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Detroit settles ACLU tax foreclosure lawsuit to keep impoverished residents in their homes

Wayne County

Detroit has settled a lawsuit filed by the ACLU, alleging the city made it too difficult for residents to learn about, and qualify for, a property tax exemption based on poverty.

Thousands of Detroiters in poverty paid property taxes they didn't owe because they didn't know they were exempt, and the city didn't tell them.  Many lost their homes at tax foreclosure auctions when they couldn't pay the taxes.

The lawsuit also alleged Detroit made it extremely difficult to prove eligibility.  Residents had to physically go to City Hall and ask for the application to be mailed to their homes and the documentation required to prove eligibility was complicated and burdensome.  

The settlement requires the city to notify owners of homes worth $95,000 or less about the poverty exemption in an annual mailing.  The application will be put online and it will be easier to prove eligibility.

For low-income residents whose homes are currently in tax foreclosure, they'll be able to keep their homes by paying $1,000, regardless of the amount of property taxes ostensibly due.  The payment can be spread over time.  But residents only have until July 13th to be approved, because the deadline to put homes into the annual county foreclosure auction is coming up soon.

Michael Steinberg with the ACLU says the settlement will likely prevent more than a thousand Detroiters from losing their homes in the foreclosure auction over the next three years.

"It's a life changing win for homeowners unfairly facing tax foreclosure," he says, "and it's a huge win for the city which will have fewer abandoned properties in its neighborhoods."

Under the terms of the settlement, Detroit will exercise its right of first refusal and buy the homes facing tax foreclosure now -- if owned by a low-income resident who applies in time -- for the amount of the taxes owed to the county, which is about 60%.  The city will forgo its own 40% of the taxes.

The United Community Housing Coalition will buy the homes from the city for the amount of the county taxes, and then make them available to the former homeowner for $1,000.  Philanthropic groups are providing the bulk of the money used by UCHC for the program, along with $275,000 from the city.

Steinberg says there will be a major outreach effort by community groups to let homeowners know about the program, with people going door to door at homes slated for tax foreclosure and auction in September.

Tracy Samilton covers energy and transportation, including the auto industry and the business response to climate change for Michigan Public. She began her career at Michigan Public as an intern, where she was promptly “bitten by the radio bug,” and never recovered.
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