Detroit homeowners urged to apply early for tax cut

Christine MacDonald
The Detroit News

Detroit officials are urging thousands of low-income homeowners with delinquent taxes to apply by March 21 for a new program that could wipe away most of their debt.

"Pay as You Stay" legislation that passed the Michigan House and Senate is awaiting Gov. Gretchen Whitmer's expected signature. Meanwhile, officials are moving quickly to promote the program in time for homeowners to avoid the annual tax foreclosure auction this fall. 

"This is a big task," said Detroit's Chief Financial Officer David Massaron said. "We know we have a ton of work to do."

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.

To qualify, homeowners first have to apply for the current year's Poverty Tax Exemption, also called the Homeowners Property Tax Assistance Program or HPTAP. That would either wipe away or discount their 2020 tax bill.

It would also qualify them for the Pay as You Stay program to erase much of their old debt.

To apply for the 2020 Poverty Tax Exemption, or HPTAP, read more here. Download the application here

About 3,200 who got the tax break in 2019 and are on payment plans for delinquent debt will already qualify for Pay as You Stay, according the the Wayne County Treasurer's office.

But there are an estimated 11,000 Detroit homeowners on payment plans so city and county officials are promising a marketing blitz with nonprofits to encourage more homeowners to apply.

Those whose incomes qualify would get interest and fees eliminated. And the remainder of their debt would be capped at 10% of their home's taxable value for the prior year. They would be enrolled in a new payment plan for the remainder of the debt, which would be administered by the Wayne County Treasurer. 

That March 21 deadline could be extended, officials said, but they urged residents to apply as soon as possible. 

The treasurer's office did not give a deadline to apply for the Pay As You Stay program. 

Owners generally have until summer before losing their homes to the fall tax foreclosure auction. Wayne County forecloses after taxes go unpaid for three years.

March 21 is the deadline that the Detroit Board of Review has set for granting its first round of tax exemptions. Once the board qualifies residents, the city will send those names to the treasurer's office, which will notify homeowners how to enroll with Pay as You Stay, officials said. 

Low-income Detroiters who qualify don't have to pay property taxes, but housing advocates have argued the yearly application process 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. 

Once Whitmer signs the legislation, it could take Carla King's debt from more than $6,000 to $540.

The 55-year-old west side homeowner is on disability and didn't realize her income qualified her not to pay taxes until earlier this year. King said she is grateful for a way to reduce her debt but doesn't understand why she didn't know about the tax break earlier. 

The threat of losing her home every year has been stressful, she said. 

"We need more people to know about this," King said. "All the people in the city (government) sit on this or only tell their people."

Other cities could opt into the program, but it's unclear if there are other municipalities that will offer it to their low-income owners in debt. 

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 Detroit 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. Mayor Mike Duggan has said the law doesn't allow the city to reimburse residents and the city can't afford it.