At first glance, the Pay as You Stay program — which would dramatically cut down on back taxes for low-income homeowners in Detroit and attempt to stave off tax foreclosure — seems like a great idea. 

The initiative was announced by Mayor Mike Duggan, Wayne County Executive Warren Evans and County Treasurer Eric Sabree last week. It will need state legislature approval to go into effect, but if passed, Pay as You Stay would allow qualifying Detroit residents (making $19,303 or less for one person, or $28,671 or less for a family of four) to not pay penalties or interest on property taxes for previous years. Homeowners would have three years to pay back taxes. 

Some housing advocates characterized the plan as an improvement over the current system that could make a significant difference for low-income Detroiters struggling to pay their bills and at risk of losing their homes.

To show how the program would work, the city used the example of a person making $814 per month, with $11,700 in back tax debt for a home with $10,400 in taxable value. Under the proposed program, their payment plan of $192 monthly over five years would be cut to $29 monthly over three years. 

The program attempts to tackle the epidemic of tax foreclosure, which has fueled blight and neighborhood instability while playing a huge role in turning Detroit into a majority renter city over the last decade. Between 2010 and 2017, somewhere around 120,000 Detroiters lost their homes (rented or owned) to tax foreclosure. (In that period, 47,000 occupied homes were foreclosed in the city.)

There’s a lot of reasons why so many Detroiters faced foreclosure, but one is the city’s extremely high tax rate — and the fact that homes were illegally overassessed for years, resulting in tax bills that didn’t match what homes were worth.

The number of tax foreclosures has declined, with less than 800 occupied homes entering the auction in 2018. Still, 30,000 people were on payment plans for back taxes as of last year — so still at risk of foreclosure — and the Pay as You Stay program could help lower that number further. 

But there’s a few major, if less obvious, problems with this plan. First off: officials’ pitch that it would help up to 31,000 Detroiters might be wildly overestimated.

To be part of the Pay as You Say program, you first have to enroll in the Poverty Tax Exemption (PTE) program, which is mandated by state law but designed and funded by the city. It cuts property taxes in half or eliminates them altogether for qualified applicants each year. A majority of Detroit homeowners who owe back taxes are likely eligible for the exemption, according to a Quicken Community Loans Fund survey. Between 2012 and 2016, more than a quarter of Detroiters were eligible for PTE — but only 12 percent of eligible residents actually received aid.

So why haven’t more Detroiters received the aid that they, by law, should have?

Researchers at the University of Michigan studying the poverty tax exemption found that Detroit’s program was beset with problems — including that lots of eligible people didn’t know about it at all. Those that did hear about it often reported trouble getting an application, receiving materials too late to apply, difficulty navigating the extensive requirements (which have included tons of documentation and multiple in-person visits), or never hearing back from the city after submitting an application. 

One woman told researchers she gave up on getting the tax exemption after several failed attempts, saying, “It’s like they make it difficult for you on purpose.”

The PTE program has been made more accessible in recent years following a lawsuit, but Alexa Eisenberg, U of M School of Public Health doctoral candidate and lead author of the study, estimated that just 1 in 5 eligible Detroiters now successfully enroll. The Quicken survey estimates the number is even lower.  

Eisenberg said those stats suggest that in practice, Pay as You Stay would also only work for a small group of people. 

“If you have to jump through a fiery hoop to get this payment plan…. The majority of people will continue to suffer, continue to lose their houses and they’ll disappear,” she told Detour. 

The number of PTEs has gone up from about 3,800 in 2014 to an anticipated 6,000 or more this year, according to a city spokesman. Officials plan to announce this week that they’re conducting another citywide mailing to potential PTE applicants as part of their goal to expand outreach.

Eisenberg raised another issue with the Pay as You Stay proposal: she said it effectively “kills” the fix people close to the problem think would actually make a difference. Housing advocates have been pushing for a retroactive poverty exemption program that wipes eligible residents’ back taxes altogether, as well as eliminating the rule that requires residents to apply annually. By comparison, Pay as You Stay has a far more limited impact. 

In contrast to how local officials talked about tax foreclosure in the early 2010s — as a problem that was largely homeowners’ fault for not paying, and a fact of life they had no ability to change — there have been large strides and multiple reforms on the city and state level that seek to make a real difference for poor Detroiters struggling to stay in their homes. But overall, it’s too little, too slowly, argued Eisenberg. 

The “incremental policies” are “almost more destructive in a way… we’re really just delaying the [foreclosure] process. We’re diffusing it across many years,” while still losing low-income homeowners without putting real tools in place to protect them, she said.