Radical new program saves Detroiters from brink of homelessness

Allie Gross | Detroit Free Press

Show Caption Hide Caption United Community Housing Coalition contract meeting Shalandra Jones-Scott address the room at a United Community Housing Coalition contract meeting on Oct 11 2018.

Shalandra Jones-Scott hadn’t planned on addressing the room. But then she heard the stories.

While individual details differed, the narrative arc remained the same: anxiety — a true belief that homelessness was just around the corner — followed by an incomprehensible, almost abstract, rush of relief. And, in many cases, disbelief.

Jones-Scott — and the 60 or so other Detroiters in the room — lost their homes to tax foreclosure this year. According to all the major literature on the matter, the likelihood of them keeping their houses once they went up for sale in the annual Wayne County Tax Auction was minuscule. While the auction was always a gamble, increased interest in recent years had caused a general uptick in final sale prices. This fall, for example, United Community Housing Coalition, a local nonprofit that helps people navigate tax foreclosure and ideally stay in their homes, bid on 135 houses for its clients. They were only able to save three.

It's a bleak reality. And it’s why, as Jones-Scott sat listening to the housing sagas of these strangers, she was struck by the seeming amazement of it all. Instead of calling homeless shelters or packing their lives into plastic bags for a move, she and everyone else in the glossy art-deco building downtown were moments from signing a contract that would promise them a deed — as early as January — for the homes they had been convinced they had lost.

"I want to say something, too," Jones-Scott, 46, found herself suddenly announcing, hoisting her 1-year-old grandson Samaar off her lap and placing him onto the linoleum floor in front of her.

"I am thankful," she began, her eyes moist as she explained she now had a legacy — and equity — to pass down.

"I’m living with some health issues, where I needed to be stable, so this means a lot to me," she said. "I got something to leave my kids."

Jones-Scott’s home is one of 500 selected this year for the Make it Home program, a unique — and some might even say radical — partnership between the City of Detroit and UCHC.

Utilizing the Right of Refusal, a provision within Michigan's larger tax reversion law that allows governmental entities to buy foreclosed properties pre-auction, the City of Detroit, with significant funding from the Quicken Loans Community Fund, scooped up the occupied foreclosed homes — diverting them from the auction.

When deeds are issued in January, UCHC will hold them until the occupants repay the purchase price (a range between $1,000 and $8,000). The payments — the payback of a zero-interest loan — will then go into a revolving fund, ideally to buy and save more homes next year.

“We ultimately got more homes than any other year,” said Michele Oberholtzer, director of the Tax Foreclosure Prevention Project at UCHC explaining that the Make it Home project, which started last year with 80 homes, has created a new pipeline for keeping people in their houses.

"Usually, the only tool that we have available to us is the tax auction, which sometimes works and helps people to buy their homes back for a low price, but it is also very harsh," Oberholtzer said, emphasizing that the roulette-approach can be brutal. "It doesn’t matter if you raised your kids there, you have a mortgage on a home or just installed a new roof — the highest bidder wins."

The Make it Home program gives priority to owner occupancy.

"We’ve always been trying to find other tools," said Oberholtzer. "Especially something that will give credit to the resident and give some sort of preferential treatment to them."

For those now "credited" occupants, the Make it Home program could feel like divine intervention. In reality, it's much more mundane, but also, in some ways, a remarkable phenomenon: Bureaucrats from the public and private spheres coming together to imagine a solution to a problem that's burdened the community for decades.

While the fall auction was created by the Michigan Legislature in 1999 to reactivate abandoned spaces and spark new ownership, it has, in fact, worked to ensnare a large number of poor people, especially those with cash flow problems. This is notably a problem in Detroit, where the poverty rate hovers just below 40 percent.

Over the last 20 years, at least 145,000 Detroit properties have been put up for sale in the auction, and, of that number, an estimated 50,000 properties were occupied at the time of foreclosure.

While poverty is a clear problem, housing advocates have argued the issue is more complex than just cash-poor Detroiters. State law, for example, allows poor homeowners to get poverty tax exemptions so long as they certify their status every year. Over the summer, however, Detroit settled a lawsuit filed by the American Civil Liberties Union (ACLU), which alleged the city made it too difficult for residents to learn about, and qualify for the poverty tax exemptions.

Additionally, there have been claims of overassessments.

In Michigan, homeowners are expected to pay property taxes based on the fair-market value of a home. The ACLU, among others, has argued that many properties were never properly reassessed by the City of Detroit after the Great Recession cut housing values.

A 2018 study out of the University of Chicago found that one in 10 Detroit tax foreclosures between 2011 and 2015 was caused by inflated property assessments.

Making things more complicated is the fact that many of the most prolific auction bidders are not homeowners looking to plant roots but speculators who "rent" houses back to owners who lost them, using predatory schemes that often lead to new evictions and cycles of instability. Or, as is more common, the speculators just sit on them.

"The Wayne County Tax Foreclosure Auction is one of the greatest destabilizing forces in Detroit," Joshua Akers, assistant professor of Geography and Urban and Regional Studies at the University of Michigan-Dearborn, told the Free Press over the summer for an article about the effects of speculation on the neighborhoods.

"The auction is the perfect way to gamble. If a bet doesn't pay off in three years, all you lost is the initial purchase price," he continued. "At least that's the speculative perspective. There is a much higher cost for the neighborhoods."

In addition to absentee landlords and more blight, the auction — what Akers calls "displacement without gentrification" — has altered the makeup of Detroit.

Black homeownership peaked in Detroit in 2000 at 144,571 units, according to Akers and his writing partner Eric Seymour, a postdoctoral research assistant at Brown University. By 2015, that fell by 46 percent to 95,506 units.

Despite all these issues being documented over the years, bidding remained one of the only options to keep owners in their homes.

“The way I’ve often thought about the 'genius' of the foreclosure mess is it has just the right amount of diffusion of blame," said Oberholtzer, explaining that the city is in charge of the assessments, the county is in charge of the foreclosing, and ultimately PA 123 — the tax reversion law that mandates the auction — is a state law.

"There has always been this finger-pointing ‘Well, we can’t do anything about it.’ or ‘It’s not us!’ " she said.

The positive response to the Make it Home program has felt like a remarkable shift.

"Instead of saying what we can’t do because we’re not responsible for all of it, it’s now, ‘What can we do? Who are the partners that can help make difference? Who are the funders? The nonprofits?’ " she said.

"The nice way to talk about previous years is to say, 'It was so frantic, it was so overwhelming, and we just didn’t know.' It was also, however, a lack of vision and understanding that retaining our homes and our homeowners is an investment," she added.

"It’s worth not just something to try and avoid, it’s worth our money and our effort to invest in keeping people in their homes, just the way we invest in economic development, and tax credits for brownfields. This is the city investing in neighborhoods in a nontraditional but super-important way with really good dollar-bang for your buck.”

From Jones-Scott's house off Fort Street in the southwest neighborhood of Boynton, it's easy to almost ignore an undeniable eyesore next door.

In a city known for neglected nooks and rotting structures, the house next door is only interesting when one knows its history. A clear piece of evidence of the destruction of the auction.

Foreclosed in 2016, the property ended up in the hands of the Detroit Land Bank after nobody bid on it. For a while, it seemed to attract unwanted activity — drugs and illegal dumping — then, this past summer, it caught fire.

Drain pipes have toppled over, the windows are cracked, the charred siding exposes the property's flimsy structure.

The Detroit Land Bank has it slated for demolition — a task that will likely be financed with Hardest Hit Funds, federal money earmarked to help families hit by the economic and housing crisis, but that have been OK'd for demolitions (Michigan received a total of $761 million in Hardest Hit Funds since 2010, $260 million of which has gone directly to the Detroit Land Bank).

In the interim, as demolition plans are made, the house sits empty, a danger.

"I try to keep up the yard in front," Jones-Scott's husband, Mark Scott, said on a brisk Friday morning last month, as Jones-Scott sat relaxing on an oversize red couch — a gift from Scott — and a candle, for good energy, burning in the corner.

Despite the dilapidated house next door — or the fact that their neighborhood, Boynton, is regarded as the most polluted ZIP code in the entire state — for Jones-Scott and Scott, this is home.

For a long time, homeownership felt out of reach. Scott is a chef, but Jones-Scott has been in and out of work.

In 2015, however, Jones-Scott, who is HIV positive, won a settlement from the Dearborn Police Department over comments an officer had made about her status.

After years of bouncing among hotel rooms and subpar rental units — including one whose owner was based in China — and even living in cars, the couple decided to use the money to try homeownership.

Turning to a relative who was in the real estate business, they purchased their home — blocks from where Jones-Scott grew up. The cousin wanted $10,000 but they were able to negotiate it down to $7,000.

While Scott's mom had warned against the couple buying anything too quickly, they went for it.

"When we came and looked at the house — I mean we were already in a situation where we got kids in a van — it was just a mess. We needed to do this ASAP," Jones-Scott remembers.

After the deed was signed, they discovered the relative hadn’t been paying property taxes. The back taxes for 2013 and 2014 were now their burden.

“We both never owned a home before. So we didn’t know about looking back into the back taxes,” Jones-Scott said, shaking her head slowly.

While the couple got on a tax payment plan shortly after the purchase, in December 2017 they defaulted.

By then, taxes for 2013, 2014 and 2016 were delinquent. To redeem the house, they’d have to pay $3,554.

On June 1, they made a payment of $300, an attempt to save the house. Days later, Wayne County Circuit Judge Robert Colombo signed a judgment of foreclosure. They are unclear where the $300 went, a note to the chaos of the system.

The interceding months have been a whirlwind. The couple believed they would bid on the house with the help of UCHC, but then someone knocked on their door one day and they were told they could be eligible for the Make it Home program. As homeowners who qualified for the poverty tax exemption, they could get the deed for $1,000.

"I don’t know how it works; this guy was calling from out of town; I don’t know if he was one of the attorneys helping people with this initial $1,000 program," Jones-Scott said, trying to recall the process by which she got involved in the Make it Home program, her explanation highlighting just how fragile the foreclosure-response system is. A knock on a door, a phone call, a person delivering life-changing information — it can all feel like chance how information is disseminated. And also, in some ways, faith.

This reality is something Oberholtzer acknowledges as a barrier as well.

“People might get stuff from us and not know who we are," she said. "We’re not the government. They don’t know if they should trust us."

Luckily, Jones-Scott and her husband were receptive.

"It’s one huge weight off my shoulders," Jones-Scott said. "I needed to have this place. I’ve been positive for 18 years — I don’t think I’m going to die from HIV, but you just never know. I need to make sure my kids and my grandkids will have something when I’m not here so they don’t have to be homeless."

Read more:

Nancy Kaffer: Why the treasurer should stop holding Wayne County tax auction

Detroit Land Bank notches many wins including 10,000 side-lot sales

Just like the auction, the genesis of the Make it a Home program is about chance.

In April 2017, Oberholtzer and Ted Phillips, the executive director of UCHC, were speaking at a poverty solutions conference at the University of Michigan. Arthur Jemison, a top Detroit housing official, was the keynote speaker.

"Arthur made a comment that there really wasn’t much the city could do. It was sort of out of their hands, it was a matter of the treasurer doing foreclosures,” Phillips said, recalling that he had tried to get Jemison's attention.

“You can do this Right of Refusal,” he thought to himself.

At a break in the conference, he caught up with Jemison and explained the idea.

“‘Yeah, that sort of makes sense,” Phillips remembers Jemison responding.

“From that we sat down and, jeez, within a day or so sort of had a framework," said Phillips, who noted that he had approached other administrations in the past about the idea but never got anywhere with it.

From Jemison's perspective, the program just made sense.

"So, this is one of those things where a city that’s interested in being pragmatic and working with advocates and advocates interested in working collaboratively were able to do something together, and I think that’s the way we try to organize our department and our staff," he said. "Listen, be partners."

The listening has been big. It's something Oberholtzer also credits for the program's creation.

Following the 2015 auction — that year a total of 24,000 properties were for sale, 8,000 of which were occupied — Detroit Chief Service Officer Vicky Kovari began hosting monthly roundtable meetings for auction stakeholders, community groups, as well as representatives from the city and county.

"I think it built a relationship and trust,” said Oberholtzer. “You can only have so many meetings where you don’t solve anything before it starts to feel really icky. I think it was the result of a strong relationship."

In fall 2017, six months after Phillips and Jemison's chance encounter, the first version of the Make it Home program launched. That year, there were just more than 6,000 foreclosed homes in Detroit, nearly 2,000 of which were occupied. The city used its Right of Refusal to pull 80 homes selected by UCHC.

That first year, all the homes were occupied by non-deed holders (think renters or those with rent-to-own land contracts) who got caught up in the auction because the landlords or owners failed to pay taxes. The Quicken Loans Community Fund, which has representatives attending the monthly roundtables, kicked in $300,000.

After the success of the first year, the project expanded for 2018 to also include deed-holders like Jones-Scott. This year, the program included 170 deed-holders and 330 non-deed holders. The Quicken Loans Community Fund donated $1 million.

While the city had agreed to include deed-holders in this year's batch, Phillips said the support was buoyed by the ACLU and Detroit settlement over the inaccessibility of poverty tax exemptions.

Part of the settlement touched on the use of the Right of Refusal, stating that the city would have to exercise its right for any “poverty exemption-eligible homeowners with homes currently in foreclosure.”

In addition to the city agreeing to pitch in $275,000 for the purchase of these homes, it agreed in the settlement to sell the houses back to homeowners at a discounted rate of $1,000 for the 2018, 2019 and 2020 tax years.

The City of Detroit for example, paid the county $2,793.93 to purchase Jones-Scott's house in the Right of Refusal — the owed taxes, minus the city's portion. However, because of the lawsuit, she needed to pay back only $1,000 plus a $25 fee.

While the number of homes in the auction was lower than ever this year — fewer than 3,000 properties were put online — the issue of poverty in the city, and the struggle to pay property taxes are still present.

A Wayne County Treasury spokesman said 44,000 properties are at risk of foreclosure next year — 36,000 of them in Detroit.

Those who have been working in housing for decades also flag the 50,000 occupied properties that were subjected to the whims of the auction between 2005 and 2017.

“If you look at the rationale for why it’s highly appropriate to be helping these categories of people, it would apply backward in time to really affect tens of thousands of people. The question is, what are we going to do for those folks?” asked Peter Hammer, director of the Damon J. Keith Center for Civil Rights.

"Just imagine how much carnage could have been avoided, both in terms of people and property, if we would have had the same compassion 10 years ago as we’re starting to have now."

From Hammer's perspective, the crass reality of politics — coupled with the barrage of negative news articles each fall — is what ultimately forced those in power to "show more compassion."

It is also easier, he contends, to address the issue in 2018 than, say, 2012 because a lot of the damage has already been done.

"I think that displacement was not accidental and the extent that people wanted mass-displacement, they’ve gotten that, and so it’s easier now to show some compassion about the handfuls of people who are left," he said.

Jemison, who joined Mayor Mike Duggan’s office in 2014, is unsure why the Right of Refusal program was not utilized earlier but stresses the fragility of Detroit's economy pre-bankruptcy.

“You have to put yourself in the shoes of the officials at that time who were imminently seeing the potential for a bankruptcy, imminently seeing the potential for a significant reduction in value, which means less general fund revenue and even further threats of bankruptcy," Jemison said of why a Right of Refusal program or the reappraisal of property values did not occur between 2008 and 2013.

“Since then, I think we’ve taken steps every year to attack this problem so I just think that little bit of perspective helps me think about it a little bit differently,” Jemison said

In the past, the city has used Right of Refusal almost solely for development projects.

"When I first arrived here in 2014, Right of Refusal was used exclusively for a property that was critical to an economic development initiative that was going to create new tax revenue for the city," Jemison, a self-proclaimed “houser," said, adding that after talking to advocates about the “intractable problem” he felt it was "the right time and place to do this. Let’s do it now."

From Hammer's perspective, keeping people in homes is economic development.

“Efforts were made to balance the budget on the backs of distressed homeowners. Ironically, this was also very shortsighted. The massive foreclosures and blight accelerated the collapse of the property market with devastating long-term impact for tax revenue," he said. "None of this is an excuse for the city in not addressing the harm done and taking actions that make whole homeowners harmed by the city's actions."

While the city has not made any comment on how it can or would work to make amends with the damage done in the past, Jemison is vocal about the future.

“You really want to intervene much further up in the waterfall so to speak, when people are really just starting to be tax delinquent,” he said, pointing to two pieces of legislation that Duggan successfully pushed for in Lansing in 2014. The first reduced the interest rate for delinquent tax bills from 18 percent to 6 percent. The second capped tax bills at 25 percent of a house's fair market value.

"But this," Jemison said of the Make it Home program, "gives us an instrument to get people who are at the very end the opportunity to take them out of the list of final occupied foreclosures and work with them."

For Oberholtzer, who has been working on tax issue in the city since 2014, there is great appreciation for the work and collaboration that is happening now, but also, like Hammer, some saddness as to why it never happened sooner.

"It’s funny to me too how we’ve been able to raise all this money for Right of Refusal, it’s been so great, but we’ve been doing this auction program for years, we would have loved that money then too," she said. "The Right of Refusal program is needed right now especially because the auction is so expensive. But in previous years the auction was quite viable. And, if we had a commitment from the different parties, we could have also invested in homeownership for a long time even without the city’s involvement."

As Jones-Scott sat down following her impromptu speech at the UCHC headquarters, the room reverberated with claps and snaps.

Everyone seated around her could relate to the stresses of the last few months. And the comfort, now, in knowing it would be OK.

It was now about the future: signing onto payment plans with UCHC, and if all went as planned, getting their deeds.

"You’re paying back into a loan fund that’s going to help the people in foreclosure next year save their home," Oberholtzer, her voice soft like an elementary school teacher, told the crowd. "So, you’re paying back what you were given in order to continue this cycle. It’s so beautiful. So please understand that’s where this is coming from. That’s why we give you one year to pay it back, or less, because we need that money next year; the clock is moving forward, we got to get it back so we can move it forward.”

The room nodded in agreement. Oberholtzer stressed the case for success one more time.

“When you are successful you help us to say, ‘Hey, Mr. Treasurer. Hey, Mr. Mayor. Hey, whoever. This works and this is worth it.' "

Following Oberholtzer's introduction, Phillips took the stage. Going through the process, he explained to the crowd the basics: You'll get your deed as early as January. You shouldn't get a tax bill this year because, technically, the city is in possession of the house. You shouldn't, still, get a tax bill in 2019, but you will get a garbage fee, and if you don't pay it, you will get a penalty, which can increase quickly.

"In 2020 you will get your first tax bill. At that point you should look into getting a poverty tax exemption, and also a reassessment of your property — reassessment claims only take place in February, however."

The speeches were encouraging and helpful, but it could also feel stressful. The fragility of the system was evident.

As individuals waited to sign their contracts, one of the participants, Karl Henderson, mused about the big picture.

“I was just thinking, these are 500 homes that won’t be stripped now. They won’t be gutted. They will be occupied. And our kids can walk past and feel safe,” said Henderson, who is in the program as a non-deed-holder who will become one. He and his fiancée have been living in a house off Joy Road that had been in his fiancée's family for years. Currently owned by an elderly relative out of state, the house was delinquent several years, owing more than $16,000 in taxes, or just more than $13,000 to be redeemed.

Through the Right of Refusal, the city paid the county $6,484.50 for the property, and since Henderson didn't own the house — and therefore didn't qualify for the ACLU settlement price of $1,000 — he will owe UCHC $7,000. The additional price includes, according to Phillips, transfer taxes, filing fees and a little bit of a cushion in case some participants are unable to pay the loan back.

Henderson had already paid $450 — and at the contract meeting, he agreed to pay $540 a month going forward.

"It’s really a great opportunity to have someone who can help you obtain and become a homeowner because that is the American dream. You don’t have rent. You don’t have to worry about someone selling it and now you have to pay even more rent."

Henderson opted against the electronic payments. He would bring his monthly payments down to the UCHC headquarters. The choice was made because he was having some issues with his banking situation — it just wasn’t feasible he explained. Besides, he enjoyed coming down to UCHC.

“I really like it.”

As Phillips finished up the paperwork with Henderson, Jones-Scott got called to sign her contract with another UCHC staff member. For the price of $1,025, her home will be hers again. She and her husband had already paid $1,000.

The space was chaotic but felt hopeful. It also was mired in reality.

“I’m not sure we’re out of the woods yet — well, we’re not out of the woods!” said Phillips.

“The smaller number of homes we lost this year, was something that back when we started this work in 2003 we would have said, ‘Oh, my God, we lost that many!’ There were so many more people in Detroit, so many more homeowners," he said, taking a moment to reflect on the past nearly two decades of work.

"So, this is not a victory," he finally said. "We’ve just gotten used to defeat. We need to keep at it. I’m glad to see, specifically with the City of Detroit, the changes that have occurred in the last several years. It’s very encouraging. But there’s a lot more to do."

Allie Gross focuses on development, housing affordability, and income inequality. Contact Allie Gross at AEGross@freepress.com. Connect with her on Twitter @Allie_Elisabeth.