The 2022 Tax Foreclosure Auction in Detroit
Detroit’s Tally in the Tax Foreclosure Auction
At “only” 3,218 Detroit properties tax foreclosed, per data published on August 7th on the Wayne County Treasurer’s auction website, the 2022 tax foreclosure auction is a far cry from the gargantuan tax auctions of the 2010s.
Between 2012 - 2015, for instance, 86,800 Detroit properties were tax foreclosed for non-payment of property taxes — an average of 21,700 per year. 25% of all property in the city was tax foreclosed in just four years.
The declining significance and scale of the auction is absolutely welcome. Further, as I wrote earlier this week in Outlier Media, there has been enormous progress eliminating not only Detroit homeowner tax foreclosures but homeowners’ underlying property tax delinquency. You can’t be tax foreclosed if you don’t owe property tax debt. Wonderful to see.
Still, the 3,218 Detroit properties tax foreclosed this year represent about 1% of all privately owned property in Detroit. You can learn a lot from what’s in the auction. Here are those 3,218 properties1 broken down by type of property, with the aid of both assessment data and US Postal Service vacancy data from Regrid:
Occupied Homes in the 2022 Tax Foreclosure Auction
When I look at auction data, I really only care about one thing: Occupied homes that have been tax foreclosed.
For homeowners, tax foreclosure is simply the end of your homeownership. In the best case, a homeowner may wind up a renter in their own home. Worst case, they are evicted by a new owner.
For renters, tax foreclosure is often a shock. It’s not your responsibility to pay the property taxes — it’s your landlord’s. But it’s long been a practice for many landlords in Detroit to buy homes in the tax auction, collect rent while not paying taxes themselves (nor for maintenance or home repairs) and then let the home, and tenant, lapse back into another tax foreclosure auction a few years down the line. This is known as “milking” a property.
Here’s how the occupied tax foreclosed homes in 2022 stack up to prior years:
While homeowner tax foreclosures have remained fairly low (certainly with some assistance from the modified homeowner moratorium still active in 2022 due to the pandemic) there’s a noticeable jump in renter occupied homes in the tax foreclosure auction this year vs. 2018 and 2019.
It’s possible that a new, momentary, form of “milking” could have something to do with that increase.
COVID Emergency Rental Assistance & Tax Foreclosure:
The COVID Emergency Rental Assistance program (CERA) helped tens of thousands of people across Michigan remain in their homes during the pandemic and pay rent when they couldn’t afford to do so themselves.
There are cases I’ve found in Detroit, though, where that money may have gone to landlords who kept the money, didn’t pay off delinquent property taxes, and let their tenants fall into the 2022 tax foreclosure auction.
Using data from the Detroit Free Press obtained via FOIA request, I was able to evaluate a small sample of about 11,000 Detroit rental properties where CERA funds were distributed. I used it to look for properties that received CERA funds and are also in this year’s tax auction. I found 36 rental properties that are in the 2022 tax foreclosure auction where CERA funds were also distributed. In total, $471,000 was distributed from CERA across those 36 properties — about $13,000 per property.
The 11,000 records in my analysis represent a fraction of the total number of Detroit properties that received CERA funding — a Michigan State Housing & Development Authority (MSHDA) dashboard shows 40,000 properties in Wayne County received CERA funds, with another 27,000 applications still under review.
I imagine the bulk of those properties are in Detroit, meaning there are probably many more amongst those 1,025 renter occupied homes where CERA funds were distributed, delinquent taxes were not paid, and a tenant — having avoided eviction once — now faces the uncertainty and instability of the auction. On the other side they may well face eviction again, now without the lifeline of CERA which stopped taking applications in June.
As far as I know, there is nothing in the CERA program that required delinquent taxes to be paid or a delinquent tax payment plan to be enrolled in by a landlord as a condition of the program. So I’m not sure if any program guidelines are even being violated in these cases.
Revisiting the 2017 Tax Foreclosure Auction
Just before the 2017 tax foreclosure auction I went door-knocking in Detroit’s Fitzgerald neighborhood. There were a handful of occupied homes facing the auction in the area that year and I wanted to warn their residents. The City of Detroit had announced the Fitzgerald Revitalization Project earlier in 2017, and I figured there might be competitive bidding for homes in Fitzgerald since auction buyers knew investment was headed to the area.
I spoke to three residents. Two of them said they planned on bidding in the auction to buy back their now-foreclosed homes. I told them it wouldn’t work, that they would likely be outbid,2 and I encouraged them to call a local housing counseling nonprofit for help. I wasn’t sure I convinced them.
As I drove around the neighborhood I noticed a large, black, Infiniti SUV in my rear view mirror that seemed to be doing the same thing as me: driving slowly from auction home to auction home. Except the driver of the SUV didn’t get out to knock on doors, and instead idled in front of each home for a bit.
I swung around and pulled up alongside the car. Two women from the suburbs were in the Infiniti. I introduced myself and said I noticed they’d been stopping at the same houses as me and asked what they were up to. They told me they were surveying properties for a suburban Detroit real estate investor who planned on bidding on homes in the Fitzgerald area in the upcoming tax foreclosure auction. They asked if I had any tips on homes worth buying.
The real estate landscape of Detroit is much different in 2022 than it was during the 2017 auction. Back then, buying homes in Fitzgerald just because city government said it was investing there was still a pretty speculative bet, and it was reflected in home prices in Fitzgerald at time:
In the first half of 2017, there were only seven MLS-recorded home sales in the Fitzgerald neighborhood. The average sale price was just $11,000. In the September 2017 tax auction, properties in Fitzgerald sold for $5,800 on average. Occupied tax foreclosed homes fetched the highest premiums — between $12,000 - $15,000 — likely too much money for the people in those homes to have competed with out-of-town speculators.
The much-heralded Fitzgerald investment plan did not pan out. But, looking at the real estate market in Fitzgerald today you might never know: In the first half of 2022 there were 19 MLS-recorded home sales in Fitzgerald. The average sale price for those homes was $85,000 — a 672% increase over the prices from the first half of 2017.
Nothing about those figures is unique to Fitzgerald — the story is the same across the rest of Detroit. The rock bottom tax auction prices of the 2010s have been nearly erased from memory by a voracious housing market during the pandemic. Since 2019, the average sale price of a single family home in Detroit has nearly doubled:
2022 will be the closest thing to a “normal” tax foreclosure auction in the pandemic-era. Only owner occupied homes with property tax debt from 2017 - 2019 still have the benefit of a pandemic-related moratorium on tax foreclosure. All other property types have been cleared for tax foreclosure this year.
But I don’t think this year’s tax foreclosure auction will look like those of year’s past. We’ve never seen a tax auction in a Detroit real estate market as frenetic and high-priced as this one. Homes that no one would have touched just a few years ago are being rehabbed and rented out by the thousands across the city. There may be a lot more large SUVs prowling Detroit neighborhoods ahead of the auction this year.
If you add up the figures in the chart you may notice it adds up to 3,037, not 3,218. This is due to a unit vs. situs address discrepancy. There may be multiple units foreclosed at a single address, but I’m using assessment data at the situs address level to evaluate what properties have been tax foreclosed so it’s counted as a single foreclosure.
This was the first year of the Make it Home program which gives tax foreclosed tenants the ability to buy their home before auction. At the time it was just a small pilot program with 80 homes in it. Make it Home wouldn’t scale up to 500 homes removed from the auction until 2018.