In 2018 Lowell Pierce was in for a shock: The bungalow he had purchased on the east side 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 on a chilly morning last month. "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 based in Detroit that works on housing issues including tax foreclosure. They were able to get him on a plan to begin paying off the back taxes and stave off foreclosure.
But the problem was just kicked down the road. While Pierce had more time, the back taxes still needed to be paid and had interest. More specifically, he was continuing to accrue new property taxes with each passing year.
That is until this year.
This spring Pierce, who fixes up houses for a living was approved for the city of Detroit’s Homeowner Property Tax Exemption Program (HPTAP). Designed for low-income homeowners that make under the federal poverty level, the program gives people 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 process and systems for doling out these exemptions. And 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 ACLU-Michigan, which led to a 2018 settlement with the city of Detroit. Under the agreement, 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 (previously, individuals had 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 exemption program. Donwell contends that in addition to sending out notices to homeowners, the City is running commercials on television to get the word out.
"I know every time a commercial has aired because I see the hits going to the website," he said, 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 that 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."
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 is 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 people actually 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 he estimates another 18,000 have delinquent taxes or are in threat of foreclosure and could benefit from assistance via the HPTAP and PAYS programs.
"A lot of people don’t know it exists," he said. "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 residential dynamics in Detroit.
According to research by Josh Akers of University of Michigan-Dearborn and Eric Seymour of Brown University: 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 largely responsible. In addition to drastically altering the makeup of Detroit homeownership, these events have also created other less appetizing side-effects like blight, vacancy, and decay, the academics found.
HPTAP and PAYS attempt to change this trajectory. And nobody knows this better than Pierce, who has seen firsthand what happens when programs, like these are — and are not — accessible.
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. 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, his sister left — eventually relocating to Arizona — and the house was ultimately foreclosed. It reverted back to county ownership, and in 2014 an LLC — the one that later sold it to Pierce — purchased it for $1,100. During this time the house sat vacant. According to Pierce, people began to scrap it. It was on the verge of transforming from home to blight. But the Detroiter decided to intervene.
"I was like, 'Hold on, I did that work on that house," said Pierce, explaining the reason he decided to return.
While some may have considered Pierce 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 at 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.
The stability he brought, however, was tested when the house was once again flagged for foreclosure. Would he be forced to leave? Would it sit empty? Would an absentee LLC swoop in and then also not pay taxes?
Luckily, Pierce notes, he never had to deal with these possibilities. This time around there were resources: HPTAP and now PAYS.
"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.