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Plan would reduce property tax debts, could help thousands of Detroiters save homes

City of Detroit

Detroit and Wayne County officials say a new program could help keep thousands of the lowest-income homeowners in their homes and out of tax foreclosure.

The plan, called Pay As You Stay (PAYS), calls for cutting the amount of money people owe on delinquent property taxes. It would reduce the balance to only those back taxes, or 10% of a home’s taxable value—whichever is less.

Interest and fees would be waived. Homeowners would then have three years to pay off the arrearage at zero-percent interest.

Mayor Mike Duggan says around 30,000 Detroiters are chronically struggling to pay delinquent taxes, and face the prospect of possible foreclosure.

But Duggan says many struggle to pay not because of what they actually owe.

“It’s all of the penalties and fines and interest that piled up on top of it,” said Duggan, who estimates PAYS would reduce the burden on the average delinquent household by 60-80%. “So we’re saying if you fall in this income level and you will stick with this program, all of that will be waived.”

Only households that meet the criteria for a low-income property tax exemption would be eligible. In Detroit, that’s a little over $19,000 a year for an individual, and around $28,000 for a family of four. Detroit’s median household income is around $31,000 a year.

Around 24,000 Wayne County households are on payment plans for back taxes, the vast majority of them in Detroit. County Executive Warren Evans says the plan strikes the right balance.

“This program is a substantial step toward reducing foreclosures. It creates kind of a critical balance between tax collections and foreclosures,” Evans said.

Linda Smith, who heads the Detroit non-profit U-Snap-Bac, says she regularly sees clients who owe thousands in back taxes, including some who inherited the burden from prior owners. She says the program could be a godsend for them.

“We all know it’s very hard to pay your bills when you’re trying to play catch-up, especially when you’ve gotten behind,” Smith said.

But Smith and other advocates caution that it will take some time and work to get the program functioning and available to the people it’s intended to help.

First, it needs Lansing’s approval. State Rep. Wendell Byrd (D-Detroit) is sponsoring a bill that would get the program started. Although it would apply statewide, some officials worried out loud Wednesday that state legislators will shy away from the plan as too Detroit-specific.

Second, even if the program is approved, participants would need to apply for and be granted a property tax exemption (PTE) to be eligible. Although more Detroiters are getting the exemption now than in years’ past – when few knew it was available and many eligible people lost homes to tax foreclosure — it’s still far from the majority of homeowners who qualify.

Researchers say an estimated 35-40,000 Detroit households could qualify for the PTE. In 2018, 5722 received full exemptions; through Sept. 30 of this year, 4,829 received them. Detroit property owners face a December deadline for a final chance to qualify for the 2019 exemption.

Sarah Cwiek joined Michigan Public in October 2009. As our Detroit reporter, she is helping us expand our coverage of the economy, politics, and culture in and around the city of Detroit.
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