opinion

Detroit residents lost homes in city's $600M mistake. It's time to fix it.

For years, the City of Detroit levied llegally high taxes on its homeowners, even as property values plummeted. Some Detroiters couldn't pay those inflated tax bills, and lost their homes to foreclosure.

It's one thing to understand that Detroiters' homes were illegally assessed. It's another to put a price tag on that transgression, as investigative reporters Christine MacDonald and Mark Betancourt din the Detroit News last week: $600 million.

That's how much Detroiters, most of them long-time owners, were overtaxed between 2010 and 2016, MacDonald found, using public records and meticulous methodology. Worse, MacDonald's analysis, undertaken with help from Reveal from the Center for Investigative Reporting, and freelance reporter Mark Betancourt, showed 90% of tax-delinquent Detroit homes were overtaxed during those years, and that at least 28,000 of those overtaxed homes had been foreclosed since 2013.

More Detroit stories:

About half of Detroit water shutoffs are still off

Why Detroit City Council rejected Mayor Duggan's $250M blight bond proposal

The question now is how to make it right — how to start making good on the debt Detroit owes to those residents.

Detroit Mayor Mike Duggan says there's little he can do. He says it's not fair to overtaxed taxpayers who did keep up during those years to help those who didn't, and that the city can't afford a refund, anyway.

These are terrible reasons to close the books on a $600 million mistake. There's the simple unfairness of overtaxation, and the plain injustice of seizing a home for unpaid taxes that were set illegally high.

If you're not one of those Detroiters, ask yourself how you'd feel if this happened to you? — and, worse, if your inability to win in an unfairly constructed system was viewed by others as evidence of the widespread moral deficiency of yourself and your friends and neighbors?

In any city, but particularly in a city where the poverty rate is near 40%, and whose longtime African-American residents — those most likely to have born the brunt of overtaxation — often fear that this city won't be for them much longer.

Some Detroiters say that new investment and development in this majority black city isn't directed to the neighborhoods where hard work and persistence have kept communities whole — that the city being re-shaped by new business, new jobs, a bustling downtown, posh restaurants and gleaming lofts is meant to lure new white residents from Detroit's suburbs. At best, they fear, their interests and well-being are an afterthought in the city's plans. Not a few suspect they are being intentionally displaced to make room for those new residents.

The Detroit City Council doesn't seem to agree with Duggan. Council President Brenda Jones questioned Detroit's tax assessor Tuesday, and plans to hold another meeting. A working group of City Council President Pro Tem Mary Sheffield issued a report this week with recommendations that could compensate homeowners harmed by overtaxation.

Sheffield says the aim is to provide Detroiters with a menu of options.

"We never wanted one answer to the solution," she says. "These individuals lost their dignity in this process. Government telling them what we’re going to do isn’t the solution. We need to put them into the driver’s seat, and allow individuals to select what fits their means."

Sheffield says she's keenly aware of the city's budget constraints, and that the working group concentrated on in-kind programs. A lot of the funding the city can apply to housing problems comes from the federal government, and carries restrictions, either for how it can be used, or who can access it. With city-funded programs, Sheffield says, there's more flexibility.

But first, she says, it's important to determine who was affected, and to build community input and oversight into any kind of restitution program.

Options outlined in the working group's report include using the land bank to offer overtaxed Detroiters homes in various conditions and grants or low-interest loans for home repair. Another idea is to offer job training for Detroiters who lost their homes but need employment more urgently than they need new housing.

In Detroit, homeowners who live in poverty aren't required to pay property tax, but the city has done a poor job of communicating eligibility requirements for that exemption. About 7,600 Detroiters got the exemption last year, but data show that at least 39,000 Detroiters could qualify.

Receiving the exemption in the current tax year doesn't wipe out past years' tax debt, even if the homeowner shouldn't have been required to pay in those years. Making the poverty property tax exemption retroactive, as anti-foreclosure advocates have suggested (and which would require approval by the state Legislature), would wipe out past years' debt for those who shouldn't have had to pay it.

The mayor opposes the retroactive poverty exemption, but he has introduced a new program that would substantially reduce property tax debt for delinquent Detroiters. That program passed the state House of Representatives last year and is currently in a state Senate committee.

At the federal level, the group's report explores the possibility of additional housing vouchers through Section 8 or veterans' programs, and the re-purposing of some Community Development Block Grant funds.

But the group's report also recognizes that any comprehensive compensation program is going to require cash, and they're hopeful that some of the deep-pocketed corporations and foundations active in Detroit-based philanthropy will step up.

I don't know the best way for Detroit to pay this debt. Post-bankruptcy, city government seems on more stable financial footing, but the city's improved outlook is also fragile. Many of Detroit's most intractable challenges remain unchanged. This city needs so much: better schools, improved social services, infrastructure repairs and upgrades, more job training, more jobs, better transit, less blight, more investment spread equitably across neighborhoods.

But it also needs residents. Duggan has said that his most important job is to grow Detroit's population. That means attracting new residents, but it also means keeping old ones. It means not ignoring their struggles. It means honoring their value to this city.

And it means rejecting the premise that years of inflated, unjust taxation are just something Detroiters have to live with.

Nancy Kaffer is a Free Press columnist. Contact: nkaffer@freepress.com.