Proposition to let Detroiters vote on Land Value Tax plan to cut homeowners’ property taxes by average of 17%
- Rep. Stephanie A. Young to introduce Land Value Tax legislation next week.
- More than 50 stakeholder meetings held since the Mayor Duggan’s Mackinac speech and plan has been revised based on that input.
- Under Representative Young’s bills, Detroit property owners would get a 14-mill tax cut to all improvements.
- Taxes on land will be more than doubled.
- 97% of Detroit homeowners will get a tax cut, with an average cut of 17% in 2025.
Detroit homeowners on average would see a 17% reduction in their property taxes under a new Land Value Tax proposal unveiled by Mayor Mike Duggan and State Rep. Stephanie A. Young today in the city’s Rosedale Park neighborhood.
Under legislation being introduced in the coming days by Rep. Young, 97% of homeowners will get an average 17% permanent property tax cut starting in 2025, if Detroit voters approve the proposal next year. The legislation guarantees that Detroit homeowners would not get a tax increase under the Land Value Tax plan.
Property taxes on improvements would be slashed by 14 mills, bringing Detroit’s tax rates in line with neighboring communities such as Southfield, Ferndale, Warren, and the Grosse Pointes.
Taxes on land would more than double, from 85 mills to 189 mills, so that owners abandoned buildings, vacant land, and underbuilt property will pay their fair share. Details of the LVT can be found here.
“We have held more than 50 meetings in the past three months meeting with groups who would be affected by the Land Value Tax, including urban farmers, parking lot owners, scrap yard owners and more,” said Mayor Duggan. “The proposal we developed together provides homeowners with an average 17% property tax cut while protecting side lots and community land uses such as urban farms from seeing any tax increases.”
How does the tax cut on improvements work?
Detroit’s millage for operations would be cut by 14 mills, from 20 mills to 6 mills for improvements on all taxable property. Here’s the comparison for homeowners (with principal residence exemption):
Current Homeowner Tax Change under Land Value Tax
Detroit Operating 20 Mills Detroit Operating 20 Mills. 6 Mills
Detroit Debt 7 Mills Detroit Debt 7 Mills
School Operating. 6 Mills School Operating. 6 Mills
School Debt 13 Mills School Debt 13 Mills
County 17 Mills County 17 Mills
Libraries 4 Mills Libraries 4 Mills
Total 67 Mills Total 53 Mills
To offset the property tax cuts for homeowners, land will be taxed at a higher rate. Land values in Detroit are very low, so large millage increases don’t result in large tax burdens. The land mills in Detroit under the proposal would increase by approximately 104 mills. This means that an average-sized vacant lot in Detroit would see an increase in its taxes from $30 currently to $67 under the Land Value Tax.
Residents who currently have Neighborhood Enterprise Zone (NEZ) property tax breaks can choose whichever is better for them, the Land Value Tax or the NEZ. If the NEZ keeps their taxes lower, they can keep it in place for the duration of their 15-year exemption. Once the NEZ exemption ends, those homeowners will immediately receive the permanent 17% LVT tax reduction.
“NEZ’s were inherently unfair because they applied to wealthier neighborhoods and for that reason, they will be permanently phased out,” said Mayor Duggan. “The Land Value Tax offers the same tax break to all homeowners, regardless of which neighborhood they live in.”
“We’ve had a lot of very constructive conversations and the feedback we received helped us to create a proposal that provides homeowners a 17% tax cut, reduces the tax increase to others and is fiscally sound,” Detroit Chief Financial Officer Jay Rising said. “Response to our revised proposal has been favorable and we look forward to explaining it in detail next month to Michigan’s legislators.
Representative Young, who previously served as a Department of Neighborhoods district manager tasked with fighting blight, will be the sponsor of the legislation expected to be introduced next week.
"For far too long, Detroiters have seen blighted property owners get a pass on paying their fair share of property taxes, giving them no incentive to improve their property," said Rep. Young. "This legislation not only levels the playing field but provides savings to homeowners which is a really good thing. While the legislature is taking the first step in this process, it will be the voters of Detroit who will have the final decision as to whether this is the right plan for them."
Three levels of approval requiredFor the Land Value Tax to take effect, it will require three different levels of approval. First, the legislature must approve the enabling legislation, then Detroit City Council would need to vote to put it on the ballot. Detroit voters would have the final say, which could take place as soon as the February 2024 Michigan Presidential Primary Election.
Here is the proposed timeline for these approvals, following the introduction of the LVT legislation:
- October 2023: Legislative approval for Detroit to choose the Land Value Tax
- November 2023: City Council authorizes Land Value Tax Ballot Question
- February 2024: Detroiters vote on Land Value Tax
"This is an important first step at reforming property taxes in the city of Detroit,” said Dave Blaszkiewicz, President and Chief Executive Officer of Invest Detroit. “We support the Land Value Tax Plan and look forward to building upon it to help create meaningful relief for homeowners and existing businesses while encouraging reinvestment, growth and progress.”
Urban Farms, Community Gardens, Community Spaces exempt from land tax increaseUrban farms, community gardens, and community spaces are regarded as community-oriented public uses of land under the proposed legislation. Those properties will not be affected by the Land Value Tax.
"I truly appreciate how Mayor Duggan gave the urban farm and gardening community the opportunity to participate in the process of developing this plan," said Jerry Hebron, executive director of the Oakland Avenue Urban Farm. "Our feedback was taken seriously and incorporated into the final proposal, which exempts urban farmers and gardeners and the work we do from increased taxes under the Land Value Tax Plan. As part of our dialogue, the Mayor also has pledged to create a new Director of Urban Agriculture position in his administration to help us work more efficiently with the City."
Side Lot owners (up to 4 side lots) protected against overall tax increase.Side lots will see a small increase in taxes, averaging $30 (going from $25 to $55). In 97% of cases, the large tax cut to the home will be much larger than any increase to the side lot. Representative Young noted the popularity of side lot sales throughout Detroit and has included a legislative guarantee for Detroit property owners against a tax increase. Any property owner who owns up to 4 side lots will be guaranteed no overall increase in their property taxes as a result of the LVT.
“Rewarding the small business owners and homeowners that have stayed in Detroit and making land more accessible through the Land Value Tax plan is an excellent step toward closing the racial wealth gap,” said Charity Dean, President and CEO of the Metro Detroit Black Business Alliance. “This tax plan provides relief to Detroiters and Black small business owners, who contribute to our commercial corridors, hire Detroiters, and spur economic development in our neighborhoods and beyond. We are moving in the right direction and I am proud to support this effort.”