Property tax debt is shrinking in Detroit and new research suggests growing participation in programs designed to give low-income homeowners relief is the main driver.
Alex Alsup, vice president of research and development at the parcel data company Regrid, found Detroit homeowners with delinquent property taxes declined by 41% from January 2020 to January 2023. Alsup said the pandemic-era decline in tax debt is a major shift from the previous decade, which was defined in Detroit by tax foreclosures, evictions and spiraling property values.
Alsup primarily attributes the success of the Homeowners Property Tax Exemption (HOPE) program offered by the City of Detroit, which automatically enrolls low-income households in other tax debt reduction programs like the Pay As You Stay program (PAYS) and Detroit Tax Relief Fund. The programs, Alsup said, have had a notable impact on the poorest Detroit neighborhoods and residents facing foreclosure.
“If you’re a homeowner with property tax debt and you qualify for exemption, all you need to do is complete that HOPE exemption and those other (programs) are triggered,” Alsup said in an interview with BridgeDetroit. “It’s automatically triggered through a single application, which is about as easy as these kinds of things get.”
Alsup is an expert on the tax foreclosure process and the systems driving housing instability in Detroit. He periodically posts insights from his research to an online newsletter and documents how city blocks change over time using Google Street View. Alsup’s explored recent property tax data collected by Regrid in his latest blog post.
“We always talk about access (to programs), but access isn’t good enough, it actually has to work,” Alsup said. “I can access a lot of things that suck.
“That’s what’s nice about the connection between the HOPE tax exemption, the Detroit Tax Relief Fund and PAYS – it just happens in the background,” he added. “ … A huge surge in property tax exemptions being granted to homeowners is a big change that (suggests) people are actually getting the exemptions they need.”
Alsup said the city granted an average of 3,500 property tax exemptions between 2013 and 2016. This increased to 16,000 in 2021. Alsup said he hasn’t seen the final number of exemptions for 2022, but anticipates estimates of 18,000 exemptions that were granted.
The number of Detroit homeowners with delinquent property taxes dropped from 25,059 to 14,720 in the last three years, a 41% decline. There was an even steeper drop (66%) in the number of homeowners facing foreclosure, decreasing from 16,513 to 5,661. Alsup said the largest declines in tax delinquency were found in Detroit’s lowest-income ZIP codes.
Property owners must pay their delinquent taxes within a specific timeframe or they risk losing their home. Homeowners with taxes that are two years delinquent are subject to foreclosure by the Wayne County Treasurer.
Foreclosures were paused from March 2020 to March 2022 due to the COVID-19 pandemic. A court ruling protected Wayne County residents who owe back taxes from 2017-19 from foreclosure until March 31, 2023.
Ted Phillips, executive director of the United Community Housing Coalition, said the combination of city programs and the Gilbert Family Foundation’s Detroit Tax Relief Fund has had a major impact on low-income homeowners. Phillips said there were concerns that a wave of tax foreclosures would hit as soon as the moratorium was lifted, but so far that hasn’t happened.
Phillips said the worst-case scenario was avoided because of previously mentioned programs, and also highlighted help offered by the Michigan Homeowner Assistance Fund, a federal program that allocated $243 million to the state of Michigan. The state launched the program last year, offering grants of up to $25,000 to help homeowners pay mortgage and property tax debt, utilities and other homeownership expenses.
“Hopefully the low-income population facing the loss of their homes will be forever lower than it was in the past,” Phillips said. “Having said that, what’s going on with a population that isn’t income eligible for the HOPE exemption? If they lose employment and are not used to these kinds of programs, tax foreclosure could see an increase.”
Phillips said anecdotally, he’s seen mortgage foreclosure cases picking up steadily in the 36th District Court. Eviction cases against renters have also “stepped up mightily” after the pandemic, he said.
That means there’s a lot more work to be done before Phillips will feel comfortable celebrating.
“One of the things about the massive numbers we’ve had is it’s made us collectively not as attentive to what all this means,” Phillips said.
Phillips described a meeting UCHC had with city officials in 2003 when the organization first started getting involved in tax foreclosure work. Figures at the table shared some bad news: 1,000 homes were set to go to auction.
“You could hear a pin drop. It was unfathomable; it was totally unacceptable,” Phillips said. “After all the years we’ve had people say we’ve got (the numbers) down. Those aren’t just numbers. It’s still a very big issue.”
Alsup’s data shows 265 homeowners and 1,025 rental properties were foreclosed on in 2022 due to tax delinquency.
Homeowners who previously had two or more years of debt made up a majority of households in debt, according to Alsup’s research. But that is not the case anymore; the share of delinquent homeowners who had two or more years of debt dropped from 66% in January 2022 to 36% in January 2023.
Alsup said tax debt has been declining since 2014, but there’s a major difference in the reasons why. Much of the tax debt eliminated between 2014 and 2020 was due to tens of thousands of residents losing their homes to foreclosure. Seven out of 10 homeowners were removed from tax delinquency from 2014-20 because of foreclosure.
“All of this is colored by living through the middle of the last decade where literally half of the homeowners in the city were behind on taxes at any given moment,” Alsup said.
Meanwhile, housing values are increasing across most of the city. Only six of 209 residential neighborhoods identified by the city are projected to lose value in 2023. That’s good news for homeowners, but also means they will see their taxes increase.
Detroiters can take advantage of their right to appeal proposed changes to the assessed value of their home until Feb. 22. Property owners have a three-week window to question how their property is valued by visiting the tax appeals section of the city’s website.
Homeowners can get a sense of whether their assessed value is accurate by using a free online tool offered by Regrid. The searchable map allows homeowners to compare the assessed value of surrounding properties.
How to qualify for tax exemption programs
The HOPE exemption allows homeowners to reduce or completely eliminate property taxes for the current year based on their income and household size. Applications for this year must be filed by Dec. 11. Download the application online or pick it up in person at the Detroit Tax Service Center inside the Coleman A. Young Municipal Center. Residents also can request that an application be mailed by calling (313) 224-3035 or emailing BoardofReview@DetroitMI.gov.
PAYS allows homeowners to significantly reduce tax debt from previous years. Qualified residents either have their debt reduced to 10% of the taxable value of their home or have interest, fees and penalties removed. Homeowners who have been approved for HOPE will receive a letter from the Wayne County Treasurer’s Office to enroll in PAYS.
The Detroit Tax Relief Fund completely eliminates the remaining property tax debt for residents enrolled in PAYS and the HOPE exemption. Call (313) 244-0274 to speak with someone from the Detroit Tax Relief Fund Hotline.