Background

Oral arguments in Pung v. Isabella County will take place before the US Supreme Court on February 25th. In Part 1 of this series, I discussed the Fifth Amendment question facing the Court. In Part 2, I’m going to address the Eighth Amendment question posed by Pung:

Is tax foreclosure an “excessive fine” meant to deter nonpayment of property taxes?

The Fine Isn’t the Foreclosure

If you only learned about Michigan’s tax foreclosure system through lawsuits like Pung v. Isabella County or Rafaeli v. Oakland County, you’d be forgiven for thinking the system’s tax auctions were obvious money grabs by the county treasurer offices who administer them. You’d hear about a $190,000 home taken over a $2,200 debt in Pung. Or a mere $8.41 debt that produced a $24,500 windfall profit for Oakland County in Rafaeli.

Massive losses. Tiny triggers.

Michigan’s tax foreclosure auctions have certainly caused irreparable harm across the state, but it is unusual for that harm to be accompanied by massive windfall profits dropped into a county’s pockets by top dollar tax auction sales. There is profit for Michigan counties in our delinquent tax system, but it largely hasn’t come from the auctions.

That matters because the Eighth Amendment question in Pung is framed as if the foreclosure itself is the fine.

The Eighth Amendment question at stake in Pung amounts to this: Is foreclosure itself, when it wipes out equity beyond what’s owed, functioning as a fine designed to deter nonpayment, and is that fine excessive?

What’s crazy making to me is how hard you have to contort Michigan’s tax foreclosure system to make the foreclosure the “excessive fine” when the system already has a far more obvious, explicit, statewide excessive fine sitting in plain sight:

The 18% annualized interest charged on delinquent property taxes.

In Michigan, the most broadly experienced financial punishment, and the most reliable source of county profit, isn’t found in the tax foreclosure auction. It happens in the years before auction, while people are still paying, still scrambling, still trying to keep their homes out of foreclosure. Foreclosure is what happens after the system’s actual excessive fines fail to deter.

Cases like Pung, Tyler, and Rafaeli — for all the attention they’ve received — are focused on the wrong part of the tax foreclosure machine.

In this piece, I am going to show:

1. That the center of gravity for both punishment and profit in Michigan’s tax foreclosure system is found in the 18% annual interest charged on delinquent property taxes, not in tax foreclosures and the auction.

2. That the 18% interest is a fine, using the Michigan Supreme Court’s own words to prove it.

3. That the 18% interest is also an excessive fine, based on the huge profits generated by delinquent tax payments and the arbitrariness of the 18% figure.

4. That whether tax foreclosure itself is an excessive fine (as Pung argues) is not as clear a question as it may seem.

5. That the likely outcome of Pung will be even greater reliance on high interest delinquent tax revenue — something that will be untouched by the Court’s rulings in Pung.

1. A Million Dollars or a Penny Doubled

Statewide tax delinquency and foreclosure data show you where the center of gravity for punishment and profit lie within Michigan’s tax foreclosure system.

Between 2006 and 2017 — the peak years of the tax foreclosure crisis — for every property in Michigan that actually went into a tax foreclosure auction, eight properties went into “forfeiture” (meaning they’d entered the second year of property tax delinquency). For those seven of eight properties that managed to avoid the foreclosure auction, their owners would have had to pay 18% interest, penalties, and fees to dodge the auction block.1

This is basically the municipal revenue version of being asked “Would you rather have a million dollars now, or one penny doubled every day until day 30?”

The data clearly shows why county treasurers would know to say “I’ll take the penny.”

I’ve used the chart below a dozen times before, but it tells the story: In Wayne County, 75% of tax foreclosure profits between 2012 and 2016 came from property owners paying their delinquent taxes, plus interest, penalties, and fees. Only 25% actually came from selling properties in a tax foreclosure auction for more than the tax debt owed. I don’t have any reason to think this dynamic would be substantially different across the rest of the state.

If you wanted to challenge the most punitive, most extractive, most constitutionally vulnerable part of Michigan’s tax foreclosure system, you would challenge the 18% interest rate on delinquent property taxes.

The legal framework is there. The facts are there. The disproportionality is obvious. It would affect more people, address more harm, and target the part of the system that actually drives the “perverse incentive” for government to profit at the expense of struggling taxpayers.

But that’s not where cases like Pung and Rafaeli aim.

They aim at the taking — at the foreclosure. They aim at what happens to equity after foreclosure — the right to surplus proceeds, the right to just compensation for the value of what was taken. That’s a project to protect property rights after the taking, not a project to reduce the day-to-day harm inflicted on the people still inside the system.

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What Constitutes an “Excessive Fine”?

The Eighth Amendment question in Pung v. Isabella County asks whether in rem tax forfeiture can be an “excessive fine.” What makes something an excessive fine, going off the Court’s comments in Tyler v. Hennepin County (the 2023 tax foreclosure ruling that laid the groundwork for Pung v. Isabella County), seems to be a pretty low bar.

Here’s what Justice Gorsuch (joined by Justice Jackson) said in Tyler v. Hennepin County (2023):

• “Economic penalties imposed to deter willful noncompliance with the law are fines by any other name.”

• “Because ‘sanctions frequently serve more than one purpose,’ this Court has said that the Excessive Fines Clause applies to any statutory scheme that ‘serves in part to punish.’”

It really doesn’t seem like there’s much legalistic nuance here. “Serves in part to punish” gets you to fine. “Excessive” is the next step, and turns on whether the penalty is disproportionate to the offense.

In Michigan, the part of the system that most obviously exists to deter nonpayment through punishment is not “foreclosure.” It’s the pricing of tax delinquency.

The foreclosure auction is a gavel. It comes down at the end. The 18% interest is a meter. It starts running early and runs for years. It’s not applied to “bad actors,” it’s applied to everyone. It’s indifferent to whether you missed a tax bill because you were sick, because you lost a job, because your mortgage servicer screwed up escrow, because you inherited a mess, or because you’re an LLC that doesn’t care. The system doesn’t ask why. It just starts charging.

So let’s take Gorsuch’s words seriously and establish first that Michigan’s 18% interest regime is a fine, and then, that it’s also an excessive fine.

2. “Is it a Fine?”, or, Don’t Punch Me and Tell Me You’re Encouraging Better Behavior

I don’t need to create my own argument to show that Michigan’s 18% interest on delinquent property taxes is a fine — Michigan’s Supreme Court has already done it for me.

In City of Detroit v. Walker (1994), the Michigan Supreme Court said the interest imposed on delinquent taxes “serves multiple purposes,” including to “encourage the timely payment of property taxes.”

In Rafaeli v. Oakland County (2020), the Michigan Supreme Court insisted the state’s General Property Tax Act “is not punitive in nature; its aim is to encourage the timely payment of property taxes and to return tax-delinquent properties to their tax-generating status, not necessarily to punish property owners for failing to pay their property taxes.”

But read those claims like a normal human being.

How exactly does state property tax law “encourage” timely payment of property taxes? It doesn’t send a cheer squad to your front door to root for your tax dollars. It threatens you with 18% interest, penalties, and fees if you don’t pay.

The system intentionally makes a behavior costly to prevent people from doing it. You don’t need to squint to see punishment here.

3. Is it an Excessive Fine?

I think the clearest proof that the 18% interest charged on delinquent property taxes is an excessive fine is found in the in the enormous profits counties across the state have reaped from their Delinquent Tax Revolving Funds — none more so than Wayne County.

Myself and others have repeatedly and extensively documented this county profit center for years. But I don’t want to make that point again here. There are plenty of ways to prove that the 18% interest on delinquent property taxes is not just a fine but an excessive one, so I’ll approach it from another angle:

I know of no publicly articulated justification for why the rate is 18%.

It’s 18% because 18% is high enough to deter behavior.

Michigan’s delinquent tax interest rate has been ratcheted up over time by amendments to the General Property Tax Act. Before 1999, the rate at the tax sale stage was 1.25% per month (15% annually). When the legislature overhauled the system through Public Act 123 of 1999, it introduced the current escalating structure: 1% per month initially, jumping to 1.5% per month (applied retroactively) upon forfeiture.

A 1999 Citizens Research Council report that informed the legislation noted, almost in passing, that “most counties show an annual surplus in their delinquent tax revolving funds, due to the significant interest and penalties due for delinquent tax payments.” In other words, the rate was already generating more revenue than the system needed, and then the legislature raised it.

What I have never seen is an analysis of what interest rate would be necessary to compensate the government for its actual costs. No cost-of-carry calculation. No comparison to municipal borrowing rates. No means testing. No proportionality analysis.

I have also never seen evidence that anyone asked whether 18% would be excessive. It seems they simply set the rate high enough to make delinquency painful and moved on.

Sure seems to me like an excessive fine.

4. Is Tax Foreclosure Also an Excessive Fine?

I think I’ve sufficiently demonstrated that the 18% interest within Michigan’s tax foreclosure system is both a fine and also an excessive fine. But, of course, that’s not what the Supreme Court is being asked. It’s being asked whether foreclosure itself — the taking of property by government — is an excessive fine. So let me address that too.

Recall what I said at the beginning of this piece: if you only learn about Michigan tax foreclosure through Pung and Rafaeli, you’d be forgiven for thinking the auction is where the system does its punishing. Lots of big equity wipeouts over small tax debts. A clean moral story.

The problem is that those stories are real but they are not typical.

Here’s what the statewide pipeline actually looks like in the peak crisis years:

• 1.9 million properties reached forfeiture statewide (2006–2017).

• 259,000 of those ultimately reached a foreclosure auction.

  • Of those 259,000, about 148,000 (57%) were in Detroit.

  • And of those 148,000 Detroit auction properties, about 86,000 did not sell.

Put those together:

If 86,000 Detroit foreclosures didn’t sell, that means only about 173,000 of the 259,000 statewide foreclosures even had a chance to produce the kind of surplus that shows up in Pung and Rafaeli.

And if only 173,000 properties out of 1.9 million forfeitures (and never mind the surely hundreds of thousands of additional delinquencies that didn’t reach the two-year mark of forfeiture) even had a shot to generate surplus proceeds, then only 9% of the properties that reached the forfeiture stage of Michigan’s delinquency pipeline even had the possibility of becoming a Pung/Rafaeli-style “windfall” story.

If you’re trying to understand what Michigan’s system does to people in the aggregate — what it punishes, what it extracts, what it incentivizes — then you can’t start your analysis at the auction and pretend those cases are representative.

Most of the time, foreclosure wasn’t a payday. It was the end of the road. And in Detroit’s case, the road often ended with no buyer at all, meaning the “fine” produced no cash benefit — just a transfer of liability: vacancy, blight, securing costs, demolition risk, administrative churn.

Which is why I keep coming back to the same point. If you want to locate the punitive, extractive core of Michigan’s system, the part that reliably produces money, and reliably disciplines behavior, you don’t look at foreclosure. You look at delinquency.

The ratio above is the story. It tells you that Michigan’s system, in practice, isn’t primarily a “foreclosure machine.” It’s a delinquency monetization machine. A system that pressures people for years, and only at the end converts the holdouts into foreclosures.

Which means if you want to talk about “excessive fines,” the most important question isn’t “is foreclosure punitive?” It’s whether Michigan’s 18% annualized interest plus stacked fees on delinquent property taxes functions as a punishment grossly disproportionate to the offense of being late on property taxes.

5. The Interest Regime Will Survive

Michigan’s most obvious, most universal deterrent, its most consistent punishment mechanism, is not foreclosure. It’s the 18% interest that runs for years before foreclosure, extracting money from people who are trying to keep their property.

Nothing in Pung threatens that.

Nothing in Tyler threatened it.

Nothing in Rafaeli threatened it.

In fact, they all conceded the point. As the attorney in the Rafaeli case said before the Michigan Supreme Court:

Rafaeli… [is] not challenging the statutory interest or penalties or fees that are tacked onto their property tax debts.

…and also, in an interview regarding the Rafaeli case:

“The government can take what belongs to them… In other words, the taxes, the penalties, the interest, the fees…”

If the Supreme Court blows up Michigan’s post-Rafaeli foreclosure math (I think it will) that upheaval will force a rethinking of the system. That’s what I’ll get into in Part 3.

But the one part of the system that will remain untouched, and that could even be increased to compensate for lost revenue, is the actual excessive fine in this system:

The 18% interest.

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Tax Foreclosure on Notice

The US Supreme Court has agreed to hear a tax foreclosure case originating in Michigan. The case, Pung v. Isabella County, represents the most significant challenge to the state’s tax foreclosure system to date, along with other systems like it around the country. It is the latest in a years long string of cases that have challenged Michigan’s foreclosure system, but the first to make the leap outside state lines and land with the Supreme Court.

If the Court rules against Michigan counties in the upcoming case, the financial consequences will be significant. My estimate is that the potential liability for Wayne County alone could fall in the range of $500 million - $750 million. A ruling in favor of Pung could also force substantial revisions to Michigan’s tax foreclosure system, if not a wholesale rethinking.

But the sticker price isn’t the only story — there is also the question of who would pay. Michigan counties don’t actually have the money at question in the Pung case on hand (I’ll explain why later), so the bill will likely be paid out of each county’s Delinquent Tax Revolving Fund (DTRF). These funds are financed, in part, by the 18% interest, penalties, and fees charged to property owners who are behind on their taxes.

If the US Supreme Court rules in favor of Pung, it will likely be residents struggling to pay their taxes and keep their homes who will subsidize payouts to former owners — often investors and speculators — who walked away from theirs.

To understand why, it will help to start with an example:

Red Grape Properties LLC

This small home on Westphalia Street, on Detroit’s east side, was tax foreclosed in 2017. At the time, it was owned by an LLC based in Clarkston, Michigan called Red Grape Properties LLC. The image below, via Google Street View Time Machine, shows what the house looked like shortly after tax foreclosure: boarded up and vacant.

The property was foreclosed by the Wayne County Treasurer’s Office for $4,700 in unpaid property taxes, interest, penalties, and fees. It sold in the 2017 tax foreclosure auction for $5,100.

The first of two questions at stake in Pung v. Isabella County could change the math on how much money the LLC that owned this property can collect as a result of its sale.

The Current Math:

Under current Michigan law, defined by Michigan Supreme Court rulings in Rafaeli v. Oakland County (2020) and Schafer v. Kent County (2024)1, the math on this is simple:

• Auction Sale: $5,100

• Tax Debt: $4,700

• Surplus: $400

• Result: The former owner is owed $400

In the Michigan Supreme Court’s ruling in Rafaeli v. Oakland County, the court found that when a property sells in a tax auction for more than the tax debt owed, the former owner is owed the surplus proceeds from the auction. The return of those surplus proceeds represents “just compensation” for the taking of the former owner’s equity by the government.

In Schafer the Court ruled just compensation could be sought retroactively. In practice, this meant retroactive claims could be made back to the 2015 tax auction, per Michigan’s statute of limitations.

The Math Proposed by Pung:

Pung v. Isabella County, however, argues that the auction price is irrelevant. “Just compensation” under the Fifth Amendment, says Pung, must be based on the Fair Market Value at the time of the taking. And, crucially, they lean on the government’s own tax assessment as proof of that value.

The assessed value of this home on Westphalia at the time of tax foreclosure was $15,300. In Michigan, assessed value is set at 50% of market value, so, that would imply a Fair Market Value of $30,600.

If the US Supreme Court rules in favor of Pung, the just compensation math could change to this:

• Auction Sale: $5,100 (irrelevant)

• Fair Market Value: $30,600

• Tax Debt: $4,700

• Result: The Wayne County Treasurer owes Red Grape Properties LLC $25,900.

This is the potential seismic shift: If the Court rules in favor of the plaintiff in Pung, the answer to “what is just compensation?” could change from “the LLC gets a few hundred dollars” to “The County Treasurer owes the LLC $25,900.”

Now, imagine that multiplier applied across tens of thousands of tax foreclosure sales statewide over many years.

I don’t have assessment data for tax foreclosed properties for all tax auction years in Wayne County (let alone the whole state), but I do for 2016 and 2017. Below is the difference in “just compensation” liability for Wayne County from the 2016 and 2017 tax auctions under the Rafaeli definition of just compensation, versus the Pung definition:

• Under current law: Wayne County’s just compensation liability for the 2016 and 2017 auctions combined is about $25 million.

• Under the Pung definition: That liability explodes to over $170 million.

If you extrapolate that across all auctions from 2015 to present, assuming the timeframe for retroactivity remains, my ballpark estimate for Wayne County’s total liability is between $500 million and $750 million. That, of course, says nothing about all other counties across Michigan, whose liabilities would be lower but who also do not have tax a base the size of Wayne County’s.

The Questions Posed by Pung

The example above deals with the first of the two simple but highly consequential questions posed in Pung v. Isabella County:

1. A Fifth Amendment Question: What defines “just compensation” when government takes a property over unpaid taxes? The sale price in a tax auction, or the property’s fair market value at the time of the taking?

2. An Eighth Amendment Question: Is tax foreclosure an “excessive fine” meant to deter nonpayment of property taxes?

I am going to break this down into a three-part series, because the implications are too large for a single post:

• Part 1: What is Just Compensation? Fair market value vs. auction price — and why a Pung win could blow a multi‑hundred‑million‑dollar hole in Michigan county budgets.

• Part 2: Is Tax Foreclosure an Excessive Fine? Whether tax foreclosure itself is a punitive forfeiture and how the Supreme Court’s answer could require a reimagining of Michigan’s tax foreclosure system.

• Part 3: My takeaways across both questions and what could be next for Michigan’s tax foreclosure system.

I’ve written about these tax foreclosure cases for years, warning that none of them will produce much in the way of positive outcomes for the actual victims of the tax foreclosure system, that the rulings largely benefit speculators, and all leave intact the true source of profit for Michigan county government in the tax foreclosure system — the 18% interest charged on delinquent property taxes. Pung doesn’t change that—if anything, it sharpens the contradiction.

Part 1: What is Just Compensation?

The dollar amount in the Westphalia Street example above isn’t remotely an outlier. The fair market value of properties in tax auctions (at least when based on assessed value) was often — and can still be — substantially higher than the prices at which tax foreclosed properties sell.

In fact, in the case before the US Supreme Court, the dollar amounts are far higher. Here’s how Pung’s particular just compensation argument plays out, step by step:

1. Pung lost their property over $2,241.93 in unpaid property taxes.

2. The Pung home sold in an Isabella County tax foreclosure auction for $76,008.

3. Pung’s estate recovered the “windfall profits” of $73,766.07 but then sued, claiming those windfall profits were not sufficient, and that just compensation should be based on the fair market value of the home.

4. Pung pointed to the assessor’s valuation of $194,400 at the time of foreclosure as the indication of fair market value.

5. The Pung estate is seeking an additional $118,392 in “uncompensated equity” represented by the difference between the sale price at auction, and the assessment at the time of foreclosure which, again, they claim is indicative of fair market value.

The rationale for Pung’s definition leans on previous US Supreme Court rulings. As summarized in their petition:

“Just Compensation” under the Fifth Amendment consists of “the total value of the property when taken” plus “interest from that time.” Knick v. Twp. of Scott, 588 U.S. 180, 190 (2019).

This isn’t coming out of nowhere. In Tyler v. Hennepin County (2023), the Supreme Court unanimously ruled that a county commits a taking when it seizes a home for taxes and keeps the owner’s equity beyond the tax debt owed. However, the Court left open whether “just compensation” in these tax foreclosure cases should be pegged to the auction surplus, to fair market value, or to something else — that is the question Pung is squarely taking on.

Pung characterizes the tax auction price as an “artificially depressed” measure of “total value” rather than fair market value. It’s easy to see why: tax auctions are distressed sales. The market is flooded with thousands of properties simultaneously, there is minimal marketing, and the purchase window is limited. Not an ideal set of conditions to maximize sale prices.

In Pung’s framing, the fair market value is indicated by the county’s own assessed value of the property: $194,400 at the time of foreclosure. Under Michigan’s property tax system, the assessed value drives the property tax bill, and the Michigan Constitution caps assessed value at 50% of market value. Meanwhile, the General Property Tax Act requires assessments to be set at 50% of “true cash value”. Put together, assessments in Michigan are supposed to be a 50%-of-fair-market-value statement. Pung is trying to hold them to it.

I think Michigan counties and their treasurers are in trouble.

I don’t see how the US Supreme Court rules against Pung on this Fifth Amendment question. Between that and the fact the Michigan Supreme Court already ruled just compensation can be sought retroactively back to 2015, the financial implications of the Pung ruling for Michigan counties could be serious, as previously discussed.

The Devils in the Details

There are three critical nuances, however, that turn the financial implications in the Pung case from a simple constitutional question into a procedural minefield:

1. Defining Fair Market Value

Even if the Supreme Court agrees with Pung that “just compensation” must be measured by Fair Market Value (FMV), the Court might not define how to calculate FMV.

Pung is leaning on the government’s own assessed value (x2) as the proxy for FMV. It makes sense why they’d do this. Establishing retroactive FMV for thousands of properties via individual appraisals would be tremendously complicated. By pointing to the assessment, Pung seems to be trying to trap the government in its own logic: If you said the house was worth $194,000 when you taxed it, you cannot claim it was worth only $76,000 when you took it.2

However, if the Supreme Court rules that FMV is the standard but declines to bless the “assessment proxy” as the method, it could create a chaotic scenario where thousands of back-dated appraisals are required to prove damages.

2. Detroit’s Assessments vs. Reality

Zooming out from Pung’s specific facts, using assessments as a FMV proxy creates its own problems in places like Detroit.

In Detroit (the source of about 60% of Michigan’s tax foreclosures in the 2010s) assessments up until roughly 2020 were notoriously disconnected from actual market conditions. I’ve long argued that, in the first half of the 2010s, tax auction sale prices in Detroit probably were far closer to FMV than anything in the tax roll.

So, if counties want to push back on using assessments as evidence of FMV, they’ll need to say the quiet part out loud: that in places like Detroit, the City’s own assessment practices were so disconnected from reality that they can’t be used as a fair-market benchmark.

At a minimum, that’s an awkward coordination problem between the City and the County Treasurer — entities that don’t share the same interests here — and potentially one with implications that extend beyond the Pung case.

3. Who Actually Tries to Collect and How

This leads to the most perverse outcome. If the Supreme Court agrees with Pung on the Fair Market Value question but rejects the assessment formula, the victory may become worthless for the average tax-foreclosed former homeowner. We know this because the U.S. Court of Appeals for the Sixth Circuit recently warned us.

In Bowles v. Sabree, the Court rejected a class action strategy based on Fair Market Value, ruling that while “surplus proceeds” derived from auction sale prices are easy to calculate on a spreadsheet, FMV is an individualized nightmare. As the Court wrote:

“The district court denied class certification... We affirmed because determining the fair market value of each potential class member’s property — no easy task, even for experts — would have led to difficulties figuring out class membership and would have undercut the ‘efficiencies and ease of administration that might otherwise favor classwide resolution.’”

If Pung wins on the principle of FMV but fails to lock in a formulaic way to calculate it (like assessments), it could effectively kill the class action vehicle.

The result could be that well-resourced commercial owners, speculators, and investors will be able to hire appraisers and lawyers to litigate their six-figure claims one by one. But the homeowner who lost a $20,000 property will be left with a theoretical constitutional right to Fair Market Value, but no real way to afford the fight to collect it.

In other words, the Court could create a constitutional right that scales with the size of the loss: the bigger and more sophisticated you are, the more real your remedy becomes.

Who Pays The Bill?

As I mentioned at the beginning of this piece, the critical difference in the definition of “just compensation” between Rafaeli and Pung is that, in the Pung equation, the County does not possess the money the plaintiff is asking for. If a home sells for $76,000 but the court orders a $194,000 payout, the county is in a $118,000 deficit.

Legally, I’m pretty sure that’s irrelevant: “The question is what has the owner lost, not what has the taker gained.” (Boston Chamber of Commerce v. Boston, 1910). The fact that the County didn’t collect the fair market value of a property doesn’t matter. They still have to pay.

In Michigan, I suspect the first source of funds for these payouts will be the county treasurers’ Delinquent Tax Revolving Funds (DTRF). These funds are used to pay municipalities their expected tax revenue while the County collects on bad debts. The DTRF is primarily funded by two things:

1. Windfall profits at tax auctions when properties sell for more than the tax debt owed. (Now curtailed)

2. Property owners who make payments on the punitive 18% interest rate charged on delinquent taxes in order to keep their homes and properties.

It is the latter that has produced the vast majority of profits in the tax foreclosure system for Wayne County, and I’m quite sure that is the case statewide as well. I’ve previously analyzed tax delinquency and foreclosure profits in Wayne County between 2012 - 2016. I found that nearly 75% of profits generated in those years came from interest payments on delinquent taxes, not profits from tax auction sales:

This is the reality of the justice being sought in the Pung case: DTRFs, mechanisms funded by people currently struggling to keep their properties, may need to be drained to pay “fair market value” settlements to former owners3. In many cases, like the home on Westphalia, those former owners are LLCs and speculators who often made a business decision to abandon the property.

During the Rafaeli case, attorneys from the Pacific Legal Foundation, who represented Rafaeli in front of the Michigan Supreme Court, argued that finding in favor of Rafaeli would “remove that perverse incentive for government to be foreclosing over an $8 debt.”

At the time I said that this misdiagnosed the problem. The real “perverse incentive” had never been foreclosing and making a killing at the auction — it was not foreclosing, and keeping people on the hook, rolling delinquent balances forward at 18% interest year after year to do things like support Wayne County’s general fund with massive transfers out of the DTRF.

Now these cases, which all trace their lineage back to Rafaeli v. Oakland County, have finally come full circle. In the name of eliminating one supposed perverse incentive (profiting off auction windfalls), they will likely create another: a system in which people trying to keep their homes end up subsidizing payouts to speculators who walked away from theirs.

If Pung wins, we aren’t correcting past abuses. We are raising the constitutional price of tax enforcement to a level that may break the system entirely.

The 2025 Wayne County Tax Foreclosure Auction starts today. In this piece are three things worth knowing about the Detroit properties in the auction this year.

Below is a map of this year’s Detroit listings and the neighborhoods with the most households facing uncertainty on the other side of the auction.

1. The Most Detroit Homeowners Tax Foreclosed Since 2017

About ~370 Detroit homeowners are in this year’s auction:

It’s a far cry from the auctions of the mid-2010s, but also more than double the number of homeowner tax foreclosures from last year’s auction which had 170. I’m not sure I’d read too much into the increase this year necessarily — tax foreclosure numbers are noisy from year to year (absent interventions like pandemic-driven moratoriums). This isn’t enough of a jump to mark a new crisis, and more than one year would be needed to claim a trend, but…

…given uncertainty around how much longer Pay As You Stay will be available due to its scheduled sunset this year (the legislation allowed for retroactive reduction of low-income homeowner property tax debt) I do expect we’ll see increasing numbers of homeowner tax foreclosures in coming years, unless something is done to keep Pay As You Stay, or something like it, in play. I wrote about this earlier this year.

2. About 1 in 5 Auction Properties Were DLBA “Own it Now” or Auction Sales at One Time

About 360 of the Detroit properties (~17%) at auction this year were previously sold by the Detroit Land Bank Authority via either Own-It-Now or the Land Bank’s Auction program. More than 100 appear to be occupied today.1

Take, for instance, this home on Prest Street which sold via a Land Bank auction in 2015 for $5,000:

Clearly vacant at the time of that auction, it is now in another type of auction (tax foreclosure). As of June 2025 when the City of Detroit’s “Street View” car last collected imagery for Mapillary, the home appeared to be occupied:

I noted the potential for this problem in a post back in early 2023. I pointed out that tax delinquency rates particularly amongst Own it Now properties had grown 350% between 2020 and 2023 — some buyers were getting in over their heads.

Now, that delinquency is metastasizing into foreclosure in some cases.

In the 2023 tax foreclosure auction, only 104 of the 2,023 Detroit properties in that auction (5%) had been one-time DLBA program sales. The share of the 2025 auction populated by one-time DLBA program sales is more than triple that rate.2

3. Overall Tax Foreclosure Counts are Steady — but the Auction Composition isn’t Great

This year’s auction looks “normal” in size so far:

What’s notable is who is in it: more owner-occupants, more renters, and more repeat-appearance homes from DLBA programs as a share of overall auction properties.

Renter-occupied homes, too, have seen foreclosure increases each of the last three years, and rulings by the Michigan Supreme Court continue to chip away at the ability of Make it Home to create homeownership opportunities for tenants out of the auction system.

So even if the headline count looks “normal,” the composition is changing year to year. The share of tax auction properties that are occupied homes has climbed from about 1 in 5 (2018–2019) to nearly 1 in 2 this year. That means a larger slice of the auction carries immediate displacement risk for both homeowners and renters, even as total foreclosures bounce around year to year.

I haven’t taken a look at citywide property tax delinquency figures in a while. That’s where you get a picture of what kinds of problems future auctions will hold and how big they might be.

In February, two young children experiencing homelessness froze to death while sleeping in their mother's van parked inside a Detroit casino garage. The tragedy prompted Detroit Mayor Mike Duggan to order a comprehensive review of how the city coordinates homeless services.

Events like these point to an iceberg problem: a mountain of underlying policy failures — or non-existent policies — culminating in highly visible suffering. Yet the City’s response (so far, a 7-point plan that resulted from the City’s review of homelessness services) focuses on immediate symptoms. Critical underlying causes, like tax foreclosure — which was displacing thousands of Detroiters annually just a few years ago — are omitted. As a result, a major opportunity to meaningfully prevent homelessness is being overlooked.

While I know of no evidence to suggest that the recent tragedy was caused by tax foreclosure, homelessness of course often results directly from policies that force families out of their homes. Any comprehensive review of homelessness should examine these upstream causes, chief amongst them Michigan’s property tax foreclosure system.

We've made tremendous progress over the past five or six years to shut down tax foreclosure as an avenue to homelessness for Detroit’s poorest homeowners. Stories like these have disappeared:

A clear chance to make sure we preserve this progress and do not return to the devastating waves of tax foreclosure from the 2010s rests on the upcoming renewal of Pay As You Stay.

On July 1st, 2025, Michigan's "Pay As You Stay" (PAYS) law will expire unless it is renewed legislatively. Initially passed in 2020 with Duggan's support, PAYS significantly reduces property tax debt owed by homeowners in poverty who apply for and receive the City of Detroit’s Homeowners Property Tax Exemption, known as “HOPE”.

Rather than championing an extension of PAYS, especially in light of the recent tragedy, Mayor Duggan and city hall have been notably silent about its renewal. As a result, the pipeline from homeowner to homeless for the city’s poorest residents may reopen.

How Detroit Escaped the Grip of Tax Foreclosure: HOPE → PAYS → DTRF

While PAYS is a statewide law, cities in Michigan can decide individually whether to participate. Detroit homeowners have been the greatest beneficiaries due to the deliberate development and use of three interconnected programs:

• Homeowners Property Tax Exemption (HOPE): The City of Detroit’s property tax exemption for homeowners in poverty which eliminates the current year’s property taxes.1

• Pay As You Stay (PAYS): Reduces property tax debt typically by 50-70% for homeowners granted HOPE exemptions (if they owe delinquent property taxes).

• Detroit Tax Relief Fund (DTRF): A philanthropic initiative funded by the Gilbert Family Foundation which pays off all remaining property tax debt for homeowners who are enrolled in PAYS.

In practice, the HOPE exemption automatically triggers PAYS (reducing tax debt) and the DTRF (paying off whatever debt is not eliminated by PAYS), creating a fully retroactive property tax exemption system2.

Together, these policies significantly reduced tax foreclosure risk and the spiral into homelessness for Detroit’s poorest homeowners, as shown in the chart above. Between 2020 and 2024, ~750 homeowners lost their homes to tax foreclosure — a stark contrast to the 6,400 homeowners foreclosed upon in 2015 alone, prior to these programs3.

Not only have these programs nearly ended homeowner tax foreclosures, they have also eliminated mountains of property tax debt, which is what puts homeowners at risk of tax foreclosure in the first place. There is no meaningful tax foreclosure prevention for homeowners in poverty without the elimination of property tax debt.4 This is debt homeowners in poverty never should have owed because they qualified for (previously inaccessible) HOPE exemptions.

Since the advent of the HOPE + PAYS + DTRF trio, not only is tax foreclosure preventable but that mountain of homeowner tax debt is being erased. Based on my analysis with data from 2019 through part of 2024, HOPE + PAYS + DTRF have together eliminated at least $60 million in Detroit homeowner tax debt across at least 16,000 owner occupied homes.

These initiatives have been unprecedented in their ability to free homeowners from previously insurmountable property tax burdens.

The Rising Risk of Backsliding

And yet, recent data shows troubling signs of some erosion, even with the powerful trio of programs, HOPE, PAYS, and DTRF:

• A point-in-time comparison from January 15 of 2020 - 2025 shows that the number of Detroit homeowners with >2 years of delinquent property taxes — meaning imminent tax foreclosure risk — jumped from 6,300 in 2024 to 8,400 in 2025. This is the first increase in years.

• Among these 8,400 homeowners at risk of tax foreclosure, 2,500 previously benefited from debt elimination from the combination of HOPE → PAYS → DTRF, but are again accumulating tax debt. PAYS currently prohibits repeat participation, leaving these homeowners without protections despite ongoing poverty.

Collectively, those 2,500 homes owed $14.5M in tax debt prior to having their debt eliminated by PAYS and the DTRF. Today, they’ve accumulated $6.8M in new tax debt. This is a tragic waste of hard won progress and points to serious danger for the families in these homes.

While an increase of 2,500 homeowners facing tax foreclosure may not seem like a large jump, once tax delinquency starts to build it doesn’t just reverse course on its own. Absent intervention, I guarantee the number of homeowners subject to foreclosure (whether they previously participated in PAYS or not) will be higher again next year, and the year after that…

This does not mean that PAYS is ineffectual — far from it.

Were it not for HOPE → PAYS → DTRF we would never have achieved the reduction in homeowner tax debt and foreclosures in the first place. The fact that 2,500 homeowners slid back into tax foreclosure risk indicates an absence of ongoing communication and outreach around the administration of these programs.

Despite improvements in the application process, HOPE remains poorly understood and many homeowners do not understand the requirement to reapply annually. During the pandemic, for example, HOPE exemptions were automatically carried over from one year to the next without need for reapplication. That benefit has since expired.

Additionally, outreach efforts to enroll homeowners in HOPE and conduct targeted follow-up after debt elimination have been evidently ineffective or non-existent. Common-sense reforms (such as automatic renewal of HOPE until financial circumstances change) have not been lobbied for.

What's At Stake if PAYS Expires?

If PAYS sunsets this July, the linchpin in the trio of programs that have been eliminating tax debt and preventing homeowner tax foreclosures will disappear. Without it, tax debt will accumulate with no chance for escape. This risks unraveling years of meaningful progress in stabilizing neighborhoods and preserving homeownership.

Mayor Duggan, who initially championed PAYS — alongside Wayne County Executive Warren Evans and Wayne County Treasurer Eric Sabree, whose support is also crucial — now appears prepared to let it expire without advocacy. Allowing PAYS to lapse risks setting the stage for resurgent tax foreclosures that could easily follow him beyond Detroit, should he be successful in his independent gubernatorial bid. Tax foreclosure is a statewide system, after all.

Avoiding the Iceberg

The recent deaths caused by homelessness make plain the urgent need for upstream policy solutions rather than merely crisis response. Yet, in the entirety of the 773 page 2026-2029 budget presented by the mayor the other day, neither tax foreclosure nor PAYS are mentioned once.

Mayor Duggan’s previous advocacy for structural solutions like a land value tax prove he understands systemic thinking in the property tax realm. He needs to translate that understanding into action by:

• Lobbying to make Pay As You Stay permanent. And, if he becomes governor, he should make it mandatory statewide as well.

• Advocating for automatic HOPE exemption renewals to remove unnecessary administrative barriers.

Mayor Duggan, Wayne County officials including County Executive Warren Evans and County Treasurer Eric Sabree, Detroit residents, and policymakers across Michigan face a critical choice: either advocate for the renewal and expansion of PAYS, preserving a proven tool to fight tax foreclosure—or allow it to expire, risking renewed foreclosures, homelessness, and preventable tragedies.

The evidence, outcomes, and human stakes couldn’t be clearer. Detroit cannot afford to reverse its progress. Pay As You Stay must be extended.

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Around 2,400 former Detroit homeowners who lost their homes in tax foreclosure auctions between 2015 and 2019 may have an opportunity to recover a total of $20M in “windfall profits” — an average of $8,300 per former homeowner — as a result of the Michigan Supreme Court’s ruling in Schaefer v. Kent County earlier this year.

My analysis, using Regrid’s Wayne County tax foreclosure auction data and Detroit assessment records from 2015 - 20191, identified homes that sold in the 2015 - 2019 tax auctions for more than the tax debt owed2 and appeared to be owner occupied at the time. These sales generated so-called “windfall profits” that could be reclaimed by former property owners due to the court’s decision.

To help affected homeowners determine if they may be able to recover windfall profits, I’ve created a map and dashboard (click the button below to open) showing the ~2,400 homes and the estimated amount each former homeowner could reclaim through the Wayne County Treasurer’s retroactive claim process.

Click to Open Windfall Profit Dashboard

Though tens of thousands of Detroit homeowners lost their homes to tax foreclosure in the 2000s and 2010s, most sold for less than the tax debt owed or didn’t sell at all, meaning no windfall profits were generated. Michigan’s statute of limitations also limits retroactive claims to the 2015 auction and later.

Between 2015 and 2019, more than 11,000 Detroit homeowners lost their homes to tax foreclosure, but only about 2,400 (22%) appeared to sell for more than the debt owed, meaning they may be eligible for claims.

Those who lost their homes to tax foreclosure likely don’t know whether their property sold at auction for more than the tax debt owed. This tool provides information that can help former homeowners determine if they may be able to recover any windfall profits. However, this dashboard cannot guarantee the recovery of windfall profits: Ultimately, only the Wayne County Treasurer can notify former homeowners who file a Notice of Intent form if there are proceeds to claim from the sale of their property and the exact amount.

I opposed the legal challenges to the tax foreclosure process which led to the decision allowing retroactive claims. As I wrote extensively here in The Chargeback, in the Detroit Free Press, and the Brennan State Court Report, these legal challenges did not address the actual source of profit in the tax foreclosure system, and the retroactive claims process will benefit speculators and landlords far more than former homeowners. Nonetheless, given the court ruled the way they did, I want to do what I can to help former Detroit homeowners recover what money they can.

What’s in this Piece:

1. How to Use the Windfall Profit Dashboard

A walkthrough of the Windfall Profit dashboard and how I think this data will be most productively put to use

2. The Retroactive Claim Process with the Wayne County Treasurer’s Office

Steps on filing a retroactive claim with the Wayne County Treasurer’s Office.

Critical Note: The Notice of Intent to claim windfall profits form, which is the first step in the process, must be filed with the Wayne County Treasurer by March 31, 2025. More details on this process are below, but I wanted that deadline mentioned up front.

3. Limitations on the Data and Dashboard

Defining what this data & dashboard can and can’t do, and where there are limitations in the data

4. Can Former Homeowners be “Made Whole” by Recovering Windfall Profits?

Exploring whether former homeowners can actually recover the value of the homes they lost by claiming windfall profits

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1. How to Use the Windfall Profit Dashboard

A. Search for a Property

You can search for an address using the search bar in the map. The map will zoom to that address. (You can also just navigate around the map and zoom in / out as with any other online map.)

Each blue circle on the map represents an owner occupied home that was tax foreclosed and generated windfall profits at auction. The larger the circle, the more money the property generated in windfall profits.

Click on the property to pull up its windfall profit details:

B. Details Provided for Homes with Windfall Profits

The box that pops up with a property’s details and windfall profit information contains several pieces of information, some of which are highlighted in the orange box below:

1. Status: This shows whether the home was Likely or Possibly a homeowner.

   1. “Likely Homeowners” are properties that had a 100 Principal Residence Exemption (PRE) and were owned by an individual (not an LLC or business entity) in the year the tax foreclosure took place.

   2. “Possible Homeowners” are homes that did NOT have a PRE but were owned by an individual AND the property tax bill was mailed to the address of the home (not a separate address like a property management company). This doesn’t necessarily indicate an owner occupied home, but it may.

2. Street Address: The address of the tax foreclosed home.

3. Parcel ID: The unique parcel ID for the tax foreclosed home.

4. Tax Auction Year: The year in which the home was tax foreclosed and auctioned off.

5. Windfall Profit: The potential amount of windfall profit that could be claimed by the former owner, determined by subtracting the total tax debt, interest, penalties, and fees owed from the auction sale price (per Regrid tax auction data).

   1. Note: There are cases where the sale price at auction may differ from the actual price paid. This can happen when a bidder “falls through” and doesn’t pay the winning bid amount and the Treasurer needs to move to the next highest bid. Thus, these “Windfall Profit” amounts may not be exact.

6. Minimum Bid: The price for the home in the first round of the auction, which reflects total tax debt, interest, penalties, and fees.

7. Auction Sale Price: The winning bid amount at auction, per Regrid tax foreclosure auction data.

8. Approx Present Day Value: The approximate present day value of the tax foreclosed home.3

9. Windfall vs Present Day Value Gap: The gap between the windfall profits that could be claimed and the present day value of the home that was lost. I have included this to drive home the point that recovering windfall profits will not compensate former homeowners for the value of what they lost.

C. Blue vs. Gray Circles on the Map

As mentioned above, blue circles on the map represent an owner occupied home that was tax foreclosed and generated windfall profits at auction. The larger the circle, the more money the property generated in windfall profits.

Gray circles on the map represent owner occupied homes that were tax foreclosed between 2015 - 2019 but did not generate any windfall profits at auction, meaning no money can be recovered by the former owner today.

I have included those homes tax foreclosed from 2015 - 2019 that did not generate any windfall profit because I do not want to lose the context in which these windfall profits exist:

They may be helpful to some former homeowners, and that’s a good thing, but the vast majority of former homeowners will see nothing at all from the outcome of these legal decisions.

D. Why There Are No Owner Names in the Dashboard

Since the former homeowners who can claim these windfall profits were tax foreclosed, it is almost certain they no longer live at the addresses on this map. That means the name of the owner at the time of foreclosure is the best hope of finding the former homeowner.

For the moment, however, I am not including those names in the public dashboard I’ve put together because I’m concerned attorneys may use it to try to track down former homeowners in the hopes of collecting a percentage of what they are owed.

For former homeowners who may use this dashboard, they likely don’t need the owner name — they will know their home by its address.

E. How to Find Former Homeowners

I’ve shared the data behind this map with several housing counseling organizations. For those organizations I’ve included owner names in the data I’ve provided.

Some former homeowners may find and use this dashboard, but the far more likely way I think former homeowners will be found is via housing counseling agencies and other governmental or nonprofit organizations who have large rosters of clients & resident contacts.

Those groups can use the owner names at the time of foreclosure that I’ve provided and run them against their client / contact lists to see if there might be any matches, and then reach out to those clients with whom they likely already have a relationship.

It’s also worth mentioning that there is of course no guarantee all of these former homeowners are still in Detroit — I expect finding the people owed this money will be very difficult.

2. How to File a Retroactive Claim for Windfall Profits with the Wayne County Treasurer’s Office

Below is the process on how to file a retroactive claim, which was shared by the Wayne County Treasurer’s Office.

Need Help? You can call the United Community Housing Coalition’s Tax Hotline at 313-725-4560 if you are a former homeowner who needs help with this process.

Step 1:
Download and complete the Notice of Intent form.

Step 2:
Ensure the form is notarized before submission. Notarization is required for all claimants.

Step 3:
Deliver the completed and notarized form to the Wayne County Treasurer’s Office by March 31, 2025. You have two delivery options:

• In person at:
  Wayne County Treasurer’s Office
  400 Monroe, Suite 500
  Detroit, MI 48226

• By certified mail (return receipt requested) to the same address.

Step 4:
Wait for notification. By July 1, 2025, the Wayne County Treasurer’s Office will send a certified notice (return receipt requested) to all claimants who submitted the Notice of Intent form. This will inform you if there are any remaining proceeds from the sale of your property.

Step 5:
If you are notified of remaining proceeds, file a certified motion with the Wayne County Circuit Court by October 1, 2025, the same court in which the foreclosure judgment was entered. This is required to claim your proceeds.

IMPORTANT NOTE: This step may change. Right now, the expectation is that the person seeking windfall profits must file a motion with the Wayne County Circuit Court after receiving confirmation of windfall profits from the sale of your home. That, of course, would be cumbersome for any individual and require assistance from a housing counseling agency. My understanding is that the Wayne County Treasurer’s office is working on making this, also, a form that would need to be completed instead of a filed motion. There may be more updates on this step in the coming months.

Step 6:
The Treasurer will file a proof of service of the notice with the circuit court and respond to the claimant’s motion.

Step 7:
The court will set a hearing date for your motion.

Step 8:
The Treasurer has 21 days after an order from the court to pay the claimants or any other parties (such as lien holders) who have priority over the claimants.

3. Limitations on the Data and Dashboard

There are a number of limitations that should be listed here. This dashboard can in no way guarantee the recovery of windfall profits. Some important limitations to keep in mind are below:

1. The Accuracy of City of Detroit PRE Data: This dashboard relies in part on the presence of a PRE (Principal Residence Exemption) which typically denotes an owner occupied home. Prior to the citywide reassessment in 2017, however, PRE data was often unreliable. I have tried to moderate that by also eliminating properties that had PREs but were owned by LLCs or other corporations (not uncommon prior to 2017) but still the PRE data has limitations.

2. Limitations on Owner Names: Another factor used in this analysis is an approximation of the owner name at the time of tax foreclosure. I am using City of Detroit assessment data to derive owner names from the year in which the tax foreclosure took place. There’s no guarantee that the owner name in the Assessment Data was necessarily the owner at the moment of tax foreclosure — homes are bought and sold, of course, and assessment data may not keep up with changes in ownership.

3. Complications Due to Mortgage Foreclosures: Oftentimes in cities like Detroit, when a bank foreclosed on a home for nonpayment of a mortgage, banks would not put the home into the bank’s name. It’s entirely possible that some of these homes had mortgage foreclosures that preceded the tax foreclosure and, at the time of tax foreclosure, it was actually a bank that was the legal owner, not the former homeowner. Without digging through deed records, there’s no way to see that, however.

4. Accuracy of Auction Sale Prices: The windfall profits shown in this dashboard are calculated by subtracting the tax debt owed (including interest, penalties, and fees) from the auction sale price. The auction data comes from Regrid’s monitoring of tax foreclosure auctions. However, an issue can arise when a winning bidder fails to make payment, which happens after the auction ends and is not observable by Regrid. In those cases, the treasurer moves to the next highest bidder. As a result, the final sale price may be lower than the original winning bid, meaning the windfall profits reported here could be overstated in some cases.

5. Data Limited to Detroit: Finally, I want to note that I only have sufficient data to conduct this analysis in Detroit. The Michigan Supreme Court’s ruling, however, of course applies across the state. Though I don’t know how many homeowners across Michigan lost their homes to tax foreclosure from 2015 - 2019 and saw them generate windfall profits at auction, I imagine it’s at least as many as there were in Detroit. Unfortunately I can’t identify those properties without quite a bit more data which is unlikely to be easy to come by.

4. Can Former Homeowners be “Made Whole” by Recovering Windfall Profits?

Even for those who can recover windfall profits, the amount — while helpful — pales in comparison to the current value of what was lost. I didn’t want this dashboard to simply declare “Former Homeowners Can Get $20M!” and create the illusion that it would solve everything.

To keep this in perspective, the dashboard includes three tallies (highlighted in orange in the screenshot below) that update as you explore the map:

• Total Auction Profits to Reclaim: This reflects the total windfall profits that could be reclaimed.

  • Citywide, that amounts to $20M.

• Present Day Value of Homes Lost: A rough estimate (likely conservative — arrived at via 2024 State Equalized Value x 2) of the present-day value of homes lost to foreclosure that generated windfall profits.

  • Citywide, this totals $120M.

• Gap Between Auction Profits and Home Values: The difference between the present day value of homes lost and windfall profits that could now be claimed.

  • Citywide, this gap is -$100M.

While the retroactive claims process offers some compensation, it falls far short of making former homeowners “whole”.