Mayor Mike Duggan says the years-long swoon in Detroit property values is coming to an end.
For the third year in a row, the city will reduce property tax assessments as much as 15 percent in eight of Detroit’s 10 tax districts, affecting 95 percent of the city’s residential properties. Downtown and Midtown, the beneficiaries of billions in private-sector investment and surging real estate demand, will see assessments raised 5 percent this year because values are rising.
“If you’re thinking about buying a house, this is the year to do it because it’s very unlikely we’ll do this again next year,” Duggan said Monday, referring to the lowered assessments. “More people are staying in their homes, more people are avoiding foreclosure, more people are paying their taxes.”
This is good news, unambiguously good news. Coupled with rising selling prices, the reduced assessments are the makings of a virtuous circle that could appeal to economic self-interest of would-be buyers, should make mortgages easier to attain and would challenge the narrative of a city in continual decline.
The reassessments, the first of their kind in more than 50 years, represent an official reckoning with market reality that Duggan’s predecessors avoided because the truth was too grim — and financially apocalyptic — to contemplate.
The two-year effort, led by Chief Assessor Gary Evanko, may not be hailed by each property owner. But it adds one more piece of needed credibility to a municipal turnaround shaped by Chapter 9, the Duggan administration’s leadership and its ability to execute a restructuring plan produced in bankruptcy court.
The lowered property valuations also are a critical precondition for achieving the single most important metric Duggan says should be used to judge his time in office — whether Detroit can reverse its population decline, turn more residents into regular taxpayers and bolster the city’s top line.
Rising property values coupled with more realistic (that is, reduced) tax assessments are one way to get there. A recent study by Dynamo Metrics concludes that property sale prices are rising in many parts of the city, a reversal from the downward trend following the global financial meltdown and national recession that hit Detroit especially hard.
The results are producing counterintuitive results. As the assessed value of Detroit’s residential real estate declines and sales prices rise, Duggan says the city is booking more revenue because more people are paying their taxes.
This is how a properly managed city is supposed to work. Two years ago, 67 percent of Detroit property owners paid their taxes. Last year, it was 72 percent. And this year, the city expects 78 percent to pay their real-estate taxes, explaining why property tax revenue is running about $10 million ahead of budget.
“It is now a more fair system,” says Charlie Beckham, the mayor’s group executive for neighborhoods. “People have more confidence in the system. And it’s working. Buy now. It’s not going to go down again — when assessments are down and property values are going up.”
Only Detroit’s most exclusive (and expensive) neighborhoods will see increases this year in assessed values, the city says. Boston Edison, Palmer Woods, Sherwood Forest and Indian Village, among others, will see 15 percent increases.
Can the momentum continue? Depends on a lot of factors, including the city’s ability to continue executing its turnaround; the pace of private reinvestment in not just downtown and Midtown, but the neighborhoods; a national economy neither the mayor nor the City Council can control; progress in addressing dilapidated public schools, a forceful counterpoint to Detroit’s narrative of progress.
The biggest municipal turnaround post-war history is a process, not a destination. For every step forward — and more realistically valued property is a big step forward — there remain significant challenges. They include more than 70,000 blighted structures, the sorry state of public education, too few jobs in the city and too many unqualified people for the vacancies that do exist, and too much violent crime.
Detroit’s critics, and they are legion in southeast Michigan, will extract the downside of the property reassessment. They’ll note the stubbornly high millage rates, which Duggan says will remain unchanged, and will challenge the notion that the city’s progress is sustainable.
Fine. The best response is results — and the third consecutive year of modest declines in property tax assessments is a result worth acknowledging in a city whose leaders spent years practicing a governing creed that ignored the basic laws of economics.
Not anymore, and that’s real progress.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.