The Michigan Supreme Court ruled this week that its 2020 decision — which held that former property owners were entitled to the profits of tax foreclosure sales — can apply retroactively.

That means the “windfall profits” generated by the foreclosing county treasurer would be returned to the previous landowners.

Since Detroit has a complicated history with homeownership, this ruling strikes at the heart of poverty and inequality in the city. Yet, it may not provide the intended restorative justice for Detroit residents. For example, landlords who bought a property through tax foreclosure but then lost it to the same process, could argue they are owed the windfall profits rather than the original owner. 

Alex Alsup, vice president of research and development for Regrid — a property data and location intelligence company — Detroit Free Press and BridgeDetroit reporter Nushrat Rahman, and United Community Housing Coalition Director Ted Phillips joined Created Equal on Wednesday to discuss what this new ruling means for homeowners, the government, and how it’ll affect issues like land speculation. 

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Guests

Alex Alsup is vice president of Research and Development for Regrid, an intelligence company that specializes in gathering information about land parcels across the United States. He shares concerns about who this court decision actually benefits. 

“I think that the ruling in Rafaeli and the [one the] other day are cast as some sort of ‘justice’ for homeowners who lost their homes to tax foreclosure. [Though] there are enormous amounts of restorative justice that’s due to them, but I do not think these rulings amount to anything like that for Detroit homeowners,” he said.

Nushrat Rahman is an economic mobility reporter for the Detroit Free Press and BridgeDetroit. She says this ruling will also impact county coffers — where the excess profit is held after a house sells in auction. 

“I talked to the Michigan Association of Counties, and they said that they don’t know the fiscal impact at this point. They’ve advised their counties to prepare for this because [they] don’t know where the money’s coming from,” she said.

Ted Phillips is the director of the United Community Housing Coalition. He says the people who are going to most benefit from this ruling are investors.

“It seems ironic that if some of these investors did make a bad play on certain properties and lose them for more than what the taxes were, that they would now be able to recoup that money while skirting taxes for all these other years,” he said.

Listen to Created Equal with host Stephen Henderson weekdays from 9-10 a.m. ET on 101.9 WDET and streaming on-demand.

The Michigan Supreme Court said Monday its 2020 decision stopping local governments from keeping profits from the sale of foreclosed homes can be applied retroactively.

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The decision means anyone who lost their home due to unpaid taxes prior to 2020 — when the decision was made — could receive any money made by the county on the sale of their foreclosed home.

Previously, counties had been able to keep all money made from a foreclosure sale, even if the sale far exceeded the amount of unpaid property taxes.

Christina Martin, an attorney at the Pacific Legal Foundation who argued the case for former property owners, told the Associated Press that local governments were “essentially stealing from people.”

“It doesn’t matter if it’s going to be expensive to pay them back,” she said. “They have to pay them back.”

The Supreme Court in 2020 said the practice violated the Michigan Constitution.

Writing for the court, Justice Brian Zahra said the case “involves governmental violation of the constitutional rights of numerous individuals.”

He said “we are not without sympathy” toward communities that kept the surplus cash because state law had allowed it.

“Nonetheless, while the problem originated with the Legislature,” Zahra wrote, “at the foundation of our government is the precept that no state officer or local government can justify a constitutional violation on the basis of a statutory directive.”

The Michigan Municipal League, which represents local governments, says complying with the ruling could cost local governments hundreds of millions of dollars, and communities should not be penalized for following what was allowed under law. 

Associated Press reporter Ed White contributed to this report.

Other headlines for Tuesday, July 30, 2024:

• Leaders within the Asian American community are celebrating a $1 million investment into Detroit’s former Chinatown neighborhood.
• The Belle Isle Aquarium will have extended hours of operation during the month of August thanks to a $10,000 contribution from Comerica Bank.
• American Indian Health and Family Services is hosting a free traditional Native American powwow in Detroit this weekend, in collaboration with Wayne State University. 

Do you have a community story we should tell? Let us know in an email at detroiteveningreport@wdet.org.