Tax foreclosure fight keeps hundreds in their homes

By Aram Vosgerchian

Detroit — This city was one of those hardest hit by the global capitalist economic crisis of 2008-2009 and the resulting austerity. Austerity is nothing but a euphemism for class war, waged when the government does the bidding of the big banks, effectively raising taxes by cutting social services. The people of Detroit have always been overtaxed and underserved compared to the suburbs, and when the housing market crashed, these tax rates were not adjusted.

In the period of 2009-2015 the City of Detroit illegally overtaxed 55 percent to 85 percent of its properties. The Michigan constitution states that no property should be assessed at more than one-half of its market rate. [1] As a result, the Wayne County treasurer foreclosed upon 1 in 4 Detroit properties for nonpayment of property taxes. The properties are often then sold to investors that are also not paying their taxes. [2] Over 100,000 working-class families lost their homes to tax foreclosures, while Wayne County only collects 10 to 15 cents on the dollar at auction. [3]

The tax foreclosures were a byproduct of the mortgage foreclosure epidemic of 2005-2009, in which 65,000 homes in Detroit were foreclosed by the banks. As a result of this, appraisals of home values were artificially inflated and foreclosed homes were sold to investors who milked them for a quick profit while ignoring property tax payments.

Detroit once had some of the highest rates of Black homeownership in the United States, but as of 2016 the city has gone from majority homeowner to majority renter according the U.S. Census Bureau.

To make matters worse, there exists a tax relief program called the Homeowners Property Tax Assistance Program (HPTAP). This is supposed to make back taxes easier to pay by reducing or eliminating the upcoming year’s property tax according to a sliding scale of income and family size.

Nearly a third of Detroit’s homeowners qualified for the HPTAP in 2016, but hardly any received it.

Struggle, lawsuit force city’s hand

A lawsuit was filed in 2016 by the ACLU and the NAACP alleging that the City of Detroit did not do enough to inform homeowners of the HPTAP or to guide them through the complicated application process. [4]

Meanwhile, in 2017, the Moratorium NOW! Coalition to Stop Foreclosures, Evictions & Utility Shutoffs had put forth a proposal that the City of Detroit use its statutory right of first refusal to purchase the homes from the Wayne County treasurer before they went up for auction, and use federal Hardest Hit Fund dollars to pay for them. The occupants would then be allowed to remain in those homes.

The Michigan State Housing Development Authority (MSHDA), which administers the Hardest Hit Fund through the Step Forward program, actually agreed in a meeting to take this proposal to the U.S. Treasury Department for approval, but at that time, the City of Detroit refused to go along or place a moratorium on foreclosures to give it a chance to be implemented.

Instead, the United Community Housing Coalition developed a pilot program that was limited to tenants whose landlords had not paid the property taxes on their homes. The city purchased 95 homes (out of 1,674), allowing those tenants to stay. However the tenants were still required to pay back the purchase costs, ranging from $2,500 to $5,000. [5] The tenants were also required to pass an inspection through the Department of Housing and Urban Development (HUD) and a police background check.

It is an insult that the participants had to pay anything at all, especially since the city’s part in this program was funded by subprime lender Quicken Loans, one of the financial institutions that unleashed the mortgage foreclosure tsunami which decimated Detroit’s neighborhoods.

The City of Detroit agreed to resolve the ACLU/NAACP lawsuit on July 3 with a settlement in part modeled on the Moratorium NOW! proposal. The settlement would allow homeowners and tenants of the tax-foreclosed properties to buy back their homes for $1,000 if they could show they would have qualified for the HPTAP had they applied in any year since 2014.

To be more specific, the City of Detroit would exercise its right of first refusal to purchase the homes from the Wayne County treasurer. The city would forego its share of the taxes (lowering the purchase cost by approximately 40 percent) and then sell the house to UCHC, which would pay for it using a $275,000 fund provided by the city. UCHC would then sell the house to the occupant for $1,000, either upfront or on a non-interest payment plan. This money will be used to continue the program until 2020.

The city also agreed to mail a notice each year to all city homeowners with homes worth less than $95,000 informing them about the HPTAP and to streamline the application process. [4]

Activists demand — and get — more time

That all sounds great, but initially the applicants were given a deadline of July 13, which was less than two weeks to gather all the necessary documents and submit the application. This included proof of ownership, proof of residence, proof of assets, proof of occupancy and proof of expenses. Many of the people who qualified lacked some of these necessary documents. [6]

It was clear the city was only reluctantly participating in this program and did not actually want to save these homes. The city had been relying on the inflated property taxes to fill gaps in its budget for decades and has stated its intention to displace entire neighborhoods in order to focus city services on more affluent areas and those targeted for gentrification.

As mayor, Duggan’s focus has been on tearing down blighted houses, and giving the demolition contracts to his corrupt campaign donors, instead of preventing the homes from becoming blighted in the first place.

It was once again up to the community to pressure the city into living up to its end of the bargain. By now, a community group called 1500 Detroit, named after the number of houses on the tax foreclosure list, had formed around this issue and created an online petition demanding an extension. [7]

The city responded to the pressure by passing the buck to Wayne County Treasurer Eric Sabree to approve the extension. Occupants now had until July 31 to complete the application, and UCHC would host workshops for them until July 24.

Even before the extension, volunteers from this group went door-to-door in Detroit speaking with the people who lived in the houses on the foreclosure list. It was soon obvious the city and its nonprofit partner UCHC were not doing an adequate job publicizing the buy-back program.

Organizers force mayor’s hand

Many of the people canvassed had only received a flyer informing them of the HPTAP, not that they were also eligible to save their homes in the buy-back program. In fact, some of the people did not even know their home was in foreclosure at all.

The city and the nonprofits claimed they did not have enough people power to canvass these neighborhoods and that if they did, this would be a job for people sentenced to community service. Anyone who’s lived in Detroit or any other big city knows that the city is never going to save us; it is up to us to save each other.

1500 Detroit had started going to Detroit city council meetings and anywhere Duggan or his staff would be present. Mayor Duggan held a community meeting July 23 at Sacred Heart Church where activists brought up these points:

“The City illegally overassessed homes in poor neighborhoods. Many of these homes (as we have verified through canvassing) consist of differently-abled occupants and/or occupants who are taking care of sick/elderly relatives. The city 1) failed to provide notice to these 1,500 home occupants about their ability to buy back their homes (verified through canvassing); 2) has barred differently-abled residents from buying back their homes due to lack of transportation/accommodations; and 3) has not given residents enough time to go through the process.”

Duggan was cornered. He hates being confronted with anything that disrupts his carefully constructed image of being Detroit’s suburban savior.

The mayor agreed to a private meeting the next day where 1500 Detroit won several concessions:

The deadline (specifically for home owners) would be extended for another 30 days. There would be accommodations for differently-abled, sick and elderly residents via home visits and sign-ups. The city would distribute mailers and public announcements to all affected homes. And the city would commit to paying off the back taxes of ALL owner-occupied homes who sign up (the $1,000 purchase price would still apply).

Housing activists doggedly persist

A small delegation from 1500 Detroit met with MSHDA officials on August 1 to discuss how to utilize federal monies provided in the Hardest Hit Fund to keep Detroit residents in their homes. After some back and forth, MSHDA was willing to bundle their Step Forward application with the Poverty Exemption application from the city. Step Forward is a program that gives interest-free home improvement loans. This would ostensibly solve the problem that most Detroit applicants faced, i.e., the “lack of financial sustainability.” [8]

About 20 volunteers, including this writer, went to the mayor’s office to make further demands on August 3. In an unsurprising turn of events, Wayne County Treasurer Eric Sabree ran away from the meeting and left his deputy in charge. During the meeting, the city agreed to holding community workshops and committed to better outreach. Activists also pushed for the consolidation of the Step Forward application, the poverty exemption application and the county payment plan.

After this meeting, Duggan’s staff finally sent out mailers and planned community meetings for August 18 and August 22 to discuss the house buy-back program. It’s unclear whether the city would have lived up to its end of the bargain without constant community pressure. Even then, these community meetings were badly publicized and poorly attended. It was yet another case of “too little too late” on the part of city government.

By this point, UCHC was signaling that the funding ($275,000) earmarked by the city for the buy-back program had basically run out. The settlement had only guaranteed funding for about 250 homes, but the volunteers with 1500 Detroit had signed up over 500 homeowners for the program.

1500 Detroit made plans to raise this issue at the next City Charter-mandated community meeting with the mayor on August 13. Several volunteers spoke during the public comment period. The mayor’s staff was visibly frustrated and tried to keep them from speaking. Ultimately, Duggan failed to outline a way to fund the buy-back program and he did not commit to having the city conduct its own canvassing of homes slated for tax foreclosure.

Historic wins made through struggle

Later that week, 1500 Detroit had a meeting with the Wayne County Treasurer’s Office. The county was unresponsive to the demand to work with the city and MSHDA to pull all 1,500 homes from the tax foreclosure auctions. They did agree to work on consolidating the application and creating a path for funding tenant-occupied homes.

The time came to start calling the homeowners and tenants who were canvassed to follow up on their application process. The deal with the city was that anyone who applied and qualified for the program would be spared from the auction even if the entire application process was not complete. More than 600 calls were made during the phone banking phase.

By the time the deadline rolled around, more than 500 homes were kept from going to foreclosure auction, in large part due to the efforts of the 1500 Detroit volunteers. This was double the number that was initially projected.

The activists successfully fought for two extensions, more funding and accommodations for elderly residents and those with disabilities. This was a historic achievement that was largely censored by the city and the mainstream media.

Since the end of the program, Quicken Loans has co-opted the community workshop model that the activists pioneered. In a disgusting twist of fate, Quicken Loans is now sponsoring workshops on property taxes throughout the city. These workshops do not mention the settlement or Quicken Loans’ role in facilitating the mortgage foreclosure crisis.

As much as the city and the nonprofits claim they want to help, they show time and again that they are unable and unwilling to confront predatory property relations.

Join the fight against foreclosures. Attend the Moratorium NOW! Coalition meetings every Monday at 7 p.m., at 5920 Second Avenue (at Antoinette Street), near Wayne State University in Detroit. Call 313-680-5508 or 313-671-3715 to get involved.