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Detroit once led the nation in homeownership. Now the city has flipped to being majority renters rather than owners. One reason is that, even as Detroit begins to bounce back economically, tens of thousands of residents each year have bright orange foreclosure notices tacked to their front doors. A 1999 state law enables properties to be taken over and auctioned if the owners are delinquent on taxes. As the city has emerged from bankruptcy, officials have acknowledged the problem and are working alongside nonprofits and some in the private sector in efforts to fix it. Some signs of progress: A door-knocking campaign raises awareness about foreclosure risks and options such as a tax exemption for homeowners in poverty. A lawsuit by watchdog groups has nudged the city to mail notices about the tax exemption to homeowners with houses worth less than $95,000. And efforts such as one backed by Quicken Loans are aiding some residents. “It feels real good,” says Pearlie Mack, a proud homeowner again thanks in part to Quicken’s help.
Pearlie Mack was a homeowner for years, until a series of difficult-to-prevent disasters.
First, an electrical fire left her West Side Detroit home in ashes in 1998. So Ms. Mack, who serves meals for a living at a Detroit public school in her neighborhood, took the insurance money and purchased a new two-family flat. When a tree branch fell and knocked a hole bigger than a sofa in her roof, she didn’t have the insurance to cover that. No longer able to own a home, she was forced to rent.
Last summer, a bright orange foreclosure notice was tacked on the front door of the house she rented. Her landlord had lost the home, but had continued to charge her $500 a month in rent.
To say stories like Mack’s are commonplace in Detroit is an understatement. But what makes her tale unusual is that it comes with a happy ending: Thanks to a program now wrapping up its second year, Mack was able buy the home she rented from the county.
“It feels good, it feels real good” she said with a laugh earlier this month. “If I had to move, it would have been a big difference. I would have had to save some money to look and find me a house to move in, and rent a U-Haul – that’s a headache, finding another school for my granddaughter to go to….” Her voice trails off as she thinks of all the problems moving again would have caused.
Each year, tens of thousands of residential structures, mostly homes, fall into tax foreclosure due to a state law amended in 1999 that destabilizes an already stressed housing market. A mortgage is so difficult to get in Detroit that the number issued has remained under 1,000 annually since 2006 – although the situation is brightening in certain neighborhoods.
The problem facing the gradually revitalizing city is one few Western cities could imagine, housing experts say. Detroit used to have the highest rate of home ownership in the US. Today, the tax foreclosures have turned the city from one of majority homeowners to majority renters for the first time in 50 years.
“We haven’t seen this many tax foreclosures in American history since the Great Depression,” says legal scholar Bernadette Atuahene, who has studied the issue closely. The people most likely to be foreclosed upon, she adds, are the poorest of the poor.
More than 145,000 residences were foreclosed and auctioned off between 2005 and 2017 in Wayne County, with the vast majority of those falling within the city of Detroit. The tally is stunning, given the city has less than 700,000 residents. Often it involves homes that repeatedly end up back in tax foreclosure. Many are stripped of their copper and appliances, making this issue one of Motown’s most intractable problems.
Thanks to legal action, private funding, boots-on-the-ground activism, and the collective efforts of elected officials, there is reason for hope. The home Mack now owns was withdrawn from tax foreclosure by the city, and she was then able to buy it, thanks to a nonprofit-run program backed by Detroit-based Quicken Loans through its $1 million community fund.
Nudge from a lawsuit
On the legal front, in July the city settled a lawsuit brought by the American Civil Liberties Union that alleged the city made it too difficult for residents to learn about, and qualify for, a property tax exemption based on poverty. The result, says the ACLU legal director of Michigan, is that thousands of poor Detroiters paid property taxes they didn’t owe because they didn’t know they were exempt – and thousands lost their homes to foreclosures when they couldn’t pay.
Under the terms of the settlement, the city now will mail a notice about the exemption every year to all homeowners with houses worth less than $95,000. “Most Detroiters didn’t even know about it – it was almost like a secret,” says Michael Steinberg. “It’s a critically important victory for thousands of Detroiters who would otherwise have lost their homes for inability to pay taxes that they should never have had to pay, and it’s a win for the city of Detroit, which will have far fewer abandoned properties in its neighborhoods.”
But housing advocates stress that are many reasons the issue may not disappear any time soon.
Catch-22 in county budget?
“The situation has improved, but not in the ways it’s being communicated entirely,” says Jerry Paffendorf, co-founder of Detroit-based Loveland Technologies, which sells professional mapping services to municipalities. Mr. Paffendorf has studied the foreclosure crisis issue closely for years.
“Wayne County has codified into its budget needing all this delinquent tax money,” points out Paffendorf. “It creates this horrible catch-22. If you need that money, how in any sense is it right and fair to collect it by pushing people out of their homes?”
“It’s the kind of thing, just like with [the] Flint [water crisis], where you’d be hard pressed to imagine these kinds of decisions being made on behalf of majority white communities. It just feels unthinkable, right?” he says.
Quicken’s fund allowed 80 renters like Mack, whose landlords were delinquent on their taxes, to be assisted in 2017. More than 500 homes have been saved from foreclosure this year, with additional funding from the JPMorgan Chase Foundation.
“They were very helpful, I mean, they put the money up because the city didn’t have it, to make this project go,” says Wayne County Treasurer Eric Sabree, a longtime Detroiter, of Quicken Loans. “But for their contribution, their funding, it wouldn’t happen.”
Quicken Loans declined to be interviewed for this story. Critics say the firm’s impact on Detroit has been mixed. It’s one of the largest employers in downtown Detroit and the largest mortgage company in the country after surpassing Wells Fargo earlier this year. But the US Justice Department is suing the company, saying it showed "reckless disregard" of government regulations when making loans backed by the Federal Housing Administration and “created a fraudulent scheme of knowingly representing” that certain FHA-insured mortgages “were underwritten with due diligence and were eligible for FHA insurance,” when they were not. Quicken’s owner denies the charges and has vowed not to settle.
Other major lenders in Detroit at the time of the housing crisis have since gone out of business.
“The mortgage crisis just decimated the city’s collection of block clubs,” says Victoria Kovari, general manager in the department of neighborhoods and a member of the Tax Foreclosure Prevention Working Group. Block clubs are neighborhood organizations and served as a key part of the city’s social fabric. She says foreclosures “created a huge amount of blight.”
Still, Quicken is a key partner of Mayor Mike Duggan’s administration, and can be credited with helping revitalize its downtown by relocating its headquarters to the city from the suburbs.
Since his election in 2013, Mr. Duggan can boast that he has turned on thousands of street lights, gotten the buses running on time for the first time in years, and helped the city exit a historic bankruptcy in which it was remarkably saved in part by its virtually unparalleled collection of artwork.
Progress, but still a tide of foreclosure notices
According to the county, owner-occupied foreclosures in Detroit are down 89 percent in the past two years, while foreclosures of all homes are down 78 percent. Advocates on the ground question these numbers.
“It’s entirely likely that more homeowners are in foreclosures than what their numbers show,” says Ted Phillips, executive director of the United Community Housing Coalition. He points out that 40,000 homes were up for foreclosure at the beginning of this year, mostly unoccupied properties, but still many thousands of occupied ones, too.
The final number of foreclosure notices dropped thanks to canvassing by his nonprofit, city council members, state legislators, and others. But Mr. Phillips argues such a figure remains an appalling starting point.
“40,000 is nothing to be jumping up and down about, and that’s roughly the number they have in foreclosure for next year,” says Phillips of the county.
The United Community Housing Coalition holds multiple workshops a week aimed at keeping those living in foreclosed properties in their homes. The city partnered with UCHC to hold more than a dozen additional workshops in each of the city’s seven council districts as well. The nonprofit provides financial support to those losing their homes, people who are already homeless, and others.
The group reports helping more than 3,000 people buy their homes from foreclosure over the years – Detroit’s only nonprofit working at such a scale.
“UCHC has been a critical partner in all of this,” says Ms. Kovari, who works for the city.
But due to $8.8 billion in Trump administration cuts to the Department of Housing and Urban Development, in the coming weeks HUD will cut $1.1 million from UCHC’s budget. That amounts to roughly 40 percent of its budget, according to The Detroit Free Press.
Assistance, one door-knock at a time
Also, housing advocates point out a key reason for the foreclosure decline: As people have left the city, fewer are left to foreclose upon. City council members, state legislators, and nonprofit groups knock on thousands of doors each year to let people know they are behind on their taxes and at risk of foreclosure. This year alone, Sabree points out that his office knocked on more than 5,000 doors. Sabree knocked on many himself, even in the powerful Michigan winters.
“People aren’t paying attention, and that’s part of the reason why that this is going on. It’s not just because they don’t have the money,” he says.
Door-knockers like Sabree help walk people through the process of getting up to speed on their taxes, when that’s possible.
Key tools and programs make that easier than it used to be: As of two years ago, you can pay everything from your local energy bill to your back taxes at 50 locations in Detroit: from Rite Aid drug stores to community centers to local retail outlets.
The Detroit Land Bank Authority, a public entity which has acquired a huge swath of the city since its inception, now operates an Occupied Buy Back Program as well. It allows eligible applicants the opportunity to buy a home back once it’s been foreclosed and handed over to the land bank.
Launched in 2015, the program assisted 180 people last year and nearly 150 more this year.
The county earns tens of millions of dollars by charging high-interest rates on unpaid back taxes and an annual auction of foreclosed properties, although it would argue it is making money off people who are not following the law.
Some people are choosing between paying the heat bill and paying their taxes, Sabree notes. But the issue is even more complex for others.
Tianna Hodge’s predicament
A trip to the county courthouse downtown regularly shows a long line of people winding toward a series of windows. In that line are dozens of people paying fines for everything from shooting craps on street corners to driving without car insurance, often because they can’t afford it.
For those without a car in one of the last metropolitan regions without a functioning mass transit system, it can take literally hours to get your children to school.
Sabree says he has seen people in foreclosure who simply refused to pay their taxes for years.
Tianna Hodge admits she knew she was behind on her taxes, and that it’s not the first time she’s been in this predicament. A Detroit native, Hodge makes $70,000 a year working for the US Postal Service. Her West Side neighborhood was mostly Jewish, then like many such American communities it became black, and now it’s becoming low income as homeowners disappear and renters replace them.
“I was afraid to show the housing coalition my taxes,” says Hodge, who has lost a home more than once to tax foreclosure despite her income. “But whatever needs to be done for me to keep my house, that’s what I’m going to do.”