Detroit Is Now Helping Predatory Speculators Depopulate The City

Detroit has sadly become a symbol of a city that has collapsed due to white flight and the loss of good manufacturing jobs to sustain the tax base. But the mismanagement of that city has also been a large part of its collapse, even more so today. Property tax assessments have not been made in over 20 years, meaning that many homeowners having been paying far higher taxes than their property truly calls for. According to the director of a housing advocacy group, “You’re getting taxes assessed on a $30,000 or $40,000 property value for a house that probably couldn’t sell for more than $5,000”.

While mortgage foreclosures were a large factor in the wake of the financial crisis, currently the primary reason for evictions in Detroit is failure to pay property taxes. In Michigan, the state demands foreclosure on any property that has not paid tax in three years. Nearly 1 in 7 Detroit homeowners, around 100,000 people, faced tax foreclosure in 2015. Part of the problem is the enormous interest charges that the state mandates on late property taxes. The law requires on 18% fee for late taxes. This was changed to allow a retroactive interest rate of only 6% for the years 2010 through 2015 but it is scheduled to revert back to 18% this year unless retroactive rate is extended. Adding to the woes of those homeowners is the fact that they have been overpaying their taxes for decades because of the lack of any knew assessments.

Obviously, the reason for the foreclosures is to somehow collect taxes that the city badly needs, with the city estimating that auctions of foreclosed properties will bring $40 million this year. The people who are being disproportionately effected by these tax foreclosure are African Americans and other minorities. A study found that tax foreclosures on majority African-American Census blocks was 10 to 15 times higher than elsewhere.

It is also unclear whether the new owners of these properties are keeping up with the taxes after they purchase them. The untold story of Detroit today is that it is a hotbed of real estate investment with speculators and gentrifiers buying up these foreclosed properties. Speculators sometimes continue to avoid paying property taxes knowing they can pick the property up for far less than the taxes if it gets foreclosed again. The result is that housing stock that is currently occupied, primarily by minorities, is being foreclosed by the city and then sold to speculators who are leaving the property empty for the time being. As Joshua Akers, an economic geographer at the University of Michigan at Dearborn, describes it, “People think that these properties are abandoned, that people just left them behind…What has happened is the city has been willfully depopulated through a policy that prioritizes the interests of predatory speculators above the people who live in Detroit.” It’s hard to see how a policy like this can help the city come back to life.