In 2018 Lowell Pierce was in for a shock: The bungalow he had purchased on the eastside of Detroit the year prior was at risk of foreclosure. In Michigan homes are foreclosed after three-years of delinquent taxes, and in Pierce’s case the LLC that sold him the house hadn’t paid taxes since they bought it in 2014.
“I put it in my name and then ‘wow bam!” said the 48-year-old. “It’s like boom, wow wait a minute, we’re going to go back into foreclosure here for these back taxes.”
Luckily Pierce was able to connect with United Community Housing Coalition, a non-profit that works on housing issues, including tax foreclosure. They were able to get him on a payment plan to begin paying off the back taxes and stave off foreclosure.
But the problem was just kicked down the road, until this year: Pierce, who fixes up houses for a living and makes under the federal poverty level, was approved for the city of Detroit’s Homeowner Property Tax Exemption Program (HPTAP), which gives individuals making under the federal poverty level, a 100% tax exemption for the current year and makes them eligible for a new program — Pay As You Stay — which was passed by the Michigan legislature in March and reduces back taxes to 10% of the taxable value of a house.
“He’s going to be able to keep his house,” said Michele Oberholtzer, the Director of the Tax Foreclosure Prevention Project at United Community Housing Coalition, who describes the new Pay As You Stay program as a game-changer in foreclosure prevention.
“It changes the math. Instead of owing $10,000 you might owe $2,000,” she said, noting that Pierce is one of thousands in the city who are likely eligible for this house saving opportunity. The challenge now: making sure as many people as possible know about it, especially as the deadline to apply for the Property Tax Exemption — a requisite for Pay As You Stay (PAYS) — is December 14.
WHAT TO KNOW TO APPLY
Under Michigan state law homeowners earning under the federal poverty level are eligible for a 100% tax exemption. It is, however, up to municipalities to create the application programs and systems for doling out these exemptions. For a long time this was an issue in Detroit.
In 2017 an estimated 35,000 owner-occupied households met eligibility guidelines for a full exemption and 4,220 qualified for a partial exemption, according to research by the University of Michigan’s Poverty Solution. In reality, just over 5,500 individuals applied for an exemption that year and roughly 5,200 people received some sort of relief.
This disconnect was the foundation for a suit filed by the ACLU-Michigan against the City of Detroit. Following a 2018 settlement the City promised to make changes to their process, and subsequently, City Council passed an ordinance codifying these changes. Some difference:
- Applications are now downloadable online (an individual used to have to go downtown to City Hall to request an application that was then mailed to them). And due to COVID-19, individuals can even fill out and submit their entire application online.
- Notaries, which were previously required, are now waived if an individual has a “hardship” such as advanced age, or have limited physical mobility. Because of COVID-19, it is being waived for everyone this year.
The City of Detroit is also continuing to offer 50% and 25% exemptions for low-income individuals making slightly above the federal poverty line. Eligibility is as follows:
“So many people who are struggling with property taxes are not aware this program exists,” said Detroit City Council President Pro Tem Mary Sheffield, who introduced the Property Tax Exemption codification rules as part of her “People’s Bill” in fall 2018.
“They don’t know,” she continued, “that you can get a full exemption or a partial exemption on your taxes if you fall below a certain income level.”
While awareness about the program has increased since the 2018 settlement — 9,072 people applied for the program in 2019, compared to 5,684 in 2017 — the numbers still fall far below the roughly 35,000 people city officials estimate are actually eligible.
“We know that there are people out there that need the assistance and we’re doing everything possible to reach them,” said Willie Donwell, the head of the Detroit Board of Review, which is the council in charge of the Property Exemption Program, explaining that in addition to sending out notices to homeowners, the City is running commercials on tv.
“I know every time a commercial has aired because I see the hits going to the website,” he continued adding that there is, however, a big difference between individuals scoping out the information and actually applying. “That’s where we need to find out what the real issue is,” he said, noting some tools to help people navigate the application process — such as in-person workshops in the neighborhoods — are unfortunately not available this year because of COVID-19.
“So some of our homeowners who rely on that process, it’s been a little challenging for them,” he said. “Unfortunately there is no ‘Hey, you can do it next year.’ You have to apply this year it’s just the way the law works.”
In order to aid those who may have been dependent on the in-person workshops the city is offering application help at TCF on Dec. 7-14 from 9 a.m. to 4 p.m.
GETTING THE WORD OUT – PAY AS YOU STAY
The same way foreclosures in Detroit can feel like a game of dominoes — one hard month or missed payment could trigger a foreclosure — the solutions are equally dependent on each other. This is particularly the case with the Property Tax Exemption (HPTAP) and the new Pay As You Stay Program.
While the HPTAP program — whose deadline in Dec. 14 — gives a low-income homeowner a tax-exemption for the current year (i.e. if you are approved for a property tax exemption in 2020 you will get an exemption on your 2020 taxes), foreclosures in Michigan are based on back-taxes (i.e. A house is at risk of foreclosure in 2021, for unpaid taxes in 2018).
Recognizing that the HPTAP program was difficult to apply for in the past — and likely some people have massive bills for taxes they should have never had if they had known about the exemptions — the PAYS program attempts to rectify this by reducing those old taxes. The catch is, you need to apply and receive a Property Tax Exemption in order to be eligible for PAYS.
“What the PAYS program will do, it’s essentially a retroactive exemption,” said Ted Phillips, the director of United Community Housing Coalition, noting that while Wayne County put a moratorium on foreclosures in 2020 due to COVID-19, this respite is not expected next year. And, as of Nov. 26 over 33,000 Detroit properties are at risk of foreclosure in the spring, according to the Wayne County Treasurer’s office.
“It is reasonable to assume that this could be a very, very dire year to say the least,” Phillips continued, noting that while the City of Detroit has made enormous headway in creating programs to keep low-income homeowners in their home, the key is making sure they know about them. “It’s very important that people act quickly to take advantage of things like PAYS.”
According to Donwell, over 5,000 people — including Pierce — are now enrolled in PAYS, but estimates another 18,000 have delinquent taxes or are in threat of foreclosure who could find assistance via the HPTAP and PAYS programs.
“A lot of people don’t know it exists, it was just signed into law in March of this year, literally two-weeks before COVID hit.”
The urgency of such programs becomes clear, according to housing experts, when considering the shifting housing dynamics in Detroit.
According to researchers Josh Akers and Eric Seymour, black homeownership peaked in Detroit in 2000 with 144,571 units and fell by 46 percent to 95,506 units by 2015. Foreclosures and the annual Wayne County Tax Auction — where individuals can bid online on foreclosed homes — are responsible. In addition to drastically altering the makeup of Detroit, they also come with other less appetizing side-effects like blight, vacancy, and decay, the academics found.
HPTAP and PAYS attempt to change this. And nobody knows this better than Pierce, who has seen firsthand what happens when programs, like these, are accessible and not.
In 2018 when the Detroiter learned his house was at risk of foreclosure the experience was very much Deja Vu. Not only had his family experienced a foreclosure scare before. They had experienced it with this very same house.
The east side bungalow that he purchased from an LLC four years ago, had once belonged to his sister Lolinda. Finances, however, forced her to walk away in 2013 after over a decade of trying to make it work.
“I told her I’d help her out, we fixed up the house really, really nice but she just couldn’t afford it, so she decided just to let it go,” said Pierce, noting that in retrospect she very likely would have qualified for the Property Tax Exemption program. She simply didn’t even know it existed.
Instead, Lolinda left, eventually relocating to Arizona. And the house was ultimately foreclosed, going back to the county in 2014. An LLC — the one that later sold it to Pierce — purchased it for $1,100. But still, it sat vacant. People began to scrap it. It was on the verge of transforming from home to blight. Pierce decided to intervene.
“I was like, ‘Hold on, I did that work on that house,” he continued, explaining the reason he decided to return.
While Pierce may have been considered a “squatter” when he first moved back into the house his family lost, those working in housing in Detroit see it differently. His determination, according to Oberholtzer with United Community Housing Coalition, may be the reason his east side neighborhood has one less eye-soar, and the City of Detroit has one less demolition to pay for.
But in 2018 when the house was at risk of foreclosure again, it was also at risk of losing the stability Pierce helped maintain.
Instead, however, there were resources: HPTAP and now PAYS. Solutions that not only help the city retains its low-income homeowners but also long-time residents.
“I don’t want to leave Detroit,” said Pierce, flicking at his sister’s decision to leave the state after her housing woes. “You can talk about the bad things, the crimes, the winters, but it’s home. It’s home.”
For more information: Call United Community Housing Coalition’s tax hot line if you live in a home with property tax issues 313-405-7726. Visit www.UCHCdetroit.org/resources to learn more. And visit this City of Detroit link to learn more about the Property Tax Exemption or get a copy of the application. In order to aid those who may have been dependent on the in-person workshops, the city is offering application help at TCF on Dec. 7-14 from 9 a.m. to 4 p.m.