Harvard student seeking help from Detroiters for research!

Hi everyone - I'm currently an urban design student at the Harvard University Graduate School of Design. I am part of a group of 13 students researching the city of Detroit, and I was wondering if any of you would be willing to help with one request: I am trying to make a point of how badly tax revenue is lost by foreclosed properties and vacant lots in comparison to occupied properties that continue to pay their taxes to the city. Would anyone be willing to share with me their electricity, water, sewage, trash, and real estate property tax bill with me as an example of comparing costs? This is for educational purposes only and is in no way a means to disclose private information. I am merely only interested in the costs relative to the value of the property, as a means to prove a very significant point. If you would be willing to help, I would greatly appreciate it. My email is ctang@gsd.harvard.edu. Thank you in advance!

Are you discriminating tax-foreclosures and mortgage foreclosures? It appeared to me after I saw the treasurer's thousands of listings of tax-foreclosed properties this year that I must be one of only a few people in Detroit that pays taxes.
You can make a point, certainly, that mortgage foreclosures are bad for a city, but just as bad is people not paying their property taxes - and that negative behavior is getting to be the norm here.

Caticang, welcome to the forum. I [[and others, probably) would be interested to learn more about your project. I actually live in Cambridge and am curious to hear about a Detroit oriented project going on. Are you by any chance working with Toni Griffin?

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Originally Posted by SWMAP

Are you discriminating tax-foreclosures and mortgage foreclosures? It appeared to me after I saw the treasurer's thousands of listings of tax-foreclosed properties this year that I must be one of only a few people in Detroit that pays taxes.
You can make a point, certainly, that mortgage foreclosures are bad for a city, but just as bad is people not paying their property taxes - and that negative behavior is getting to be the norm here.

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SWMAP - I should have been more specific. I'm particularly interested in tax foreclosures where property owners are not paying their real estate property taxes despite of the status of their mortgages. But, if you're paying your taxes, then that's great! Would it be too much to ask you for more information on how much you pay [[a range)? I just wanted to make a quantitative comparison of roughly how much money the city is currently losing from the lack of incoming revenue relative to property taxes. Hope you can help! Thank you!

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Originally Posted by cman710

Caticang, welcome to the forum. I [[and others, probably) would be interested to learn more about your project. I actually live in Cambridge and am curious to hear about a Detroit oriented project going on. Are you by any chance working with Toni Griffin?

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cman710 - Yes, I am working with Toni. I'm currently in her design studio and there are about 12 of us in her class. Each student is working on similar issues, but responding to them in different manners. In my case, for example, I'm more interested in the fiscal impact tax-foreclosures are having on incoming revenue, and how a change in how land is taxed could affect revenue for the better.

You can find an approximation of what you want from public sources.

Here in Michigan the formula for property taxes is half the value of the home, divided by 1000, times the current millage rate of the city and county.

Taxes = [[Property Value / 2)/1000 * millage rate

The millage rates for Detroit in 2009 including county taxes are 66 mills for a homesteaded property and 83 mills for a non-homestead property.

Michigan millage rates for 2009: http://www.michigan.gov/documents/ta...9_326007_7.pdf

A homestead property is one in which the owner lives there. Rental, business and second home properties are all non-homestead.

So pick a house at random off zillow.com, find it's listing price, divide that by 2000, multiply that by the correct millage rate and you'll have a close approximation of the property taxes a purchaser of that home would pay.

The tax law here in Michigan caps the amount taxes can go up to the rate of inflation. So the above formula is what a new purchaser would pay in taxes. Someone who has been in there home a long time will typically be paying less than this calculation. Also the taxes aren't based on the sale price of that home. They are based on the value the tax assessor places on the homes in the neighborhood. It is loosely tied to sale prices of similar homes in that neighborhood.

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Originally Posted by caticatang

cman710 - Yes, I am working with Toni. I'm currently in her design studio and there are about 12 of us in her class. Each student is working on similar issues, but responding to them in different manners. In my case, for example, I'm more interested in the fiscal impact tax-foreclosures are having on incoming revenue, and how a change in how land is taxed could affect revenue for the better.

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Thanks for the information. That is an interesting project. To the extent that your project produces a presentation or anything like that I would be allowed to see, let me know. I would love to see it.

caticatang,

Don't use ndavies suggestion of using Zillow. It's so inaccurate in Detroit. It's unable to pick up on the nuances of neighborhoods within the same zip code [[Brightmoor and Rosedale Park for instance) and skews towards the poorer neighborhoods which usually has more home sales [[and at lower sales prices) due to higher number of rental homes which are sold and bought more often than owner occupied homes.

ndavies does bring up some good points about needing to understand MI's residential property tax structure. In addition to his overview of how property taxes are calculated, be sure you understand how Headlee and Proposal A affect residential property taxes as well. In MI you can have one person who's owned their home for 30+ years [[pre Headlee/Prop A) paying a fraction of the taxes their neighbor who bought 6 years ago is paying, even despite the 30+ year homeowner having a higher assessed value.

You also need to be sure you understand NEZs - Neighborhood Enterprise Zones. There are two types in Detroit - Homestead and Non-Homestead. The Homestead NEZs are designed to level the tax situation outlined above for the newer homeowners. The non-homestead NEZs are designed for major rehabs of properties to cushion the jump in taxes the developer and/or future owners will face going from a building in poor condition to fully rehabbed.

I don't think either of these will disprove your hypothesis [[which I assume is showing how much more money the city could have if it put vacant properties into taxable use) but they may temper your models/projections. You'll also need to know this info if you want your project to be taken seriously by those who deal with these issues day in and day out in Detroit.

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Originally Posted by BVos

caticatang,

ndavies does bring up some good points about needing to understand MI's residential property tax structure. In addition to his overview of how property taxes are calculated, be sure you understand how Headlee and Proposal A affect residential property taxes as well. In MI you can have one person who's owned their home for 30+ years [[pre Headlee/Prop A) paying a fraction of the taxes their neighbor who bought 6 years ago is paying, even despite the 30+ year homeowner having a higher assessed value.

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I would not be concerned about effects of Proposition A. After the last several years of falling market values there should be few, if any, homeowners that are paying a fraction of their neighbor’s real estate taxes. Several years ago this may have been true, but it is no longer the case. By the way, Prop A was enacted in 1994, so the talk of someone being in their home for a longer period of time is not relevant.

To understand Proposition A go here:
http://www.educ.msu.edu/epfp/meet/01-26-04propa.htm

Prop A was designed to rein in the growth and cost of government and tie it [[more or less) to the rate of inflation. Thus, the taxable value of your home could not increase more than the rate of inflation or 5%, whichever was less. So, if home prices increased faster than the rate of inflation, then the taxable value of the home was capped for that year.

However, home values in the Detroit area never grew very much – our highest Case Shiller Index was December 2005 at 127.05. And Detroit’s index number has plunged to 66.02 as of January 2011. Coincidentally, our CS index is equal to our 1994 level – the same year that Proposition A took effect.

Since 2007 all taxing authorities should have been reducing assessed values in their communities. The best example I can give you is this report from Oakland County:
http://www.oakgov.com/exec/budget/assets/Session1_Heiber_Assessment_Projections.pdf

In 2010 taxable values went down 13.00% and for 2011 and 2012 taxable values are estimated to go down by 12.50% and 5.00%, respectively. See page 6 of 40.

As you can see, home values never grew very much and now taxable values are dropping sharply. Therefore, any savings from being “capped” have been wiped out. I see this in my own home. It is now taxed at the same value as it was in 1994 and I bought my home in 1989.

Besides that, any homeowner is free to protest the taxable value placed on their home. If they do their homework and find comparable homes with lower tax values, then they can appeal to their local assessor.

Best of luck with your project.

So the point of your study is to provide proof to public administrators that empty homes represent lost tax revenue money?

Perhaps the data will be used for cost-benefit analysis and proof that certain publicly funded/subsidized programs are worthwhile?
Don't forget that many homes here are selling for less than $50,000 and a $5,000 house is not unusual. A $5,000 home may be tax assessed for only $15,000 or so, thus affecting the maximum tax rate. The maximum tax rate formula was detailed in ndavies's 04/05/2011 comment. A low total per house revenue may make cost/benefit based solutions skew toward certain neighborhoods that are in the best shape and need the least support.

On the idea of lowering the tax rate to reduce cost of ownership and thus reducing tax foreclosures and thereby increasing overall revenue . . .
People who can not pay there home taxes have most likely lost their jobs, not simply neglected to pay taxes due to a reprioritization of stable income.
Because of the automatic nature of Michigan's tax system many will see/have seen their property tax bill stagnate or decrease due to the housing crisis. Yet persistent joblessness is still able to trigger inability to pay property taxes and mortgages even thought the total cost of ownership decreased.

Some advice if I may:
1. Contact a law student
2. ask them to access LexisNexis for you
3. do a public records search, real property
4. query a representative sample of homes, input the addresses
Lexis should give you the mortgage/purchase price, tax assesment value by year, and property tax bill by year
5. the data will allow you to research several properties over time, also the data is reportable whereas students and academics will likely give you a hard time about bias among people willing to submit to a volunteer survey and your means of forum selection because DetroitYes is not representative of Detroit whereas a 50 house sample of one [[or more) detroit zip codes is much more defensible

I hope this was helpful,
Good luck

Packman,

While Prop A may not have had an impact on all Detroit neighborhoods, it's had a big impact on more desirable neighborhoods like Rosedale Park, Indian Village, Palmer Woods, etc. and still does. The sudden burst of appreciation in the early to mid-2000s in these neighborhoods has still not leveled out for people who bought then compared to their neighbors who bought in the 70s and 80s. There's still a huge disparity between neighbors in these neighborhoods, even with the drastic decrease in assessed values of 2010-11.

Any proposal caticatang is going to do on this topic has got to include the Prop A/Headlee nexus and the ability of municipalities to grow their tax base when considering municipal finances. It's true these two aren't as applicable to the immediate future, but they will absolutely have an impact once the economy and property values start to grow again in the future. Ask any city manager or urban planner [[I'm an urban planner).