Detroit — Tax scofflaws are emboldened because city residential assessments often bear little relation to reality, according to new research.
Most cities drastically reduced assessments — which property taxes are based on — after the 2008 housing collapse. Detroit didn't go far enough, according to professors Mark Skidmore of Michigan State and Gary Sands of Wayne State universities. They researched the sales of nearly 8,000 houses in 2009 and compared them with 2010 assessments.
Houses selling for about $2,300 were valued by the city at $42,000, more than 18 times their selling price, and some that went for $12,500 were pegged at $62,000 by the city, their research found. Even homes selling for less than $100 were valued at nearly $46,000.
"When people don't perceive a tax to be fair, they don't pay," Skidmore said.
Detroit Chief Assessor Linda Bade acknowledged some assessments are too high, but argued her office is responsive to those who complain. She met with the professors last year and said their findings are "accurate in some instances," but argued they included too many foreclosed properties that skewed their results.
"We are continuing to review assessments and bring them in line," Bade said. "I acknowledge individuals could be over-assessed and when they are we take action."
Detroit's residential assessed value citywide has dropped by nearly 46 percent between 2007 and 2012. But assessments fell even further in suburbs: 57 percent in Southfield and 63 percent in both Hazel Park and Pontiac over the same period.
Some of Detroit's decrease, though, is attributable to properties that became government-owned over time and now have no tax value. In all, 66,000 city parcels are owned by entities, such as the city and school district.
"What they are doing is absolutely illegal," said Harold Hoyt of Clinton Township, who has made a business of appealing assessments for hundreds of Detroit property owners. He said he's reduced some assessments by up to 90 percent.
"Why should you pay $3,000 in taxes when you can buy the house for $3,000?" Hoyt asked.
The situation is enough to make even the city's staunchest supporters fight back.
After years of paying his taxes on his University District home, Bill Lee appealed to the Michigan Tax Tribunal after the city denied him a decrease. He filed the appeal after he was denied a small loan in 2011 to build a solarium because he owed $100,000 on his mortgage — $40,000 more than the bank found it was worth.
"I was screwing myself and I was going along with having the short end of the stick," Lee said.
Last month, the tribunal ruled the house is worth $35,000, about $70,000 less than the city's figure.