Dan and Jennifer Gilbert's $15 million contribution toward erasing unpaid property tax debt for some of Detroit's poorest residents is a key first step in helping the city's neighborhoods.
The pledge is part of a commitment of $500 million over 10 years that aims to go beyond small fixes and put a strategy into place to reverse years of declining property values and structural, systemic issues and dire poverty.
Community development leaders and other experts said that will require more than dollars and cents, more than philanthropy and largesse, as structural, systemic changes are needed to address the root causes of economic and financial uncertainty that are constants in so many Detroiters' lives.
"Yes, immediate attention is needed, but also a long-term strategy for economic development, addressing poverty," said Lisa Williams, a pharmacist who is also director of the New Beginnings Community Development Corp. on Detroit's east side.
"Having a strategy in place gives hope as we work through some of the symptoms of the true problems. When you see only symptoms being treated or addressed, it leads one to believe there are not good plans to handle the deeper issues at hand."
Last week, the Gilberts announced the pledge aimed at improving life in Detroit's neighborhoods outside of downtown, where his Rocket Companies Inc. (NYSE: RKT) is headquartered and where he has spent billions investing in commercial real estate like historic office buildings and constructing new skyscrapers just now starting to come out of the ground, for which his companies received more than $600 million in "transformational brownfield" incentives.
Of the pledge, $350 million is coming from the Gilbert Family Foundation, a nonprofit, and the remaining $150 million is coming from the Rocket Community Fund LLC.
On Thursday, Gilbert, whose fortune is north of $45 billion, said he knew that a more precise than scattershot approach was needed, and that the $15 million is a small fraction of what's coming and required.
"One of the things we learned early on in charitable giving is that you can't put Kool-Aid in the ocean and expect it to change color," Gilbert said Thursday. "In other words, if you spread yourself too thin among too many things, you're not going to have any impact on anything."
In addition to property tax debt payments, other efforts that could be targeted with the $500 million include digital equity, home repairs, employment, housing, public life and other areas. The philanthropic strategy is geared at creating economic stability by "breaking down generational barriers and jump-starting opportunities for economic stability and wealth creation," the Gilbert Family Foundation and Rocket Community Fund said.
The $15 million will create the Detroit Tax Relief Program, administered by the Detroit-based nonprofit Wayne Metro Community Action Agency.
Once the agency determines that an applicant is eligible for the city's Homeowners Property Tax Assistance Program, which grants full or partial property tax exemptions based on household income, and enrolling in Wayne County's Pay as You Stay, or PAYS, program, which reduces back taxes owed by those in the HPTAP, the Detroit Tax Relief Fund pays the remaining balance.
For example, for a family of four to receive a full property tax exemption through HPTAP, they could earn no more than $27,248. For a 50 percent exemption, the household income limit is $29,868 and for a 25 percent exemption it's $32,488.
Wayne County Treasurer Eric Sabree said there were 3,001 owner-occupied residential properties in Detroit facing property tax foreclosure as of March 23 with a redemption amount of $14.42 million.
The donation is a first step in a long, grueling race.
As Gilbert has described his recovery from a May 2019 stroke, it's a marathon, not a sprint.
Ditto the effort to improve Detroit's neighborhoods.
"The big theme here is that we are not stopping the clock on property taxes," said Jeff Horner, senior lecturer in the Wayne State Urban Planning and Studies Department. "They are going to continue to run."
Community leaders and others argued that the contributions should be a stepping stone toward more structural reforms.
Anika Goss, CEO of Detroit Future City, also said the funding should serve as a springboard toward a broader examination of "the systemic issues and change the policies that are contributing to tax foreclosure."
"This includes considering hardship policies, instituting stopgaps that avoid over-assessment, and ensuring that valuations are equitable and based on current and reasonable information," Goss said. "These efforts are essential in avoiding another 20,000 houses being in the same predicament a year from now once this first deployment of funds is gone."
Donna Givens Davidson, president and CEO of the Eastside Community Network, also wants the effort to go beyond philanthropy into public policy, where Gilbert's team has advocated for changes in things like auto insurance as well as new tax incentives for large-scale developments (which his company received).
"What I hope is that they will work with CDCs (community development corporations) like mine to figure out what are the priorities that residents have identified, in addition to the taxes," Givens Davidson said. "Work with us on policy fixes that will take this beyond philanthropy, which is always wonderful, to policy, which is more sustainable over time."
Crain's reported in January that the city's assessed property values grew by 8 percent last year, a slowdown from 2019's 20 percent increase. Detroit's residential properties' values grew by a total of $400 million when assessed for 2019 rates, $775 million for 2020 rates and $368 million for this year. Thus, this year's growth is lower than in 2019 and 2020.
The average residential property value in Detroit, including vacant properties, is $14,000. The city's housing stock still suffers from blight and disinvestment due to a range of issues from systemic racism and foreclosure to population exodus. The city's total value plummeted amid the 2008 national foreclosure crisis from $8.8 billion in assessed value that year to $2.8 billion in 2017.
In addition, Seattle-based online housing marketplace Zillow Group Inc. found in a recent study that Black homeowners in metro Detroit face the greatest disparity in the nation when comparing the value of their homes versus other homeowners in the region. Metro Detroit is among the most disparate in its home value gap for Hispanic homeowners, as well.
The gap between the region's average home values and Black-owned home values is nearly triple the national rate and more than double the national rate for the Hispanic community, according to data from the Seattle-based online real estate company.
Zillow found that the average Black home value is $106,413, compared with $195,270 across the entire multiple-listing service area, which includes Wayne, Oakland, Macomb, Washtenaw, Livingston and St. Clair counties, a 45.5 percent difference. The majority of the region's Black population lives in Detroit.
In January 2020, The Detroit News reported that city residents had been overtaxed by $600 million between 2010 and 2016. There were about 63,000 homeowners delinquent on their property taxes during that time and "more than 90 percent were overtaxed — by an average of at least $3,700," the newspaper reported.
Erasing that back-due debt is a step toward stabilizing neighborhoods.
It will put those families in a better financial position, in addition to increase surrounding property values and stave off the blight sure to come had those properties been emptied and faced the shark-invested waters of the Wayne County tax-foreclosure auction.
Williams, the New Beginnings director, said studies have shown that delinquent taxes on one property can have an impact on surrounding property values. Removing the delinquency removes the blight threat, as well.
"Blight can be associated with these properties depending on the severity of the delinquency — also suggesting a bigger issue," Williams said. "Being able to recover, if you will, those homes removes immediate blight and improves property values overall."
And George Preston, president of the Mohican Regent Homeowners Association, called the property tax initiative an "asset."
"Naturally it's going to enhance the community because (the residents) are still going to be there and, as long as they are there maintaining those properties, that's going to have a positive influence on the properties around," he said.
Givens Davidson, the head of the Eastside Community Network, praised the donation, as well.
"Anything to stop the bleeding is necessary because we have been bleeding in the neighborhoods so long," she said. "The number of properties that have been taken is ridiculous. I think it's great. I don't say this often, but I do want to commend Rock Financial (a precursor to Rocket) in taking a strong position in favor of neighborhoods. It's a preventable crisis."
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