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18 Mar 2019

Christopher McLaughlin – Managing Director

As part of my trip to the States earlier this year, I went to Detroit with CIH to learn more about housing in the city. Detroit has one of America’s biggest housing crises since the Great Depression due to the scale of property tax foreclosures on homes. It has wiped out entire neighbourhoods inhabited in the main by poor and working class people and has been described as the ‘Hurricane Katrina without water’.

As many as one-in-four Detroit properties were foreclosed on for non-payment of property taxes (think Council Tax) between 2011 and 2015 which has created huge issues in neighbourhoods where empty properties attract vandalism, crime and are often burned down or stripped of all valuable materials. It leaves those surrounding them living in no-go areas where the value of their own property is adversely affected. Those that can leave abandoning the neighbourhoods to dereliction and creating a problem for the city’s authorities.

June 7th sees the latest deadline for property owners to pay their outstanding taxes or sign up for a payment plan. Typically to reach this stage, taxes have been left unpaid for over three years, but research often shows that some people far from not being able to pay the taxes, have simply missed payments, got confused with the process and have fallen into arrears – and many don’t know they are in arrears only finding out when it’s too late. There are currently 25,000 properties facing foreclosure in Wayne County alone, 17,000 of which are occupied – leaving thousands at risk of losing their homes. Tens of thousands of properties in Detroit fall foul each year, and as many as 25% of those are renters who are at the hands of landlords who haven’t stumped-up.

It’s a spiralling chaos of toxicity. So what can be done?

As a starting point, there was an introduction in 2015 of laws that reduced interest and penalties on delinquent taxes. Further, some homeowners – who owed back taxes worth more than their property’s value – also saw their taxes reduced. But essentially, like most things, it comes down to prevention, not cure. For those who are occupying properties, the need is immediate – its necessary that some sort of moratorium is brought about to stop the foreclosures whilst the issue is worked through.

From a simplistic point of view, and looking at it through the eyes of a housing management software provider, arrears management is surely the place to begin. There has been in the past a kneejerk reaction to eviction, rather than to helping people work through their arrears and remain in their properties – as I previously said, some people weren’t even aware they were in arrears, and so some ‘flagging’ of the issue before it became a problem may alleviate many problems almost overnight.

Strong housing management provides the data upon which to help residents. Having a system whereby those who are about to fall into arrears can be identified before doing so, as well as an ability to predict trends – seasonality can play a part it arrears – often Christmas is an expensive time, and means people are more likely to default. Data analytics deliver real-time prevention, flags up issues long before foreclosure is necessary and provides a way to plan how residents can get on top of their arrears and move from being in the red to being back in the black.

I’ve made it sound very simplistic and to some degree it is, but the cost of getting it wrong impacts on not only housing, but affects social factors including policing, displacement of neighbourhoods and people, education, health and a wealth of other factors – all of which cost money to the public purse.

If you’re interested to know more, have a look at the not-for-profit United Housing Coalition of Detroit.

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