The lawsuit argues that those in Detroit and other Wayne County municipalities are being pushed out of their homes for property taxes that do not accurately reflect the fair market value of the homes.

The Michigan Court of Appeals heard arguments today in a lawsuit challenging Wayne County’s tax foreclosures as disproportionately affecting minorities in some of Detroit’s poorest neighborhoods, resulting in what some call “a government-created tax foreclosure crisis.” 

The lawsuit, filed on behalf of seven Detroit homeowners and a coalition of neighborhood associations in July 2016, argues that the Wayne County Tax Foreclosure process undermines the federal Fair Housing Act by disproportionately pushing people of color out of their homes. It was filed by the ACLU of Michigan, the NAACP Legal Defense and Education Fund and the law firm of Covington & Burling. 

“Wayne County and Detroit are creating a human catastrophe by tossing thousands of homeowners into the streets for inability to pay unlawfully assessed taxes,” said Michael J. Steinberg, legal director of the ACLU Michigan. “This short-sighted practice not only violates federal law, it destabilizes families, destroys neighborhoods and undermines the economic recovery of the region.”

The ACLU contends the taxes are unlawfully assessed because the city never reassessed residential property following the Great Recession.

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The appeals court is hearing the case after a Wayne County circuit judge tossed it on a technicality, saying the court didn’t have the jurisdiction to rule on a Fair Housing Act case and that it should have been filed with the Michigan Tax Tribunal, which looks at property assessments. 

The organizations behind the suit disagree, arguing that the Fair Housing Act specifically says plaintiffs should have the opportunity to make their case in a state court. The Michigan Tax Tribunal is an administrative office, not a court, they contend.

The appeals court is being asked to send the case back to the county for trial. 

“It’s critical to go forward now because thousands of homeowners at risk of losing homes in this year’s tax auction for taxes should never have had to pay in first place,” said Steinberg.

On a technical level, the lawsuit argues that those in Detroit and other Wayne County municipalities are being pushed out of their homes for property taxes that do not accurately reflect the fair-market value of the homes.

In Michigan, homeowners are expected to pay property taxes based on the fair-market value of a home. The organizations behind this case, however, are arguing that many properties in Wayne County were never properly reassessed.

Specifically, they note that the City of Detroit did not reduce property assessments following the Great Recession. While the mortgage meltdown hit many Michigan cities — in 2007, 100,000 properties were foreclosed across the state, an 85% increase from 2005 — Detroit, with its sprawl and high levels of job loss was particularly hurt. That year, 5% of the city’s homes were repossessed by lenders. It had the highest rate of foreclosures in the nation. 

Wayne County Corporation Counsel, representing the county treasury, argued today that the county is not responsible for property assessments and therefore can’t tell if a property is over-assessed before foreclosure.

If plaintiffs wanted to change their assessment, they could make individual appeals to the Tax Board of Review, Davidde Stella of Wayne County Corporation Counsel explained. 

While ACLU of Michigan and the NAACP Legal Defense Fund disagree that the treasury was unaware of over-assessments — pointing to a 2015 quote from now-Treasurer Eric Sabree, where he acknowledged bloated property values — they also say this focus on assessments obscures the bigger issue of foreclosures. 

“The assessment did not make people lose their homes. We’re contending Wayne County led people to lose their homes,” said Coty Montag, deputy director of litigation for the NAACP Legal Defense Fund. 

Montag noted that while the complaint alleges that Wayne County municipalities such as Detroit and Inkster “failed to conduct meaningful property assessments” as home prices fell in 2008, the ultimate issue, as it pertains to the Fair Housing Act, is not unjust assessments but rather Wayne County’s foreclosure process.

The complaint explicitly points to an assertion that the county treasury is enacting tax foreclosures despite knowledge of bloated property assessments and the fact that minorities are largely feeling the effects of this decision. 

According to the ACLU, owner-occupied homes in 100% African-American census blocks are more than 13 times more likely to be at risk of tax-foreclosure sale than houses on 100% non-African American census blocks. 

Under the Fair Housing Act, plaintiffs do not need to show intentional discrimination, but rather a neutral practice that has a negative impact on people of color. 

“We’re not alleging intentional discrimination, but there is no question this policy of neglect to reassess property values has had a disparate impact on people of color,” said Steinberg of the ACLU. “People who stuck it out in Detroit after the rebellion 50 years ago and remained loyal to the city are losing homes due to a government-created tax foreclosure crisis.” 

Over the last three years, nearly 80,000 parcels were auctioned at Wayne County’s tax foreclosure auction. In 2015 and 2016, 46,000 properties were put up for auction because of inability to pay taxes. 

Currently, 9,894 Wayne County properties are set to be sold in the September 2017 tax foreclosure auction; 8,313 of those are in Detroit.

According to Loveland Detroit, a property mapping company, 4,847 of the properties prepped for auction were surveyed as occupied. 

Take the U.S. Census estimate of 2.6 people per household, and nearly 13,000 Detroiters face displacement and uncertainty as their houses hit the auction block.

“Wayne County’s tax foreclosures have the most severe impact on the county’s African-American community,” said Montag. “Regrettably, this is the latest in a series of discriminatory housing practices in southeast Michigan, from racially restrictive covenants and redlining through the more recent water shutoff crisis and reverse-redlining that targeted African Americans for predatory mortgages. 

“The tax foreclosure crisis echoes the pattern of governmental housing discrimination against African Americans in the city dating back at least a century.”

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