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Legislation that would significantly cut the tax debt of low-income Detroit homeowners cleared a state Senate committee on Wednesday. 

Detroit Mayor Mike Duggan said the proposal could help "tens of thousands" of owners facing tax foreclosure.  

Those who qualify for the program called "Pay as You Stay" would get interest and fees eliminated. And the remainder of their debt would be capped at 10 percent of their home's taxable value.

“Today, we reached a major milestone in our efforts to keep Detroiters in their homes with the passage of the Pay as You Stay legislation out of the Michigan Senate Finance Committee," Duggan said in a statement. "I would like to thank Chairman Jim Runestad and the bipartisan support of the committee members who have worked closely with on this bill for the last several weeks.

"I especially appreciate the efforts of Senator Stephanie Chang whose efforts were critical in today’s successful vote. As well as City Council members Janee Ayers, and Andre Spivey for their active support."

The committee voted 5-1 to move the bill to the full Senate, with state Sen. Kevin Daley, R-Lum, as the only no vote. The full Senate could vote next week. It previously passed the House in December, 106 to 1. 

Low-income Detroiters who qualify don't have to pay property taxes, but housing advocates have argued the yearly application process for the city's Poverty Tax Exemption is cumbersome and many don't realize it's available.

Currently, cities can't wipe away taxes retroactively even if a person can prove he or she would have qualified for the break in the past.

"Pay as You Stay" is designed as a temporary program to help wipe away back taxes for those residents who would have qualified. To participate, homeowners would have to qualify for the Poverty Tax Exemption. 

If enacted, the program would stop taking new applicants in July 2023. 

The proposal announced last fall is less than some advocates wanted: A retroactive exemption that would wipe away all debt for up to three years. 

To apply for the 2020 Poverty Tax Exemption, also called the Homeowners Property Tax Assistance Program, read more here. Download the application here

Many homeowners on payment plans are struggling with debt despite tax foreclosures going down dramatically in Detroit in recent years. Nearly one in four Detroit homeowners owes more in delinquent property taxes as of fall 2019 than they did three years prior, despite being a part of low-interest plans designed to help them get out of debt and avoid foreclosure, according to The News. 

The News' investigation also found that Detroit overtaxed homeowners by at least $600 million after it failed to accurately bring down property values in the years following the Great Recession. 

cmacdonald@detroitnews.com

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