Why more demolitions won't stop Detroit's blight

Thousands of Detroit residents have been displaced illegally — and Duggan's answer is to demolish the homes

click to enlarge A demolition in Detroit. - Steve Neavling
Steve Neavling
A demolition in Detroit.

Mari Kirkendoll lived in her Detroit home her entire life. Her parents were the first people to live there when it was built in 1950, and Kirkendoll planned to pass down her home to her three children, just like it was passed down to her.

Now, however, she's likely to lose her childhood home because it's been foreclosed on for delinquent property taxes.

Like thousands of Detroiters who faced eviction in the past decade, the 63-year-old fell behind on her taxes because they were based on the city's illegally inflated property tax assessments, which is a violation of state law.

The Michigan Constitution states that no property can be assessed at more than 50 percent of its market value. However, research has shown that illegal property assessments were the norm in the city, not the exception. A 2017 report by law professor Bernadette Atuahene found that up to 85 percent of homes in the city were being taxed at inflated rates that violated state law, and that this has contributed to the mass foreclosures in the city.

Between 2011 and 2015, the Wayne County Treasurer foreclosed on one-in-four properties in Detroit for nonpayment of property taxes, leading to a decline in population, homeownership, and property values. Atuahene's research found that 10 percent of these homes were found to have illegally inflated property tax assessments — meaning they should not have been foreclosed on in the first place.

Even more troubling, the same report found that on average, lower-valued homes were assessed at 18 times over the legal limit. Higher-valued homes, on the other hand, were assessed below the legal limit. This means that the most vulnerable neighborhoods in the city, like Kirkendoll's, have been targeted with illegally inflated tax bills, leading to mass amounts of tax foreclosures.

Duggan's band-aid approach

As residents continue to lose their homes to tax foreclosures, Detroit Mayor Mike Duggan recently announced that he's planning to seek taxpayer approval for a $200-million bond issue that would enable the city to continue razing homes when federal dollars run out at the end of this year.

"We're going to take down 4,000 houses a year, and in five years by the end of 2024, we will not have a single abandoned house in any neighborhood in the city of Detroit," Duggan said during a May 30 speech at the Mackinac Policy Conference.

Removing blight has been a pillar of the mayor's campaign efforts since his election in 2013. Since then, more than 18,000 blighted homes have been demolished, and more than $200 million federal dollars have been spent on blight removal.

Duggan's administration said demolishing homes is a priority because it reduces crimes and increases property values. A Wayne State University study this year found a correlation between home demolitions and a decline in crime over the past five years.

"There is no more important example of the dangers vacant houses create than the recent tragedies that have taken place in vacant homes on the east side of the city," Duggan spokesman John Roach tells Metro Times in a written statement, referring to a suspected serial killer who raped and murdered victims in abandoned homes. "In addition to attracting crime, they also are targets for arsonists and drive down property values."

Roach also says property values rose in areas where homes were demolished.

"Property values in neighborhoods that have seen significant demolitions have seen huge increases in their property values as a result. Last year alone, 90 percent of Detroit neighborhoods saw property values increase by an average of 12 percent."

But the focus on demolitions came at the expense of lower-income people who could have received assistance.

A lifeline demolished

In 2008, the U.S. Department of Treasury set aside money called Hardest Hit Funds under the Troubled Asset Relief Program to help cities with foreclosure prevention and neighborhood stabilization efforts. 

Under the platform, a program called Step Forward was created to help struggling homeowners like Kirkendoll with loans for mortgage and tax payments. The program was supposed to help put a stop to the foreclosure crisis by keeping residents in their homes, but it didn't.

Although it is less expensive and more effective to prevent a foreclosure than to demolish a property, in 2013, several city officials prioritized blight removal and lobbied to use Hardest Hit Funds for demolition, making Michigan the first state to tear down homes using money intended to save them. 

Of the $761 million that Michigan received in Hardest Hit Funds since 2010, more than half was spent on demolishing homes. This led to a decrease in funds for the Step Forward program, making it harder for residents to obtain assistance.

Jerry Goldberg, an attorney who has worked with city residents to fill the Step Forward application, says it's almost impossible for anyone to get through. "They make it so difficult for residents to obtain," he says. "It was even difficult for me, as an attorney, to get my clients approved for the program."

According to records obtained by the Michigan State Housing Development Authority, half of homeowners who seek assistance are denied, and since the start of the program in 2009, only 11,695 Wayne County homeowners have received help.

Joe McGuire, an attorney who works with the Detroit Eviction Defense, has helped residents dealing with the effects of foreclosures for years. Like Goldberg, he says he and his team have also been having difficulty getting residents approved for Step Forward.

"Most people who apply are getting rejected, and the process is too difficult to get around," he says. "There are professional counselors whose jobs are to help people prepare their Step Forward applications, and even then, they are getting rejected for strange reasons too."

While Detroit is one of the poorest large cities in the nation, it has the highest effective tax rates in the country. To help combat this problem, a Homeowners Property Tax Assistance program was created to help low-income homeowners. Depending on income and household size, residents can have either half or all of their property taxes waived.

McGuire adds that most of the residents he works with qualify for this property-tax-assistance program and have qualified for years, meaning that they could have gotten help to avoid their tax delinquency.

"We have been telling the county to take all resident owner-occupied homes off the foreclosure list," he says. "There is no need to take someone's home away, especially when we've seen evidence that those properties have been overassessed, and that the options for assistance haven't been made aware or easily available for the residents who need it.

Kirkendoll is one of those residents. For years, she was eligible for the tax-assistance program and should have been exempt from paying any taxes, which could have prevented her home from being foreclosed — but she was never told that she was eligible, or that the program even existed.

"I didn't know that I could've gotten help; you really have to pay attention," says Kirkendoll. "We learn by losing; there's no lesson in winning." But Kirkendoll is not the only one who lost her chance at help. In 2017, 40,000 residents qualified for the Homeowner's Property Tax Assistance Program. Only 5,000 were accepted.

This is something that the city had already received scrutiny for. In 2016, the American Civil Liberties Union sued the City of Detroit, alleging that the system for distributing poverty tax exemptions was not widely advertised and was challenging and burdensome to apply for.

In a 2018 settlement with the ACLU, the city agreed to buy a group of foreclosed homes and sell them back to low-income owners for $1,000.

click to enlarge Mari Kirkendoll's Detroit home. Kirkendall fell behind on her taxes because they were based on the city's illegally inflated property tax assessments, which is a violation of state law. - Maryam Jayyousi
Maryam Jayyousi
Mari Kirkendoll's Detroit home. Kirkendall fell behind on her taxes because they were based on the city's illegally inflated property tax assessments, which is a violation of state law.

Creating the crisis

Illegally inflated assessments have been a problem for more than a decade, ever since the 2008 housing market crash forced thousands of Detroiters into foreclosure due to failure to make mortgage payments.

As an immediate result, one in four homes in the city were foreclosed on, and hundreds of thousands of families were displaced from their homes. This caused Detroit to shift to a majority renter city from a majority homeowner city.

Property values plunged considerably. According to assessments from Zillow, in 2007, the average home in Detroit was worth $80,000. By 2010 that number had dropped to an average of $35,000.

Despite the decreasing property values, however, city officials failed to make the proper adjustments to ensure that home assessments matched the true cash value of homes.

Kirkendoll appealed the city's assessed value of her modest home, $22,000, because she felt that it was inaccurate. When she took her case to the Board of Review, "they asked me what I thought my house was worth," she says. "I put down $6,000."

Kirkendoll says she went throughout the neighborhood and took pictures of abandoned homes and homes set on fire. "Your home can be in tip-top shape, but the shape of the surrounding area can have an effect on the value of your property," she says. "They didn't want to see my pictures, though."

Using an aerial view photo of her home, and the estimated value she gave, Kirkendoll persuaded the board to decrease her home's assessment by $11,000. But it wasn't enough. By then, she was already tax-delinquent, trapped in payment plans that sometimes included fees higher than her actual tax bill. Kirkendoll couldn't keep up with her inflated payments, and soon, she was forced into tax delinquency.

"I'm anxious now," she says. "We could be homeless, and I don't have a plan B."

Her home is one of more than 4,000 tax-foreclosed properties in Detroit headed to the annual foreclosure auction in September. Of those, nearly 1,700 are occupied homes.

A for-profit scheme

In accordance with the law, every local taxing authority is required to reassess homes annually so that they can reflect an appropriate tax bill. In Detroit, this was not done for a number of years until 2017, when Duggan acknowledged that the city's assessments were inflated and promised to accurately adjust them following a year-long 2013 Detroit News investigation.

"When we assess people honestly, a lot more start paying taxes, which is going to mean a significant reduction in foreclosures and that cycle we've been at over and over," Duggan said at the time. "With this change, we are very close to fair assessments across the city, and I really do think we are going to be growing from here."

Just recently, Kirkendoll's home was eventually reassessed at $6,000, what she had originally asked for at the Board of Review six years ago. However, the city refused to remove the taxes she was unlawfully charged.

"$6,000 is what my house was worth all along," she says. "Now, the interests and penalties are over 40 percent of what I owe. If you eliminate that, then maybe people could come out of the hole. It's like they want to drive you from the city or something."

So why is the system set up so that people are more likely to fall behind on their taxes? Motives are unclear, but many suggest it is an easy way for taxing authorities to make money.

"If late tax payments and tax foreclosures weren't so profitable for the county, they would have changed things a long time ago," says Jerry Paffendorf, CEO of Loveland Technologies, a company that tracks foreclosures in Detroit. "It would have been straightforward."

‘It’s like they want to drive you from the city or something.’

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The county reimburses the city for all property taxes it fails to collect. In turn, the county acts as a debt collector, adding late fees and 18 percent interest rates to residents' tax bills. If residents fall behind on their taxes for three years, the county takes their home and sells it at the annual tax-foreclosure auction as a last resort to collect dues.

This traps the city's most vulnerable residents with interest rates on an illegally inflated tax bill that they should not have been paying in the first place, while the county generates revenue.

Paffendorf found that "since 2009, according to data from the Wayne County Treasurer's office, Wayne County has made over $300 million that they would not have made if people paid their taxes on time." In one year, the county took in a whopping $60 million on just late fees and interest rates.

"It just doesn't make any sense to put a house you know has a family in it on an auction website," Paffendorf says. "Open auctioning of occupied homes has been unethical and devastating to Detroit."

Paffendorf also claims that the foreclosure crisis is contributing to the increase of vacant homes across the city.

"When comparing Motor City Mapping data from early 2014 with the Detroit Land Bank data from 2018, we found that 11,429 homes went from occupied to vacant," Paffendorf says, adding that "of these properties, 6,545 went through tax foreclosure between fall 2013 and fall 2017."

This means that more than half of the 11,429 properties that went vacant between 2014 and 2018 went through tax foreclosure between 2013 and 2017.

No reparations

The city of Detroit says foreclosures have dropped.

"Tax foreclosures over the past four years have plummeted," Roach tells Metro Times. "Since 2015, foreclosure of all occupied homes, including rentals, is down 84 percent."

Although the number of foreclosures is declining, a recent analysis published this year by the Quicken Loans Community Fund shows that the number of occupied tax-delinquent homes has fallen by only 13 percent between 2014 and 2018. This demonstrates that tax delinquency is still an issue that needs to be addressed.

Wayne County Treasurer Eric Sabree has only pushed for legislation to institute payment plans, but that has done little to help homeowners already affected by illegally inflated tax bills.

A few months ago, during the State of the County address, Wayne County Executive Warren Evans addressed the foreclosure crisis, and critiqued the transparency of payment plans.

"The number [of foreclosures] have gone down," Evans said. "They're still in the thousands, unfortunately. That is accomplished in large part by the use of payment agreements that allow folks to have an adjustment in the time and the amounts that they need to pay the back taxes."

Evans brought up the question of whether payment plans are helping put a stop to mass foreclosures, or if they're only delaying them.

"The question that I can't answer, but the benchmarking I would like to see is, what is the success of the payment plan?" he said. "Are we really helping people to stay in their homes? If we are not and we're kicking the can down the road, only to have it foreclosed a couple of years later, we need to know that, too. I think that analysis is something that we need to spend more time looking at."

On Sept. 5, the annual tax foreclosure auction will take place, and many homeowners, like Kirkendoll, will have run out of options and will have to find a new place to stay. At this point, it's unclear if there will ever be reparations provided to homeowners who lost their homes to overinflated taxes, or if there will ever be an end to this crisis.

Paffendorf says that Duggan's goal to make the city blight-free by 2024 will never be achieved unless the causes of the foreclosure crisis are addressed.

"If new blight is being created because of how tax foreclosure and the auction are handled, then we need to fix that or a lot of this money will be wasted tearing down properties that should have remained occupied," he says. "If tax foreclosure isn't fixed, Detroit will need a lot more blight money in the future."

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