Owning real estate is an undeniable part of the American dream — and of American citizenship. It is also the key to building intergenerational wealth.
Imagine paying your mortgage, yet being stripped of the deed to the property you’ve worked hard to maintain, where you’ve raised your family and watched your tenants and neighbors do the same?
For years, New York City has routinely generated revenue by selling homeowner and landlord debt to city-chartered trusts, and in the process, setting up property owners for foreclosure. This debt is comprised of monies owed for delinquent property taxes, water and sewer bills.
For the first time since the pandemic, New York City’s tax lien sales will resume on Dec. 17th.
Tax lien sales, and the fees and interest imposed by private buyers that purchase the liens, push too many property owners into insolvency. They compound the stress of today’s coronavirus pandemic and the lingering effects of the Great Recession of 2008.
The sales should be abolished, period. They reek of systematic unfairness in a tax system that favors the wealthy. The current lien sale system, which were established in 1996 under the Giuliani administration, plunder the wealth of struggling homeowners and have a disproportionate impact on communities of color, resulting in a “Black Tax.”
It is time to create a new system. I join a broad coalition of housing advocates, nonprofits and elected officials that call for eliminating tax lien sales and replacing them with a more just public system to deal with tax delinquency. The sales are, in fact, a direct byproduct of unfair lending practices that hamstring homeowners and undermine their finances.
Let’s find more humane alternatives, such as transferring foreclosed properties to community land trusts and nonprofit organizations that would work with the homeowner or put the distressed properties to good use, such as affordable housing.
Mayor’s Support for Lien Sale Undercuts Mantra of Equity
Despite the on-again, off-again pandemic recovery, Mayor Bill de Blasio wants to go after property debt as an impetus for them to pay overdue bills for city services, fund the city budget and support general-obligation bonds guaranteed with property tax revenue. But his push for the sale runs counter to his mantra of equity and progressive leadership.
People of color face the greatest risk. According to the Urban Institute, Black homeowners were more likely than White homeowners to have missed or deferred their mortgage payment due to the financial impact of the coronavirus. It’s not a great leap to assume the arrears extend to property taxes, water, sewer and utility bills.
The New York City lien sales, repeatedly postponed by the pandemic – first by the city and then the state –destabilize low- and moderate-income homeowners. Property owners often do not realize that they are in arrears until it’s too late.
Under pressure to dramatically revise or abolish the system, the City Council authorized the 2021 lien sale for one year instead of the usual four years.
In a bid to soften the blow, this year’s sale exempts buildings with 10 or fewer units if one is the owner’s primary residence. Such owners must submit a hardship declaration. Also, only liens for unpaid taxes will be sold. Delinquent water and sewer debts are exempt.
Even so, according to the Department of Finance, more than 11,000 properties are eligible for the sale. A lion’s share — 4,519 — are in Brooklyn, followed by Queens’ 2,817 and Manhattan’s 1,373. The city lists 1,324 properties in the Bronx and 1,161 on Staten Island.
Lien sales are part of a burden nationwide that has contributed to black homeownership barely rising since 1970, two years after passage of the Fair Housing Act, according to the Urban Institute.
In fact, over the past 15 years, Black homeownership has declined more dramatically than for any other racial or ethnic group in the United States. In 2019, the Black homeownership rate was about as low as in the 1960s, when private race-based discrimination was legal. Here’s a sad datapoint: The homeownership gap between Black and White Americans is now larger than 50 years ago.
The City Council has appointed a 12-person task force to study tax lien sales and make recommendations. The ideas proposed so far range from replacing the system, to tweaking it and exempting some properties.
For example, one proposal would create a land bank that would collect outstanding debt, but would have flexibility to work with delinquent owners, according to the task force’s minutes. Another would eliminate tax lien sales for one- to three-unit residential buildings, as well as co-op and condo units. These alternatives assume that liens may still need to be placed on tax-delinquent properties, but reject the idea that selling that debt to a private trust produces equitable outcomes for either the homeowner or tenants.
Those are the types of ideas that inject fairness into the system and give homeowners and building owners more time to recover from the pandemic.
Let’s give people a fair chance to pay their debts and remain property owners, while offering alternatives that guarantee equity for tenants and homeowners alike.
David R. Jones, Esq., is President and CEO of the Community Service Society of New York (CSS), the leading voice on behalf of low-income New Yorkers for more than 170 years. The views expressed in this column are solely those of the writer. The Urban Agenda is available on CSS’s website: www.cssny.org.