By Patrick Cooney, Amanda Nothaft
Research brief for the working paper “The Eviction Machine: Neighborhood Instability and Blight in Detroit’s Neighborhoods” by Joshua Akers and Eric Seymour
From 2005 to 2015, 120,000 residential properties in Detroit—nearly half of all residential properties in the city—experienced mortgage or tax foreclosure. A substantial number of these properties were sold to speculative investors who purchased properties in bulk, either through mortgage or tax foreclosure markets, while tens of thousands of tax foreclosed homes went unsold.
This brief summarizes “The Eviction Machine: Neighborhood Instability and Blight in Detroit’s Neighborhoods,” by Joshua Akers, of the University of Michigan-Dearborn, and Eric Seymour, of Rutgers University. Akers’ and Seymour’s working paper details the ways in which speculators or bulk buyers have operated in Detroit over the past decade and how the practices they employ generate housing and neighborhood instability.
Akers and Seymour find that thousands of properties purchased by bulk buyers out of foreclosure markets have been the site of multiple evictions, neglect, additional tax foreclosures, and eventual demolition at public cost.
Key findings include:
- 90% of all purchases from the Wayne County Tax Foreclosure Auction have been to investors and bulk buyers since the auction began in 2002.
- There is a subset of bulk buyers who use eviction as part of their business model, filing hundreds of evictions for the properties they own.
- Since 2014, it has cost an estimated $34 million in public funds to demolish blighted homes purchased by speculators out of the tax foreclosure auction.
This process of foreclosure, speculation, eviction, and eventual demolition exacerbated blight and instability in many of Detroit’s neighborhoods. However, it’s not inevitable. This brief concludes
with a number of interventions that can be taken by the City of Detroit, State of Michigan, Wayne County, and the courts that can limit foreclosures, speculation, and evictions, and improve housing stability and strengthen neighborhoods across Detroit
There are multiple points of intervention where we can collectively act to stop the eviction machine, by reducing the number of properties entering tax foreclosure, reforming the tax foreclosure auction, and mitigating the harmful impacts of speculative practices.
- Moratorium on the Wayne County Tax Foreclosure Auction: A central issue that Akers and Seymour highlight in their work is how the tax foreclosure auction serves to facilitate harmful property speculation in Detroit on a large scale. Because the auction continues to serve as the primary source of cheap property for speculators, Akers and Seymour call for a moratorium on the auction to allow for a comprehensive reassessment of policies and the creation of a “more systematic approach to property redemption and tax repayment.”
- Make the Poverty Tax Exemption (HPTAP) retroactive for multiple years: Because many Detroit households at risk of foreclosure have delinquent taxes going back several years—and because many have delinquent taxes for years they would have qualified for the HPTAP—another potential intervention is to make the HPTAP retroactive. As Akers and Seymour note, such an action would “compensate in-part for the barriers low-income homeowners faced in accessing the exemption in prior years” and would “dramatically reduce the number of owner-occupied homes entering foreclosure in Detroit.” While stopping short of a retroactive PTE, the new Pay as You Stay program, backed by Detroit Mayor Mike Duggan and Wayne County Treasurer Eric Sabree, is an effort to help reduce the burden of back property taxes for low-income Detroiters. The program requires approval from the Michigan Legislature.
- Continue and expand targeted enforcement of bulk owners and contract sellers: While the Detroit Land Bank uses the city’s nuisance abatement program to repossess vacant homes owned by absentee landlords, Akers and Seymour recommend a more targeted approach focused on those owners the data shows are tied to an outsized number of evictions and demolitions
- Enforcement and adjudication of the City of Detroit’s rental ordinance: Akers and Seymour note that while the City of Detroit has increased efforts to enforce the city’s rental ordinance, the vast majority of landlords have failed to register their properties or pass inspection. Concurrently, the 36th District Court does not always recognize tenants’ rights under the ordinance to withhold rent if properties are in disrepair. The authors note that if the court required compliance with the ordinance in order for landlords to bring landlord-tenant disputes before the court, it could help to both push landlords to become compliant and reduce evictions.
- Adjudicate land installment contracts as forfeiture rather than landlord-tenant cases: Land contracts are often structured so that they revert to rental agreements after a single missed payment, leading to eviction. Akers and Seymour note that under a land contract, the buyer is generally granted more rights, such as a longer “redemption window” in which to make payments. The authors write that if the 36th District Court refused to recognize these contracts as landlord-tenant disputes and forced the seller to pursue the case as a contract forfeiture, it would both reduce evictions and make predatory land contracts less desirable to sellers.
- Provide counsel to low-income tenants facing eviction: Fewer than 5% of tenants facing eviction in Detroit have legal representation, compared to 83% of landlords. More than half
of tenants in eviction cases do not show up for court. When tenants had legal representation, two-thirds of these cases were resolved with an agreement between the landlord and
tenant. When tenants do not have legal representation, three-quarters of cases are likely to end in “disruptive displacement” from the home. The estimated cost of a publicly-funded legal counsel program in Detroit is between $3.5 million and $4 million annually, including both legal representation and support services.