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Exposed: Tax Evictions Could Displace 20,000 Detroit Property Owners

Exposed: Tax Evictions Could Displace 20,000 Detroit Property Owners
Tue, 9/30/2014 - by Michele Oberholtzer

On Monday, U.S. Bankruptcy Judge Steven Rhodes made a landmark decision to authorize continued water shutoffs for unpaid water bills, leaving thousands of Detroiters without access to water. At the same time, and less reported on, some 20,000 Detroit residents stand to lose another basic human right — their housing — as the Wayne County Treasurer prepares to carry out mass tax foreclosures across the city.

Ironically, last week Detroit rolled out the red carpet to lure back its prodigal sons and daughters of Michigan for a permanent "Detroit Homecoming" – and at the same time billed itself as a “Welcoming City” for immigrants to settle here. But while Detroit courts newcomers, it is ignoring the thousands of current residents who face eviction by their own local government as it seeks to cash in on unpaid debts regardless of the long-term financial or human costs.

In October, the Wayne County Treasurer will host an online auction to sell properties whose owners owe back taxes. According to the county website, over 26,000 properties are up for auction, over 90% of which are in Detroit.

Of these, 23,000 made it into Round 2 – where auction prices start at a mere $500. These aren’t just empty lots and vacant buildings; rather, an estimated 10,000 are occupied properties, which means that at least 20,000 people face imminent eviction.

Already nearly every block in Detroit has been affected by evictions. But tax foreclosures are growing rapidly each year — from 10,000 in 2013 to 100,000 projected in 2015. There under 400,000 properties in the entire city.

If Detroiters facing foreclosure knew they could buy their home for as little as $500, they’d jump at the chance. But local government does the bare minimum to inform those people who could benefit most. Foreclosure notices don’t even mention the auction, let alone the auction website.

And even if residents knew about it, those who don’t have internet access or aren’t web savvy can’t participate. So most homes will be sold to someone other than the resident — someone in New York who reads Curbed, someone in China who attended the three-day “Buying Detroit” convention, someone with no intention to visit the property before buying, let alone live in it.

The people who purchase occupied properties will likely evict current residents, starting a cycle of displacement and blight that will cost the individuals, the owners, the community and the city in the long run.

But the new owners investing in Detroit will be in for a surprise because even properties listed in “good” condition at auction may never turn a profit. In today's economy, just as it’s harder to get a job unless you’re already employed, it's harder to occupy a home unless it’s occupied. As soon a house becomes vacant in Detroit, scrappers break in, strip out wiring, plumbing and appliances, and remove anything of value.

Over time, rain and snow blow in through broken windows, pipes burst and animals or squatters take shelter. As the recent blog phenomenon “GooBing Detroit” showed, a lovely home can become an uninhabitable eyesore with shocking speed. The city is taking measures to ensure that owners either rehabilitate or demolish their properties, but the best approach is to avoid blight in the first place.

Oscar Mack has lived in his home on Maiden Street for 20 years. He worked to save his house from foreclosure by following Michigan's Step Forward payment plan, but the county carried out the eviction anyway. “I stopped mowing the lawn when I found out,” he said. “I just can’t fight for this house anymore.”

Like so many others facing a similar crisis, Oscar had no knowledge of the online auction and the opportunity to buy back his home.

Detroit is bankrupt so it’s understandable to see aggressive measures being taken to come up with money wherever possible. But even when Wayne County makes back all unpaid taxes at auction, foreclosure on occupied homes with create costs far greater than those owed. Some properties are foreclosed for laughably small debts (as low as $1,900), but if that property becomes blighted and ends up in the hands of the city, Detroit Land Bank Authority can expect to pay $10,000 to $12,000 for demolition.

Whether they stay or go, people displaced by the foreclosed homes can also have very expensive unintended consequences, including decreased population, reduced enrollment in schools, increased homelessness and a general fragmentation of the community.

Pat Driscoll of Detroit Eviction Defense says about tax foreclosures on occupied homes: “The property tax system is broken but people are still being evicted because of it.” The bottom line, says Driscoll, is to “keep people in their homes any way we can.”

While foreclosure on Detroit's occupied homes appears to be a policy of mutually assured destruction, the good news is that it’s preventable. For starters, property values must be reassessed so that taxes reflect actual market rates.

Furthermore, foreclosures should only be executed if debts exceed a reasonable portion – say 10% – of property value. Michigan must revise its mandate to foreclose properties with three years of unpaid taxes. And all levels of local government should work to notify property owners at risk of foreclosure and offer reasonable options to avoid it.

If those measures fail, renters should receive the first option to buy the home in order to maintain continuous occupancy.

After years of economic and population decline, it’s easy to view Detroit today as a skeleton waiting for energy, ideas and money to flesh it out and breathe in new life. But if Detroit is a skeleton, its people are the bones. Mass water shutoffs and widespread home evictions should be a stark warning to newcomers. It doesn’t matter how much water you throw into the melting pot: if you don’t plug the gaping hole at the bottom, you’ll never fill it up.

 

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