Potential tax cut for low-income Detroiters passes Senate

Christine MacDonald
The Detroit News

Low-income Detroiters facing foreclosure are closer to getting significant relief from back property taxes. 

The Michigan Senate unanimously approved legislation Thursday pushed by Detroit Mayor Mike Duggan that would significantly cut their delinquent tax debt.

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% of their home's taxable value.

This house in northwest Detroit was in tax foreclosure in 2015. One in 10 Detroit tax foreclosures between 2011 and 2015 were caused by the city's admittedly inflated property assessments, a study by two Chicago professors has concluded.

“It will provide local leaders with the tools to help residents avoid foreclosure and break the cycle of poverty," Wayne County Executive Warren Evans said in a release. "I applaud the Legislature’s bipartisan effort to move this critical legislation forward. When signed into law, this reform will provide substantial relief to residents struggling to stay current with property tax payment plans and, ultimately, reduce foreclosures in Wayne County.” 

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 when individuals can prove they 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 Detroit 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

The legislation previously passed the House in December in a 106-1 vote. It must go back to the House again for what is expected to be final approval. Then it is expected to go to Democratic Gov. Gretchen Whitmer for her signature. Whitmer spokeswoman Tiffany Brown said Thursday the governor is "supportive."

The legislation was sponsored by Rep. Wendell Byrd, D-Detroit.

Duggan called it "a major step forward in helping Detroiters stay in their homes."

"We urge all those in need of financial help with back taxes to apply for the Homeowner’s Property Tax Assistance Program (HPTAP)," Duggan said in a release. "HPTAP is a requirement to be eligible for PAYS to reduce past payments and can also dramatically cut your tax bill going forward."

Many homeowners on payment plans are struggling with debt despite tax foreclosures declining 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.