A grassroots organization calling itself the Coalition to End Unconstitutional Tax Foreclosures  has lobbed a grenade into the heart of Motor City. The report accuses the City of Detroit, Michigan, of inflating property tax assessments  for low-income homeowners over the course of the past 10 years, in violation of the state’s constitution. These artificially inflated valuations allegedly put many struggling Detroit families in the crosshairs of foreclosure actions, according to the study.
The organization’s website notes that, per the Michigan Constitution, “no property should be assessed at more than 50 percent of its market value.”
According to attorney and Chicago-Kent College of Law Professor Bernadette Atuahene, between the years of 2009-2015, “anywhere between 55 percent to 85 percent of properties were being assessed in violation of the Michigan Constitution.” Atuahene co-authored the study with University of Chicago Harris School of Public Policy Professor Christopher Berry.
Detroit News  reports that “the Wayne County treasurer foreclosed on about 100,000 Detroit properties for unpaid property taxes from 2011 through 2015.”
The study found that 95 percent of Detroit’s lowest-valued homes were being unjustly assessed. So, what was the rate among the city’s highest-valued homes? Only 13 percent, according to the study.
Atuahene told Detroit station WXYZ , “When you have more education and you have more money to hire a lawyer, you’re going to appeal your taxes and in Detroit you always win because they were so drastically wrong. People who most needed the city to get these property tax assessments correctly, the poorest of the poor, are precisely the people who didn’t have the power or the knowledge to go an appeal.”
Atuahene further stated that as many as 25 percent of the homes sold for $8,000 or less would not have been in danger of foreclosure if not for the incorrect assessments.
Representatives from the city government told WXYZ that they could not comment on the study “because they don’t have the access to the raw data used or the methodology.” Although they noted that homeowners are capable of filing an appeal or applying for a poverty exemption if they believe the appraisal amount to be incorrect, Atuahene said, “They are not supposed to be paying these taxes in the first place, but due to several barriers erected by the city of Detroit, they didn’t know about it or weren’t able to apply for it.”
According to Detroit News, city officials have acknowledged the city’s assessment problem but pointed to double-digit reductions during the last four years. The city also completed a reassessment in 2016, as required by the Michigan State Tax Commission, Detroit News reports—the first complete one the city had done “since the 1950s.”
Detroit’s Deputy CFO-Assessor, Alvin Horhn, told Detroit News in an email that, “We believe the citywide reappraisal has been an important part of the major reduction in the number of foreclosures occurring in the city, which continue a steady decline and will provide a solid foundation for future growth. The number of foreclosures of owner-occupied homes, specifically, has gone down by nearly 90 percent over the past few years."
For insight, DS News reached out for comment to Rose Marie Brook, President, Fabrizio & Brook, P.C. , a financial services law firm that operates in Michigan. Brook told DS News, “Inflated home values leading to foreclosure increases a city's vacancies, blight, and all that goes along with it. In the majority of cases, foreclosure is a last resort when all other loss mitigation options fail. Finding viable ways to allow people to stay in their homes and maintain their mortgage is generally not only in the best interest of the homeowner but also in the best interest of the city and the lender. If these allegations are true, it’s disappointing that the city is contributing to its own troubles.”