Of those who praise the comeback of redevelopment in the City of Detroit, little is known of the immense chaos that exists within the city’s Finance Department and the Wayne County Treasurer’s Office. In the first half of 2015, Detroit experienced the single largest tax foreclosure in American History (1). This year, about 60,000 homes are set to foreclose and be auctioned off by the Wayne County Treasurer due to delinquent property taxes. Half of these homes are still occupied. The real estate crisis of the earlier 2000s added to the already declining city revenue for Detroit. Coupled with distrust and lack of cohesion between city departments and city residents, Detroit’s continuing real estate crisis is perpetuated by a weakening of Detroit’s social contract. Residents are less likely to feel as if they contribute to a community when that community has issues upholding a suitable standard of living that is compounded by long police response times and the lack of a comprehensive tax system detailing how much property owners must pay in order to remain in good tax standing.
That is not to say nothing is being done to combat low collection rates within Detroit. This year, Mayor Mike Duggan and the city of Detroit will continue their initiative to cut property tax assessment between 5 and 15 percent (2). In 2015, the city cut assessments by almost 20 percent in some neighborhoods. Marginally, this move has increased collection rates from 67 percent in 2014 to 72 percent in 2015. This year’s property tax collection rates are projected to be around 78 percent (2). However, in order to further counter the high rates of tax recidivism in the city and poorly assessed properties that led to the foreclosure crisis, a renewal of confidence is required from long-time residents of Detroit.
The failure to reduce tax delinquency recidivism, referring to individuals that continue to be delinquent in their tax payments, ultimately lies in the failures of the Wayne County auction system and informing the public of the amount they must pay in taxes each month. There would not be an issue of tax recidivism without the immense problem Detroit has with tax delinquency. The loss of Detroit households has led to disinvestment in the city from administration entities that also handle tax foreclosure (3). With the state overhauling the delinquent tax foreclosure process in 1999, homeowners are automatically disadvantaged (4). This overhaul was established with the passing of Public Act 123, which amended the General Property Tax Act to subject tax-delinquent property to forfeiture, foreclosure, and sale over a three-year period. Before Public Act 123 was enacted, tax liens on parcels/property were offered up for auction. If owners are delinquent for three years, the country treasurer forecloses on their properties. The deeds are then sold at an auction. Seventeen percent of auction-sold properties last year were successfully sold for reuse. Most properties are used to scam rent money out of leasers until the property once again reverts back to tax-delinquency (3).
Within a four-year span, only 22% of the properties sold at tax delinquent auctions remain in good standing with their property taxes. The problem lies in landlords purchasing parcels for cheaper prices at these auctions, then not paying property taxes for these homes that they lease out. Detroit residents who lease from these landlords are surprised to see eviction notices on their doors due to the inaction on the part of landlords to keep their homes in good standing (6).
In 2014, more than half of the houses sold at auction have returned to a delinquent status. More alarming, in no year studied was there a greater number of properties up-to-date on the taxes than there were of properties subject to foreclose, foreclosed again, and delinquent. While high tax delinquency recidivism as that found in Detroit can be attributed to broader government dynamics, it also mirrors the lack of residents’ confidence in city government. In most cities, residents feel a part of a greater community and therefore will more readily contribute to the successes of their cities. The city of Detroit has fostered a hostile environment for impoverished residents who do not benefit from the revitalization of an increasingly expensive midtown and downtown area (6). In order to comprehensively approach tax delinquency recidivism and ultimately increase revenue for the city of Detroit, direct reform to the auction system and tax assessment process should be coupled with the efforts to holistically improve the confidence of Detroit residents in the city’s services and departments that are designed to them as citizens of Detroit.
1. Gottesdiener, L. (n.d.). Detroit Just Had the Single Largest Tax Foreclosure in American History. Retrieved from http://www.motherjones.com/politics/2015/04/low-income-black-and-elderly-residents-detroit-isnt-city-rise-one-under-siege
2. Editorial: Lowering Detroit taxes will increase revenue. (n.d.). Retrieved from http://www.detroitnews.com/story/opinion/editorials/2016/02/09/editorial-lowering-detroit-taxes-will-increase-revenue/80041250/
3. The Blight-fighting Solution for Saving 40,000 Detroiters From Eviction – Next City. (n.d.). https://nextcity.org/features/view/detroit-foreclosures-tax-auction-loveland-technologies-jerry-paffendorf
4. Reuse of Abandoned Property in Detroit and Flint: Impacts of Different Types of Sales: Journal of Planning Education and Research September 1, 2015 35: 347-368
5. Alsup, A. (n.d.). A Recent History of Tax Foreclosure. Retrieved from https://makeloveland.com/blog/a-recent-history-of-tax-foreclosure (GRAPH)
6. Alm, J., Hodge, T., Sands, G., & Skidmore, M. (n.d.). Detroit Property Tax Delinquency: Social Contract in Crisis (p. 1, Working paper). Retrieved from https://www.lincolninst.edu/pubs/2473_Detroit-Property-Tax-Delinquency.