The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Detroit’s Population Decline:
The Result of Deliberate Policies

Jul 20, 2015

Several hundreds of thousands of Detroit residents have been pushed out of the city in just the last decade by home foreclosures, according to data from a series published by the Detroit News.

The city has experienced nearly 140,000 mortgages and tax foreclosures since 2005. That’s one out of every three city properties. Based on the average household size for the city in the latest Census, the foreclosed homes likely housed close to 400,000 residents. Almost 29,000 more homes, with probably another 80,000 residents, are set for foreclosure auction in the fall, not to mention 40,000 more whose owners recently temporarily staved off foreclosure by agreeing to payment plans on their back taxes.

This emptying out of the city is the result of policies employed not only by mortgage lenders but also Detroit’s city government.

Mortgage lenders did their part by pushing subprime loans designed to make it impossible for homeowners to pay them off. Close to 75% of mortgages sold in the city between 2004 and 2006 were subprime loans, loans which carry higher interest rates, by at least 3 percent, than other mortgage loans. Of these, about 80% were adjustable-rate mortgages designed to suck buyers in with low interest rates that later skyrocketed.

In many cases, mortgage lenders pushed these booby-trapped loans not just on people rated as bad credit risks, but also on people, especially black borrowers, who should have qualified for lower-interest loans.

Among the mortgage lenders that pushed the most failed mortgages in Detroit was Quicken Loans. Quicken is owned by none other than Dan Gilbert, the man often pushed by local media around Detroit as the city’s “savior,” leading Detroit’s “turnaround” by buying properties in downtown Detroit. In reality Gilbert and others like him use money handed to them by the city through generous tax breaks to make huge profits.

Detroit’s city government is actually responsible for many more foreclosures due to tax debts than those stemming from mortgage debt. Of the 139,699 properties foreclosed on since 2005, 110,000 or 79%, were due to unpaid taxes.

Actions of the city directly contributed to homeowners’ difficulties in paying their tax bills. An investigation by the Detroit News found the city’s assessments in 2013 were 65 per cent higher than actual property values. When people got behind in their taxes, they were hit with loan-shark level interest rates of 18 percent, which is mandated by the State of Michigan.

The foreclosures are clearly the result of a conscious policy being carried out by the wealthy, the banks, big corporations and their friends in City Hall to push people deemed “undesirable” out of the city of Detroit, in order to hand property over to big real estate developers.

The same thing taking place in Detroit is happening in large cities all around the country.

It’s what capitalism today has to offer, as wealthy investors and financial institutions no longer find investing in production profitable enough, and instead look for areas to speculate, like real estate bubbles and mortgage-backed securities that were at the heart of the economic crisis of 2008.