Last week, the Wayne County Treasurer announced a total moratorium on tax foreclosures for the year 2020 due to the state of emergency caused by the coronavirus pandemic. Suddenly, the pressure was off for over 12,000 properties, including 8,000 occupied homes in Detroit that were likely to be foreclosed this year.
Most people’s first reaction to this news was a huge sigh of relief; a success years in the making, and long overdue. My job title at the United Community Housing Coalition is literally to prevent tax foreclosure, yet my first reaction (after the shock) was to mourn the collateral damage that this blunt tool will cause. Few recognize that this sweeping moratorium, while very beneficial to homeowners, perpetuates housing insecurity for many residents who live in but do not own their would-be foreclosed home, as well as delaying necessary interventions for vacant homes.
For years, there have been calls for a moratorium on tax foreclosure of owner-occupied homes. More than 1 in 4 Detroit properties have been foreclosed since 2010, causing many to lose their homes and spreading blight across neighborhoods. Past calls for moratoriums have been met with the same response: “We have to foreclose, it’s the law.” Yet Wayne County has decided to unilaterally defer foreclosures with no higher direction from the legislature.
Governor Whitmer has issued an extension for tax foreclosures across Michigan, and other counties will be using discretion to determine which properties will need additional leniency. In Ingham County, for example, it is likely that no occupied home will be foreclosed this year, while foreclosures continue for vacant structures or vacant land so that they can hopefully be restored to productive use. Other counties may suspend foreclosures for property owners directly affected by the coronavirus while proceeding for others.
Wayne County had over 7,000 vacant homes and lots subject to foreclosure this year. The moratorium means they will remain without intervention that much longer. Among the over 4,000 occupied homes still at risk of foreclosure, more than half are occupied by someone other than the owner. Many landlords have already had at least a 1-year delay in foreclosure, as more than a third of these owe more than three years. Were it not for the moratorium, their residents would have a chance to become the owner of the home they live in. Now they too must wait.
UCHC operates a program called Make it Home in partnership with the City of Detroit to help existing residents of tax-foreclosed homes own their home for a low price. In just three years, 1,157 occupied homes have participated in the Make it Home program. If there had been a moratorium on foreclosures during any of these years, it would have harmed these people, not helped them.
Tax foreclosure itself is not always a bad thing — it is extremely useful to clear debts and clear title. The worst thing about the foreclosure is the public auction, which is a Russian-roulette approach to property disposition — but properties in the Make it Home program never go to public auction, because the City of Detroit gives residents “first dibs” by using its right of refusal to help them become owners. Therefore, a moratorium on the public auction can occur without a moratorium on foreclosure. This year, UCHC has already worked with hundreds of residents of potentially foreclosed homes who hoped that they would have the chance to become owners through this process.
Even if the Wayne County Treasurer had been inclined to heed calls for a moratorium on only owner-occupied homes, they would have had difficulty because it is hard to truly know which properties that would apply to. Occupancy itself changes, ownership is not always clear, data sharing between government entities is imperfect, and the treasurer’s office does not prioritize these details. In the absence of good information, we make worse decisions — and the slumlords are bailed out with the homeowners.
The days before the coronavirus quieted Detroit were as busy as any for those on the frontlines in the fight against tax foreclosure. UCHC, the City of Detroit, the Wayne County Treasurer’s office, and others were scrambling to ensure that low-income homeowners would be able to avail themselves of the new “Pay As You Stay” (PAYS) plan to get out of tax foreclosure and significantly reduce their debt. The Wayne County Treasurer had already pledged to stop foreclosures for anyone approved for the HPTAP property tax exemption (a tax exemption for low-income homeowners), so our job was to make sure people got it. We were also working hard to reach out to all the non-owner residents of foreclosed homes to enroll them in the Make it Home program, to prepare to potentially withhold rent, and to navigate repair issues.
Early last week one of my clients came to the office. This young man held a child in one arm and carried a bassinet in the other with a new-born baby inside. The children’s mother was in the hospital after having complications with the birth. Why was this man spending his time coming to UCHC at such a delicate time? Because he needed to know what was happening with his house. The property owner is a foreign company that has not been heard from in years. My client has taken on many home repairs in the meantime, but he has avoided the major repairs, because he knows the owner can just return at any time and take the house back.
In the absence of good information, we make worse decisions — and the slumlords are bailed out with the homeowners.
This young father wanted reassurance from me that his home would be in the Make it Home program this year because he cannot wait any longer to repair the collapsing roof. Before the moratorium, the answer was yes. After the moratorium, it was no. I don’t know if they can wait another year. I doubt that house will ever be livable if they leave. I doubt they will ever have such a chance to own their home again.
Right or wrong, the moratorium is here. And it will buy time, but it will not solve the underlying problems, nor cancel the outstanding debt (plus interest!) on the properties affected. So, what will we do with the time we have? We have a few opportunities and a few additional requirements to protect the needs of affected residents:
• Understand exactly when and for whom it is possible to interrupt state laws requiring foreclosure, particularly when following the law causes permanent harm.
• Make sure that landlords who avoided foreclosure are held to rental ordinance standards requiring quality conditions, and that renters who are forced to make repairs or withhold rent are protected.
• Make sure low-income homeowners get their HPTAP property tax exemption, and then make sure that they then get the Pay As You Stay plan with the Wayne County Treasurer (available mid-April and after) to reduce or eliminate their tax debt. This plan will still be a critical solution for long-term foreclosure prevention for homeowners facing tax foreclosure.
• Use this time to improve the data-sharing between City of Detroit, Wayne County Register of Deeds and Wayne County Treasurer, so we can better determine which properties are owner-occupied.
• Ensure water access for those who live in homes with “ambiguous” ownership by eliminating the DWSD requirement for an active lease or deed in the resident’s name to establish service.
• Explore other ways to transition property ownership to a resident besides tax foreclosure, such as nuisance abatement.
One of the strangest aspects to the moratorium on tax foreclosures is that we have been told for many years that the foreclosures were mandatory, and outside the power of the treasurer to halt — that “the law’s the law.” Now, to discover that, with good cause, the foreclosures can be stopped, I think we all feel a bit ripped off. Were not the housing crisis, municipal bankruptcy, emergency management, over-assessments, and the Great Recession good cause? Did not those homeowners deserve the clemency now being offered to the investors who scooped up deeds by the thousands? If it wasn’t clear before, it is now: it is within the power of our government to change its own laws and practices. The gift and the curse of this current crisis is to witness how we can do things differently.
Michele Oberholtzer is the director of tax foreclosure prevention with United Community Housing Coalition. She is a graduate of University of Michigan College of Engineering and founder of The Tricycle Collective. She is also a writer, singer, and community organizer. More of her writing can be found at oberdoit.com.
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