Research

The project: Each year, non-payment of property taxes causes thousands of Detroit residents to lose their homes to tax foreclosure. Detroit’s exceptionally high tax rate disproportionately burdens low-income residents, threatening their ability to maintain homeownership and attain long-term financial stability. Michigan law requires local governing bodies to make a Poverty Tax Exemption (PTE) available for homeowners in poverty who own and occupy their property. By reducing or eliminating property taxes for low-income homeowners, this policy works to alleviate poverty by decreasing household tax burden and preventing the devastating financial consequences of property tax foreclosure.

While approximately 12,000 Detroit homeowners living in poverty qualify for the PTE, the policy remains underutilized by residents in need. In partnership with the United Community Housing Coalition (UCHC), the Healthy Environments Partnership (HEP) and researchers at the University of Michigan School of Public Health, this project evaluated the effectiveness of the policy and studied potential factors that may hinder or facilitate its access. Findings can inform best practices across local governing bodies to strengthen this policy’s ability to alleviate poverty in Detroit and statewide.

The process: Researchers interviewed 105 Detroit homeowners who sought walk-in counseling assistance with the United Community Housing Coalition Tax Foreclosure Prevention Project in 2017. The majority of participants in the study owned their homes outright (91%), while 5% had land contracts. About 64% of the households were unemployed. 

Results: The study found many homeowners who were eligible for the HPTAP in prior years did not apply for the exemption because they did not know it existed or that they qualified. Some people now face tax debt and foreclosure for back taxes they could have been exempt from paying. 

Even if homeowners were aware of the Poverty Tax Exemption, they still faced considerable barriers at each stage of the application process that prevented them from receiving the exemption. Challenges stemmed from the application’s complex documentation requirements and procedural demands, and were often compounded by the multiple social, economic, and/or physical vulnerabilities faced by applicants. 

The study made recommendations for next steps to increase awareness of the Poverty Tax Exemption, make it easier for homeowners to access and complete the PTE application process, hold the city accountable for notifying residents of the status of their PTE application, and alleviate the financial burden of back taxes. 

More information: Preventing owner-occupied property tax foreclosures in Detroit: Improving access to the Poverty Tax Exemption

Roshanak Mehdipanah, U-M School of Public Health
Alexa Eisenberg, U-M School of Public Health
Ted Phillips, United Community Housing Coalition
Michele Oberholtzer, United Community Housing Coalition