenue, it’s short-term, easy revenue. Without people owning their homes, the city’s not going to have a sustainable future.”
The county and state said they have made their best efforts to keep people in their homes. At the Cobo Center last week, people could enter into payment plans that would lower their interest rate to 6 percent and often shave off a bit from the total owed. The newly available payment plans are thanks to a bill signed by Gov. Rick Snyder in January that allowed the county to lower interest rates from 18 to 6 percent. At the foreclosure event, Szymanski said, about 1,800 people were able to enter into plans that capped their payments at 3 percent of back taxes per month, with 10 percent due at the time the payment plan is signed.
That’s what Gabriel McNeil, 52, was able to do. His monthly payments were lowered from $250 a month to $66.
“Now I’m real comfortable,” he said. “I could pick up soda cans and pay that.”