clock menu more-arrow no yes mobile

Filed under:

All the latest news and opinions on Wayne County’s Tax Foreclosure Auction

New, 11 comments

No more Action Before Auction program, plus three solutions to the foreclosure crisis

A foreclosed home in Detroit (2014)
Beth J. Harpaz/AP

The Wayne County Tax Auction isn’t until September, but there’s been a lot of auction-related news in the last week.

To quickly review, tax foreclosure has had devastating effects on homeownership in Detroit over the last decade. In a city where housing is primarily single-family, Detroit homeownership flipped from majority homeowner to majority renter sometime in 2016.

One of the main vehicles for this crisis is the Wayne County Tax Foreclosure Auction. If a property has been behind on taxes for as little as $1 for three consecutive years, it gets put in the auction where anyone can bid for ownership. Over 150,000 properties have ended up there since 2000.

To have that much turnover in homeownership obviously has destabilizing effects. Some people and organizations have stepped up with solutions, but the problem has persisted.

In case you missed it, here’s a roundup up of some of the news and opinions offered in the last week about the auction.

Tax foreclosure down in 2018

First, the good news: At 2,920 properties, tax foreclosure hit a 14-year low in 2018. That was due to several factors, including a poverty tax exemption offered to low-income homeowners that was only properly administered after the ACLU and other legal partners got a settlement from the city of Detroit last year.

In addition, the city has been exercising its “Right of Refusal” with more regularity. A municipality can pull property from the auction and either put it in its respective land bank or give the owner a chance to pay taxes or set up a plan to pay them.

Through the Neighbor to Neighbor program, the Quicken Loans Community Fund worked with the United Community Housing Coalition to provide assistance to these at-risk homeowners. The group knocked on the doors of all 60,000 Detroit homes with unpaid taxes, reached over 24,000, and successfully removed about 20,000 from the list.

But those high numbers demonstrate how big a problem tax delinquency still is—it’s declined only 8 percent from 2013 and 2018, according to the report by Quicken Loans. While foreclosure is decreasing, many of the underlying problems remain.

Solutions proposed

The coalition was aided by Loveland Technologies, a data and mapping company based in Detroit that compiles information about properties. Co-founder Jerry Paffendorf put forth a document suggesting possible solutions to the long-term crisis, which he submitted to the Wayne County Ethics Board.

In it, Paffendorf writes about the “ethical failures and unnecessary harm to people” caused by tax foreclosure.

People should absolutely pay their fair share of taxes, but even a cursory glance will show you that many homes have long been overassessed and are being foreclosed over inflated tax debts. A majority of the owner-occupied homes that enter foreclosure are eligible for the Poverty Tax Exemption which means they should not even be paying property taxes in the first place.

Paffendorf’s document is in-depth, well-researched, and worth reading in its entirety. But to summarize, here are his three proposed solutions:

  1. Stop auctioning occupied homes and prioritize ownership for the residents of foreclosed homes
  2. Stop using surpluses from delinquent tax collection and the auction proceeds for anything other than solving the problem of tax foreclosure
  3. Install an oversight entity that includes community members to keep the Treasurer’s office transparent, accountable, and humane

That last recommendation is necessary because, in his eyes, “The Treasurer’s Office currently operates with an almost complete lack of accountability.”

The Detroit Free Press reported in February that members of Treasurer Eric Sabree’s family had purchased tax-foreclosed properties and were late on taxes. As the head official of an office capable of foreclosing on homes, the news presented serious ethical questions.

Controversial program suspended

In March this year, the Detroit Free Press published another investigation into Wayne County, this time on its “Action Before Auction” program. Designed to help homeowners, the program lets the county exercise its Right of Refusal, sell it to a developer, who them eventually sells it back to the owner.

But that’s not how the program had been working. Instead, after buying it for very little, developers often held on to the property, not selling it back to the original owner, but instead selling it for profit elsewhere.

And this double standard was especially galling: “Multiple developers were approved for year two of the program despite being delinquent on taxes for properties they purchased in year one.”

A little over a month after the report, Action Before Action is no more.

“This was one of the worst programs I’ve seen in my career so ending it is good news,” Ted Philips, director of United Community Housing Coalition, told the Free Press. “The question now is, what will be done regarding all the havoc this program has caused?”