African Americans in Wayne County are suffering from a tax foreclosure crisis more severe than any this region has seen since the Great Depression. But unlike the Great Depression, thousands of homeowners today are at risk of losing their homes for taxes they never should have been required to pay in the first place.
Even though taxes in Michigan must be based on the true cash value of a home, the City of Detroit failed to reduce the tax assessments to match the plummeting values following the Great Recession. Also, although homeowners who meet the federal poverty guidelines are excused from paying property taxes, Detroit’s process for obtaining the poverty exemption is so convoluted that few people who qualify actually receive the benefit. These policies have a gross disparate impact on African American homeowners, who are ten times more likely to lose their homes than non-African Americans.
In 2016, the ACLU of Michigan, NAACP Legal Defense and Educational Fund (LDF), and Covington & Burling law firm filed a lawsuit against the City of Detroit and the Wayne County Treasurer, asserting violations of the Fair Housing Act and due process. The judge ruled that the homeowners properly stated a claim against both Detroit and the county treasurer, but nonetheless dismissed the case against the county treasurer on jurisdictional grounds. In July 2018 we reached a historic settlement agreement with Detroit that has the potential to save the homes of thousands of low-income residents.
Under the terms of the settlement, (1) those homeowners set to lose their homes to tax foreclosure in 2018, 2019 or 2020 who qualify for a poverty exemption can buy their homes back for $1000, to be paid, if necessary, in interest-free installments; (2) Detroit will create a streamlined, user-friendly poverty exemption application process; (3) Detroit will mail a notice to homeowners each year about the existence of the poverty exemption and other programs for low-income homeowners; (4) Detroit will contribute $275,000 to the United Community Housing Coalition fund to help low-income homeowners in tax foreclosure buy their homes back; and (5) Detroit will pay damages to the named plaintiffs.
(MorningSide Community Organization v. Sabree; attorneys include Michael J. Steinberg, Bonsitu Kitaba-Gaviglio, Dan Korobkin, Mark Fancher, and Brooke Tucker of the ACLU; Coty Montag and Ajmel Quereshi of LDF; and Shankar Duraiswamy, Amia Trigg, Donald Ridings, Wesley Wintermyer, Sarah Tremont, and Jason Grimes of Covington & Burling.)
Read our Fall 2018 Legal Docket.