Council Poised to Renew Controversial Tax Lien Sales Program, With Tweaks to Protect Pandemic-Pummeled Homeowners
Housing advocates oppose the de Blasio-backed measure, which would extend a Giuliani-era debt-collection scheme for another four years while temporarily excluding financially ailing small owners.
A City Council bill to be discussed at a Wednesday hearing would renew the city’s controversial tax lien sales program for another four years — with pandemic protections to shield some homeowners from foreclosure for unpaid taxes.
But not everyone currently in danger of losing their home would get help.
Councilmember Adrienne Adams (D-Queens) is the prime sponsor of the renewal measure, set to be introduced in the finance committee at the request of Mayor Bill de Blasio. She was among the elected officials who prevailed on Gov. Andrew Cuomo to postpone the sale of property owners’ debts to investors during the pandemic.
As THE CITY previously reported, Adams and Councilmember Antonio Reynoso (D-Brooklyn) had called for the lien sale, which brings tens of millions of dollars to city coffers each year, to be abolished.
“From its inception, we all know that the lien sale has been ripe with injustices,” Stacey Yearwood, a spokesperson for Adams, said at an October rally to eliminate the lien sale.
Adams’ office did not respond to a request for comment about the new bill, which would renew the lien sale with changes.
The mayor’s pursuit of an extension comes after Cuomo postponed the city’s usual annual lien sale six times in response to the pandemic’s economic stress on property owners, most recently on Dec. 2. His moves effectively canceled the sale for 2020.
More than 3,000 properties that were on the 2020 lien sale list would roll over into next year’s pool, if the new measure passes.
Meanwhile, many property owners whose liens were sold to a private investment trust last year are now headed for foreclosure proceedings despite broad moratoriums that aim to protect homeowners.
Council Members Turn
The tax lien sales program, which dates to the administration of Mayor Rudy Giuliani, has recently come under fire for putting strains on homeowners and tenants already in dire straits.
The law was last renewed in 2016, passing nearly unanimously. Only then-Brooklyn Councilmember Rafael Espinal Jr. voted against it.
Concilmember and Brooklyn borough president hopeful Reynoso was absent for that vote, but has committed to oppose the law’s renewal.
Councilmember and comptroller candidate Brad Lander (D-Brooklyn), who voted to re-up the lien sale four years ago, is now calling for the program to be replaced by a community land trust model. His office did not respond to requests for comment.
Comptroller Scott Stringer and Brooklyn Borough President Eric Adams, both mayoral candidates, have come out against renewing the sale. Abolition is also supported by the nonprofit Center for New York City Neighborhoods, founded with the help of City Hall to aid New Yorkers weathering the late-2000s foreclosure crisis.
“The NYC tax lien sale is incredibly destabilizing for low- and moderate-income homeowners,” said Cristian Salazar, a spokesperson for the group.
But de Blasio is not convinced, given the city’s dire budget outlook.
Laura Feyer, a de Blasio spokesperson, said the mayor understands that “homeowners and renters alike are struggling with their bills in light of the economic conditions.”
But, she added, he believes “the lien sale is an important tool to ensure the city has the revenue to pay for public services like first responders and education.”
The 2019 lien sale sold off more than $120 million of overdue city taxes and fines, according to the city Department of Finance. The bonds, sold at a discount in exchange for upfront cash, banked a bit over $74 million for city coffers, according to Stringer’s office.
In all, the city collected nearly $30 billion in property taxes last year, according to Department of Finance reports.
‘Impact Is Going to Be Devastating’
Liens sold to investors in that 2019 lien sale are entering the foreclosure process, despite pandemic-related court delays on other proceedings.
With less than three weeks left in the year, the total foreclosure filings by the 2019 lien trust stands at over 950 — with 400 added last month alone.
The 2018 trust sought over 1,200 foreclosures in all.
“This is just the tax lien trust doing what the tax lien trust does,” said Paula Segal, an attorney with the nonprofit legal support group TakeRoot Justice. “Their responsibility is to their investors and to make money.”
For property owners, she added, “The impact is going to be devastating.”
A mix of laws extend temporary protections from mortgage foreclosures due to COVID-19 related to non-payments, but do not explicitly refer to tax foreclosures.
The statewide foreclosure and eviction moratoriums were first issued through a March 20 executive order from Cuomo lasting for 90 days. In renewing the order since then, the governor has specified that it covers unpaid mortgages.
But one Brooklyn property owner facing tax foreclosure is fighting back, arguing that the moratorium actually does extend to tax foreclosures as well.
Foreclosure defense lawyer Jason Bost, whose associate is the attorney in the case, said the governor’s order should cover all foreclosures during the pandemic.
“This is not the time to be moving forward to foreclose on a property,” he said.
The governor’s office told THE CITY that it is up to the judge to decide how to apply the state’s mortgage forbearance law in this suit.
Jacquelyn Griffin, an attorney for Brooklyn Legal Services, says her clients typically show up “very late in the legal process,” after a judgment against them has been filed.
“I think many of them don’t really understand the implications of a tax lien foreclosure and how to deal with it,” Griffin wrote in an email.
“It’s confusing to them that they could lose their home over $15K of delinquent property taxes.”
A Limited Lien Freeze
The bill before the Council would put a freeze for all of 2021 on selling liens on one-, two- or three-family homes with assessed values under $250,000. Owners must also make less than $150,000 for the most recent calendar year and prove direct COVID-19-related hardship to the Department of Finance.
Critics say the changes are insufficient and argue the revenue raised — 2020’s liens were expected to bring in $57 million — is nothing compared to the harm to stressed property owners.
Hannah Anousheh, coordinator for the East New York Community Land Trust, told THE CITY that because the carve-out is so “limited and inadequate,” it is difficult to determine what the impact of the changes would be. Her group has called for an end to the lien sale.
“This criteria is extremely restrictive and this legislation is, in short, exactly what our coalition warned Council members not to do for the last four months,” Anousheh said.
Segal said the proposed pandemic protections would barely make a difference.
“The paltry carve out for low-income, low-equity homeowners who can prove that they have been directly impacted by COVID will do nothing to change that,” Attorney Paula Segal from TakeRoot Justice said. “The Council should not pass this bill into law.”
More Time To Collect
The delay in the 2020 lien sale bought more time for the Department of Finance to continue outreach to property owners on the lien sale list.
According to a list on the department’s website, last updated nearly a month ago, nearly 6,000 properties eligible for the lien sale have been removed since October, bringing the current number down to 3,155. That’s lower than last year’s sale of 3,182 liens.
This could mean that many property owners have either paid debts owed to the city or have entered payment plans.
“I commend them for that,” said Segal.
By late November, Brooklyn led the list with the most liens remaining in this year’s sale, with 1,358, or 43% of all liens. Queens holds the second most liens sold, at 769, followed by the Bronx with 402, Staten Island with 331 and Manhattan with 295.
Carlos Romero, a Brooklyn handyman, had a lien sold on his three-story building at 83 Van Siclen Ave. in Cypress Hills last year. The Ecuador native, who’s been a New Yorker for 23 years, bought the property in 2008 shortly before becoming a father.
But Romero missed his property tax payments starting in late 2018, where he found himself faced with multiple deaths in his family.
“It was a lot of things, like my father, my mom, my nephew who lived with me — he passed away too — so everything accumulated and I didn’t pay attention,” Romero told THE CITY.
After the lien was sold, he moved to live with a cousin in Queens and to save all the rental income he can get from his three-unit property. He’s been talking with the lien trust that purchased his debt and is trying to set up a payment plan with his lawyer.
But, he said, the fees are piling up and the lien trust isn’t returning his calls.
“If you don’t pay, they keep adding money,” Romero said, “they don’t give a s—t, they don’t even call me back.” For now, his building is not facing foreclosure proceedings.
Romero says he never received any of the notices the Department of Finance sends out to offer property owners a way to settle their debt prior to being sold to private investors.
“They just sell to the bank, and they charge penalties. And they want to put a higher interest on the amount. I think it’s unfair,” Romero said. “We have the poor people paying taxes. And there are a lot of people, millionaires, that are avoiding taxes.”