Scope and Causes of the Tax Foreclosure Crisis

The City or County fail to identify the numbers of owner-occupied families that where displaced ignoring the human costs of their foreclosures. Estimates from UCHC were near 9,000 owner-occupied homes and families in 2013.

The rise in the tax foreclosures during the 2010-2013 period began to swamped non-profits, such as United Community Housing Coalition (UCHC), with requests for help. In 2013, hundreds daily had attended Show Cause Meetings at Cobo and other sites hoping to make arrangements early in the year. Door to door work found many more in the community still unaware of the danger to their homes ownership, and renters unaware of their landlords tax problems.

The 2013 dip in the above graph of foreclosed properties was most likely related to the January 2013 introduction of tax assistance by Step Forward Michigans Loan Rescue program. At the time it was not widely known about, so the Treasurer agreed to pull from auction anyone applying for the program, as the process was lengthy. As the auction deadline approached this included about 1700 homeowners.

https://whydontweownthis.com/2014/mi/wayne/detroit#11/42.3530/-83.1002

In 2014, of the 23,512 properties in the auction almost half of unpaid property taxes ($57 million) was owed by the banks.

7,618 were identified as occupied structures with 5,358 unknown.

In 2014, 104,587 properties were subject to foreclosure, over of the 384,840 properties in Detroit.

In 2015, 62,000 properties have been given tax foreclosure notices. 37,190 have been identified as occupied by WDWOT, with another 2420 as possibly occupied.

https://whydontweownthis.com/2015/mi/wayne/detroit#11/42.3530/-83.0996

https://www.motorcitymapping.org/?boundaries=neighborhoods#t=overview&s=detroit&f=public

After the last several years of auctions there are:

82,830 -Publically owned Properties

5,957 -occupied

1,167 -possibly occupied

Elements of the causes of the Tax Foreclosure Crisis

Detroits Storm Surge of Foreclosures

Metro Detroit has also been devastated by an unnatural disaster of mass unemployment,predatory lending, and mortgage banking fraud. We also need a moratorium on foreclosures!

1) Counting workers who can only find part-time jobs and those who have given up looking,Detroits real unemployment is at Depression levels. According to the Bureau of LaborStatistics, in May, 2013, the number of people with jobs in Metro Detroit actually fell over thelast year, recording the largest decline of any major metro division in the country.

2) Underwater Homes: Metro Detroit is 50% higher than nationAlmost half of Metro Detroit homeowners (43%) owe more on their mortgage than the houseis worth higher by half than the national rate of 28% (Zillow Real Estate, Feb. 2013).

3) Foreclosure Rate :

Metro Detroit triples the national averageHUDs Spotlight on Metro Detroit in January, 2013, reports 131,400 foreclosures sinceApril of 2009, or 7% of all units compared to a national rate of 2.4%.

4) Empty Homes:

45,000 foreclosed homes in Detroit are vacant Of 70,000 foreclosed homes in Detroit, 65% are still vacant according to HUD. Empty houseslead to blight and a downward spiral in home values and tax base.

Mortgage Collapse and Predatory Lending

Triggered by the collapse of subprime loans:

Interest rates 3% or more than conventional loans

Variable interest rate that rests to a higher rate after a short period

Up to 8 times more profitable than conventional loans

Massive fraud and deception in underwriting these loans

Racist targeting of African American and Latino communities by the banking industry

In metro Detroit, in 2005-2007, 62% of African Amercans got subprime loans, compared to 28% for whites

In Detroit, from 2004-2006, roughly 75% of loans to African Americans were subprime

From 2005 to 2009, Detroit had more than 67,000 foreclosures (1 in 5 Detroit homes)

Detroit, in 1996, had the lowest foreclosure rate of any major metroplolitan area in the US

Subprime Loans Racist & Predatory

Detroit's Financial Crisis Began with the Foreclosure Crisis

zFrom 2000-2010, Detroit lost 237,500 people (New Orleans lost 140,000 after Katrina)

zFrom 2008 2011, the State Equalized Value (SEV) on Detroit real estate declined by 29%

Loss of Tax Base and Market Value

Housing Costs

As graphs and text indicate, housing affordability has declined in Detroit over the last decade or more. Affordable housing is defined as spending less than 30% of household annual income on housing costs (including taxes, insurance and some utilities). In 2011 69.3% of renters lived in housing that was unaffordable. Increased housing costs coupled with stagnant or decreasing wages resulted in over half (52%) of the homeowners with a mortgage living in unaffordable housing. Even for homeowners without a mortgage a significant portion (32%) suffered this fate. This are priming conditions for todays present state of massive tax debt, thousands facing auction, foreclosure or subject to foreclosure.

Mass Unemployment and Underemployment

Mass Unemployment: Official Rate Real Rate

Detroit 18% 30%

Metro Detroit 10% 15%

Detroit unemployment rate has consistently been twice that of the state average since 2001.

Over Taxation of Homeowners and Loss of Market value

City of Detroit 33.4984

Wayne County 7.9220

Wayne County Community College 2.4769

Huron Clinton Metropolitan Authority 0.2146

Wayne County Intermediate School District 3.4643

Detroit Board of Education 30.9323

State of Michigan 6.000

NET MILLAGE RATE 84.5085

DEGC

Tax Rates

PROPERTY TAXReal estate is assessed at 50% of market value, on an annual basis.

What is a mill? A mill is $1 per $1,000 of the taxable value of property.

Example: If the taxable value of a house is $20,000 and your rate is 35 mills, then your tax is $700. If the taxable value is $10,000 and your tax rate is 35 mills, then your tax is $350.

A study by the Lincoln Institute of Land Policy looked at effective property tax rates in the 50 largest U.S. cities in 2011. Detroit had the highest property tax rates of all 50 cities on homes, apartment buildings, commercial buildings, and industrial buildings.

The chart shows the effective tax rates in Detroit vs. the average of the largest 50 cities. The Detroit tax rates are generally twice as high as the U.S. averages. Detroit needs lots of reformsproperty taxes would be a good place to start.

Duggan announced the city would be reassessing property over the next three years in an attempt to bring assessments in line with the true value of homes, adding that many homes especially in northwest Detroit have been overassessed for years.

There isnt any doubt that the assessments in this town have been a source of great anger to a lot of Detroiters, and in the worst case they have forced people from their homes, Duggan said, alongside members of City Council at a news conference on Monday.

Duggan said the city will assess all single-family homes in the city over the next three years to ensure accuracy.

Detroits reassessment follows an exhaustive review conducted by Chief Assessor Gary Evanko and his staff of current assessments and actual home sales between October 1, 2011, and September 30, 2013.

For example, the data revealed that with the exception of some neighborhoods that have maintained their sales value, nearly the entire northwest side of the city was overassessed by a minimum of 20%, the mayor's office said.

Banks refuse to pay property taxes

In 2012, almost half of unpaid property taxes ($57 million) was owed by the banks.

This does not include zombie foreclosures, where the bank evicts the homeowner, but fails to take control of the title.