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Detroit property values climb 8%, marking fourth straight year of growth

Christine Ferretti
The Detroit News

Detroit — Residential property values climbed 8% last year, marking the fourth straight year of property value growth in Detroit, officials said Thursday.

Mayor Mike Duggan said 189 out of 194 neighborhoods saw values rise. The majority — or 111 neighborhoods — saw a 5% to 10% boost. Another 53 neighborhoods saw values go up by 10% to 15%; seven others had values go up by more than 15%. There were 18 neighborhoods that had increases of less than 5%.

"It isn't they went up in downtown and Midtown and went down everyplace else," Duggan said during a news conference while referencing a color-coded city map. "This is what a healthy, growing city should look like. It should show property values going up from one end of the city to the other."

Detroit Mayor Mike Duggan addresses the media.

Existing homeowners' tax bills won't jump significantly because state law caps yearly increases at the 2% rate of inflation, no matter the growth in assessed value. But those buying homes could pay more because the cap is lifted when a property is sold. 

Duggan and City Assessor Alvin Horhn noted the city's process for setting values has improved dramatically since the state assumed oversight of the department in 2014 after years of mismanagement and inflated tax bills. A citywide reappraisal to correct the tax rolls took multiple years and cost more than $8 million, Horhn noted. 

Horhn said Thursday five neighborhoods saw values drop between 2.5% to 6.9%. Declines, he said, are predominantly in areas of the city that have experienced a high volume of demolition.

Sections of the city where property values declined were mainly in District 3, which covers northeast Detroit and parts of District 5 in the heart of Detroit. 

"When we remove a house off the roll, that's just land," he said. "So there will be a significant loss in value in that particular neighborhood in those conditions."

City of Detroit map of impact of proposed property assessments

To determine this year's assessment, the city evaluated two years of market sales. This year, that included 62,355 transfers of all types, including market sales, quitclaim deeds and land contracts, the city noted. 

Proposed assessments for 2021 will be mailed beginning Monday for about 400,000 residential, commercial and industrial properties. Residents will have an opportunity to appeal assessments. Residents can appeal through Feb. 22. 

Horhn noted the city had been experiencing decreases across the board in assessed values. When Duggan took office in 2014 he cut residential assessments by 20% and dropped them further in 2015.

"It has been a struggle to get the assessments right-sided," Horhn. 

Horhn said when Detroit was in bankruptcy in 2014, residential property values were in a tailspin and had lost an estimated $3 billion in value in the Great Recession.

"It's the fourth year when we've seen neighborhood after neighborhood increase in value," he said. "The recovery has expanded. It's grown stronger and every indication is we will see a fifth year of increased assessments across the city."

In 2019 assessments, the city’s class of residential properties gained about $400 million in value compared to the year before, the city noted Thursday. In the 2020 proposed assessments, the residential property class grew by over $775 million, bringing the city’s gain in residential value over those two years to more than $1 billion, a 39% increase in residential property value over two years. This year, residential values are projected to grow an additional $368 million.

“This strong property value growth provides greater stability not only in our neighborhoods but also for (the) city’s economy and revenues,” Acting Chief Financial Officer Jay Rising added in a statement. 

Foreclosure in Detroit has been an ongoing crisis. The city overtaxed homeowners by at least $600 million after it failed to accurately bring down property values in the years following the Great Recession, a January 2020 investigation by The Detroit News showed.

Detroit completed a state-ordered reappraisal of all residential property in 2017 to correct the problem but thousands of Detroiters faced foreclosure over back taxes.

Of the more than 63,000 Detroit homes with delinquent debt as of last fall, more than 90% were overtaxed, by an average of at least $3,700, between 2010 and 2016, according to calculations by The News. The debt owed on about 40,000 of those homes is less than the properties were overtaxed over those seven years, The News found. 

Detroit's City Council narrowly rejected a resolution last fall to give residents potentially overtaxed before 2014 priority in affordable housing, home-buying discounts and job opportunities. 

The plan — opposed by tax justice groups and some council members who argued it fell short of providing meaningful relief — sought to offset losses from 2010 to 2013.

The resolution included eight preference programs to be funded with a one-time $6 million appropriation of surplus dollars from the city's 2020 fiscal year budget.

Last week, U.S. Rep. Rashida Tlaib, D-Detroit, partnered with advocates to urge Gov. Gretchen Whitmer to investigate overassessments in Detroit.

Horhn on Thursday rejected ongoing arguments that properties are being improperly valued,including a University of Chicago study that estimated how many foreclosures were caused by the city's chronic over-valuation of properties.

He stressed there are nuances to determining the values. 

"We have reviewed every single sale in this city. Over 65,000 over a 24-month period," he said. "We look at every neighborhood, 194 residential neighborhoods in this city, we have a staff of appraisers who drive this city, we do aerial imagery...we look at everything we can possibly look at to come up with a value for this property.

"More than that, we have staff who live here, they understand what Detroit is," Horhn added. "They understand the differences in these neighborhoods."

Law professor Bernadette Atuahene, a member of the Coalition for Property Tax Justice, has argued the city was aiming to address tax issues between 2010 and 2013 to help Duggan, who took office in January 2014, "Avert political responsibility."

During last week's event with Tlaib she said she wanted Duggan to create a fund to compensate Detroiters who were overcharged and Wayne County to halt foreclosures until systemic property tax overassessments are fixed.

Atuahene said the 2018 University of Chicago conducted a "careful study" and Detroit is "Still denying the methodology." She contends there have been continued overassessments in the city.

"You can never come up with a solution to a problem you haven't acknowledged," she said. 

Duggan reiterated on Thursday that campaigned on the issue of overassessments. 

"A number of council members have been working on a plan that is a reasonable plan to give preference for folks who owned houses during that time and I'm hopeful council will come up with a good solution sometime soon and I'll be supportive of that," Duggan said. 

The city postponed this month's mailing of its 2021 property tax assessments amid an influx of applications for property tax assistance.

Officials said there was a 20% surge in applications for the city's Homeowners Property Tax Assistance Program. The city has been working to ensure each application is reviewed and that property tax exemptions are granted to eligible Detroit homeowners.

The notices going out are not tax bills. Tax bills will be mailed out at the end of June and in November, the city noted. 

Residents will have three weeks to appeal all assessments, an extension beyond the typical two-week timeframe. The Assessors Review appeal process will take place between Feb. 1-22 in Room 804 of the Coleman A. Young Municipal Center.

Last year, the assessor had more than 4,800 appeals and was able to settle about half of them, Horhn said. 

The March Board of Review is the second step in the review process.

Commercial, industrial or personal property owners can take appeals directly to the Michigan Tax Tribunal by May 31.

Anyone with questions or wishing to challenge their assessments can email the Assessor’s office at Assessorreview@Detroitmi.gov.