New York City’s controversial tax lien sales system for collecting unpaid property and water debts expires at the end of next month — without any clear path toward what comes next.
Mayor Eric Adams and City Council Speaker Adrienne Adams have both come out against the longtime practice of selling off tax liens to investors, which generates tens of millions of dollars each year and steps up pressure on property owners to pay their bills.
The city sold the liens from 2,841 properties in December 2021. It was the first sale since May 2019, after postponing the 2020 sale because of the pandemic.
The mayor campaigned on ending the sales, declaring they threaten “generational wealth in Black and Brown communities.”
But neither Adams nor Adams has unveiled specific plans.
Advocates for small property owners are pushing for significant reforms for how the city collects the unpaid debts, and they’re hopeful new city leaders will come up with a way that doesn’t further burden those already stretched thin financially.
And some grassroots activists want to get rid of the lien sale in favor of a community land trust model, in which nonprofits would take ownership of the property and maintain income-restricted units, in consultation with the indebted previous owners.
“There’s this opportunity to create the replacement system with the Council and with the mayor, and that’s an exciting prospect,” said Hannah Anousheh, a coordinator for the East New York Community Land Trust, which was created at the start of the pandemic.
Through the lien sale, which Mayor Rudy Giuliani created in 1996, the city sells debts of property tax and other municipal charges to a trust of investors at a discount. It was conceived as a way to address property abandonment and to collect unpaid taxes after City Hall had struggled for years with both.
Today, tax lien sales are a revenue-raiser for the city, with private investors responsible for collecting the debt. The liens sold this past December are valued at $145 million, according to the city Department of Finance.
Often, property owners late on their bills must pay more fees and interest on top of what they already owe, sending them further into debt, and sometimes resulting in foreclosures if debts remain outstanding.
The lien sale disproportionately impacts homeowners of color, a report from homeownership advocacy group Coalition for Affordable Homes found, as well as smaller property owners, and can lead to negative effects on tenants, too.
Landlord groups have been pressing for an end to lien sales.
With the lien sale, “you’re just compounding the economic disadvantages of many of these property owners already,” said Jay Martin, executive director of the Community Housing Improvement Program, which mostly represents owners of rent-regulated buildings.
“When we’re talking about providing relief to everyone across the housing spectrum, specifically renters, we should also be talking about those who are also having to pay the property taxes.”
The most recent sale only involved owners delinquent on property taxes and excluded liens for water and sewer bills.
More than 11,000 properties were at risk for the most recent lien sale 90 days before it occurred — but through hardship declarations, payment plans and other exemptions, the actual number of properties whose debts were sold decreased significantly.
Representatives of community groups THE CITY spoke with said they knocked on doors to notify property owners and help get them off the list.
According to the city Department of Finance, 941 property owners were pulled from the sale out of 973 owners who declared COVID-related hardships. Property owners could also receive exemptions if their properties sustained damage as a result of Hurricane Ida. Figures show 49 owners declared Ida-related damage, and 42 successfully received exemptions.
“What the experience of the lien sale has shown in both 2019 and in 2021 is that most can be resolved with payment or payment plans, raising significant revenue while protecting those unable to take care of the tax liability through payment plans,” said Department of Finance spokesperson Curtis Simmons.
Ana Champeny, deputy research director of the Citizens Budget Commission, agreed.
“It’s been pretty effective in generating revenue and keeping delinquencies low,” she said, but emphasized that city officials would do well to figure out why properties have liens in the first place.
A new system, observers say, could increase the city’s capacity to look for heirs of deceased owners and establish ownership before a sale of liens to investors. Such examinations may influence how the city handles certain properties — including those that are blighted or abandoned, like several on the most recent lien sale list that THE CITY visited.
“There’s a big difference between a low-income homeowner who is unable to pay their property taxes because the value of the property has gone up [and] the tax burden has become greater too, versus a landlord who’s been pulling equity out of a building,” said Oksana Mironova, a housing policy analyst with the Community Service Society.
A closer examination could reveal situations more complicated than they appear on paper.
For example, the city in December sold a lien on a two-story, brick home in Brownsville, purchased by a man named John Riddick in 1988. He died in 2015, leaving the home to his children.
Jalaunda Fripp, one of Riddick’s children who lives out of state, said there’s a person she deems to be a “squatter” in the house.
The man who currently lives in the house, who gave his name as Anthony Lewis, told THE CITY he was minding the property with permission of his “cousin,” the late owner’s daughter. He said he appreciated having a place to live with his four children and fiance. (He did not respond to a call and text asking about Fripp’s claim that he is occupying the property without authorization.)
Fripp declined to comment further and referred questions to her lawyer, who also declined to comment on her behalf.
Task Force Fails
Advocates have long sought to end the tax lien sale, which they say is predatory and only serves to compound owners’ financial hardships.
Legislation passed in early 2021, which now-Speaker Adams spearheaded, authorized the December sale with some new protections for homeowners. The bill limited which kinds of property were eligible for the lien sale and created the exemption for COVID-related financial hardships.
A 12-member task force convened as required by the law, with a mandate of submitting a report to the mayor and City Council with recommendations how the city could improve and replace the system. The task force issued some draft proposals in October but did not reach consensus on any of the ideas, and the task force never submitted the report, which was due in November.
“The task force could have been this amazing opportunity to really start figuring out the replacement system, but they refused to use it that way,” Anousheh said.
Speaker Adams told THE CITY that “citizens of this city should not have to be forced out of their homes” for unpaid bills.
“Moving forward, we are going to look towards ways to changing the structure of the tax lien, to changing the harm it has done to too many New Yorkers,” she said, adding that she is looking ahead to working with the mayor. “So we’re going to move forward, hopefully in consensus. My hope is to do away with it altogether.”
Eric Adams has expressed wanting to end the sale too — but stressed through a spokesperson that collecting owed taxes and utility fees is still a priority.
“Mayor Adams believes the City should explore alternatives to the current lien sale process that ensure the city can continue collecting its debts while helping homeowners — particularly Black and brown homeowners who have been disproportionately impacted by the pandemic — and allow them to remain in their homes,” said Jonah Allon, a spokesperson for Adams.
At the very least, said Martha Stark, a clinical professor at NYU’s Wagner Graduate School of Public Service and a former city finance commissioner, “there’s a huge opportunity for the city to make sure that there’s more accuracy with what they’re doing,” regarding looking at properties on the list, reaching out to property owners and making sure return addresses are updated.
Multiple sources who spoke with THE CITY pointed to the need for reforming New York’s property tax system, in part to ensure property owners are taxed equitably — the subject of a recent report by a commission former Mayor Bill de Blasio convened.
Attorney General Letitia James has also called for reforming the lien sale, as has Comptroller Brad Lander, who supports the community land trust model — the preferred alternative of several housing advocacy groups that make up the Abolish the NYC Tax Lien Sale Coalition.
A land trust program could incorporate hands-on outreach and property owners, who would have more choice than they do now about what happens to the property, said Paula Segal, senior staff attorney with the nonprofit legal support group TakeRoot Justice.
“We hope in this new system, most people, when given the option to transfer the debt that they have and they cannot pay into a different ownership interest in the property, they’ll take it. They’ll…lease the land from the community land trust. They’ll be able to stay,” Segal said.
The city has another Giuliani-created program known as Third Party Transfer, in which the Department of Housing Preservation and Development gives nonprofit caretakers properties whose owners are delinquent on taxes. The program, meant to preserve cash-strapped properties as affordable housing, has been criticized for stripping homeowners, small landlords and co-op shareholders of valuable assets.
HPD declined to comment.
The city in 2019 froze Third Party Transfer and convened a working group aimed at reforming it. The group issued recommendations in November, and the City Council must reauthorize the program for it to resume.
Advocates would want a land trust model’s “third party” to be an organization rooted in the community, rather than an unconnected nonprofit or for-profit entity.
Jacquelyn Griffin, an attorney with Brooklyn Legal Services, expects the fallout from the latest lien sale to come within the next year or so, as property owners whose liens were sold start getting notices from the trust.
“The city will talk about our credit rating and the money that we get from the lien sale, but ultimately, they have to decide how that weighs against, for example, senior citizens losing their homes, because what we’re usually talking about are multi-generational homes,” Griffin said.