Detroit and Wayne County officials want to wipe away portions of property tax debt for thousands of poor homeowners as part of a new proposal announced Wednesday.
Those who qualify for the program "Pay as You Stay" would get interest and fees eliminated. And the remainder of their debt would be capped at 10% of their home's taxable value. The owners who qualify would have to pay the bill within three years with no interest charges.
The changes need to be approved in Lansing, and legislation could be introduced as early as this week by state Rep. Wendell Byrd, D-Detroit. It is designed particularly to help Detroiters stay in their homes, but it's anticipated that any homeowner in the county who qualifies for a property tax exemption could see the debt relief.
About 31,000 Detroit owners living in their homes are behind on tax debt and Mayor Mike Duggan estimated that more than 60% could meet the income requirements to qualify.
"You will never eliminate the blight if people keep moving out of their houses," said Mayor Mike Duggan at a press conference Wednesday. "I think we can agree that people below the poverty level have a right to be treated differently than the others. So what the county executive, the treasurer and our staff have come up with I think is a fair solution."
Critics have argued that while foreclosures are down dramatically in Detroit, thousands are stuck in repayment plans with unmanageable debt created in part by the city's admitted inflated assessments and inaccessible tax breaks.
Low-income Detroiters who qualify don't have to pay property taxes, but housing advocates have argued the yearly application process for the property tax exemption is cumbersome and many don't realize it's available. This year, more than 5,800 have been granted the break, according to the city's Board of Review.
To qualify, a single person would have to make less than $19,303 per year and a family of four less than $28,671. If approved, the program would be available for three years.
Currently, cities can't wipe away taxes retroactively even if a person can prove he or she would have qualified for the break in the past.
The proposal announced Wednesday is less than some advocates wanted: A retroactive exemption that would wipe away all debt for up to three years.
Byrd introduced similar legislation in 2015, but it didn't get enough support. Experts say they aren't aware of another municipality that has retroactively forgiven property taxes.
Duggan and Wayne County Treasurer Eric Sabree said they could face opposition in Lansing from other county treasurers. The legislation would allow counties to opt into the program if they want, officials said.
Occupied foreclosures in Detroit have dropped from 9,111 in 2015 to 514 this year, a 94% decrease, according to a county and city press release.
"Since 2015, we've been able to reduce the number of occupied foreclosures by 94%, but far too many Detroiters still are at risk of foreclosure," said Mayor Mike Duggan in a press release.
More than 24,700 properties currently are on payment plans, according to county data as of Sept. 23. Of those, about 11,000 are believed to be owners living in their homes and are paying 6% interest on an average debt of $4,000.
Sabree had been cool to the idea of retroactively giving the tax break, saying last year "it would go down an inequitable road" for other low-income homeowners who paid their bills.
Sabree said Wednesday he supports the plan, saying it "would help the most vulnerable homeowners" stay in their homes.
"There are still homeowners who are struggling with their tax payments and this plan will help those who can least afford to pay," Sabree said.
It's not clear yet how much waiving interest, fees and capping the tax debt could cost Wayne County, said James Martinez, a spokesman for Wayne County Executive Warren Evans.
The ACLU of Michigan settled a lawsuit with the city of Detroit over the tax break application in 2018, arguing it was also overtaxing owners with inflated assessments.
Some housing advocates worry that thousands in payment plans will never be able to get out of debt in Detroit, the nation's poorest big city.
A yearlong investigation by The Detroit News in 2013 concluded Detroit was over-assessing homes by an average of 65%, according to a review of state tax appeals. The series prompted state regulators to overhaul Detroit's Assessment Division and ordered the first reappraisal done in the city in decades.
